At Benchmark, “good judgment comes from experience, which comes from bad judgment”
When Benchmark general partner Bill Gurley was coming out of college, he wanted more than anything to be a venture capitalist. He wanted it so bad that after growing up in Texas as the son of a NASA engineer and graduating from college in Florida in he went to New York for the first time in his life to beg for meetings with VCs. The response, at the time, was “Don’t even think about it kid. Go work for 20 years, and then come back.”It didn’t take Gurley 20 years. In less than a decade, he became one of the biggest sell-side analysts on Wall Street, quickly narrowing his focus in 1996 to “this thing called the Internet, which no one knew anything about at the time,” he recalled during tonight’s PandoMonthly fireside chat in San Francisco.
Ultimately, with Gurley’s reputation growing, it was Microsoft founder Bill Gates who recommended Gurley for his first venture job with Hummer Winblad (HW). Gurley jumped at the opportunity, saying that he said yes before even hearing the entire offer. But his time at HW was short lived. Even in his limited experience within the industry, Gurley recognized that the culture wasn’t a good fit for him. Fortunately, his next stop was Benchmark, which even to this day does things differently.
Early on, Benchmark came up with a new economic model for venture firms. The firm called it the “equal partnership,” and the premise was that everyone at the firm would get the same economics (meaning their financial compensation). At the time, and still today to a large degree, this is far different than most firms where junior partners “do the bulk of the work,” according to Gurley, while the senior partners reap the benefits. When you’re invited into something like that, “it feels special,” Gurley added, noting its effect on encouraging teamwork, while minimize political infighting.
It’s not just partners in the VC firm that benefit from this model, according to multiple-time Benchmark-backed entrepreneur Michael Wolfe. “It means you get help from the entire firm, not just the partner you are working with,” he wrote in a Quora post. “It means you don't get bogged down by politics and factions within the firm.”
Benchmark’s equal partnership model persist to this day, but other aspects of the firm’s culture have changed dramatically since then. Nowhere is this more true than in firm transparency and brand marketing. Early in Gurley’s career, Benchmark was so radically transparent in its operations that it invited a journalist into its partnership meetings.
This journalist, Randall E. Stross of the New York Times ultimately wrote a book on the experience called “eBoys: The First Inside Account of Venture Capitalists at Work.” Gurley described the book as a sensational “Hollywood gossip story,” which painted the firm in an unkind light. “If you read the book it has a remarkable amount of profanity in it,” Gurley says. “The first draft had three times as much. Any time anybody used profanity, Randall had obviously written it down.” Ultimately, the book marked the end of Benchmark’s transparency policy, attempting instead to make the narrative less about the firm and more about the entrepreneur and the company.
Benchmark couldn’t bury the book entirely, however, and it led to at least one humorous anecdote. One pair of founders, who Gurley declined to name, misinterpreted the level of profanity in the “eBoys” book as an indication of the firm’s culture. “Shortly after the book, two young founders came in and decided that [profanity was] what we liked and proceeded to curse through the entire presentation,” Gurley said, laughing. ”And not a little, but a lot. It took us awhile to figure out what had happened, so I think we shied off a bit.”
Gurley and his partners at Benchmark experimented briefly with international expansion, which quickly proved counter to its core identity. The firm launched satellite funds focused on Europe and Israel. It wasn’t long before these funds departed from the Benchmark model, and the firm “went back to our [Silicon Valley] knitting,” in Gurley’s words. As has been noted elsewhere, Benchmark determined that “service businesses are tough to scale, so we’re not going to try.”
To this day, Benchmark is always experimenting, Gurley says, but the firm always returns to its roots.
“Good judgment comes from experience, which comes from bad judgment,” he said.
[Image source: Walt Disney's "The Emperor's New Groove"]