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The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Benchmark's Eric Vishria on Where is the Value in AI: Chips, Models or Apps | Why Nvidia Will Not Be The Only Game in Town | The Commoditisation of Foundation Models | Which AI Apps Have Sustaining Value vs Hype and Short Term Revenue

Wed, 25 Sep 2024

Description

Eric Vishria is a General Partner @ Benchmark Capital, one of the world's leading venture firms. At Benchmark, Eric has served on over 10 boards including Confluent (CFLT), Amplitude (AMPL), Benchling, Contentful, Cerebras and several other private companies. Prior to joining Benchmark, Eric was the Co‐Founder and CEO of RockMelt, acquired by Yahoo in 2013. In Today's Episode with Eric Vishria We Discuss: 1. How to Make Money Investing in AI Today: How does Eric think through where value will accrue in the stack between chips, models and applications? Why does Eric believe foundation models are the fastest commoditising asset in history? Why does Eric believe that Nvidia will not be the only game in town in the next 3-5 years? 2. How to Invest in AI Application Layer Successfully: How does Eric analyse between a standalone and deep product vs a product that foundation model will commodities and incorporate into their feature set? How does Eric differentiate between the 10 different players all going after customer service, or sales tools or data analyst products etc? How does Eric analyse the quality of revenue of these AI application layer companies? What does he mean when he describes their revenue as "sugar high"? 3. How the Best VC Firm Makes Decisions: What is the decision-making process for all new deals in Benchmark? As specifically as possible, how does the voting process inside Benchmark work? What deal was the most contentious deal that went through? What did the partnership learn? How has the Benchmark decision-making process changed over 10 years? 4. Does AI Break Venture Capital Models: Does the price of AI deals and size of their rounds break the Benchmark model? Will foundation model companies all be acquired by the larger cloud providers? Unless multiples reflate in the public markets, does venture as an asset class have hope? Why does AI make paying ludicrously high prices potentially rational?  

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5.089 - 22.704 Eric Vishria

Foundational models are the fastest depreciating asset in human history. I don't believe NVIDIA is going to be the only game in town on infrastructure. We have a major, major shift in AI, which could be bigger than any of these other shifts maybe combined. It's simultaneously the most exciting and most disorienting time in my 25 years in technology.

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22.804 - 28.149 Eric Vishria

There's a lot of uncertainty, but we've been more active than we've been since 2010 and 2011.

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29.85 - 49.18 Harry Stebbings

This is 20VC with me, Harry Stebbings, and today we have Eric Vichry, a general partner at Benchmark, joining me in the hot seat. Now, what is amazing about Eric is the breadth of his investing success. From Benchling, to Amplitude, to Cerebrus, to Confluent, these are incredible companies, but in totally uncorrelated and different industries.

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49.38 - 65.788 Harry Stebbings

A once-in-a-generation investor, a true picker, and one of the greats. But before we dive in today, all of you listening use tons of software every day. Sometimes it fills us with rage. You can't figure something out. The chatbot in the bottom right is useless. You keep getting bombarded with these useless pop-ups.

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65.968 - 83.937 Harry Stebbings

And for those of you who build products, no one wants their product to feel like this. Thankfully, a company exists to help users without annoying them. CommandBar. It does a couple of very helpful things. First, it's a chatbot that uses AI to give users extremely personalized responses and deflect tickets. But it can be beyond just text.

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84.137 - 101.068 Harry Stebbings

It can also co-browse with the user and show them how to do things inside the UI. Magic! But it can also detect when users would benefit from a proactive nudge, like a helpful hint, or an invitation to start a free trial. CommandBar is already used by world-class companies like Gusto, HashiCorp, Yotpo, and Angelist.

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101.368 - 120.213 Harry Stebbings

If you're a product CX or marketing leader, check them out at commandbar.com slash harry. And talking about incredible companies with Command Bar, I want to talk to you about a new venture fund making waves by taking a very different approach. It's a public venture fund anyone can invest in. not just institutions and accredited investors.

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120.433 - 138.017 Harry Stebbings

The Fundrise Innovation Fund is democratizing venture capital, which could have big consequences for the industry. The fund is already off to a good start with $100 million into some of the largest, most in-demand AI and data infrastructure companies. Companies like OpenAI, Anthropic, and Databricks.

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138.297 - 160.32 Harry Stebbings

Check out the Innovation Fund's impressive list of investments for yourself by visiting fundrise.com slash 20VC. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Innovation Fund's prospectus at fundrise.com slash innovation. This is a paid sponsorship.

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160.62 - 179.99 Harry Stebbings

And finally, let's talk about Squarespace. Squarespace is the all-in-one website platform for entrepreneurs to stand out and succeed online. Whether you're just starting out or managing a growing brand, Squarespace makes it easy to create a beautiful website, engage with your audience, and sell anything from products to content, all in one place, all on your terms.

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180.21 - 199.063 Harry Stebbings

What's blown me away is the Squarespace Blueprint AI and SEO tools. It's like crafting your site with a guided system. ensuring it not only reflects your unique style, but also ranks well on search engines. Plus, their flexible payment options cater to every customer's needs, making transactions smooth and hassle-free. And the Squarespace AI?

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199.223 - 222.242 Harry Stebbings

It's a content wizard helping you whip up text that truly resonates with your brand voice. So if you're ready to get started, head to squarespace.com for a free trial. And when you're ready to launch, go to squarespace.com and use the code 20VC to save 10% off your first purchase of a website or domain. You have now arrived at your destination. Eric, I am so excited for this, man.

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222.302 - 245.24 Harry Stebbings

We've been waiting. I think it was like five or six years since our last one, at least. So thank you so much for joining me today. You look older, Harry. The Botox isn't working. But I was just listening to you on another show, actually. Not nearly as good as mine, by the way. You said that as a CEO, you felt you fell short. And it didn't really go anywhere from there in that conversation.

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245.621 - 251.204 Harry Stebbings

And I wanted to understand why... As a CEO, you think you fell short as specifically as possible?

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251.604 - 269.635 Eric Vishria

When I reflect on Rockmelt, which is a startup I founded and was CEO of, my reflection is that we fell short, like far short of my hopes and dreams for the company, like my expectations for the company and my hopes and what I thought we could accomplish. We fell really, really far short of it. You know, and I think there's a few ways to think about it.

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270.015 - 294.113 Eric Vishria

One of the reflections, and it's been really useful now as a venture capitalist, is good teams with an interesting idea, it's not necessarily enough. The real lesson from it for me is like, Hey, you can put it together a great team. And I think we did. You can have an interesting or provocative idea. We were rethinking the browser and this is circa 2010. So I think we had some of the right ideas.

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294.513 - 318.397 Eric Vishria

We had some of the right execution even and a great team, but distribution for a browser, brutal. But the big takeaway, the big lesson from that actually, I think is just that, you are really hard. And I think it makes you really empathetic. It makes me really empathetic as a venture capitalist now. When I meet entrepreneurs and you kind of understand like, well, you know what?

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318.417 - 322.082 Eric Vishria

This stuff is really hard and there's a whole bunch of stuff you can do and there's a whole bunch of stuff you can't.

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322.563 - 333.495 Harry Stebbings

But something is wrong there. If you think about that as an investor today, you're like, it's either wrong team, wrong market, wrong product, wrong time. Something is the inhibitor there.

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333.896 - 350.246 Eric Vishria

Yeah. I think the question is whether it's deterministic or not. Like it, It's just like, is all of that knowable? Like we're all taking calculated, whether you're an entrepreneur or you're an investor, you're taking a calculated risk, right? Of certain probabilities. And so I just, I don't think it's deterministic.

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350.586 - 370.795 Eric Vishria

If you kind of like perfectly evaluate the team, the timing, the product and everything at the beginning, you can actually determine with certainty whether it's going to work or not. And that's just like, that's part of it because there's too many things that change along the way. As those things change, the probability of potential outcomes changes a lot.

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370.875 - 375.377 Eric Vishria

And so like, I think that's the part of it that that's why startups are hard and fun.

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375.758 - 381.08 Harry Stebbings

Is there anything you would have done differently about your CEO ship? Now you've worked with some of the best CEOs, the best founders.

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381.36 - 407.05 Eric Vishria

Oh, a million. I do a million things differently. Like I, and I say this to the CEOs I work with now is, Some of the big mistakes that I made were definitely not thinking about distribution enough. That's always a big thing. There were a couple times or two people specifically that I think about where what they wanted in comp and what I was willing to give were separate.

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407.07 - 425.738 Eric Vishria

They were just off and they were so far out of market in terms of what their ask was. At least for one of them, I would have just... broken all the rules and thrown it out and hired them. Those are two examples. But I think those things, you know, you can get into real trouble if you kind of keep doing something like that. It's always a balance.

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426.158 - 436.346 Harry Stebbings

Can I ask, on one, in terms of the distribution element, how do you dig into that as an investor today, evaluating whether a founder has thought that through comprehensively enough for you to get comfortable on that?

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436.827 - 454.664 Eric Vishria

I'm not looking for an answer or a right answer. What I'm really looking for and trying to figure out is, has the person thought about deeply and is constantly learning or constantly applying and adding new mental models to their framework to figure out what the right path is and they're navigating it.

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454.884 - 471.081 Eric Vishria

It isn't like, hey, I'm a boat captain and I'm looking and like, this is where we're going to go. You start going and then conditions change and you get more information and you have to kind of constantly change. And so what you're actually trying to evaluate isn't, they're not going to have all the answers and that's okay.

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471.401 - 486.094 Eric Vishria

You can have theories and hypotheses and then evaluate and change as time goes on and you get more information. I think that's really what you're looking for versus this is how it's going to work. And that could be bad in its own way.

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486.514 - 504.027 Harry Stebbings

Speaking of like changing tides, being that kind of captain of the ship and moving with the tides, you then become an investor, very different role than being a CEO. And you said something that I very much agreed with before, but I loved it. And I wanted to dig into why. You said career investors, ah, they're all better. They're always better.

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504.347 - 505.207 Eric Vishria

They're better investors.

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505.628 - 506.128 Harry Stebbings

I agree.

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506.548 - 514.214 Eric Vishria

Well, also not necessarily better board members, not necessarily better advisors, not necessarily a better bunch of things, but definitely better investors.

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514.574 - 516.796 Harry Stebbings

Why do you think they are better investors?

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517.256 - 545.675 Eric Vishria

Practice and reps matter. And so if you take somebody who's 15 years into their career, as an example, and they were an operator at that time, they may have seen three to five companies that they worked on and know them really deeply and know the ins and outs of them. If you're a career investor, over 15 years, you'll have seen 30 or 35 companies and hundreds and hundreds, thousands of pitches.

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546.355 - 565.37 Eric Vishria

And then of those pitches, you'll be thinking about, well, I saw this one and this is what it looked like then. And 15 years from now, or 10 years later, or five years later, you've run this very long-term business. a longitudinal experiment and you have data and mental models around that. And so I think that that's really helpful.

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565.65 - 583.858 Eric Vishria

It can actually hold people back too, but I think that's really helpful for investors. And so that's why I think the career investors tend to be really better investors. Why are they not the best board members? They haven't actually done these things at depth. They haven't done them themselves. They often lack empathy and understanding.

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583.878 - 602.508 Eric Vishria

I think they often think that things are more deterministic than I think they actually are. Like all of those things, I think actually really can get in the way. And I was talking to my partners yesterday about it kind of. We were talking about a board member and he was at a different firm who is on a couple of boards with us.

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602.628 - 625.671 Eric Vishria

And it's like the challenge with that career investor is they think like if a company has a plan and they miss the plan, that's because the company messed up. And if the company had a plan and they exceeded the plan, it's because the company did great. Or executed or management did great or management messed up. And it's just like, there's about 47 other ways that could go wrong.

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625.911 - 648.127 Eric Vishria

The plan could just be gobbledygook from the beginning. It could be totally wrong and messed up. There could be external reasons for it. And the whole job that we have is to try to... figure out root cause on those things and help them figure out root cause on them and then like fix it. You're not helping your three-year-old like fall or not fall or teach them a lesson. Like that isn't the job.

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648.487 - 653.531 Eric Vishria

It's quite a different actual mental model in terms of what the engagement with entrepreneur is.

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654.775 - 678.486 Harry Stebbings

My question to you is you mentioned some amazing companies there that are often completely detached in terms of sector. There are very different companies there from Confluent, Contentful to Cerubris. And I spoke to Bruce Dunleavy before the show, and he said that bluntly your breadth of sector mastering is completely unparalleled as an investor.

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679.046 - 688.63 Harry Stebbings

And he asked a great question, I thought, which was, What is your learning process for entirely new categories and how do you break it down and learn so fast?

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688.99 - 709.079 Eric Vishria

I'm not a sector specialist and nobody at Benchmark is. And I think the fundamental idea with Benchmark is there's a small group of people, a small group of partners who are all equal. And right now it's five of us, but sometimes it's four, sometimes it's six, but it's basically four to six who cover technology.

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709.339 - 730.978 Eric Vishria

And the challenge with that, if you kind of think about it, is we can't be sector specialists. The sectors that have the most disruption and things are changing the fastest are changing. That part's constantly changing. So you have to be, as a group of investors, you have to be moving. You have You have to be looking at new stuff because that's where the disruption is happening.

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731.538 - 752.106 Eric Vishria

Then the question is, I can't be a sector specialist. I can't be a semiconductor specialist or I can't be an open source specialist. Of course, we each have preferences and things that we like and don't and lessons that you can apply, but it's not a specialty model. I think about this a lot and we should talk about it in the context of AI. So you can't have that.

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752.146 - 776.171 Eric Vishria

So then the question is, well, what can you evaluate on? And I think this is it for me, which is you can say, hey, this is an extraordinary entrepreneur. That's an evaluation that you can try to make. There's a second thing, which is this entrepreneur has a very interesting and unique insight. Like that's a really important thing for me. And then you can say this market can sustain a big company.

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776.871 - 796.324 Eric Vishria

Those are three things which I think even coming without sector specialist, without being a sector specialist, you can try to come to a belief or a probability distribution for each of those things. And I think if you have those things and then you add on top of all of it, I have chemistry or want to work with this company or want to work on submission or whatever.

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796.824 - 820.296 Eric Vishria

Then I think you have like the basis for an investment. And I think one of the maybe contrarian things around that is I think that a lot of venture capital in the SaaS era and certainly a lot of growth venture capital got to be like a very spreadsheet-y investor bankery type of approach, which is like it's kind of the model's figured out.

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820.816 - 842.193 Eric Vishria

We plug these things in and we kind of know we figured it out that way. And I think... that doesn't work. I think there was a period of time where it might have worked for a bit, but I think it largely doesn't work. I think the AI stuff is going to wipe out that breed of venture capitalists. It's going to be really challenging because you really have to make these other fundamental assessments.

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843.134 - 858.681 Harry Stebbings

Can I pose an alternative to you there, which is actually, those are generally vertical SaaS companies with deep data reserves, which will then be able to leverage foundation models that are relatively commoditized to build much better vertically specific apps and become stronger.

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858.701 - 877.9 Eric Vishria

Could be. That's possible. But I would tell you this, we were talking about a company yesterday and it has every possibility that you just said. The entrepreneur in that case is, you know, one of the challenges with these platform shifts is, you know, some form, some variant of the innovator's dilemma. It's not quite the innovator's dilemma, it's

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878.26 - 895.195 Eric Vishria

as Christensen articulated it, but it's some form of the innovator's dilemma, which is like you have to make the platform shift. And in order to make the platform shift for a company like what you're articulating, you have to kind of be willing to burn down the existing business, at least in short order. There's a whole bunch of entrepreneurs who don't do that.

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895.675 - 911.197 Eric Vishria

And so this is what I just go back to. If you have a learning entrepreneur who is constantly rethinking how they're navigating the ship, then that makes a really, really big difference in the probability of outcome as you're working through a platform shift.

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911.55 - 927.956 Harry Stebbings

I've got to take this one by one, because otherwise I'm just going to go all over the place. You said the insight development. I agree, and I love that. I actually ask it. Mike Maples always taught me to ask, what is your insight development? How do you view the world in a way that others don't agree? I asked Pat Grady on the show, who says hi, by the way.

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928.677 - 947.908 Harry Stebbings

But I asked Pat Grady on the show, and I said, do you have to be contrarian and right? What if a founder says, I think that actually the world is moving to cloud? Duh. and I'm going to facilitate that much quicker. There's not really an insight. Does that matter? Do you have to be contrarian and right in your insight?

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948.533 - 965.508 Eric Vishria

You know, there are levels to it. Like, yeah, you can say like, hey, we're going to cloud and we're doing this. But normally there's an insight. I would say like if you look at most of the successful companies, there's an insight. Like there can be an insight underneath that, right? Which is like, yeah, it's going to cloud and this is the right way to attack it.

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965.928 - 988.023 Eric Vishria

Or it's going to cloud and, you know, and the like core differentiation is going to be like here, not here. Like normally there's an insight there. I think there's a couple of cases where, you know, and you really have to think about it. There's a couple of cases where just like violent execution by a determined team in a hyper-competitive market where like nobody has an insight has worked.

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988.344 - 1002.052 Harry Stebbings

But even now, actually, you could argue that say like in an Uber Lyft case, which is exactly what I was thinking, the insight I think would be that broad is better than narrow in terms of market expansion and being everywhere is more important than honing one.

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1002.597 - 1024.171 Eric Vishria

Yeah. I mean, I think you could say that's a good case of violent execution by a determined team. And so I think there are insights there, as you said. There's little execution detail insights in your point. And so it's not like... It doesn't have to be some pie-in-the-sky insight that's like, oh my God, AGI is coming in Q3 of 2025. That's not the kind of insight that we're talking about.

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1024.191 - 1042.682 Eric Vishria

We're talking about actual things that are nuances that help build a company. And so... Yeah, they think they come at different levels. I would also say, and this is a difference, and I've been fortunate to work with Pat on a board and work with the larger Sequoia team on a number of companies. And there is a difference also in stage, right?

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1042.742 - 1051.347 Eric Vishria

They're growth investors, or at least Pat and his team are growth investors, and we're early stage. And so there's also a stage difference in terms of how we evaluate things.

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1051.98 - 1058.182 Harry Stebbings

You said about markets being large enough to support massive companies. How do you think about market creation?

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1058.662 - 1075.388 Eric Vishria

I think you have to say, and this goes back to the insight thing, if this thing, whatever the product is, accomplished what it was supposed to and what the entrepreneur said it could do, would there be market creation there? You mentioned Uber. Uber is a good example of this.

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1075.828 - 1090.517 Eric Vishria

And this goes back to the whole like that professor, the like taxi cab analysis that was done like in the early days of Uber where it was like, oh, the entire market's this big. And it's like, well, if you can imagine, everybody has a smartphone in their pocket.

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1090.977 - 1104.545 Eric Vishria

And if you could actually request a ride instantly and pay for it easily with shorter wait time and much more accuracy and much less cumbersome communication, could a market be created?

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1104.685 - 1104.925 Eric Vishria

Yeah. Yeah.

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1105.285 - 1125.461 Eric Vishria

And I think that was a huge part of, you know, Gurley and the rest of the benchmark teams at that time predates me. It was a huge part of their insight in terms of the investment thesis. And so like when you kind of think about a situation like that, okay, that's market created. That's a good example of market creation. And we have those all over. Like if you were like...

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1126.461 - 1143.325 Eric Vishria

I'll give you another one that's kind of like really interesting right now, which is AI medical scribes. And so you're like, you go to the doctor and you talk to your doctor and then they have to do a bunch of notes and everything else. And so there's a bunch of these AI medical scribes. You kind of like look at it and you look at the proposition and I've looked at it now.

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1143.665 - 1165.754 Eric Vishria

I've met several of these companies over the years and we haven't invested in any. But going back, I don't know, five years when I met the first one, it's like, If this exists and works, yeah, that's a better way. It is a better way. So there will be market created there. It's going to take away from the actual human scribe business, but it is a new market in a way.

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1167.455 - 1182.112 Eric Vishria

And like, you can imagine, like, it's not hard to imagine that exists. And we often say this when we're talking about companies, which is like, if you fast forward three years, is this a thing? Like, is it a thing? It's like often a good sign when you're like, yeah, like, that's a thing. Like, it's going to be a thing. Like, we believe that.

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1182.372 - 1204.227 Harry Stebbings

I totally agree with you. But what on earth do you do in this? And we're totally switching tasks to AI companies. But in this sea of AI companies, we're both in 11x together. Great. Love Hasan. Fantastic. But there's a lot of other competitors to 11x. I'm with you. I've met five medical scribe companies. I thought Nabla was the best. But there were like 20.

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1204.747 - 1212.152 Harry Stebbings

And I don't have a freaking clue who's going to win. So how do you filter when everyone does the same, says the same?

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1213.113 - 1234.009 Eric Vishria

I think this is where we go back to where we started. Do we have an extraordinary entrepreneur that you believe in? Do you think they have an insight that is cogent? And I would say this, maybe this is a more useful way to say it. The more competitive the market is, the higher the bar you have to hold on those two things, I think. And so in a hyper-competitive market...

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1234.429 - 1254.514 Eric Vishria

You have to really believe in the entrepreneur and really believe in the heart of the insight and their execution ability. And in a less competitive market, it's just misery in life to work as a venture capitalist and serve on the board if you don't really love the entrepreneur and really love the area.

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1254.554 - 1272.445 Eric Vishria

So that's a thing for me, which is I think about a lot when I'm kind of looking at a company is like, Am I going to be able to authentically help this entrepreneur close great talent? Am I going to be able to talk to them and tell them why this should be...

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1276.201 - 1299.659 Eric Vishria

this should be an amazing... This is an amazing person that I can tell somebody that this should be their life's work and help convince them to join a company. Which is a big part of what we do. And so when you look at that, I ask myself that question. And if my answer is like, you know what? I think it's a cool business. It'll probably work. But...

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1300.72 - 1315.977 Eric Vishria

like I just don't understand how I can make that pitch, then I don't do it. Like, that's my, like, I just, I don't do it. And so, and so like, there's this balance there, but like, I think that's a big important part of it. And the more competitive the market, the higher the bar has to be.

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1317.18 - 1332.964 Harry Stebbings

I totally agree. My worry is in a lot of these cases, the quality of product does not matter as much as the existing distribution moats that incumbents have. Could be. Like AI medical scribes, great example. Microsoft has such large enterprise.

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1332.984 - 1334.525 Eric Vishria

Yeah, Nuance could just crush everybody.

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1334.565 - 1341.767 Harry Stebbings

Just crush everyone. You're a 10% better product. Agreed, better product. But they just crush everyone with bundled packaging.

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1341.807 - 1359.658 Eric Vishria

Yeah. Today's incumbents are paranoid and on top of things and like, is Microsoft and Nuance going to move slower and whatever than your average AI medical scribe company? Of course, but they're not dopes and they don't have their head in the sand. And so like, yeah, I mean, I think that is like, you do have to factor that in for sure.

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1359.998 - 1372.691 Harry Stebbings

Eric, does AI allow companies to charge more price per seat and have better revenues? Or does it merely denigrate their margins because of the increased cost of implementing AI?

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1373.151 - 1391.69 Eric Vishria

The answer is for sure both. I would maybe tweak your question, which is to say, I don't know that it's going to be like the price per seat model. But I'll give you a simple way to look at it. Let's take the AI coding area, right? We've seen like tremendous amount of capital go into AI coding and co-pilots and AI software engineers and whatever.

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1392.071 - 1415.868 Eric Vishria

Let's say your fully loaded IT or software person is 200 grand for just for argument's sake. And if you think about that $200,000, there is, call it $10,000 for every one of these software engineers or IT people. There's $10,000 of tool spend. In that, I would put like Jira, which is Atlassian, GitHub, ServiceNow, a computer, whatever, development environment, get whatever.

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1416.048 - 1435.1 Eric Vishria

So all that's caught $10,000 a year, roughly. on that 10 grand a year of spend, how many hundreds of billions of market cap has been created? Like 300, 400, 500, some big number of market cap has been created on $10,000 worth of spend for each of these software engineers.

0
💬 0

1435.481 - 1454.931 Eric Vishria

So if the AI, if you can get AI good enough to eat much more of the $200,000 of value attributed to your software engineer, IT person, It just follows that there's like 20x more value creation and there will be giant, giant outcomes.

0
💬 0

1455.071 - 1479.904 Eric Vishria

So in this way, and this is the challenge with it, which is it's simultaneously the most exciting and most disorienting time in my 25 years in technology, because that is a really challenging situation where In some ways, the prize is so big that you could very easily say you can justify really ridiculous prices on any fundamentals basis.

0
💬 0

1480.104 - 1498.634 Eric Vishria

You can justify really ridiculous investment, again, on any fundamentals basis because it's like, well, the prize is so big. So that's one part of it. And then the other part of it's like, wait a minute, we're a little ways away from replacing the software engineer right now. We're a bit away from that. And we haven't actually captured that much market value yet. Right.

0
💬 0

1498.834 - 1511.089 Eric Vishria

And really no one's demonstrated anything close to that level quite yet. Although the trajectory is like really quite good. And so that's the tension and challenge with it. And this is the kind of thing that we have to like navigate through every day.

0
💬 0

1511.449 - 1531.788 Harry Stebbings

Those companies in that trajectory are scaling revenues faster than ever. I remember when it was like, oh my gosh, they got to 10 million ARR in such a, now it's just completely different in terms of revenue scaling. How do you determine and think about analyzing revenue quality? And I've heard you set before sugar high revenue versus sustainable revenue.

0
💬 0

1532.248 - 1550.718 Eric Vishria

I was talking to a team that had gone like a four-person team, zero to four million in four months. Amazing. Like just amazing kind of revenue trajectory. But I put like almost no value on that, like going zero to four million. And I think one of their things was like, well, like, why are you giving me credit for that? And I was like, well...

0
💬 0

1551.278 - 1574.326 Eric Vishria

The thing that I take away from that is that whatever you're selling, and this is true for a lot of these AI companies, customers want to buy. Customers want to buy it. And I think part of it is just like the products to a lot of these customers, the products are magic. They feel like magic to the customers. So the customer and the ROI on those products is just tremendous.

0
💬 0

1574.647 - 1594.186 Eric Vishria

And they know that they have to experiment with it or they have to try it or they want to try it because they see so much potential value in it and they feel it. So the demand side is very clear and it's just pulling. And I think that's probably the biggest thing that we can take away with these early stage companies and their traction, which is like, okay, there is demand.

0
💬 0

1594.486 - 1612.218 Eric Vishria

And then you have to kind of evaluate and figure out like, okay, do we think that whatever the product the company is building, the entrepreneur, I mean, go back to the same things, like has sustainable advantage over time. And that's a really, you know, that's a really difficult judgment right now. But I think it's like one of these things that we have to do. But I totally agree with you.

0
💬 0

1612.638 - 1626.464 Eric Vishria

The quickness of the scale is unlike, it's like three, four, five years of what SaaS company, like your traditional SaaS companies were doing. We're seeing in under a year. And we have a whole portfolio of companies that are like this. It's amazing.

0
💬 0

1626.724 - 1643.501 Harry Stebbings

But I find it kind of paradoxical because you've got two questions here, which is the $600 billion AI question. Thanks, David Kahn. The CapEx spend is so much and the revenues are trailing so far behind. And then you also have the speed of revenue scaling is faster than ever. Oh, my gosh. They almost seem at odds.

0
💬 0

1644.001 - 1646.304 Eric Vishria

I don't worry about the $600 billion thing.

0
💬 0

1646.324 - 1648.606 Harry Stebbings

Do you think that's the right question to ask was really my question.

0
💬 0

1648.786 - 1669.485 Eric Vishria

No, I don't. I go back to my software engineer example. Forget about AGI for a second. The prize is so big even without AGI. The prize is so big. And so, yeah, the revenue will materialize. There's a lot to figure out. I was We had a dinner guest yesterday. We do these dinners as a partnership with the guests on Mondays.

0
💬 0

1669.645 - 1694.099 Eric Vishria

And one of the kind of conversations around it was we were kind of unpacking is like if you think about search. So search, we started first seeing the search, the first search engines call it 1995 is when you started to see the first search engines. And then Google Series A was 1998. I believe. And immediately was a better search engine and a better trap and everything else.

0
💬 0

1694.4 - 1716.324 Eric Vishria

What I think is lost in time is Google didn't figure out the monetization. Of course, they did it through an acquisition. They didn't actually figure it out themselves. They didn't figure out the monetization of search until 2001, I think, or late 2000. And so we had... Five or six years of these search engines, which anybody at that time was using them every day.

0
💬 0

1716.624 - 1728.159 Eric Vishria

There were crappy display ads all over them and all kinds of stuff that was just totally like people. I think, sure, there were paid search engines. People tried to do all kinds of things to figure out the monetization model.

0
💬 0

1728.359 - 1748.792 Eric Vishria

And so I don't know that we figured out the monetization model, but I think what we can say very clearly, customers perceive a lot of these products, not all of them, but a lot of these products as magic, which they are basically magic. And they want them. There's a bunch of monetization that needs to be figured out, but I kind of don't worry about it. It's like, we will figure it out.

0
💬 0

1748.812 - 1768.506 Eric Vishria

That's just the delay. And so I feel like And the reason the parallel to search is interesting is because it's like, hey, there was a new technology that was really powerful, web search. And it took a while to figure out monetization. And we have a new technology, alums, that are really, really powerful. And we've got to figure out monetization on them.

0
💬 0

1768.966 - 1779.914 Eric Vishria

And it's not going to be a $20 a month subscription. That's not the right way. And it's not going to be just bundled API. There's going to be much, much more sophistication and interesting models than that.

0
💬 0

1780.322 - 1798.314 Harry Stebbings

How do you think about value in the stack? When we think about where value in the stack is today, it's obviously in compute. NVIDIA has seen that. It's also in models with open AI. Your partner Sarah wrote that models are the fastest commoditizing technology ever, which is a great statement. I've used it a couple of times in shows.

0
💬 0

1798.814 - 1803.337 Harry Stebbings

How do you think about where value accrues in the stack and where you need to spend most time aligned to that?

0
💬 0

1803.837 - 1809.601 Eric Vishria

Foundational models are the fastest depreciating asset in human history, I think has turned out to be largely true.

0
💬 0

1810.041 - 1812.383 Harry Stebbings

Does that mean there's still great value in OpenAI?

0
💬 0

1812.963 - 1832.235 Eric Vishria

I think that's a good question that is really interesting because if you think about OpenAI and Anthropic and Meta and Google, and then there's a whole bunch of others coming, XAI and Mistral and so forth, SSI now. I think the foundational model war benefits us all in a way.

0
💬 0

1832.416 - 1849.326 Eric Vishria

It's really, really good for consumers and people around it because it's just like they're pushing the state of the art so much. In terms of value accrual, for Benchmark, we have no foundational model investments. And then two, we have a set of infrastructure investments available. which I think are really interesting.

0
💬 0

1849.406 - 1867.177 Eric Vishria

So we have Cerebrus, which is a semiconductor and systems company for AI that we invested in and led their series A in 2016. So we've been working on it for eight years. We have companies like Fireworks, which are an inference service and others kind of off that infrastructure software layer.

0
💬 0

1867.197 - 1875.022 Eric Vishria

And I think those like, you know, again, they're growing very, very quickly, like astoundingly quickly and doing really cool things. But

0
💬 0

1875.362 - 1899.643 Eric Vishria

at the same time you kind of have to ask like okay what are the foundational models going to do and how are they going to move up the stack and so this is again where i go back to you need great entrepreneurs who are like constantly updating their mental models and re-navigating and um do you not think we just see all the foundation model companies just get acquired by the big players we've seen character inflection adapt i don't think all the foundational model companies will be acquired by the big players

0
💬 0

1900.103 - 1903.705 Harry Stebbings

Some may, but- If you are not, how can you fund survival?

0
💬 0

1904.225 - 1917.113 Eric Vishria

Well, I think this is a question, right? And they're going to do it. But I think there's a set of people who certainly believe in the size of the prize. And so they continue to be able to raise really tremendous amounts of capital to train bigger and bigger models.

0
💬 0

1917.453 - 1927.519 Eric Vishria

Just to put it in perspective, like $100 billion, even for the oil state companies of technology, doing $100 billion acquisition is unprecedented.

0
💬 0

1927.844 - 1931.647 Harry Stebbings

But doing a $30 billion is not, and you only need to acquire the LickPref.

0
💬 0

1932.087 - 1947.318 Eric Vishria

Yes. I mean, I think, well, I think there's two things, which is like if $30 billion acquisitions are not unprecedented, and maybe you could say like in this world, you know, therefore 100 also is not like that big of a stretch. Like that isn't that huge a multiple, but it does feel like a big number to me.

0
💬 0

1947.338 - 1949.1 Harry Stebbings

It would also navigate through antitrust.

0
💬 0

1949.585 - 1952.207 Eric Vishria

Well, I think the antitrust thing is a big question.

0
💬 0

1952.227 - 1974.407 Harry Stebbings

Does AI today, do AI rounds break the benchmark model? And I mean that slightly deliberately, provocatively. But your fund sizes are very disciplined. You are hailed as the boutique provider of venture. Very tailored, very artisan. But these rounds are often, you mentioned some of the software creation AI companies. These rounds are like $50 million starting price.

0
💬 0

1975.208 - 1995.85 Eric Vishria

I don't think so. And I don't think so for two reasons. One is through 30 years of performance, I think we have unprecedented flexibility in what we do. And so if we want to write a $50 million check, we can write a $50 million check and we have. And if we want to write $150 million check, we can write $150 million. check. If we deploy a fund in 18 months or a year, it's fine.

0
💬 0

1996.05 - 2011.717 Eric Vishria

We can do whatever we want. The fund thing is almost like irrelevant artifact of history and accounting. And so I don't worry about it there. So that's one part of it. The second part of it is... Does it not just impact your decision-making?

0
💬 0

2011.977 - 2025.845 Harry Stebbings

Does it not just impact your decision-making? I totally get you. Of course you could. Every LP wants to be in Benchmark. It's the one fund that every LP is like, oh, I want Benchmark. I totally get it. Of course they do. But if you have a 500 fund, you're just not as likely to write a 50 or a $75 million check.

0
💬 0

2027.426 - 2045.289 Eric Vishria

You know, I think one of the things that we maybe think about almost not at all is we almost never think about like fun cycle or fun timing or anything else. And we almost never think about or talk about portfolio construction or anything else like we it does not come up.

0
💬 0

2045.749 - 2063.992 Eric Vishria

It's really interesting because when I talk to other venture capitalists, they're like, well, how do you think about the portfolio construction? And how do you think about check diversity and company? And just like never, ever talk about it. And so it isn't a thing. Genuinely isn't a thing. That's a bunch of inherited goodness and flexibility. I think there's this amazing Munger quote.

0
💬 0

2064.292 - 2077.335 Eric Vishria

And he said, you know what? Finding good investment ideas is hard enough. Finding great companies is hard enough. Let's not over constrain it, basically. Let's not over-constraint it. Let's not add a bunch of things to it.

0
💬 0

2077.636 - 2092.045 Eric Vishria

So what I say back is like in the benchmark view and approach, what we're looking for is these exceptional opportunities led by these exceptional people that can turn into something extraordinary if things work. Like that combination is hard enough.

0
💬 0

2092.325 - 2098.849 Harry Stebbings

Do you not think it helps provide a lens of focus to narrow your examination of where to spend time?

0
💬 0

2099.729 - 2121.78 Eric Vishria

We very, very openly and regularly talk about things that are just, hey, that's way off. That's a $50 million check for 10% ownership. That's not the core model, obviously. But the flip side is I look at, you mentioned 11X. That's an amazing company we're super lucky to be part of. I think about Brett Taylor, Sierra. I think about Lens, Fireworks.

0
💬 0

2122.421 - 2138.272 Eric Vishria

I go through and I look at these companies and I'm like, I like that AI portfolio. It's a bunch of infrastructure software companies. It's a semiconductor company in Cerberus. It's a few application companies as well. And like the foundational model rounds and some of those things have gotten like really, really large.

0
💬 0

2138.553 - 2145.159 Eric Vishria

But you kind of look at some of the things that are happening on the ground in the early stage in AI and it's like, yeah, it's totally doable, totally manageable.

0
💬 0

2145.419 - 2152.262 Harry Stebbings

Do you think that you always need to play the game on the field? Bill Gurley, your partner, said that once, and I oscillate.

0
💬 0

2152.543 - 2169.413 Eric Vishria

I mean, to some extent, you always have to play the game on the field, or you always have to, maybe a different way to say this, you always have to be aware and cognizant of the game on the field. So the game is the game. You can always choose to play more or less. You can choose to play more or less. So I'll give you a really concrete example.

0
💬 0

2170.233 - 2188.87 Eric Vishria

2021 was like SaaS craziness, everything craziness, right? Like everything was running and everything else. In 2021, we made like three new investments as a firm. Three. That was the game on the field and just saying, that's okay. I'm okay not playing that game. And that's great. And I have no regrets on that at all. I think that is fabulous.

0
💬 0

2189.291 - 2213.796 Eric Vishria

This year, 2024, the game on the field is we have a major, major shift in AI, which could be bigger than any of these other shifts, maybe combined. It's really big. There's a lot of interesting work happening. There's a lot of uncertainty, without a doubt. But we've been more active than we've been since 2010 and 2011. What was happening in 2010 and 2011? Mobile shift.

0
💬 0

2214.197 - 2220.065 Harry Stebbings

To what extent with AI do you think we are overestimating what we can do in one year and we're all getting ahead of our skis?

0
💬 0

2220.487 - 2246.115 Eric Vishria

One of the beauties of this in our model, like I think about if I go back to 2010 and 2011 for a second, in that timeline, that's when Snapchat, Uber, Twitter, Instagram, that's when we did the series A's. And Instagram, Snapchat, Uber, whatever, a weird round in Twitter. The round that Peter led in Twitter at that time was like technically a series C or series D.

0
💬 0

2247.015 - 2268.231 Eric Vishria

at like 200 pre because the company had its history right with odio and everything else and so it was it was a rule breaking around it's a good example of exactly what we were talking about earlier yeah you kind of have your like norms and then every once in a while you just have to be like throw it all out and just do it and that was a good example but you think about that like that body of work which is which was obviously tremendous towards the returns which

0
💬 0

2268.871 - 2281.598 Eric Vishria

And like, fast forward to today, you're looking at the game on the field here. You know, we have to kind of ask ourselves, like, hey, are there extraordinary opportunities and extraordinary companies getting built here? And if so, like, you just got to do it.

0
💬 0

2281.919 - 2289.523 Harry Stebbings

I heard you say once when it came to Cerebrus that Peter's role as your partner was to help enhance your instincts.

0
💬 0

2290.043 - 2291.084 Eric Vishria

Yeah, he did. He did.

0
💬 0

2291.784 - 2306.074 Harry Stebbings

He's amazing. I have such a man crush on Peter. I haven't told him, and so it's lucky that this isn't a podcast. My question to you there is, is that not dangerous? Should a partner not be the counterbalance, not the Duracell battery to your energy?

0
💬 0

2306.414 - 2329.328 Eric Vishria

Well, I think both are true. My partners have kept me out of countless companies. It's amazing. You asked this sector question earlier. We were talking about it. I spend a lot of time trying to understand chemistry, my chemistry with an entrepreneur and try to figure out, am I going to love working with this person? Do I believe this person is a learning machine or not?

0
💬 0

2329.368 - 2350.004 Eric Vishria

So I spend a lot of time on that. I spend a lot of time trying to believe, do I think that insight is cogent or not cogent? Does it hold together effectively? And I spend a lot less time on the sector specifics because I just feel like if I'm an F on a sector, with best effort, I can get to a D plus. That's not good enough. And so I'd just rather not.

0
💬 0

2350.304 - 2370.444 Eric Vishria

And I actually think this is maybe contrarian and total aside. I think this is why the memo writing culture at a lot of firms gets you in trouble because you put a lot of information into It encourages putting a lot of information that is like third and fourth order stuff into document as if that is impacting your investment decision.

0
💬 0

2370.844 - 2393.366 Eric Vishria

Where like most of these investments, there's really like one or two questions that really matter. All energy should go to those and everything else is kind of like unknowable, non-deterministic, or irrelevant. So what Peter did in the case of Cerebrus was, and I remember it really distinctly, I met the company first on a Wednesday. And I was like, why am I meeting a semiconductor company?

0
💬 0

2393.566 - 2418.929 Eric Vishria

This is so stupid. I shouldn't be doing this. We don't make semiconductor investments. This is maybe February, March 2016. And I came out of the meeting and was like, wow. And so the team was amazing. And then the insight was really keen and really sharp. And it's now totally accepted. But at the time, it was so sharp and so contrarian. Contrarian is not the right word, actually.

0
💬 0

2419.209 - 2438.854 Eric Vishria

What it was is unique and novel. That's what it was. It was unique and novel. And so I came out and I was like, this is interesting. We met again. So I called in a bunch of partners to meet on Thursday. And so a whole bunch of us, including some of the founders, including Bruce, he mentioned earlier, like he came in because it's like, you know, like, what do I know about semiconductors?

0
💬 0

2438.894 - 2459.419 Eric Vishria

Almost nothing. Well, really, probably nothing. Colin Bruce, who had actually done semiconductor investments and discussion. So that was on Thursday. I spent time one-on-one with Andrew on Friday. Bill and I had lunch with Andrew on Sunday. I'm talking to Peter about it on Sunday night. He's just totally discouraging me from doing the investment.

0
💬 0

2459.639 - 2479.99 Eric Vishria

He's like, this goes against everything I've learned in the industry. Totally discouraging. He hasn't met the company yet, just based on my articulation of it. Monday. So I bring the company in. Peter was like, I was like, just have an open mind on it. Just have an open mind. And so comes in on Monday, Andrew pitches and he had a term sheet already. And so we were running obviously.

0
💬 0

2480.31 - 2495.521 Eric Vishria

And he pitches. And at the end of the pitch, we're debriefing. And we have a system where we talk and then you can call the sponsoring partner. Basically, you can call for a vote. And Peter said, call for the vote. He told me, he was like, call for the vote. And he pushed me.

0
💬 0

2495.661 - 2516.667 Eric Vishria

So he pushed me to call for the vote and to push her over the line after spending literally 16 hours before trying to talk me out of it. And so the answer is... So yes, my partners have kept me out of a lot of stuff. But what he was doing in that moment is he had updated his own evaluation of the opportunity and the idea and was like... yeah, it makes sense.

0
💬 0

2517.107 - 2537.457 Eric Vishria

Also, Eric clearly really wants to do it and see something here. And so I'm 18 months into being a venture capitalist and I have one of the greats of all time, 16 hours before, telling me this goes against everything, don't do it, blah, blah, blah. And so I think that encouragement of like, hey, you saw something there,

0
💬 0

2537.877 - 2554.868 Eric Vishria

And then like the rest of the group saw it and was like, yeah, there's something there. And like, and so I go back and think about that a lot because each of us in a good partnership, each of us brings our own points of view and our own biases and baggage, but our own insights as well. And so you got to put all that together.

0
💬 0

2554.888 - 2561.573 Eric Vishria

And if you do that well, that's like, that's these partnerships at its best. And I've seen that. a whole bunch of times.

0
💬 0

2561.793 - 2569.681 Harry Stebbings

In the deals where your partners have saved you, as you mentioned many times, what did they see that you did not see most often?

0
💬 0

2569.961 - 2590.607 Eric Vishria

I'll give you a great example where Sarah saved me. We were looking at a company and she's like, Eric, and this goes back to your sector thing. It's just like a perfect example that ties this thing together is like, she's like, Eric, I'm telling you, you're used to looking at software companies. At this company, you're gross margin and like these unit economics really, really matter and they suck.

0
💬 0

2591.028 - 2611.323 Eric Vishria

There isn't a path to get better and the entrepreneur is not engaged on the topic. It was just like a great insight because like for us, you know, as your kind of traditional software investor and like doing things, it really doesn't matter. Like it's just like all of these things end up, you know, your SaaS companies are going to end up in between 75 and 83% gross market.

0
💬 0

2611.343 - 2629.912 Eric Vishria

Like they're just going to end up there. Like it's fine. It works itself out. And so like a company that starts there, like, you know, way less than then, it's just like, whatever. And you'll fix that. But, you know, I think it was like a great insight that like kept me out of it because there were a ton of things that I loved about the entrepreneur. And it was really like a compelling individual.

0
💬 0

2630.312 - 2640.537 Eric Vishria

But I think her point on the nature of the business and the fit between the entrepreneur and the nature of that business in specific was spot on. And so Sarah saved my bacon.

0
💬 0

2640.558 - 2661.464 Harry Stebbings

So I was talking to my, my partner the other day who comes out of DST. And so he's like trained on like gross margin and like real numbers guy. And he's like, oh, the gross margin of 3 million in ARR. And I'm like, dude, no one gives a fuck. No one gives a fuck. It's 3 million in ARR. The gross margin in 10 years, I've got no idea what it'll be like.

0
💬 0

2661.504 - 2672.877 Harry Stebbings

And even then, if it's still a shit gross margin and it's go-go times, we can still get a great multiple. And if it's amazing and shit times, the IPO market, there's so many fucking variables. I don't have a clue.

0
💬 0

2673.197 - 2693.167 Eric Vishria

I totally agree. I think this goes back to the spreadsheet conversation and why I think spreadsheet investors are going to get wiped out or have a really hard time in this era. And I think SaaS was such a boon and gift to the investor bankery spreadsheet investors. Plug your stuff in and you figure it out at scale, right? At the early stage though, I totally agree with you.

0
💬 0

2693.207 - 2718.44 Eric Vishria

People will come in and they have like a million and a half and they're talking about their net dollar retention or whatever. It doesn't matter. In none of that stuff, in not a single company, I think I've worked on five companies that have gone from zero to more than 200 in revenue. And in not a single case did the economics at the very early stage extrapolate all the way. It's just not a thing.

0
💬 0

2718.66 - 2733.457 Eric Vishria

Not even the economics from when they were at 30 or 40 or 50 extrapolated to 200. It just isn't how it works. There's so much change that happens at these companies. And so just false precision around that is just dumb.

0
💬 0

2733.837 - 2754.089 Eric Vishria

And I think you can say, let me take the flip side of it, which is the flip side is there are things that you can see at those stages, which would tell you that this thing is going into a wall or is going to have to undergo a major transformation. I think there are problems that you can see, but I think the positives are not really knowable that way.

0
💬 0

2754.409 - 2776.602 Harry Stebbings

Can I ask you, in terms of like how you spend your time, I spoke to Victor on your team and he said Eric is so unlike most other VCs. He spends like 70% of his time with his portfolio. Yeah, at least. I would love to understand how you think about the makeup of your time between sourcing, picking and doing diligence and doing references and then servicing, helping portfolio.

0
💬 0

2776.942 - 2777.623 Harry Stebbings

What does that look like?

0
💬 0

2778.32 - 2801.313 Eric Vishria

I'm probably, at this point, I'm probably 80 or 85% on working on the portfolio. I mean, it's a lot. And part of that's because, whatever, I'm on 12 or 13 boards. I can't remember. But a huge part of it is that is our model. Like, that is the benchmark model. And since the benchmark model is a concentrated portfolio of, like, very high conviction commitments.

0
💬 0

2801.733 - 2810.78 Eric Vishria

Like, we're making commitments to entrepreneurs. It's, like, it's very high concentration and very high conviction commitments. That is the nature of our model. And I think that is... Are you on too many boards?

0
💬 0

2811.541 - 2812.422 Harry Stebbings

12, 13 is nuts.

0
💬 0

2812.842 - 2830.64 Eric Vishria

It is a lot. But I think they're all at different stages. So it isn't as nuts as it kind of seems on the surface because like four or five of them are really young companies, right? That are in their very early days. And like you said, I spend 80, 85% of my time on them.

0
💬 0

2830.68 - 2838.026 Eric Vishria

So it's not like I'm, you know, if I spent 60% of my time looking for new companies, then of course you wouldn't be able to spend that much time on your portfolio.

0
💬 0

2838.126 - 2842.669 Harry Stebbings

Final one for you. You said about cool the vote. What does the vote look like?

0
💬 0

2843.37 - 2863.482 Eric Vishria

Our vote system, which is somewhat irrelevant, but it's a way to kind of quantify people's feedback. So a company comes in, we all talk about it. At this point in time, most of the time, there's only five of us, right? So at this point in time, we would have chatted about the company and at least two or three partners would have met typically.

0
💬 0

2863.802 - 2886.078 Eric Vishria

And so there's a decent amount of institutional knowledge about the company. And then at the end, you kind of quantify your feedback. And so it's a way for partners to quantify their feedback to others. And so our voting system is you vote one to 10, you can't vote five. Six and above is yes. Four and below is no. And it's kind of strength of conviction, right? If you get a bunch of 10s, amazing.

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2886.498 - 2896.506 Eric Vishria

I've never seen that happen. If you get a four, like partner's telling you they didn't really like it, but it's not, whatever. If you get a two, your partner's telling you they're really discouraging you from doing it.

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2896.946 - 2897.746 Harry Stebbings

Have you ever had a one?

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2897.867 - 2903.129 Eric Vishria

I don't know. If your next question is what happens if you don't have the vote and you still want to do it, I have no idea. I don't know what happens.

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2903.45 - 2914.936 Harry Stebbings

Does that not go against being non-consensus? Seeing the beauty which others don't? Not necessarily. Because you have to get a quorum, so you need to get three out of the five.

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2915.616 - 2936.792 Eric Vishria

I don't know that you have to get three out of five. Like I said, I don't know what happens. Benchmarking is a very high trust, like high confidence in each other model and structure, right? Is it always five people saying yes? No, I'm just saying nobody knows what the votes are except the sponsoring partner. And if a partner wants to do something, I think they can do it.

0
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2937.092 - 2941.836 Eric Vishria

You're getting feedback from your partners who you trust and have confidence in.

0
💬 0

2942.356 - 2944.477 Harry Stebbings

Why do the voter tool?

0
💬 0

2944.637 - 2961.366 Eric Vishria

I think it is actually useful to quantify things. You get all of this feedback, right? And anybody who votes a six on an investment does it apologetically. They have to be truly conflicting. There's nothing strategic. That's managing politics. That's not managing making the best investment decisions.

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2961.826 - 2964.849 Harry Stebbings

Do you not think it's about kind of being all in or like hell no?

0
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2964.909 - 2984.148 Eric Vishria

Well, I think the sponsor, your sponsoring partner, the kind of advocate probably needs to be that. But your other partners who are looking at it and trying to help you make a decision, I don't know that they have to be that way. They have less information necessarily. And so having their strength of conviction doesn't need to match yours.

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2984.508 - 3000.804 Harry Stebbings

Okay, we're going to do two types of quickfire. One's a short quickfire, one's a slightly longer one. Quickfire on people. You've got one takeaway from working with Gurley, Fanton and Matt Kohler. Okay, I just chose them because they're my favorites. So what's the biggest takeaway from working with Gurley?

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3001.324 - 3026.42 Eric Vishria

Even great companies can be overvalued. One of the things that Bill is really good at is thinking about fundamentals, right? He came from public market investing way, way back when. At the beginning of his career, he has that mindset, that analytical mindset. And so he thinks through that and says like, hey, on a fundamentals basis, you will trade sometime at under 30 times free cashflow.

0
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3026.6 - 3045.904 Eric Vishria

And so that's a thing. You and I were talking about what's the ARR number and the revenue and all this stuff. But ultimately, you talked about the four areas, which is sourcing, picking, winning, helping build. There's a really important fifth stage that nobody talks about and not every venture capitalist gets to, which is exiting.

0
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3046.384 - 3065.11 Eric Vishria

And ultimately, our job is to return money back to our investment partners. And so when you think through that, you do have to ultimately, hopefully, everyone gets to a place where they're thinking about this fifth step. Not everyone does. And in that place, you do have to think about these fundamentals.

0
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3065.15 - 3079.675 Eric Vishria

And so occasionally, you have an amazing company that you really believe in, but it can be overvalued too. Okay. Fenton, what's the takeaway from Peter? The insights around people and motivations that Peter has are unparalleled.

0
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3080.035 - 3099.641 Eric Vishria

And I've described this before, but like Peter and Bill, one of the things that's amazing about the two of them is they are very, they're very, very different style investors, like almost diametrically opposite in a bunch of ways. And obviously they have a lot of common ground, which is how their partnership was so effective for so long. Peter is very much like people first. Bill is very much

0
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3100.001 - 3103.763 Eric Vishria

I would say like market first. It's a different mental model in looking at these things.

0
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3104.084 - 3107.225 Harry Stebbings

Totally agree with you. I remember Peter once told me price is a mental trap.

0
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3107.746 - 3127.257 Eric Vishria

He told me a version of that on one of the first investments I looked at at Benchmark in 2014, summer of 2014. The discussion was like, well, could you do it at 40 or 60 or whatever? It's like some price. I was like, well, I'd do it at 40 and not 60. And he's like, no. No. That doesn't work. No, it can't do that.

0
💬 0

3127.937 - 3135.68 Eric Vishria

I've said this now subsequently to new partners who've joined in my own way where like, yeah, that's not, you can't, not allowed to make that claim.

0
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3136.04 - 3144.744 Harry Stebbings

I remember also when I was debating whether I should get more operating experience before becoming an investor. He was like, do you want to be an investor? And I was like, yeah. He's like, then invest.

0
💬 0

3144.904 - 3146.265 Eric Vishria

Then be an investor. Yeah. Yeah.

0
💬 0

3147.125 - 3149.307 Harry Stebbings

Final one, Cola. What have you learned from Matt?

0
💬 0

3149.687 - 3169.245 Eric Vishria

Matt is the best at understanding the insight and the depth of an entrepreneur's insight. That is Matt's superpower, understanding the depth of the insight. Is the insight bullshit? Is it authentic? Is it really deep? He's six sigma on that. Matt says very little and it is always insightful.

0
💬 0

3169.765 - 3173.486 Harry Stebbings

The normal quickfire. What do you believe that most around you disbelieve, Eric?

0
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3173.886 - 3196.794 Eric Vishria

I don't think NVIDIA is going to be the only game in town. I don't believe NVIDIA is going to be the only game in town on an infrastructure layer. And I think the entire setup right now is an assumption that if AI is real and here to stay and there's real ROI, then NVIDIA just continues to run at this level. And I don't believe that.

0
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3197.079 - 3203.124 Harry Stebbings

That's a good one. Credit to you, Eric. That's fantastic. Which venture investor outside of Benchmark do you most respect?

0
💬 0

3203.464 - 3206.747 Eric Vishria

There's so, so many. Good.

0
💬 0

3206.767 - 3207.428 Harry Stebbings

You've got one.

0
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3209.79 - 3232.706 Eric Vishria

You know, I think you'd have to say, I'd have to say, I'd have to say Getz and Jim Getz. And the reason I would say Jim Getz, well, one, Jim is the one who first told me I should get into venture. And so I'm eternally grateful to him for that. He said that to me in 08. It took me six years to figure out that he was right, but I'm super grateful for him for that. But two, we talked about this.

0
💬 0

3232.786 - 3254.254 Eric Vishria

There's almost nobody who's had wins in the consumer land at the scale of WhatsApp and wins in the enterprise land. And he's done it over and over. So to have Palo Alto Networks and WhatsApp is just insane. And obviously, he's had many, many other wins. And so he's been a spectacular, spectacular investor. And I'm eternally grateful to him.

0
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3254.696 - 3256.677 Harry Stebbings

Why did you not join Sequoia?

0
💬 0

3256.937 - 3278.183 Eric Vishria

Just like at that time. So in 08, when I talked to them, I really had it in my head that I wanted to be a founder. And I'm super glad I did. I had some conversations, but came up with the idea for Rockmelt. And so Tim Howes and I, who was my co-founder, pursued Rockmelt. And then five years later, you know, Rockmelt went through our ups and downs. We were bought by Yahoo in 2013.

0
💬 0

3278.623 - 3280.964 Eric Vishria

And then, you know, a year later, I joined Deathmark.

0
💬 0

3281.544 - 3282.604 Harry Stebbings

And you didn't go back to them?

0
💬 0

3283.205 - 3284.165 Eric Vishria

I did not. No.

0
💬 0

3284.73 - 3285.21 Harry Stebbings

Different time.

0
💬 0

3285.25 - 3292.735 Eric Vishria

I think, you know, Square, like a lot of firms, hires people quite early in their careers and like grows their own.

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3293.196 - 3308.766 Harry Stebbings

Are you ready for my hardest one? Okay. Off schedule. This is like for true pros. The heaviest things in life are not iron or gold, but unmade decisions. What unmade decision do you have that weighs on you most? I don't know.

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3308.806 - 3329.955 Eric Vishria

I can think of several little things that I would have done, but I don't know. We had, Early acquisition interest in Rockmelt. That was probably something that I should have leaned into more in retrospect. That's an example, and that would have been a very different. But in the scheme of things, looking back now, it's 2024. Would it have changed anything? Probably not.

0
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3330.255 - 3357.344 Eric Vishria

This is the whole, what's that children's story about the horse rider and the soldier and the conscription? Have you heard this story? No. It's a really amazing story. The summary of it is it's like ancient China and there's a draft. And the first part of it is there's a family in rural China and they get a horse. This kid finds a horse. The villagers are like, oh my God, he's so lucky.

0
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3357.364 - 3374.957 Eric Vishria

It's so lucky. It's so lucky. And the wise man is like, we'll see. And the kid's riding the horse and breaks his leg. And then the villagers are like, Oh my God, it's so unlucky. It's so unlucky. It's so unlucky. And the wise man is like, we'll see. And then there's a draft, a military draft.

0
💬 0

3375.377 - 3395.512 Eric Vishria

And the draft people come to this rural village and they draft everyone except the kid with the broken leg because he has a broken leg. And the villagers are like, we're so lucky. He's so lucky. And the wise man's like, we'll see. And so I say that because it relates to my Rockmount experience and kind of where we started, which is founding and building a company is really, really hard.

0
💬 0

3395.932 - 3415.243 Eric Vishria

And you have to have a lot of determination in order to do it. And you go on these ups and downs, and I certainly did. And ultimately, we didn't realize the potential of what we wanted, but... Did it work out or did it not? And in the fullness of time, I'm like, I couldn't be happier where I'm at. And thankfully, those team members, they're at great places and great companies.

0
💬 0

3415.263 - 3421.446 Eric Vishria

A whole bunch of them work inside of the portfolio that I work on, which I'm super grateful for. And so we'll see.

0
💬 0

3421.866 - 3425.508 Harry Stebbings

Reminds me of the businessman and the fisherman. I don't know if you've heard that one. I haven't heard it.

0
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3425.868 - 3433.814 Eric Vishria

Oh, yeah, yeah. I have heard this one where it's just like, well, what would you do with all that money? Well, I'd retire in a small fishing village. Yeah, totally.

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3433.834 - 3452.119 Harry Stebbings

Drink beer and chill. Yep, pretty much. An ultimate one, you can call yourself up before the birth of your first child and say, Eric, you should know this. What would you say? Man, it's hard. LAUGHTER What was the hardest?

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3452.519 - 3466.83 Eric Vishria

I think the big thing in the first few years, and we went from zero to two, so it was particularly challenging, but not as challenging as people who went zero to three or zero to four. But I think the hardest thing is your time goes away. It inverts.

0
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3467.35 - 3488.845 Eric Vishria

It used to be, you know, on a typical like for you or for me now, my kids are a little bit older is like Friday is like the day you're the most tired. And then you have Saturday and Sunday to recover. This totally inverts, right? For me, like when we had kids at the end of the work week was that was the most rested I was going to be. And Monday morning was the most tired I was going to be.

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3489.265 - 3493.568 Eric Vishria

And like it just like completely inverted because the weekend was just so hard with little babies.

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3493.948 - 3505.373 Harry Stebbings

I'm so well trained then. In the week, I have venture, which is the easy part. And on the weekend, I have just back to back to back media stuff and Saturday and Sunday. And so I'm knackered coming into Monday.

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3505.693 - 3508.095 Eric Vishria

Okay, okay. Yeah, you're in good shape then.

0
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3509.155 - 3517.641 Harry Stebbings

I'm totally fucked. Final one for you. When I ask you for a memorable moment from your time at Benchmark, what's the one that you tell grandchildren?

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3517.981 - 3539.035 Eric Vishria

That one for me would be when the founders of Confluent, Jay Neha and June called me and said they were going to go with Benchmark for their Series A. That was my first investment. It was three founders, you know, and the company's gone on to wild success. That was a huge, huge moment for me and really memorable. I remember where I was and it was a big deal.

0
💬 0

3539.435 - 3541.457 Eric Vishria

Eric, dude, I've absolutely loved doing this.

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3541.497 - 3562.552 Harry Stebbings

Thank you so much for agreeing to do it. This has been amazing. So fun. What a man. I absolutely love doing that show. If you want to check it out on YouTube, you can by searching for 20VC. There you'll find all of our episodes in video. I'd love to hear your thoughts and feedback. But before we leave you today, all of you listening use tons of software every day. Sometimes it fills us with rage.

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3562.692 - 3579.207 Harry Stebbings

You can't figure something out. The chatbot in the bottom right is useless. You keep getting bombarded with these useless pop-ups. And for those of you who build products, no one wants their product to feel like this. Thankfully, a company exists to help users without annoying them, CommandBar. It does a couple of very helpful things.

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3579.507 - 3598.726 Harry Stebbings

First, it's a chatbot that uses AI to give users extremely personalized responses and deflect tickets. But it can be beyond just text. It can also co-browse with the user and show them how to do things inside the UI. Magic. But it can also detect when users would benefit from a proactive nudge, like a helpful hint, or an invitation to start a free trial.

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3598.827 - 3620.193 Harry Stebbings

CommandBar is already used by world-class companies like Gusto, HashiCorp, Yotpo, and Angelist. If you're a product CX or marketing leader, check them out at commandbar.com slash harry. And talking about incredible companies with Command Bar, I want to talk to you about a new venture fund making waves by taking a very different approach. It's a public venture fund anyone can invest in.

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3620.413 - 3641.028 Harry Stebbings

Not just institutions and accredited investors. The Fundrise Innovation Fund is democratizing venture capital, which could have big consequences for the industry. The fund is already off to a good start with $100 million into some of the largest, most in-demand AI and data infrastructure companies. Companies like OpenAI, Anthropic and Databricks.

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3641.308 - 3663.324 Harry Stebbings

Check out the Innovation Fund's impressive list of investments for yourself by visiting fundrise.com slash 20VC. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Innovation Fund's prospectus at fundrise.com slash innovation. This is a paid sponsorship.

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3663.624 - 3682.994 Harry Stebbings

And finally, let's talk about Squarespace. Squarespace is the all-in-one website platform for entrepreneurs to stand out and succeed online. Whether you're just starting out or managing a growing brand, Squarespace makes it easy to create a beautiful website, engage with your audience, and sell anything from products to content, all in one place, all on your terms.

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3683.234 - 3702.065 Harry Stebbings

What's blown me away is the Squarespace Blueprint AI and SEO tools. It's like crafting your site with a guided system. ensuring it not only reflects your unique style, but also ranks well on search engines. Plus, their flexible payment options cater to every customer's needs, making transactions smooth and hassle-free. And the Squarespace AI?

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3702.225 - 3720.298 Harry Stebbings

It's a content wizard helping you whip up text that truly resonates with your brand voice. So if you're ready to get started, head to squarespace.com for a free trial. And when you're ready to launch, go to squarespace.com slash 20VC and use the code 20VC to save 10% off your first purchase of a website, or domain.

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3720.559 - 3729.753 Harry Stebbings

As always, I so appreciate all your support and stay tuned for an incredible episode coming this Friday with the OG of sales and customer success at HubSpot on 20 sales.

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