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Yesterday in Helsinki, this editor interviewed four of the six general partners at Benchmark, the nearly 30-year-old, Silicon Valley firm that\u2019s known for some notable bets (Uber, Dropbox), paying each general partner exactly the same way, and for continuing to raise similar-size funds over its many years rather than balloon in size.\u00a0 <\/span><\/p>\n We were speaking at Slush, a major event for the European startup ecosystem, so I naturally asked why the firm was making such a big showing, given that it\u2019s hard enough getting the Benchmark team to appear in Silicon Valley together.<\/span><\/p>\n Victor Lazarte, a gaming company entrepreneur who joined Benchmark five months ago as its newest GP, admitted that there was \u201cno business reason\u201d for Benchmark to come other than it\u2019s an \u201cexceptional\u201d place for the tech world to convene. (It truly is gorgeous.)\u00a0<\/span><\/p>\n Larzarte was equally candid when the conversation turned to soaring valuations in recent years, and I asked about his own gaming company, Wildlife Studios, which raised a Series A round from Benchmark in 2019 at a $1.3 billion valuation and, less than a year later, was assigned a valuation of $3 billion when Vulcan Capital led a subsequent round. Larzarte said the company had really made \u201clike, no progress\u201d in between rounds, but that because Benchmark had funded the company, \u201ceveryone\u201d subsequently wanted to invest in the company. (He said that, in retrospect, taking on too much money at too high a valuation so quickly was a \u201cmistake.\u201d)<\/span><\/p>\n Not last, we talked about how strange it is to be living through a general downturn and a boom in AI investing at the same time. On this front, the team was clear in its assessment that today\u2019s high-flying but closed large language model companies aren\u2019t going to be the breakaway winners that many expect them to be. (Worth noting: it is not an investor in such closed LLM companies, including OpenAI and Anthropic.) You can catch our conversation in this longer broadcast<\/a>; meanwhile, you can find some excerpts below, lightly edited for clarity.<\/span><\/p>\n Regarding Benchmark\u2019s views on the sweeping trend of AI in everything, partner Miles Grimshaw said we\u2019ll be collectively astounded at how backwards our current use of software will look just a few years from now.<\/b><\/p>\n I think if we look back at ourselves in a few years \u2013 maybe even a year \u2013 it will feel like we were primates kind of mashing rocks together to make fire. In two years, it\u2019ll be weird that you had to click all these buttons in Salesforce and navigate around and that it didn\u2019t do more for you. User expectations of what\u2019s possible are ratcheting up, and you\u2019ve got tectonic forces at play for imaginative, creative founders to take advantage of.\u00a0<\/span><\/p>\n I think the question [ties to] the startup opportunity versus an incumbent opportunity. You can never tell founders where they should go \u2013 that\u2019s not what we do. But one of the places to maybe avoid \u2013 the traps \u2013 is: don\u2019t be Microsoft. Don\u2019t be [part of] the Copilot game [meaning Microsoft\u2019s AI-productivity tool that\u2019s powered by OpenAI\u2019s ChatGPT]. That\u2019s what they\u2019re doing. It serves their business model. It serves their product environment very well. But be more creative and ambitious than just Copilot.\u00a0<\/span><\/p>\n Peter Fenton, the most senior member of Benchmark\u2019s team, weighed in to add that:<\/b><\/p>\n I\u2019ll come out because [Grimshaw is] not saying it: we didn\u2019t invest in a large language model. Maybe this is unique to Benchmark, but our view is the capital intensive [companies are tricky]. We\u2019ve been in some \u2013 we all took Ubers here [to the event]\u00a0 today [and that was a Benchmark portfolio company]. And capital-intensive businesses and venture backed companies have historically not been great partners.\u00a0<\/span><\/p>\n Our [belief] is that open source will end up having a profound effect on the ecosystem. We\u2019re all, in a way, soldiers in the army of \u2018tear down anything that\u2019s getting capital intensive and overbuilt\u2019 and then propagate a developer driven world. And these experiences in AI are going to be built by developers who are imagining stuff that no one can fathom at a large language model, because they\u2019re serving a different kind of platform horizontal need. So yeah, we hope [the closed LLM companies] do well. We love the innovation. But I\u2019ve been particularly drawn to the idea that there\u2019s an open source founder who\u2019s probably going to surpass almost everything that you can do with capital.<\/span><\/p>\n Other outtakes from our conversation include Fenton discussing a big miss by Benchmark that came up during the chat (by accident, candidly), which is Airbnb.<\/b><\/p>\n You mentioned Airbnb. That\u2019s one of those on our long list of deep regrets. When I joined the industry, you could buy 20% to 25% of a company in a Series A investment for a number today that sounds like a seed round \u2013 $7 million to $10 million. Because we had an ownership threshold that was impossible to achieve [when Airbnb was first fundraising], we missed the opportunity. And we\u2019ve sort of relaxed that as a constraint because it\u2019s not a question of what can Benchmark own. It\u2019s: what is the company\u2019s potential?<\/span><\/p>\n We also talked about what makes a Benchmark company in 2023, with GP Sarah Tavel saying the focus very much remains on nascent teams:<\/b><\/p>\n Of the investments that we\u2019ve made so far this year, some large percentage of those [were] actually at incorporation of the company. So more often than not, it is actually two people who see an opportunity, and we\u2019re getting there before they even left their last job to start that company.<\/span><\/p>\n