20VC: Benchmark's Eric Vishria on Why Career VCs Have Advantages Most Under Appreciate, Why We Are In An Infrastructure Renaissance & What Makes The Best VC Partnership

You are listening to the 20 Minute VC with me, Harry Stebbings, @hstebbings with 2 Bs on Snapchat, and it'd be great to see you there where you can see all things behind the scenes at the 20 Minute VC. However, to our guest today, and I'm thrilled to welcome Eric Vishria to the show. Eric is a general partner at Benchmark, one of the world's leading VC funds with a portfolio including the likes of Twitter, Uber, Snapchat, eBay, WeWork, Yelp, and many more revolutionary companies of the last decade. At Benchmark, Eric has led deals and sits on the board of the likes of Confluent, Amplitude, and Bugsnag. Prior to being in VC, Eric was the founder and CEO at Rockmelt, the startup that sought to reimagine the browser for the way people use the web today. The company was ultimately acquired by Yahoo in 2013. And prior to Rockmelt, Eric held numerous different roles in operations, including VP of Products at HP and VP of Marketing at Opsware. I do also want to say a huge thank you to Peter Fenton and Mitch Lasky at Benchmark for the intro to Eric today, without which this episode would not have been possible. But before we dive into the show today, if you're an early-stage startup, the right infrastructure and support systems are critical. And that's where First Republic are so good. First Republic's resources, network, and expertise allow entrepreneurs to customize a solid foundation for your business across all stages. So why First Republic? Well, you get to leverage their incredible network of VC firms to prepare you for future fundraising events. You get to count on a single point of contact that will be there for you and your employees when you need them. You get access to exclusive events and networking opportunities. But don't trust me on this— their clients include the likes of Instacart, eShares, and Wish, just to name a few. Check it out by heading over to innovation.firstrepublic.com. And speaking of incredible startups there. One that really is a must is Segment. Why? Well, Segment allows you to collect data from every platform— mobile, web, server, cloud apps— and load it into Segment. Segment then sends the customer data to your tools and destinations where it can be used most effectively. Destinations include email, analytics, warehouses, help desks. And with over 200 sources and destinations on the Segment platform, that can really empower your team. Segment really is the last integration you will ever do, and that's why the world's best companies use Segment to drive growth and revenue, including the likes of Atlassian, New Relic, Craton Barrel, just to name a few. Simply head over to segment.com to find out more. But enough from me, so I'm now thrilled to hand the mic over to Eric Vishria, General Partner at Benchmark. Three, two, one, zero. You have now arrived at your destination. Eric, it's such a pleasure to have you on the show today, having heard such great things from Peter. But thank you so much for joining me today.

Thank you. Thank you for having me.

Now I'd love to get started today though by discussing a little bit about you and how you made your way into the wonderful world of VC.

Sure. I'm not sure that it's particularly interesting, but I had been working as an operator for 15-ish years before I became an investor. I started my career at LoudCloud, which was a cloud company maybe 10 years or 8 years too early, and we became Opsware and then got bought by HP. And then after HP, I actually started a consumer browser company called Rockmelt and worked on that for several years. We got bought by Yahoo, and then I spent a year at Yahoo. So I got a flavor of enterprise startup, enterprise So I did consumer enterprise, big company, consumer startup, consumer, big company. And then after that, made my way to Benchmark. Been here for the last couple of years.

But I do want to start today with exactly that and the pathway in. There's always the debate, as we know, operators turned VC versus career VCs. So I'm intrigued to hear what your thoughts are on this kind of route into venture and the pros and cons you see inherent within both.

Sure. Different models work. I think one of the things that's really— if you look at the backgrounds of the successful venture capitalists, they vary tremendously. models kind of clearly work. The pendulum has swung pretty far in terms of perception with entrepreneurs really favoring, seemingly favoring operators. Even as an operator, I can say, I think the pendulum has swung too far in that direction. And I can give you 2 different ways to think about it, kind of more concrete examples of why the career investor has some distinct advantages that I think we may underappreciate in today's environment. So one is, if you take my career as an example, 15 years as an operator, I've seen I've seen 5 businesses at some level of depth, right? LoudCloud, Opsware, HP, RockMelt, Yahoo. And those are 5 businesses, and I know them well and spent a bunch of time on them and worked them really hard. But the same, if you take an investor who's been at it for 15 years or venture capitalists who've been at it for 15 years, they would have seen, say, 25 or 30 businesses at relative depth, maybe not quite the same level, but at quite a significant level. And having that breadth of business models, business dynamics, market dynamics, To be able to draw from and apply in the next scenario is a huge, huge advantage. And I think I see that. I mean, you're talking about 5 times as many, and I'm certainly a student of business as much as anyone else. And, you know, you read the books and every S-1 and everything else, and I've been doing that for a long time. But it's just different from sitting on the board of 20+ companies and seeing everything that they're going through. So I think that's like the business models and having familiarity with them and having exposure to them is a huge advantage.

Absolutely.

That meta view. Right, exactly. Exactly. And then, you know, the second thing I just tell you is like a big part of what we do and spend time on is recruiting execs and recruiting the management team and other roles inside the organizations. And if you think about, again, as an operator, you will have gone through— take a VP of sales. You'll— if you're CEO of a company, you're going to probably go through a few VPs of sales over the course of the company. You're going to have exposure. You're going to get to interview 25 VPs of sales that make it to you at some level of depth. And I can tell you, as a board member across across a bunch of different companies. I've interviewed 25 VPs of sales in the last year as a venture capitalist. And so you're again, like, just if you take that, the number of execs that you're going to have exposure to in terms of the recruiting process and other things gives you a really great advantage as a career venture capitalist to be able to draw from a bigger network and have a broader exposure. I think the flip side is, as an operator, I think operators turned VCs tend to be more empathetic. They tend to obviously have more feedback and insight into operational issues, as they should. And so again, both have their advantages. And I think for the most part, if you look at the best partnerships, this isn't entirely true, but I think it's largely true. I think the top-performing partnerships tend to have a mix of operators turned VCs and career investors, and I don't think that's an accident.

I do completely agree. But I do want to ask then, you said about it potentially the pendulum swinging the wrong way. How do you expect the pendulum then to swing in the future? Do you agree with Pat Grady in stating that he thinks it will swing much more back to the career VC route?

I think it'll probably swing back to the career VC over time. I think this stuff is cyclical, so I wouldn't say that the pendulum is swung the wrong way. I just think the pendulum swings, and the nature of it is it always over— goes too far in one direction and then comes back the other direction. I'm sure it'll swing back over time, but when that happens, your guess is as good as mine.

But speaking of paths in there, and, and I want to discuss your path, and I want to ask 3 questions, and sorry for the repetition, but I want to ask, what were the biggest takeaways then for you personally from your operational role at Sequoia Capital? that you think lend to you being a better VC now?

I think having been a founder, having raised money, having been a CEO gives me a good amount of empathy with the entrepreneur and entrepreneurial journey. And I think that just gives you an advantage in terms of serving on a board and working with the CEO and management team to help build the company and understand some of the stuff that they're going through.

Well, what about then the biggest surprises about the move into VC?

I don't know about surprises, but I would say I think from the outside, It seems easy. I think there's a perception that you like sit back and all of these people come to you and pitch you, and then you're just kind of like picking, and it's like it's a laid-back and easy job. And I think what's really clear to me, and I knew this going in, but it is emphasized even two years in, is to do this job at the highest levels, it's actually extremely challenging. There's a ton of hustle required. You have to get out there. The best stuff is very competitive. So I think there's a perception that it seems easy, and it may be that it's easy.

Can I ask, are there any really big adjustments then, maybe in terms of your workflow from the operational to the VC?

Well, you know, I'll tell you one really interesting thing that I've noticed is operators, and I think particularly CEOs, like the way you would manage a meeting, the way you manage a company is you, you ask questions and you're getting feedback and you're, you're oftentimes trying to lead or guide. And so you may actually like lead the witness a bit and try to get to the outcome that you think is best for the company. And I think that's a very different thing. is best for the company. I think one of the things that I've realized is operators tend to want to project that way. So when they see a pitch or they see an opportunity of a company investment, you tend to want to project, well, this seems really interesting if you did this, or if you tweaked it in this way, or if you moved it in this direction. And what I've noticed is the career investors, they have an actual much more of an impartial observer mentality when they are talking to these companies and listening to the pitch. They actually are asking questions and are very careful not to lead and not to project change, but to really understand the opportunity, the entrepreneur, the market as it stands, and then evaluate whether it's a great investment or not a great investment, or whether they believe it's a great investment or not a great investment. And I think that's a very big adjustment in terms of how you approach each of these meetings. And I think it makes all the difference in terms of making good investment decisions. And it's something that's actually kind of hard to get into the right frame of mind on.

I do want to move from kind of the investors themselves there To the funds that are behind them. So I'd love to talk about Benchmark there, and maybe in particular with the very specific thesis that you don't do growth, you don't do seed, and that you only do early stage. So I'm really intrigued. Why is this and what's the value of having such inherent focus?

Well, I'd say first and foremost, the A's are the most fun. So I think that we're very lucky in that we get to do the part that we love.

Why is that? Why are A's the most fun?

Well, I think so. There's, there's a couple of different parts of it. So I think if you think about seed, you are Planting a lot of seeds, and what exists at that point in time is really a team for the most part, a team and a concept. You're trying to have a lot of options, and so a seed investor is going to make a lot of investments, a lot of seed investments, and it's going to be largely based on the people, and that's kind of it. And then if you kind of fast forward all the way to the growth stage, at the growth stage, there's a lot of data. There's a lot of data. There's a lot of metrics. There's a lot of things to look at. And so at that point, You're really focused on, like, what is the data telling me? What are the metrics? You know, how do I understand that? I think that A is kind of a really interesting nexus of a couple of these things where you have a team. Obviously, the team matters tremendously, but the idea or the concept is usually further developed and better understood. There may be a very, very little bit of early data, not much that you're looking at. And so I think there's a whole bunch of things that are coming together. And so it's challenging to evaluate, but it is a lot of fun. And one of the big differences is, you know, we We aim and aspire to be the entrepreneur's first call. That's the standard we hold ourselves to. And so you get a bit of in the trenches with the entrepreneur, trying to help in any way you can build the business. And so I just think it's a blast.

Can I ask, what does it— I often hear from VCs about being the first call. What does that mean then in terms of the interaction with founders and operators?

Well, I think you want to be able to help in a variety of different ways. And I think when we say first call, we mean like, hey, there is a problem, There is a question, there is something you want to talk through, there's a hire you want to talk through, there's a termination you want to talk through, there's a strategic decision you want to talk through. Being able to be the person who gets that call or one of the people who get that call and be able to talk to the entrepreneur, that's what it's about. Super rewarding and something that is earned. I don't think that's something that's given.

Can I ask, what do you think the benefits are of having such a focus on the kind of early stage A and B?

I think the context switching in terms of like, if you think about how you evaluate CEOs, Or how you evaluate growth or evaluate some of these other things, or how do you evaluate making a kind of quote unquote active investment where you take a board seat versus a quote unquote passive investment where you don't take a board seat? Those are really tough context switches. And I don't know that it's easy to kind of switch frame of mind to look at a seed opportunity and then 3 hours later look at a growth opportunity. The way you evaluate those 2 things is so different. I think one of the advantages of the focus is you can actually have some kind of consistent way of thinking through these things and hopefully make better decisions as a result.

What do you think of the vertical specialization that we've seen in the last few years? Are you bullish on vertical specialization as well?

There are a lot of different models work. And I think, you know, there's a set of investors who've done an incredible job at security or a set of investors who've done an incredible job at e-commerce. And I think so I get those verticals and those can certainly work. I think for our model, it doesn't tend to work. I think we are all generalists to a large degree. And I think that that's how our model works. And that isn't— I don't know that that's right or wrong. I just think it is what it is. Different models work.

I do have to also— in today's— you said one of the big things was competition between funds there for the best deals. In today's competitive world of Series A in particular, do you think it's not necessary for A funds to potentially dip into seed in some cases of kind of extreme popularity for the startup to ensure the optionality for the A?

It hasn't been our experience, and we certainly benefit from a track record and I think, you know, in a brand. But the challenge with doing that The other part is you do also get into conflict scenarios. And I think this is also something that isn't understood. Like, say you did make a seed investment in a company and then a competitor to that company comes along. Are you conflicted out of investing in that competitor? And what if that competitor is the one that you really want to be part of? It cuts both ways. And I think it cuts both ways for the entrepreneurs, frankly, too, because for the entrepreneur, you do have to really think about the signaling risk of that being a seed investor, of a firm that also leads As being a seed investor. What if they decide not to compete for the A? Then does that Is that a bad signal to everyone else? I think generally, yes, it is. So I think that's— it's a challenge.

No, I very much agree with you on the signaling there. But I do want to discuss a quote from one of your partners that we had on the show, Peter Fenton. He said the best enterprise investors are also the best consumer investors. So with that in mind, how do you evaluate this statement in particular, do you think?

That's a funny statement because I think in the modern era, if you go back, call it the last 10 or 15 years of venture capital, There are only 2 that I can think of who have had multibillion-dollar consumer outcomes and multibillion-dollar enterprise outcomes, and that would be Peter Thiel and Jim Goetz at Sequoia. And so I can't think of many others. So that's a very, very short list. So that may be a really high standard. I would say all venture capital firms are partnerships. The thing that you can kind of separate is I've noticed people who even may be more consumer-oriented or more enterprise-oriented, if generalist enough, they can still add value on the other side. And so I get a lot of value from my partners' perspectives. My partner Matt, who is largely a consumer investor, as an example, I think he has tremendous perspective on enterprise investments. And so you can see that example. I can give you a really concrete example. I think one of the investments that I made, we saw a number of our consumer companies were struggling with this challenge around machine learning and deep learning 15, 18 months ago, and they were all running into a very similar And so having that consumer perspective and the perspective from those consumer companies actually informed an enterprise investment opportunity. And so I think you have a lot of that type of cross-pollination, which ends up being very productive and kind of doesn't fall into the clean lines of, hey, this person looks at consumer opportunities and this person looks at enterprise opportunities.

Speaking of consumer opportunities, then, before we dive into the quickfire, a lot of people are saying kind of with the current state of the consumer environment, We're in a slight trough with Snapchat potentially being the last breakout. Obviously, a Benchmark portfolio company. Congratulations on that. But with that in mind, how do you assess the current consumer landscape? And would you agree that we're potentially in a trough?

I'd probably describe it a little bit differently than a trough. I actually think we're in the midst of kind of an infrastructure renaissance. And so why is that? Well, let's look back. If you kind of go into the mid-'90s and you look at the rise of Sun and Cisco and networking and all these things, that was infrastructure, compute infrastructure, networking infrastructure. infrastructure, et cetera, that basically allowed the build-out of, a few years later, Google, Yahoo, Facebook, YouTube, and a whole bunch of consumer experiences. Similarly, in the early 2000s, you had the build-out of Qualcomm and Broadcom and a whole bunch of technology, mobile technology, mobile networks that basically enabled, obviously with the platform of the iPhone, enabled a whole set of consumer experiences like Instagram and Twitter and Snapchat and Uber, among others. And so these things are very cyclical. And again, this is overly simplistic, but I think we're in the midst of an infrastructure revolution. Maybe it's around ML, maybe it's around cloud, maybe it's some combination of these things that are coming together, and there will be a new set of consumer stuff. We can say for sure, it may be a few years out, and it's probably going to be on some new platform that may or may not exist today. I think that's one of the really exciting, inspiring, and challenging things about this business is it's constantly changing. The platforms are constantly changing. The dynamics are constantly and you have to be always looking for the next thing.

Do you have a platform that you're most excited for the future about?

I don't know that I have a theory that I'm willing to share.

No, I wouldn't either if I was you, so don't worry. That was a horrible question. What a bastard I am. But anyway, I'd love to finish with a quickfire round today. So I say a short statement and then you give me your immediate thoughts, about 60 seconds per one. How does that sound?

Okay, sounds great.

So let's start with your favorite book and why.

My favorite book is Endurance by Alfred Lansing, which is story of Shackleton trying to cross the Antarctic, a British explorer trying to cross the Antarctic in about 1912, 1913, and just an incredible journey. I think it's an amazing story of leadership, adventure. It's a lot like the entrepreneurial journey, except of course lives aren't at stake in the entrepreneurial journey. It's just an amazing, amazing story, and I felt a lot of similarities as I was going through Whack-a-Mole.

What's the most challenging aspect of your role at Benchmark day to day?

I'd say 2 things. You know, one of the things about being on part Being part of a firm like this is the expectations are obviously amazing and incredibly high, and so you wake up every morning and you want to be the absolute best and compete at the highest level. That is no joke, and that's something that I take very seriously, and you certainly don't want to be the person that was the beginning of the end of a storied franchise. I'd say the second thing is being a small partnership, there are 5 investors at Benchmark, you're constantly struggling with coverage. How do you see all the opportunities that are out there because there are so many, and That's a constant tension and constant challenge.

What would you most like to change in VC and startups?

This is probably more environmental-specific than anything else. I think constraints are generally good and yield really special things. It's the story of the vines, the grapevines that kind of fight the hardest to produce the best grapes. And I think we— I'd like to see us go back to an environment that rewards operational discipline and execution and is more capital-constrained. And I think that'd be good for all of us.

And then I want to hear, and this one isn't in the schedule, So I'm just too intrigued. What does the investment decision-making process look like on the investment table? Is it unanimous voting? Is it conviction-driven? What is it internally?

Our investment process is one of advocacy and voting. So basically there is an advocate. So one of the 5 of us falls in love with something, is probably the best way to describe it, gets really excited about the entrepreneur and the opportunity. All 5 of us work on diligencing that opportunity and have perspective, and then we vote. And the vote is a way for your partners to give you perspective of how strong their conviction is and what their perspective is on the opportunity.

Does it need to be unanimous?

No, it does not have to be unanimous. There is a legend here, which I actually don't know how true or not true it is, that the highest returners, highest returning investments like eBay, eBay and Ariba and Red Hat and some of these others from the late '90s were split votes. But I think in recent years, you know, Snapchat, Uber, Instagram, and some of the other big winners.

And then I want to hear about your most recent investment. And why you said yes.

Sure. The most recent one that's announced was Contentful, and that's a content management system via API. And the thing that was most amazing about it, besides the product made a ton of sense from the very beginning, Sasha and Paolo, the founders, were unbelievably compelling. But the thing that was most incredible to me when I saw it was it's a Berlin-based company and it's a Berlin-based company with— at the time there wasn't a single employee in the US, and yet they had built this incredible enterprise customer base of US companies. And that's just something that doesn't happen very often at all. You don't see companies closing major US corporations, 6-figure deals on the phone from Berlin. And so that just kind of gave me tremendous conviction that this was a really broad problem and they had a really incredible solution for it.

But Eric, it's been such a pleasure to have you on the show. As I said, I heard so much from Peter, so I can't thank you enough for giving up the time today.

It's such an honor to be here. Thank you.

And as with all of the incredible Benchmark team, such a pleasure to have Eric on the show today. And you can find out more about his incredible journey on Twitter @EricVishria, and you can see behind the scenes at the 20 Minute VC on Snapchat @hstebbings with 2 Bs. It'd be fantastic to see you on those respective platforms. But before we leave you today, if you're an early-stage startup, the right infrastructure and support systems are critical, and that's where First Republic are so good. First Republic's resources, network, and expertise allow entrepreneurs to customize a solid foundation for your business across all stages. So why First Republic? Well, you get to leverage their incredible network of VC firms to prepare you for future fundraising events. You get to count on a single point of contact that will be there for you and your employees when you need them. You get access to exclusive events and networking opportunities. But don't trust me on this— their clients include the likes of Instacart, eShares, and Wish, just to name a few. Check it out by heading over to innovation.firstrepublic.com. And speaking of incredible startups there, one that really is a must is Segment. Why? Well, Segment allows you to collect data from every platform— mobile, web, server, cloud apps— and load it into Segment. Segment then sends the customer data to your tools and destinations where it can be used most effectively. Destinations include email, analytics, warehouses, help desks. And With over 200 sources and destinations on the Segment platform that can really empower your team, Segment really is the last integration you will ever do. And that's why the world's best companies use Segment to drive growth and revenue, including the likes of Atlassian, New Relic, and Crate and Barrel, just to name a few. Simply head over to segment.com to find out more. As always, we so appreciate all your support and cannot wait to bring you Wednesday's episode.