Uncapped #41 | The Benchmark Partnership

18:37Peter Fenton:One of the things that you just said, which I hope is okay for me to press on is, and I've wanted you guys to talk about this, which is I know each of you individually and I know you all are founder friendly. And there's like, it's very easy for people in a competitive venture landscape to like poke at one historical example that everybody else has done. If you're just loud, you can just like, you could just poke at people. Sure. I would say you're not loud externally and you sort of have a mindset of like, we're going to let our actions speak. But I've wanted you guys to sort of like speak because I know you're very founder friendly And I've talked to founders you work with and all of that.

19:12Peter Fenton:So I'm actually curious to hear, you know, your sort of thoughts is, you know, you've seen some of the stuff like, is it important for you to sort of just like talk about like what you just said, like there's like a thing and then we have like an immune reaction to it and the firm updates or like, yeah, how do you process all that?

19:30Jack Altman:Humans are storytelling animals. Every firm has their story. And depending on the situation and what the motivations are of the counterparty, you to accentuate certain parts of a firm's history. You know, the ethic of the firm, and I think this is sort of borne out and even in our worst moments, is the company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative, it's the collective premise of an entity which is bigger than any one individual. And there are moments in the past, you know, look, I've been around through the generations where it used to be the standard model that, you know, when are you going to get a real management team?

20:13And that sort of faded to, well, perhaps we can go the distance

20:18Jack Altman:and you have the Steve Jobs narrative, which is like what crimes were committed against this notion of general management versus the founder mode reality that we all support. The part that's sort of most relevant, I think this is what happens every day here, is we view our job, I do personally, and this has been borne out in the references, is making the founders the best version of themselves. And like any relationship, if it's simply sycophantic and enablement and codependency, we make them worse. If it's harsh and it's judgmental or absent, we make them worse. So one of the things I think you need to figure out in references is like, what questions should you ask?

20:56Jack Altman:And of course, if you're going to engage with any great firm, you want to go and do references. The one that's the first phone call, but I actually think it's even, you go a level deeper and say, how does this person make you a better entrepreneur? And how have they unlocked your potential? And what we care about more than happiness is flourishing. And our companies, and I think what's borne out in the work that we've done is that if I work with that group, like I'm gonna be a better version and I'm not gonna be living in fear because then you're not a better version of us, nor am I gonna be getting, forgive me what happens in our job right now, I'm struck by the number of boards where I see this is a relationship that's sycophantic, that where people aren't afraid, people are afraid, I should say, to pursue the truth because they don't hurt anyone's feelings.

21:37Jack Altman:Or worse, I think the greatest crime that occurs in many of the boards that we all serve on is that somebody says something behind the entrepreneur's back, they won't say to their face. That's one of the things I think is a deep ethic at Benchmark is that we are transparent. Like if we're going to say it to your face, we may not say it behind your back, but we're not going to be a situation where, here's what I really thought about the board meeting. And this idea of congruence, which is a key term in psychotherapy, is that you really want to know that you can trust your partner because they're not putting a face, a mask on because they want you to feel a certain way, but they're being real.

22:08Peter Fenton:By the way, this also goes to your point about if you're not going to, if you don't need to put more dollars into the company, if you structurally almost can't put more dollars into the company, then you just want to tell them the truth. You're truth-seeking. If you're hoping to win the next round, you don't want to piss them off because next month you might be writing a term sheet. And I think there's a lot of, there's the references piece, there's the I want to put more money into this company thing. There's just like, I don't want to fight type of stuff. And I do think it leads to that, which I think there's like the best version of being founder friendly is not comfort all the time, obviously.

22:39Peter Fenton:Yeah, definitely not. And there was, I mean, there was a recent example of this. I recently led an investment that's still unannounced, but we actually had the founders over for dinner in the dining room where we'll have lunch here in about an hour. And after, you know, during the dinner, they showed a demo. We were going through their commercial strategy and we gave them a lot of very direct feedback. And, and a lot of it was constructive. It was like a really productive, constructive conversation, but not every founder, you know, responds super well to that. So I called the founder afterwards and I was like, well, how was that for you?

23:09Peter Fenton:You know, how would you respond to that? And in that call, he said, you as a team are going to make us better founders. And I can tell that right away. And because of that, he really wanted to work together because it wasn't just going to be, you know, slaps on the back and congratulations, but it was going to be a relationship where we really pushed both the founders and the whole team to be a better version. Does it feel like structurally different to you than KP and Founders Fund in any way? I think maybe the most difference is with Founders Fund, because I do think Founders Fund obviously really, really leans on this, the kind of like Hippocratic oath of VC, which is do no harm.

23:48Peter Fenton:And in doing so, it's like, hey, we're going to be completely hands off is kind of the pitch. And then if you need something, call us. I think, again, that sells really easy. I actually do think that it's one of these things that in practice actually materializes sometimes as, I don't wanna say like laziness, but it is just more passive. It is just like we should back founders that are gonna figure it out all on their own and that they don't need help and they don't need any VC assistance. And sometimes that works out. And sometimes maybe there are founders that are like that, but I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, any of these things.

24:26Peter Fenton:Like even Tiger Woods has a coach. It's like a hundred percent. And so I think like having that position is something that I think is a great soundbite and like, you know, goes really well on Twitter. But I think when it comes down to it, there's very, very few practitioners, even, you know, the Tiger Woods of the world that don't benefit from something like that.

24:43Jack Altman:This is ultimately the highest accolade of a firm that they seek is a manifestation of a value system. And everyone in this room, I've heard this, and I know I'm going to hear this on your newest investment, is that if we've really done our job, and you'll hear this in our references, they feel like a co-founder benchmark. It feels like they were a co-founder. And what does that mean? Well, it wasn't a conditional transaction. It wasn't a one-night stand if they gave us money and then we sort of could brag about the brand. But it was a, they were proximate with me When, when, what a founder and a co-founder does, it's a bit like being in a partnership where you have a child, where you just say like, there's something existentially deep that's permanent in that relationship.

25:26Jack Altman:And I believe most companies that have single founders end up finding proxy co-founders because they, they, you need support systems. You need a relational, you know, balance and as the ups and downs of being an entrepreneur. And so if we've achieved that, you could say, well, it's not for everybody. Some firms might want more of like just the money, thank you, and the brand. Or they want services that are delivered by people who work at the firm. Yeah, those are different facets. But the depth that can occur when you have that kind of proximate relationship ends up taking you through troughs that would advise the companies to be sold early or to have a destitute founder who's just tired and doesn't.

26:09Peter Fenton:There's also a through line to it. Like I felt this as a founder where like even like a like a long time exact might be four or five, six years. But then you have a board member who's there through the first round, the second round of execs and the third exec team and all of that. So you're working many more hours per day with people on your team. But then when you look back over a decade, you're like there's somebody who's with you the whole time. And it's your co-founder and your board members. So there's there's something about the long arc of it, too, that is special. I have moved away from talking about it as like guidance or advice or whatever.

26:41Peter Fenton:And I loved your sparring partner thing because I think that's what it is. And that's what the co-founder thing is too. Because like startups are hard. They're really hard. And the most successful startups are doing things that are new, innovative, and haven't been done before. Therefore, you're figuring things out for the first time. Like you're figuring things out for the first time that are like challenging hard and no one knows. And so like a huge part of the co-founder thing or, you know, which we should be careful about like using it. But like it's that aspiration or that idea is, hey, we're asking each other questions that like sharpen our thinking.

27:23Peter Fenton:we are like trying to figure things out together and i think that's a that's a very specific way of working where i feel like a lot of times what we're doing is you're i'm i'm talking to somebody i'm thinking of a very specific example from last week was just like where it's like the author knows like she knows what she wants to do and it's like in there and you're asking questions to help them realize realize it and and for it to like come surface or get clarity on it and like that's very it's different than getting like advice right that isn't advice that is that's a sparring partner yeah and um and and a sounding board and i think that's where you get it's part

28:04Jack Altman:of what i feel like is forgiving this where i got to be the older person in the room the the degradation of our industry and it really has been a degradation as i think it's shifted the the system has shifted to winning our goal is to win right because there's there's capital supply now And so you have this large sums of capital that need to be deployed. And so the system is built to, I think, create in the mind of the entrepreneur a selection criteria. They'll say if you're doing POCs, you want to design the criteria of the POC so you win it. So what's happening is the industry's programming entrepreneurs in a way to select for things that I think are off target.

28:40Jack Altman:And they're aligned with the target of the firms and the capital basis they're deploying, but they're off target relative to the quality of the relationship the entrepreneur seeks. So what are the big ones? The biggest thing, I'm not going to pick on the off-target things, the on-target things are when I want a co-founder, what questions do I ask? And do they make me a better version of myself? Do they provide the kind of expansion of my horizons that make me every day feel more joy for doing this work? Do they keep me honest? Are they available? Do they put me first? And so a lot of winning as opposed to serving, winning is a moment in time.

29:16Jack Altman:We average in our boards 10 plus years. If you could back them with the history of my boards, 10 plus years. And so maybe three or four executive teams, as you say, might go through those years. And the sense of continuity of my partner is there. And this is the case of, I mean, I love my relationship with Howie, not to pick one, but with Howie Lew at Airtable. and how he's going through a genesis right now and a creativity that I think occurred at the beginning of Airtable. And it is so fun to watch, but I understand the human and I know what he's gone through. I know how to help him at parts sort of say, like this is an area you want to be asking some questions about.

29:52Jack Altman:And I think that that's different than winning. Winning is a transaction of like, take my capital and I got to get onto the next one. Because if you win, you got to win the next one. And so we say yes once or twice a year, serve for a decade long. and the differentiation of that. And because our incentives aren't the same as deploying capital. So I think that creates, in the entrepreneur's mind, they have to ask the right questions. What do you want in that co-founder? Because you can't fire your board member.

30:15Peter Fenton:Right. I'll take a shot at one of the things I think is like off target, which is the like, you know, it's become like a thing to sell no board seat. And you're like, one of the advantages of working with our firm is we'll give you all this, you know, capital with no board seat. And I think it's, there's like a misunderstanding of boards as governance and control rather than boards as like signing up to work on the company, which I think is like how it should be understood in like 99.9 % of cases. Yeah. But I think it has been very effectively and somewhat disingenuously sold the founders because it like sounds good and you just keep control of your company and there's no risk.

30:50Peter Fenton:And that means that we don't have to help. And so we can, it'll end up deploying a lot more capital. Deploy more capital. Yeah. And probably says something about the experience of the average founder with the average board member. It's like, can you blame a founder for thinking that's a good pitch based on the experience that they probably had with the average farmer. Yeah, and also you hear about a terrible situation once and it makes a big impact without nuance and it's hard.

31:10Jack Altman:It's going on right now. These seed rounds at over 100 million with no board. And it just, I know how it ends. It's just between now and then, the amount of entrepreneurs that will miss the opportunity to really seek out a close partner is such a shame.

31:28Peter Fenton:It is. One of the things I wanted to ask you all about was, I'm guessing I'll take it as a premise that we probably all agree that like a great entrepreneur is like unique or odd or strange or just Beats to their own drum in some important way You know, maybe there's examples where it's not like that We could talk about that too But one of my questions is do you think to be a great investor? You have to be the same way Do you have to be unusual as a person to be a great investor? Or is that not the case? And can you just sort of be like a regular person who can spot unusualness.

32:01Jack Altman:You know, one of the things about Benchmark, as we were talking to Ev...

32:06Peter Fenton:I'm asking selfishly because I don't think I've got the oddities that sometimes I wish I had.

32:10Jack Altman:You know, in our conversations with Ev, I think Peter framed it perfectly, which is like when you know very clearly and then given our structure of equal partnership, you're essentially refounding the firm every time somebody new comes on. Because the whole dynamic of the partnership changes. The conversations change, sort of feel changes, everything sort of changes. And so it feels like a refounding moment. There's some alignment that happens. I think it goes back to the core of like, what values do you prescribe to as a person? And part of it is like, you are competitive. I think that is important.

32:45Jack Altman:Like there is a competition aspect to this asset class. At the end of the day, we are investment managers. and you enter a company and then there's competition to enter the company and then you invest and then the company itself faces competition at some point. Like you can run competition free for maybe 12 months and then the big guys show up. Like each of us has faced immense industrial like competitive threats from external bodies and you have to have some kind of competitive persevering spirit about you that can be that stabilizing force for the founders. Because you also have to have that empathy that the founders feel it 10 to 100x more than you.

33:32Jack Altman:Because at the end of the day, you as an investor are diversified. You get to work on lots of projects. The founder is simply not diversified at all. This is the only thing that they get to work on. This value system, hyper-competitive energy, in empathy, like that is actually not present in a lot of people.

33:52Peter Fenton:I mean, you and I talked about this a little bit with like Max at LaGora's interesting example. You know, you did the seed. We're not here to pump LaGora, but like while we're here, it's like, you know, and it's like, but it was like NYC. It's a legal tech company. Like there was already Harvey. And the question I think I asked you right before we sat down was like, why'd you meet? Like, you know, I think like once you meet Max, you can see it's good. But like, I'm like, you know, to the extent that like, that's like a case study in spotting somebody who I think is unusual in a very positive, strong way.

34:22Peter Fenton:Like, what was that for you?

34:24Jack Altman:Well, Peter and I actually met Max in this exact room together. That was the first reading we had. And I think within 15 to 30 minutes, we both came away sort of like that unspoken language between us that we want to be in business with this person. Yes, it was legal tech, but there was some core purpose with him as he was expressing it. And the founding story of like how he picked that problem. And, you know, they're sitting in Stockholm watching Harvey. At the time of our seed round in March 24, I think Harvey had already raised a billion and a half dollar valuation or two billion. And then by the time the product had launched in October of 2024, I think their number one competitor had already raised a three or four billion dollar valuation.

35:08Jack Altman:And so, but what we were backing was him, his co-founders, because when we invested, it was a team of five people that had a very core insight on how to attack the legal market and why LLMs were like the perfect fit for lawyers. And when he expressed it, Eric likes to say this a lot, there's a magic of founders when they explain something very complex and they explain their unique insight into it. And it becomes very obvious. Like, that's obviously how the world should work. and with your fire and your energy, that will probably be how the world works. And in Max, you saw that right away. We saw it right away.

35:45Jack Altman:And so we needed to be in business with him. And that was it. And like the conversation immediately went to, well, great. Like, what are you doing the rest of the day? Like, we just want to spend time with you because like clearly you're spectacular. Clearly there's something here. Yeah, and it's been amazing. And like, we didn't see it, right? Like the product didn't launch until six months after our money went in. And then I think like, you don't start to see the amazing stuff that a person can do for a while,

36:14Peter Fenton:but it's amazing. If you look back at other great investments that you've had, do you think it's always clear that the person's unique to you or was something in the Lagora situation, did something there jump out faster? Or like, are there other situations where you don't see it for a while? Do you always see it quickly?

36:30Jack Altman:No, I think you see it quickly, but each person spikes differently. Like I think we all have different coming back to your question of like, is there one way to succeed as an investor? God, no. In fact, in this firm, we joke these imagine two circles. Entrepreneurs that I respond to entrepreneurs Eric responsive. There's this tiny little gray area in between with like six people in the universe.

36:54Peter Fenton:And for two people who do like a lot of software infrastructure or enterprise or open source or whatever. for our Venn diagrams of entrepreneurs to be so separate is kind of remarkable. So you guys meet a founder together and one of you will be like, this person's amazing. And the other one's like, I don't see it at all. And flipped. I don't know about that. Yeah, no, no, no. I could never work with that person. That's a different statement than whether they're good or not. Whether they're good or not. I would like benchmark to invest, but I don't want to work with them. Yes.

37:25Jack Altman:Good for you and not for me. Yes. I think we do have that. By the way, Bill Gurley and I had that where it's like there's, again, almost no intersection. What's interesting, I think this actually relates to any entrepreneur that's thinking about working at a venture firm. A friend of mine was raising money, family friend, so that it wasn't appropriate for benchmark. And I said, you know, he said, how do I choose? And I said, the question I would be asking if I was an entrepreneur is, which of these esteemed venture capitalists is most personally resonant with you and committed to you? And they're going to say they're committed because they want to win, codify it.

37:58Jack Altman:like make them be explicit about the kind of commitment they're going to make and make it uncomfortably concrete so with most of the entrepreneurs i work with we speak every friday and and so but you you make it real and if you don't want to put the time in if you don't feel that response for you with running your fund and for us individually um i knew max lagora like chaitzen would be 24 70 fly to stockholm on a moment and he has and he is today yeah it's true You're going to do it today. He's going to do it today. Okay, so there you go. And so as you introspect in your commitments, does it clear that threshold for you personally?

38:36Jack Altman:Because if it doesn't and you're doing it because it's a good investment, that is a reliable path to a bad investment and a bad relationship. And so I think you're going to find that chasing what is it that you see and then allowing that to get washed with experience because sometimes you're going to get it wrong. And when you get it wrong, you learn, okay, don't make that mistake again because you've seen me make that mistake and vice versa.

38:58Peter Fenton:So it's interesting that you guys have like these Venn diagrams that let's just say they don't touch just to make it simple. But they're both good. Like I know you both make very good investments. Is that basically like, you know, you can kind of cultivate any set of tastes as long as it includes the good stuff. Like, is that basically what you shake out to? Or is it like...

39:14Jack Altman:There is a lot of overlap on the people though. Like if you look at the people in these Venn diagrams, the four of us have, there is overlap in the quality.

39:23Peter Fenton:In the qualities of the people. Yeah. Yeah. Something Keith and Vinod said that was interesting when I talked to them together is they're like, they're really different people, which is very apparent when you talk to them. And they said one thing that we basically always agree on is do we walk out of the meeting with the founder and was that person special or not? Which I thought was an interesting thing, because I wouldn't have expected that out of the two of them because they are quite different. So I would have thought that there would be these very different tastes in there. That doesn't mean they always want to make the same.

39:49Jack Altman:It's very rare that one of us thinks a person is special and the other person is like, absolutely not.

39:55Peter Fenton:Yeah. Yeah. I mean, another question I always have here is like, are really special people? Is it like, can you miss it? Like, is it a special ability to tell special people? And like, let's take Max at Lagora. Like, do you think that a hundred reasonably, at least okay VCs who are, you know, been doing it for a while, do you not think most of them would have come out and been like this guy is great is it unique to be able to see greatness well earlier is it more about getting into the right room with howie and jack dorsey at the right time that's a good question i think most of the time people react similarly like people who are good at this will identify or see that specialness like we and we miss it like everybody misses it sometimes but do it but i think there's a bigger thing that happens which is i think people talk themselves out of stuff for other reasons yes like they'll the competitive situation, you know, this company or like, can the outcome for what they're working on be big enough?

40:53Peter Fenton:And like, you know, like those kinds of things. Like I have that in like, I'll take Alex at scale. Like you met Alex and you were like, something's going on. This guy is a winner. Like when we saw it very, very early, like we saw it together. And, um, and you know, and those were particularly painful because it's like, we absolutely recognized that he was amazing and a super special person. We absolutely recognized that the autonomous vehicle labeling revenue was bullshit and going to go away in like not that long. So the facts and the read was correct and the conclusion was incorrect. And it's like, damn it.

41:31Peter Fenton:And so like, you know, that's like a particularly painful one is good lesson for me, which is just so you thought he was special and you thought he was special and passed anyway? Yes. Have you ever done that? And like, have you ever passed on a special person because you didn't like something else about the setup and been like, I'm still glad I did that? Or is the lesson just always back if you feel that way, no matter what else? I mean, at this particular moment in time, I would say like, yes, I did. You know, with the hindsight benefit, it's like, if you feel that way. And I think you have chemistry with person.

42:01Jack Altman:Like that's part of it, which is like, who do we respond to? We're focusing on the positive case. The negative case, which is useful also to think about, and it's actually true, I think, if you're an entrepreneur, is this word inauthentic. And I think it's easy over time, over many decades, to see the masks, the fakeness, the posing. And if there was one trigger for all of us in general, I think this is true in entrepreneurship, it's true for the employees you're recruiting, is that they think you're faking it. Yeah. And if there's a little fake it till you make it thing, put that aside. I think that's broadly bad advice.

42:37Jack Altman:If someone's not willing to be vulnerable with us in the meeting and expose what they don't know and be real, then how can we have a relationship? So there have been people come in here who've done well, who've raised money. And particularly now in the cycle, I think you get people who are playing a promotional game because there's something that's attractive in the external metrics. It could be a research background, pick your favorite. and they, okay, we got to sex that up a bit and then we'll flip these people. If there was a common thread in the benchmark investments is that very low representation, there are exceptions of the promoter.

43:13Jack Altman:And the case where you find someone who's like really talented, but they're in the wrong market and we don't back them, but we love them, that happens. But when we get in trouble as an industry, I think is when we start to become quite accepting of the, this is, forgive me, the distinguishing traits between founders and entrepreneurs. When you find it in a market like we're in, the number of founders increases geometrically. I think the number of entrepreneurs stays as a fixed constant. So what happens, we have a lot of founders, because I could be a founder, you could be a founder, you were a founder, but you're also an entrepreneur.

43:48Jack Altman:Entrepreneurs have this guile. There's a sense of leverage. Like Brendan at Mercore, to me, He is an entrepreneur in any cycle in any market. He happens to also be a founder right now. I think that's not the case for a number of people who found companies who would otherwise, if the market was shitty, they would be employees at big company X, Y, or Z. So as a founder, you have to, I think, introspect. You have the entrepreneurial qualities. And to study entrepreneurship, the vast majority of entrepreneurs drop out. The phenotype of the personalities, they don't want to be validated by a system they didn't create.

44:26Jack Altman:They're not looking for, you know, fancy brand names. They're not attracted to big, you know, fancy whatever. They look for things that are substantive. The dropout's not straight-ish, dude. Yeah, and there are exceptions. You know, Brett got great grades.

44:41Peter Fenton:Brett's in that Van Dyke. Six people in the universe on a stage.

44:46Jack Altman:But I think this market right now, because it's so attractive to be a founder, has brought in a degree of promotion and the sorts of stuff that get people into trouble over the mid to long term. And, you know, our whole system is identifying and getting proximate to the entrepreneurial energies, which are, you know, kind of, as we know, these forces beyond all measure. There was a period of time between Q4 of 2022, we call it like end of 2023, there was like a broader macro tech correction where like a whole bunch of like public tech stocks corrected. there was like a tightening of the late stage market and like you know interest rates were going up and like all the sort of like tourist capital had like fled the scene for a little bit of time and capital just like got a little bit harder to raise and at that time what was really interesting is if you look at all the seed and a deals that we did and where those companies are now like it will look like our hit rate went way up but i actually think what happened is that if you were willing to start a company at that point in time in AI, you were a true believer.

45:50Jack Altman:Like there was some natural inspiration for what you were doing. So it's like letter fireworks, red Sierra, Harrison at Langchain. Like it's, it's companies where the entrepreneur had some fire that was like, I need to do this. God, we're all those done in that era, in that one year.

46:06Peter Fenton:I think you're right. And I think a lot of people read it as what happened here is they just got to the blue ocean thing first. Maybe there's a degree of that, but a lot of it is if you want to do this at a time when it looks really painful. That's just a different subset than people who are going to do it at a time when it looks incredibly attractive. That's right. Yes.

46:21Jack Altman:Yeah, 2008, 2011, when we did Series A at Uber, Instagram, Twitter. Snapchat. Snapchat. Yeah. But then by 13, 14, it became very...

46:32Peter Fenton:Yeah, and it's funny because all the think pieces and essays about this stuff are always like there was a new technology, and on top of that new technology came X. You know, you get cloud, you get blah, blah, blah. You get mobile, you get blah, blah, blah. You get AI, you get blah, blah, blah. Which I think is true, but you don't really see people talking about in the moments where the psychology requires a different kind of hardness.

46:53Jack Altman:And I think in that moment in time, like 2022, 2023, early 2024, if you wanted to be in AI applications, an AI application enablement, it actually took a special kind of person that truly believed regardless of what anybody else thought. Because at that time, it was quite unpopular and weird to decide you wanted to build an AI application. Yeah. Because the natural assumption was that fundamentally the foundation models were so powerful. And as they reached more and more intelligence, like they would just start to gobble up the applications themselves.

47:29Peter Fenton:Even if you look at the people who worked at the labs in the like late 20-teens. Yeah. And now you compare those people to the people who are working at the lab. I mean, not the opposite people are brilliant now. but like you look and you see like ilia and greg brockman and all these people it's like they were doing it when it was really not cool yes and those are still i think the most brilliant people yes there's something there the last topic i want to get to is basically how you all are thinking about ai which i realize is sort of like something that we've probably all talked about a lot but i do think it's like the most interesting thing going and i don't think any of us want to talk about politics right now going through sort of a lot of your recent investments it's actually clear that you guys caught the AI wave in like a pretty substantial way.

48:12Peter Fenton:A lot of them were not obvious companies. You know, even Lagora, which is sort of like a middle of the fairway venture type of company, was not an obvious thing to do from Sweden. And, you know, there was already Harvey. I think Manus was a very unusual investment as well. I think Cerebris is extremely interesting. Obviously, like Sierra was like before it was happening. And I think when it happened, it's like, wait, Brett Taylor is doing customer support. Like, I don't think you guys were loud about AI, but I think just empirically speaking, you look back and you caught a lot of it. So I guess what I'm curious about is as you're thinking now and you're looking at companies today, what are you excited about?

48:46Peter Fenton:Like what are, you know, to the point of you guys are having these conversations as a partnership and you're being really curious. Like what is at the top of your curiosity list in AI right now?

48:55Jack Altman:I think you just have to roll back to, you know, call it end of 2022 when we happen to get involved with these spectacular entrepreneurs. I think the thing that it became clear to us sitting around the table was that AI was the thing. And even if it wasn't the thing, it didn't matter. That was like where we were drawn to. Like it was the thing that had this like gravity pool for us. And so all we wanted to do was spend all of our time talking about it, thinking about it, meeting all the people, working on it, all that kind of stuff. And then you have to overlay your value system on the thing that you're excited by.

49:29Jack Altman:And the thing that we laid on top of that was what kind of relationships do we want to get into with companies? in that moment in time. And we decided we wanted to be in business with companies where that ethic of being the primary partner, board partner, lead investor, first investor, principal investor, principal believer in the mission is how we wanted to practice investing in AI at that time. And so that meant that we were looking for just really spectacular entrepreneurs with unique approaches to the market. And if you want to do that in a place where you want to be the first investor and you want to back teams with two people, three people, four people, five people, whatever, you're often meeting people that are probably a little bit early on whatever the next curve was.

50:19Jack Altman:And so if you remember what was happening in 2022 and early 2023, everybody wanted to start a foundational lab and everybody wanted to aggregate GPUs. And so there was like a big drive to aggregate capital to basically buy GPUs, which then would be utilized for training runs and stuff like that. And it wasn't that we had some hypothesis or some macro view of why we don't want to do that or do want to do that. We were looking for companies and entrepreneurs that resonated with us, that wanted to partner with us. And in that moment, we met a lot of people that were working on really aggressive ideas that we thought were just spectacular people with spectacular approaches.

51:05Jack Altman:And as a result, you saw this list of companies that we compiled at that time. So that was when we did Sierra, when we did Fireworks, we did Langchain, we did Markor, we did Levelpath, we did Lagora, Manus, et cetera, et cetera. All of that came together. And when Eric did Cerebris, the Series A, like it's all of that same stuff, which is partnering super early with founders, working on something that they're deeply passionate about. And frankly, it's cliche to say it, but all of those investments at the time were a little bit non-consensus.

51:42Peter Fenton:Yeah.

51:43Jack Altman:I think you have to be.

51:44Peter Fenton:It's interesting because from the outside in, before I joined Benchmark, I think if you look at the investments that were made in that kind of 22, 23 time period, you had like an inference cloud with fireworks. You had a data infrastructure platform with Mercore. You had a horizontal AI play with Sierra. You had a vertical AI play with Lagora. And obviously that's only four of the kind of 10 great investments that were done in that era. It was easy to ascribe kind of like a thematic nature. Then you got here and you're like, oh my God, these guys have no idea what they were doing. That is correct.

52:15Peter Fenton:That is correct. But I think you come in, you're like, oh wow, they had like a vertical, they had horizontal, they did data. It was like, oh, they kind of feel how you're saying. Like they must've done a market map. And then you come in and you start asking about each of the investments and the story behind each of the investments. And like 90 % of the story on every single one of the investments is the person, is the founder and the entrepreneur and the relationship that they built and why the entrepreneur was so special. And that was so revealing to me coming into this organization and this partnership was like, wow, like the founder centricity just like bled off the page in terms of the stories of all those investments.

52:51Peter Fenton:And so I think that's the way that we're approaching it today is obviously we love to talk about all of the newest and greatest things that are going on in AI every single week. But in terms of the actual investments, it's always, and I think it lends itself, especially to this era where I think because the sands are shifting beneath the founder's feet so quickly in AI and things are changing so rapidly, like founder centricity as an investment strategy matters more now than, you know, any time in the last decade. I think the underlying like technology substrates changing very quickly with AI in a way, like anything, any software that you could have built in like 2022, you could have built in 2010, plus or minus.

53:30Peter Fenton:Like once we have the cloud, you know, we got little APIs here and there, but for the most part for 12 years, like it was pretty stable. If you compare that to today, you're getting more change like every quarter than, you know, we did in a decade in terms of the substrate. And so a founder's ability to navigate that and actually like understand where their edge is and where their edge is going to come from and how quickly the moats are deteriorating because they're deteriorating really quickly and how do you build the next one? Like it's just, it's critical. And so I think it becomes even more important.

53:58Peter Fenton:And so if I look forward, I'm like, you know, we see all the same things. Like it sure feels like the infrastructure cycle is going to continue. It sure feels like, you know, five years from now or maybe even sooner, we're going to have really interesting things in robotics. It sure seems like agents are getting really good and the applications are going to get better. And like all these things like seem like really clear, but I don't know that that isn't enough, I don't think, to make an investment. It's impressive to me that it would be it would have been so tempting to answer my question with some high-minded thesis about like, and you all just said founders.

54:33Peter Fenton:Well, I think it's also,

54:35Jack Altman:if you step back and you just think of these as forces, not like specifically AI or social or mobile, there are windows where the disruption is so high that entrepreneurs come in and they see something with such clarity that they can't not do it. And then there's this lag effect years of like all the other people then come in afterwards and and in a sense that happened already with ai it happened with the first generation it happened with people doing okay now we gotta do our model company now we got but but when your brother and the team of people were at open ai and that was before it was obvious then lightning struck my belief is that that is likely to happen again at least one or two times in the ai cycle where there's something so disruptive that no one can fully understand it and then there's a completely new kind of entrepreneur that emerges.

55:25Jack Altman:What we've been watching for the last three months post-op was 4.5, is the force of that disruption has awakened a whole group of entrepreneurs that were otherwise not seeing things they were seeing that now they weren't seeing them three months ago. I'm a big believer in what you're doing with Sunday and robotics, because that's a world where we all know that in a decade, we're going to have these things in our house. But the path from here to there, is that an incumbents game where the big companies are going to push down complex products, or will there be entrepreneurs? It seems likely that it will bring, so much of this is like, okay, where is there a disruption that, but then the lag effect of our industry is that, you know, 90 % of the capital flows in afterwards after the entrepreneurs have figured it out.

56:07Jack Altman:By the time it's sort of figured out and there's the next thing, like it's not for us. And that's our faith that the Silicon Valley is an adaptive landscape that will continually have these disruptions that make, as soon as there's a winner, like we're kind of uninterested, we move on.

56:22Peter Fenton:so it's a great place to end thank you guys this was really fun thank you thank you