Benchmark's AI Bets: Cerebras, Sierra, Legora, Fireworks, Starcloud, Gumloop..

27:12Ev Randle:And thousands of employees. And thousands of employees, and it clearly aggregates very large bills and great revenue sources for some people. That's right. I'm like asking Opus 4.8 what I should have for lunch. You know, it's like probably not, that's probably not the best use of our inference budget. But it's like, it's interesting. So I know you guys are investors in Lagora. I was at Harvey the other week and they were talking about the same thing. It was like, it's kind of similar to how like text messaging was before you would pay per text. That's right. And like, so now it's happening within our chatbots and like within the different kind of prompts that we have.

27:43Like, how are you seeing, like, do you, how do you think the business model of that will play out? And like, will it get more efficient?

27:51Ev Randle:Yeah. Yeah, I think, I think it all depends on, it sort of depends on two different things. So there's, I have something that I call, and there's many other mom tests out there. And so I might even be trademarked. I don't know. A mom test? But my, so my personal AI mom test is, and you know, I, again, not every mom is like this, But my mom is, you know, from, you know, lives in like this rural suburban town in Colorado. And she's not exactly an AI native. Or, you know, she like doesn't know how to reset her password on her iPhone, for example. She's not like the most tech savvy person. And so the thing I always ask is like, okay, for my mom, what is the amount of queries or the amount of things that she needs out of AI that can't be done by a really, really, really cost effective open source model?

28:41Ev Randle:and like you know this was you know i started asking this two years ago and there was actually like oh well i don't know now it's like 100 like there's there's nothing that my mom actually asks of her ai products that needs to be done by the frontier or even a nearer frontier model and you can start like layering that out it's like well okay well what about like a high school student or like what about like this this like this person or this person or this professional in this area and depending on your use case and who you are and what you're trying to get out of AI, you either, you might need the frontier.

29:11Ev Randle:Like again, like I think what we're seeing in the market right now is like people are willing to pay a huge premium to access frontier intelligence to this day. But there's a growing portion of tasks in the economy and within these enterprises where you just don't need a frontier model. And oftentimes you don't even need anything close to a frontier model. And so I think what you're seeing and, you know, Cognition published some work on this as well, where they actually, you know, trained or I don't know if they, I think they post-trained an open source model on tasks that they saw done within cognition, where there was low task complexity, like it didn't need frontier intelligence, but they were extremely popular things that were happening within cognition.

29:52Ev Randle:So it was like people were maybe just defaulting to using a frontier model for this thing. And they're like, wow, you'd actually save an immense amount of money if you took it away from the frontier, because it's a very simple kind of gated task that doesn't need frontier intelligence and you're going to save you know 95 on that action or that query so i think you're seeing like more and more as the models get better and better there's a growing proportion of queries or actions or whatever you want to call the use of inference that's going on that doesn't need the frontier um that said again like i think what's also growing is uses for frontier intelligence because again i don't think we had like unbelievable quality um coding models until Opus 4.5, until like the last winter, which is why you saw Anthropics Revenue and why you saw Cloud Code go so parabolic because there was a genuine breakthrough in the usability of those models.

30:40Ev Randle:And so it's not that frontier intelligence isn't growing and the demand for that and the ability and willingness to pay a premium for that isn't growing. It's just that there's a lot of non-frontier tasks as well. And the demand for those is also growing immensely. And so I think the, like my partner, Eric Vichery, had this really great tweet where, you know, a lot of people try to make this, like this is a very zero-sum thing. It's like, okay, well, like, is open source going to win? Or are Anthropic and OpenAI going to win? And I forget all the things that he went down, but it was basically like, on-device inference, yes.

31:11Ev Randle:Open source inference, yes. Proprietary models, yes. Like, it seems like there's a lot of demand for all of this stuff, and the demand is all going parabolic. And so it's not this zero-sum game, at least yet, in terms of like, well, either it's all going to be open source or all going to be a frontier model from one of the three frontier providers. It turns out that there's use for all of it, and it's all growing very, very quickly. So I guess to push on that a little bit. So to your point, earlier this year and even to today, OpenAI has crazy amounts of revenue. Anthropic was last rumored and reported around$45 billion, and now people are speculating around$60 billion.

31:50Both are trying to go public, but the same as SpaceX and XAI. What happens once those models become efficient? right? Like, what do you think is going to happen to the scale? Do you think it's going to continue? Do you think, what do you think is going to happen?

32:04Ev Randle:Yeah. Yeah. I mean, it's, it's, it's, it's the$1 trillion question or the multi-trillion dollar question. If you kind of combine SpaceX AI, OpenAI and Anthropic onto that equation. And I think it's, it's left like, like it depends on, it depends on what the next, you know, 12 to many years look like. And what I mean by that is like, you know, do you believe that we're on a path to recursive self-improvement and this, you know, future of a bunch of geniuses in a data center? Whereas if you do have a bunch of geniuses in a data center, if like if the frontier goes that high, then you legitimately do have probably a lot of pricing power and a lot of ability to continue to grow and continue to monetize and probably even re-accelerate growth if you're a frontier lab.

32:54Ev Randle:On the other hand, if like at any point it seems like you know capabilities are actually hitting an absolute ceiling um and distillation continues as it has historically and the open source actually gets you know 95 as good as wherever the ceiling of capabilities tops out um that's a really scary situation for the for the frontier labs i don't think it's like a death knell for them because you know it's like again like most of the users of chat gpt would use chat gpt whether or not it was a gpt model in there or not like they like the product yeah like most of them don't even know they wouldn't be able to tell you if the model is different.

33:26Ev Randle:In our little bubble in San Francisco, people will be able to tell you, but the vast majority of the 900 million weekly active users were - They have no idea what 5.5 is. No idea. They wouldn't be able to tell you if you swapped it out for 5.2 or something, they wouldn't be able to tell you. And so I think that scenario wouldn't kill them because, again, people like the products and they've done both OpenAI and Anthropic have done a tremendous job of building amazing products on top of their models. but it would certainly be a very very different situation because you'd have a much much greater impact from open source depressing their ability to have pricing power and charge a premium for the tokens that they're producing and it's like i mean open source inference also costs money it's not like open source means free someone still has to run the gpus someone has to build the data center someone has to still operate the data centers it's more just about like how much premium margin that the frontier labs can create i don't think we'll know until it's very clear whether or not we actually have RSI and there's going to be the geniuses or God in a data center or whatever you want to call it, at which case we'll have different problems to be thinking about.

34:31Ev Randle:Or if we do end up at some point topping out on capabilities sometime in the next few years and distillation continues, I think it's much harder to garner a premium margin if you're a front-tier model company. It becomes much harder. given the scale and how fast things are running another common question is how do we fund this and there's different types of funding that's happening i mean i think we're like literally across from general catalyst and they have their cvf fund and like there's people who are going after debt for tokens and trying to create the right mix but the kind of like the undercurrent of all this is companies are raising money faster than ever before i went in one of the questions in our like conversation before is like do we talk about the bubble i don't think the bubble is very interesting i'm like most interested in like what are the biggest concerns right now with that because reading through the cracks of all of it right it's like what i think we all know when companies are running off the tracks and um when they're overfunded to an extent but then again like there are it's a weird time like yeah there are total hail marys where these companies are outperforming what you thought they were doing.

35:42And so they raise another round. And then six months after that, they raise another round. And then they just keep on getting more and more capital under them. But okay, so to this point, the funding ecosystem has changed dramatically. The playbook is out the door. And so with a firm like Benchmark, who is just fundamentally on the early stages, like how do you capture that value at the early stages and continue that?

36:04Ev Randle:Yeah. I think, I mean, it's something that we talk about a lot internally, because you're right that even the funding market, it's not just like, I think the one that everyone talks about, like the change in the funding market and like the venture growth asset class, the trend that everyone talks about is like companies staying private for longer. That's been like the prevailing trend that everyone talks about is that, you know, you have, you know, I mean, name your company. I mean, obviously some of these companies are now going public like SpaceX, but before it was like, you know, SpaceX is never going public and Stripe is never going public and Databricks is never, you know, it's like these would be, if this was 2005, all these companies would have been public for years.

36:45Ev Randle:And now there's just so much capital available for them in the private markets via these venture growth platforms that they just stay private, you know, essentially indefinitely. And I think a more recent change is that, as you're mentioning, like AI is just so, so different because depending on what you want to do, oftentimes there are massive day one costs. If you want to create a NeoLab and you have some incredible research direction that you want to pursue, but you need$2 billion of compute to see whether it's going to work or not, that's very, very different than Airbnb raising the 500K or whatever they raised at YC in their seed to like see if, you know, Airbnb would have any product market fit.

37:37Ev Randle:Like it's just like a completely different equation and type of funding mechanism and just like it's a completely different capital market. Also, I think what you're seeing is now because of the staying private longer thing, you also have these crazy situations where oftentimes you almost like see a rebirth of a company um where oftentimes people think like oh well when it's a growth stage there's you know it's like early stage you get high multiples on money um but you know it's higher risk and then late stage you get like you know you can get like a two to three x um but it's much lower risk um and i think the crazy thing is that because these markets are so big in ai and elsewhere and because these companies are staying private for much longer you actually have these situations where a late stage company can have much higher upside than like a series c uh which is super weird uh it's so weird it's like like my so my first investment when i was at kleiner perkins was um spacex and it was at an over 100 billion dollar valuation um and you know talking with peers and friends at the time it's like man like are you gunning for like a two and a half x like like how much upside could there possibly be if you're getting in at a triple digit billion entry valuation.

39:01Ev Randle:And I think the thing that ended up being true for SpaceX was like, well, actually you had this thing called Starlink that had started a couple of years before that and had really started to scale. And that was like a rebirth of the company. If you look at the P &L of the day and in the S1, the vast majority of the business is their consumer broadband business. And B2B broadband business via Starlink, it's not even a launch business. And so I think the two things that we grapple with and think about a lot is like, how do we continue to be the best venture capital firm that partners with entrepreneurs very early in their journeys and is their most meaningful partner when you have a much, much more capital intensive early life cycle for some of these AI businesses?

39:45Ev Randle:And when you have these businesses that actually sort of go through these transformational moments at later stages, where it feels like actually, even though they're 15 years in, they're still only 1 % done with their journey. So I don't have a great answer for that. I think we're extremely flexible in what we do. Like we don't say that we just do seed or we don't say we just do series A. Like we partner with the very best entrepreneurs in the world when we think that we can deliver unbelievable upside for LPs and be the most meaningful partner to them. Like those are the kind of the constraints that we think about.

40:16Ev Randle:And I think the trends that we're seeing both in AI and in capital markets writ large definitely expand our thinking in terms of like what actual rounds and what type of situations are applicable to a firm like Benchmark. There are definitely new types of funding vehicles too. Like private credit has really taken over where banks left off and different kinds of funding to add into it. So how has venture capital in the grand scheme of the alternative asset class changed? And how has the rule changed? Yeah, I think, I mean, I think this is where things get tricky when people are having these discussions is that these firms can completely change what they are.

41:01Ev Randle:And yet we still just use the term venture capital. And so whenever I like, you know, write like an occasional blog post or something, I always say like venture dash growth, because I'm like, venture capital is something very particular. And so even when I'm discussing like, you know, something like a Databricks or something, I'm like, like, that's, that should be called something different. And so I'll call it like venture growth. And that's like one way to do it. But I think a lot of these firms, they have just become alternative asset managers. And like, that is what they are. And they have venture products, but they are not venture capital firms.

41:33Ev Randle:And that's, that's not me being like, oh, they're not VC firms because they're bad. I think all of these firms are wonderful. Um, but like general catalysts and Andreessen Horowitz, those are alternative asset managers, um, because they have so many products. Uh, you know, many of these places have, like, if you think about like an iconic, like, yeah, like iconic has like a great growth stage venture practice, but they also have, like, they started as, you know, like a high net worth wealth management, um, practice as well. Like that, like that's a very different thing than just being like a venture capital firm.

42:01Ev Randle:So I think as these firms have evolved, one of the things that I think as an industry we haven't done a good job of is just evolving our nomenclature and the terminology of how we talk about these things. And so, yes, General Catalyst still has a venture product. And they also have a growth product. And they also have a debt product. And they also have a health assurance product. And they have a wealth management product because they're an alternative asset manager. And so I think that venture in many ways is still the same, but it's a product now for many of these firms. It's not the firms themselves.

42:35We've definitely alluded to this a bunch during the conversation, but I'm really curious to get your perspective. The public markets are seeing the largest IPOs of all time, and it's all apparently going to be happening this year. And so how do you think the markets are going to take that? Will it be absorbed? Will it be kind of like aftershocks? how that will how will that actually then affect this asset class yeah yeah it's um i think in a

43:04Ev Randle:few ways the first is like i did this um i did this analysis um like this very quick analysis because i was just like i know that like just using one a single example with anthropic after the 380 billion dollar round i was like man i know this is so much bigger of a deal than we've ever seen in a growth round ever and um and i also um like i i know it's it's like and i also know that we're not talking about it enough like currently just how different it is and so i did this analysis where i basically um charted out over the last 10 years i took like four of the best pre-ipo investments ever over the last decade uh in terms of like both just the raw scale like they were big rounds and then also the investors did really well in the rounds and so i think it was slack doordash snowflake and new bank and like typically in those rounds they were like you know the the total round size for the pre-ipo round was like 500 million to 2 billion um and the investors over a four-year period made from like a 2 to 5x um and like everyone went home happy with that that was like a great outcome for all involved um so i think like the snowflake pre-ipo round over a four-year period ended up, you know, it was like 500 million turned into like two and a half billion.

44:22Ev Randle:Like that's insane. That's amazing. When you think about the Anthropic$380 billion round, if Anthropic was to go public and get liquid at a$1.5 trillion valuation, which, you know, they just raised at about a trillion dollar valuation. I don't think people would think that's that ambitious of an estimate. And I think a lot of people would have their estimates higher than that, the gross return of their$380 billion round, the$30 billion that they raised at$380, it would return 35 times that of the Snowflake pre-IPO round. So it's 35 Snowflake pre-IPO rounds in a single round. And I have friends, I know several people that have$3 to$4 billion dollars invested into Anthropic.

45:11Ev Randle:And like, like, it's like so hard to even talk about, like these numbers are so big that it's hard to even comprehend because five years ago, a growth fund was like a billion dollars. Yeah. Like until COVID brought all these growth fund sizes up, a normal growth fund was like a billion dollars. And now there's an individual company that these people have$4 billion invested in, and they might return five times their money in less than five years on$4 billion. Like it's unbelievable. And at least SpaceX took, you know, 20 plus years to like, you know, to make everyone rich and put all this money in the ecosystem.

45:48Ev Randle:But I just don't know if people really understand and are ready for the impact that this much liquidity could have on the ecosystem. I think the one place that people are definitely predicting it and are already seeing it is in the SF housing market. Oh my God. Where it's like, you know, everything's going for 2x asking price at this point. All cash. And it's all cash. Or in equity. Or in lab equity. But I think there's so many knock-on effects in terms of like, what do those employees do? What do they invest in? What causes or companies do they then invest in? Do they start new companies? Do they stay at these labs?

46:25Ev Randle:Like, there's just, it's going to be a shock that's going to impact every single aspect of life, both practical life in Silicon Valley, but then also the lives of employees, investors, and founders in the ecosystem as well. Oh, absolutely. I've done now two episodes with Michel Del Bono, who, to your point, Andreessen Horowitz has multi-products. He runs their multifamily office of Mark and Ben and the principal is there. So it's the wealth management division for them. And each time I talk to him, I'm asking because there's going to be a huge wealth event, like the most amount of wealth creation probably ever because of all these things happening simultaneously.

47:08And so we've gone through a couple of the questions. I'm obviously not going to reiterate them now, but like one of the biggest questions is what do you do when 90 % of your net worth, probably more at this rate, is in one position? And so he has some really great answers to that. Today's episode is sponsored by VCX by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital. Learn more at getvcx.com. Some of you may not have heard this yet, but our sponsor Public just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before.

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48:36Ev Randle:Enterprise AI runs on Merge, the AI infra platform for integrations, agent tooling, and model orchestration. So your teams ship product, not plumbing. Mistral, Dropbox, and Drada already trust Merge in production. Start building at merge.dev. Founders scale faster on deal. Set up payroll for any country in minutes, hire anyone anywhere, get visas handled fast and get back to building. Visit deal.com slash sorcery. That's D E E L.com slash sorcery. So as we wrap up, um, I have like a couple more questions, but one of the things when I was doing research on you all was super interesting was like how diverse your portfolio is, especially in the AI mix like you have StarCloud.

49:23Data centers in space named in the SpaceX S1. Then you have Cerebrus that just went public. Sierra, Langchain, Legora, Fireworks, which we talked about a bit. Merkor. Banis.

49:35Ev Randle:Banis. Merkor. Yeah. Merkor, interesting. I just listened to his podcast with Harry Stebbings and I was really surprised about the positive things that are going on there after the data breach. He cleared a lot of air. Good for him, honestly. HeyGen, Gumloop that we talked about in Exa. So because of this whole mix and like there has been, you know, you guys have a concentrated strategy. Like how do you, how do you come up with a portfolio of this type? They're all very mature. They're all doing really well. Like what is, I guess, like what is the magic between all of that? Yeah. I think so. So when I was coming in and I was kind of in the, in the, like before, before I joined Benchmark, I was like, wow, they've done such an amazing job thematically.

50:16Ev Randle:They have the vertical AI winner in Lagora. They have the horizontal AI winner in Sierra. They have a data infrastructure play in Lagora. They have a developer play in Langchain. They have a prosumer play in HeyGen. And you can keep going and keep going, overall data centers in StarCloud. And then I got in, then I joined and I realized, oh wow, there was literally no thought of like, oh, this is the category that we're going into. It was truly kind of what we talked about before. It was all founder out. It was all based on the founder. And yes, like, did they resonate with the idea that the founder was pitching?

50:57Ev Randle:Yes. But there was zero thought to, oh, this is like, this is going to be a big category. It was just, this is an unbelievable entrepreneur that is going to put their energy to an idea that they've convinced us is really, really interesting. But even in some of those cases, um some of these companies were pivots um and and you know so there was no way that we were um you know super smart to know um you know that some of these companies were going to be in big categories because they weren't even the categories that we invested in and again i think that's sort of the benefit of benchmark is like we don't invest in categories we invest in people when chathan invested in star cloud it was like weeks like we closed the investment weeks before elon started like, you know, professing his love and bullishness on Orville Data Center.

51:45You guys have the partner meeting. You're like, wow, look at that.

51:48Ev Randle:We were definitely, I think Elon, I forget which platform he was on, but he did like a long interview with somebody. And, you know, like half the interview was on Orville Data Centers. And we started like sending it around our group chat. We're like, oh man, this is about, this space is about to get really hot. And it was so ironic because it was like, you know, again, there's so many things, you know, there's like, it's such a heated debate of like, you know, oh, like our orbital data centers the future. Are they going to be too hard to pull off? And that like we obviously discussed both sides when we were talking about the investment.

52:20Ev Randle:But like the investment was about people. It was about Philip and the team that he had built. And it's like, wow, like these are like one that they already had, you know, a GPU working in space. And so like they had proven out their metal and they were the only company that had a GPU in space. So there was already some things that we saw in the attraction, but it was based on the people. I think when you focus and you have your strategy around that, like, again, great entrepreneurs are always in style. And, like, they always pull rabbits out of hats and they end up being magnetized and, you know, drawn towards where are these really massive categories.

52:52Ev Randle:And they often end up pioneering them. Wow. Okay, so as we close out, I have to ask our Brex question. Of course. So Brex is all about performance. If you didn't know that, now you know. Spending smarter, moving faster. But an element of performance that I think is very valuable is who you surround yourself with. You've been at so many legendary funds at this point. You've been surrounded by the top investors over and over again. But I'm really curious from your standpoint, who has been kind of like a mentor to you? Who do you keep as a guiding figure for you as you continue to evolve and grow in your career?

53:27Ev Randle:Yeah, I mean, I wake up every day and I like pinch myself because I've just been so unbelievably lucky and fortunate to, as you said, work with a lot of the people that have like defined the history of, you know, venture capital and growth investing. And not only have they been extremely good at their job, but like basically every single one of them has been a wonderful person. I feel like I learned something different from every single one of them. And so like if you take like a Napoleon Ta, who is a GP at Founders Fund, who runs the growth investing practice at Founders Fund. I mean, I learned a ton about investing with him.

54:01Ev Randle:But the most important thing that I learned from Napoleon was his focus on family and work. And he had a very simple life. He doesn't, you know, he doesn't do, you know, he doesn't do podcasts. He doesn't, you know, he doesn't network. He doesn't, you know, try to spend a bunch of time with other investors. He goes to work. He works really, really hard. And then he spends time with his family. And it's like this beautiful, simple life. and he loves both spending time with his family and working with the Founders Fund team. And it was something that made me realize, wow, and just helped me prioritize just my time and how I think about the important things in my life.

54:32Ev Randle:I think another one now is, I mean, currently Eric Vichery, I think, is just an incredible role model and leader within Benchmark. I think he is someone who, obviously, when you look at his number three on the Midas list this year, if you look at his results, he's, you know, best of the best. Like he is a Mount Rushmore venture capitalist at this point. But you spend an hour or two hours, however long with him, and he is just a extremely kind, hardworking, you know, completely normal person where it's like, it's clear that he's unbelievably smart, but he's almost unassuming in like, he's not, he's not trying to prove anything to you.

55:14Ev Randle:He's not trying to make you feel smaller, or make you feel like he's the smartest person in the room. He's worked really hard, he works really smart, and he just brings like a kindness and like a normalcy to his conversations and his workings with his entrepreneurs and his partners in this room that motivates me and inspires me to do more of the same, where it's like there's not some alchemy to doing this job really, really well. If you work hard and you kind of know the direction that you need to go and you're a great partner to entrepreneurs and you work really hard for them, you like that that ultimately is the job and if you just do that and then get some lucky breaks over over your career you can end up being one of the best vcs of all time so those are the two that come to mind mostly because they I think they've taught me more about you know lessons outside of like the nine you know like the day-to-day work than inside it but I think every single person I've worked with I've been very fortunate to do so because they've all taught me so much.

56:07Amazing. It's a, you know, sophisticated answer compared to the typical growth investor that chooses Charlie Munger. Yeah. Yeah.

56:17Ev Randle:Unfortunately, unlike David Sinner, I've never had dinner with Charlie Munger. Otherwise, maybe it'd be Charlie instead. Oh, amazing. This is a great place to end. Thank you so much. I had so much fun talking everything about AI and who knows what actually happened. Exactly. That's the best part. We can look back at this in a year and I've probably been wrong on everything. What is an agent anymore? It'll be some new term. Well, thank you so much, Ev. Yeah. Thank you, Molly. It's been great. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.bc, where we deliver a once a week top deals and tech headlines email, and also go deeper on our podcast interviews.

56:52Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up. you