🎧🍌 Benchmark’s Eric Vishria on Going Zero to $100M ARR in 12 Months
Why AI grows 10x faster than SaaS, how Benchmark makes new investments, archetypes of the top AI founders, why storytelling is a superpower, and parallels between the 50's, 90's, and today
Eric Vishria is a General Partner at Benchmark Capital, joining the firm in 2014.
This conversation goes inside the new class of startups going zero to $100 million ARR in 12 months, the ways AI is changing company building, and how Eric and Benchmark make new investments.
We get into the risk rewards of Series As today, how Benchmark competes to work with founders, and and why the best storytellers win.
We also talk about parallels between the 90’s, 2000’s, and today, and how the archetype of successful founders has changed in the age of AI.
Special thanks to Spenser Skates, Sajith Wickramasekara, Bobby DeSimone, and Semil Shah for their help brainstorming topics for Eric.
Check out prior episodes of The Peel with Spenser, Bobby, and Semil.
Support this Episode’s Sponsors
Bolt: Help them break a world record for the largest hackathon - up to $1m in prizes. Sign-up.
Numeral: The end-to-end platform for sales tax and compliance. Try it here.
To inquire about sponsoring future episodes, click here.
Timestamps to jump in:
5:17 What gets Eric excited about a new investment
7:48 Backing learning machines
12:34 Backing Cerebras at inception
16:20 Why the best storytellers win
21:17 How Eric works with founders
26:38 Companies going zero to $100m in 12 months
31:09 Revenue quality of AI products
32:41 Moats and business models in AI
38:41 AI margins and runway
41:14 Parallels between winners of the 90’s and today
44:54 Archetypes of the best AI founders
50:43 SaaS companies successfully pivoting to AI
53:43 LLMs are most comparable to transistors in the 1950s
56:19 Ways Eric uses AI personally
58:05 How VC has changed over the past decade
1:01:40 VC is a hustler’s business
1:03:20 Backing extraordinary companies is all that matters
1:09:36 What makes Benchmark unique
1:17:03 How Benchmark makes investment decisions
1:18:38 Skipping senior year of high school
1:20:21 Working with Ben Horowitz and Marc Andreessen ‘00-’08
1:24:42 Starting RockMelt, selling to Yahoo
1:26:28 Joining Benchmark in 2014
1:28:08 Investing in Confluent one month later
1:28:50 Lessons from Spenser at Amplitude
1:29:36 Fireworks AI’s hyper growth
1:30:49 Pricing in AI changing from tokens to outcomes
1:32:23 Ways Eric’s perception of VCs changed after becoming one
1:34:07 How to build a management team
1:38:21 The best CEOs make new mistakes
1:39:50 Why there should be more public companies
1:44:03 “Even great companies can be overvalued”
Referenced:
Find Eric on X / Twitter and LinkedIn
👉 Stream on YouTube, Spotify, and Apple
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Eric, welcome to the show.
Eric Vishria:
Thank you so much for having me.
Turner Novak:
I think this will be fun. We're going to talk investing, AI, building companies, lessons learned, a lot of different stuff.
Eric Vishria:
Well, I feel lucky to be one of the few investors that you actually have on, so I appreciate that.
Turner Novak:
I've had this no VC policy, and I'm trying to stick to it so hard, but every once in a while I'll have somebody come through.
Eric Vishria:
There are a lot of VCs, so we're going to overwhelm you.
Turner Novak:
Yeah, it instantly will fill up 10,000 episodes.
Eric Vishria:
Oh, yeah. Yeah, yeah, they have a lot of incentive too.
Turner Novak:
Well, so interesting thing I heard you say once I thought was kind of an interesting topic to start with. You've said that for every single investment you've made, you know almost immediately when you show up that, "This is a founder I want to back." Can you just talk about that?
Eric Vishria:
I wouldn't say when I show up, but I would say I build conviction quickly. Some VCs tend very positive, so we have a positive disposition, so we're more inclined to get excited. And then, others are less inclined to get excited and more skeptical oriented. I would say I'm more inclined to get excited and then diligence or my partners or whatever, everyone backs me off. I work that way.
Turner Novak:
Okay.
Eric Vishria:
So people work differently in terms of what their excitement is. But for me, I walk in and you meet somebody. And a lot of times if I learn something very quickly, especially if I'm spending a lot of time in a space and then an entrepreneur says something that makes me think. They have an insight, they have something that just makes it click for you and you're like, "Huh. I meet companies every day. I talk to people every day. I read stuff all the time, and nobody's ever said that. Nobody's ever given me that insight. No one's ever made me think that way." So that's a really good thing for me. So that's one thing that really happens.
Turner Novak:
So just the eye-popping stat or the new piece of information that kind of changes your view of something.
Eric Vishria:
Yeah. And I would say, to be clear, it's not a metric normally. It's very rarely a metric. Actually, I don't think it's ever been a metric. It's an insight. It's a view of a market or a lens. A long time ago, I worked with this designer who was from IDEO, and he said this thing, which I really think about sometimes, which is he's like, "A lot of times the most important thing isn't the solution, but it's framing the question correctly."
And I kind of think of that with the insight, which is like, it's like, "Hey, everyone's looking at this market or looking at this opportunity. And it's like, 'Okay, well this is our vector of attack, and if you do it this way.'" And you're like, "Huh, that kind of makes sense." So there's kind of an insight thing on it.
And then, the second thing that really happens to me a lot is you meet somebody and they just feel like a learner. And I've described this before, but they're the founders who come in and they feel like they're just sticking a vacuum to your brain and just sucking everything out of it. Right?
Turner Novak:
Yep.
Eric Vishria:
And when you have that feeling, where someone's just basically downloading your brain into their brain and then you kind of think about it and you're like, "Wow, if this person does this three times a week for 10 years, that's like 1,500 brains that they've downloaded into theirs."
Turner Novak:
That's a lot of brains.
Eric Vishria:
That's a lot of brains. And so, that level of learning or compounding is just, and you feel it. You almost feel it. And so, it's actually also it's become a realization for me is I almost don't care where an entrepreneur starts in terms of their sophistication around company building as an example, and cares so much more about their slope or their rate of learning. Because if the rate of learning is really steep, then it really just doesn't take that long to just compound past everybody. And so, every once in a while, it doesn't happen that often obviously, but every once in a while you meet someone, you have that chemistry, you get the insight, you feel like they're a learner. And then, I get really, really excited about that.
Turner Novak:
So how do you tell that somebody's good at learning? Because you could be saying this to me and I could tell you, "Oh, I'm a good learner."
Eric Vishria:
Yeah.
Turner Novak:
How do you know?
Eric Vishria:
It's subjective. It's a feeling, I guess. It's a feeling that you have.
Turner Novak:
Is it the type of questions they ask?
Eric Vishria:
Yeah, I think it's the type of questions they ask. It's like when you ask questions of them, do they understand the question behind the question? Are they digging into the insights? Are they trying to get to the bottom of things? Do they feel like they're reasoning from first principles? You feel like, "Oh, this person is reasoning from first principles. Are they afraid? Are they willing to ask dumb questions? Are they willing to ask questions that just seem really basic back to you? Are they pushing on it?"
Turner Novak:
So you think if somebody asks a basic question, that's actually a hidden indicator of it really?
Eric Vishria:
Yeah.
Turner Novak:
Okay.
Eric Vishria:
It can be. And even when they... You'll say something and they'll say, "Why did you say that?" And they're just willing to ask because I think that's a good sign, just like, "Hey, I'm confident enough, but also willing to ask." So I think there's just this feeling about it, but there's another thing about it, which is you'll see it in the evolution of their story. The narrative of the company, the reason for the company existence, the reason why the company will win hangs together. It's like a cogent story.
And a lot of times, it's funny, like you, we invest at the very early stage at Benchmark. And probably, I don't know, a third to half of the investments that I've led for us have been initial capital. So that happens all the time. And I would call them straight to A's as the way I think about them, but you're just like, 'Okay, this is a thing. It's going to be a thing. We're going to do it." In those cases, you're trying to figure out, "Does this person have an insight on the market? And does the whole story hang together in such a way that I don't know if it'll work or not." You're taking a lot of risks. These are early stage investments. Some of these companies are going to work, some of them aren't, and that's okay.
And I think that's actually one of my learnings from my own experience and everything else is you can have great people, you can have the right market and for reasons that are just external, things can work or not work. So I think that's one of the things that's very special in Silicon Valley, is we don't have to... Working or not working isn't... If something doesn't work, it could just mean that it just didn't work. It's like, "Fine." It's totally okay. And I think that's a really special thing about the Valley. But you look at it and you hear the story and you're like, "If that works, that could really matter." And the story is really cogent. And we have example after example of that, where it's just like, "I don't know if that'll work or not, but it kind of hangs together."
Turner Novak:
Those are my favorite checks and favorite founders and just-
Eric Vishria:
The best.
Turner Novak:
... products and companies where it's like you basically explain to someone, you kind of caveat it with, "I'm not sure if this is going to work, but here's what they're doing."
Eric Vishria:
Yeah.
Turner Novak:
And there's a thesis and sort of a problem they're trying to solve. And you finish and you're like, "Yeah, that could be a really good idea."
Eric Vishria:
Yeah. "It could be a really good idea." That's one of my favorites. The Cerebras one for me is, it's an AI chip and systems company.
Turner Novak:
Okay.
Eric Vishria:
And that one-
Turner Novak:
This is the one that they filed to go public?
Eric Vishria:
They're filed to go public, yeah. They're on file.
Turner Novak:
What's the latest with that?
Eric Vishria:
They're on file. Well, I think we will see when this thing gets published. But I would say they're whatever. There was the Sisyphyus thing and all this other stuff. But the cool thing, I've worked on the company with Andrew, who's the founder and CEO or co-founder and CEO since inception, so since the very beginning. It's five founders and it's a semiconductor company. And so, it's capital intensive and it has these challenges. But it's one of these things, it's like, "What do I know about hardware?" I know the answer is nothing, literally nothing. But when he came in and pitched, it was like, "I don't know if this will work." Now this is 2016, March of 2016.
Turner Novak:
Oh, so there was no semi-talk. NVIDIA was still not even a company yet.
Eric Vishria:
It was a $30 billion company at that point in time, not a $3 trillion company. And Google hadn't announced their TPU yet. This is way before all this stuff. Right?
Turner Novak:
So what was the pitch then? How did they get you excited when there was no real other proof points that were super public around it?
Eric Vishria:
So yeah, the cover slide and the second slide was the team. The team was legit. They've been around forever doing semi startups, semi and system startups. So you were like, "Okay, these guys are pros."
Turner Novak:
So you didn't even know necessarily it was a semi company yet. It was just the team.
Eric Vishria:
Yeah. The first one was the team, and the next thing was, the next slide was basically, "GPUs actually suck for deep learning. They just happen to be a hundred times better than CPUs."
Turner Novak:
Okay. That's an interesting pitch.
Eric Vishria:
But it's provocative.
Turner Novak:
Yeah.
Eric Vishria:
You know what I mean? But talk about insight, right? You were talking about insight. And you're sitting there, and remember, this is pre-transformer, obviously way pre-LLM. It's pretty, any of this stuff. This is early, I don't even know if OpenAI was founded yet. That's the stage that we're talking about. It's in that era.
And so, but they're saying this and you're like, and as soon as you said it, you're like, "Wait a minute. Why would a graphics processing unit be the right solution for AI" or deep learning at the time? And you're like, "Yeah, it might not." And then obviously went into, "Well, these are the characteristics of the workload and these are the things that we would build in our solution." And you're like, "That could work. That could work. That's a really... If it worked, it could be really, really valuable." Which is obviously ultimately what matters in venture is the asymmetry. Right? And so, I think it was a good dynamic where you're just like, "Okay." The thesis makes you think, and I kind of love stories like that.
Turner Novak:
Yeah. Well, speaking of story, so Sajith at BenchLink said one of the things he's learned from you is the importance of the company narrative and the story. I'm not sure why he asked me to ask that specifically, but it sounds like maybe you guys have something there. But what's the importance of it? It sounds like you just talked about it a little bit.
Eric Vishria:
One of the things that I think about is, as a founder or a CEO you're always pitching in some way. And I think engineers and we all want to be cynical about, "Hey, it's pitching. Pitching, it sounds disingenuous. It sounds like you're selling something. Ew, gross."
Turner Novak:
Yeah, snake oil.
Eric Vishria:
Yeah, snake oil and whatever. And I don't mean it that way. I mean it in this different way, which is you're telling the story of why this company should exist, why you are uniquely able to do it. This is the company, why this is a real problem. Why is it this company, and why are you going to win? Right? And if you think of it in that context, when you talk to customers you're doing that, when you're talking in prospective employees you're doing that. When you're talking to partners, you're doing that. When you're talking to investors, you're doing that. That's the job. That's what you're doing all the time. Right? And you're doing that again and again to your employee base and to everyone else, and you're constantly iterating and editing the story.
And so, I think it's easy to cast that aside and whatever, but actually I think it's everything. And it matters so, so much in all of these different contexts. And the people who can do it the best consistently win. They consistently do better. And I think part of the reason that they consistently do better is because smart people on the other side of it are like, "wait a minute, that doesn't hold together." And then you're like, "Oh, yeah, you're right. That doesn't hold together. I need to fix something about that." Or something changed in the world that's going to have to cause me to rejigger my story. Or we have this challenge. Maybe it's a customer concentration issue or maybe it's two quarters of flat growth or maybe it's whatever. Any problems are going to occur all the time.
And a lot of times those problems occur or those idiosyncrasies in a company happen for really good reasons, and you need to be able to explain them. And sometimes they happen for really not good reasons, and you need to be able to introspect and address them. But I think all of it, the test of that or the source of that, is really the company narrative. And at the end of the day, I think the CEO O owns that, owns that company narrative, and it's so important. And I can see a real difference between the CEOs who really own that and lean into it and spend time on it and the CEOs who don't. And so, I think it really matters.
Turner Novak:
Do you know why some maybe lean in or out in certain ways? Is there a certain characteristic of a CEO that might lead you to enjoy it or understand why you should do it more?
Eric Vishria:
To some extent, it's about ambition. Right? Because if you're super ambitious and you're telling me the story that's really big. And you understand every little layer of that story as it breaks down to all the way down to where you are today. It's all layers of an onion or something like that. And you could look at Elon as an example of this, where he's just a master.
Turner Novak:
Oh, yeah.
Eric Vishria:
He's unbelievable.
Turner Novak:
The going to Mars thing.
Eric Vishria:
Yeah.
Turner Novak:
I'm like-
Eric Vishria:
Amazing.
Turner Novak:
"That feels pretty far away, but you got people bought into it."
Eric Vishria:
Yeah. And it's not even going to Mars. It's colonizing. Right?
Turner Novak:
Yeah.
Eric Vishria:
It's like literally interplanetary life.
Turner Novak:
We need to become an interplanetary species. That is, I don't think you can give a bigger, kind of top that.
Eric Vishria:
Okay. So we start there.
Turner Novak:
Yeah.
Eric Vishria:
And he comes all the way down to like, "Okay, we need to launch a rocket and then wait. We need to launch a rocket and the rocket needs to be usable. And then, we need to have multi-forms of that rocket. And then, we need to be able to take satellites." And he just keeps on building on the story. And they're like, "Oh, we need robots to be able to address things or work in space, whatever it is."
Turner Novak:
Work in space. Yeah.
Eric Vishria:
And so, the dude has a story and it kind of hangs together. "We're not a car company, we're a battery company." And whatever it is. It's truly master class of this. And I believe he believes it. I don't think he's not trying to bullshit everybody. I think he believes it. But it's just a great example of the nature and scale of ambition, and then therefore how storytelling matters around it.
Turner Novak:
Okay. So let's say you meet a founder, they blow your mind with a new insight, great storyteller, very ambitious, you love the team. How do you usually engage with the founder and try to win the opportunity to work with them, give them money, you're working together for years. What does the relationship usually look like?
Eric Vishria:
To me, people invest for different reasons and like to do the job, venture for different reasons. I was a founder before. I like to do it to work with founders. That's my North Star, that's my motivation. That's the part of the job I enjoy the most. And so, the chemistry with the founder matters tremendously. I care a lot about that. I want to spend a lot of time with the founder. I work with founders for a decade plus. That's a very classic way we work at Benchmark.
And so, for me, if you're meeting someone like that, you get excited. Then the next thing is to really engage with them on the substance of what they're building and why are they building it? What's their motivation? How does it work? What are the dynamics behind it? What are the steps they see in the evolution? What are the questions? What are the learnings that you have from other companies that might be applicable to this one? And that's the kind of engagement. It's just like, "How do we maximize the probability that the founder's vision is realized? And the greatest ambition that that founder has comes to life?" And if we can increase the odds just a little bit of doing that, and maybe just a little bit every quarter, if we get a little bit better every quarter on that, then again, the compounding takes over.
Turner Novak:
Are there any things you found that move the needle the most on that percentage to get them there, like little things like showing up to board meetings prepared or something? Are there any things specific you found that really-
Eric Vishria:
There's so many things that are just... And every company and every founder is a little bit different. In anything that's post-product market fit, maybe this is actually pre or post, but anything post-product market fit I'd just say it's so much about how are you building the company itself.
I think good companies are durable and resilient in ways that really matter. And sometimes you meet founders and it's like, "Wow, this is an amazing individual. And that's cool, but does this person really want to build a company which is more than one person? And at least for now."
Turner Novak:
Yeah, maybe in the future.
Eric Vishria:
Maybe in the future, but at least for now, it's more than one person and there's other dynamics around it. And so, you have to be able to build around that company. So I think a lot of it goes around building a company. And then, that comes down to who are you recruiting? Who's joining the company? What are their superpowers? What are your superpowers, and how does it all fit together? And so, I think I spent a lot of time on that. And a lot of things, it's interesting because I was listening to a Zuck podcast yesterday.
Turner Novak:
Which one was it?
Eric Vishria:
It's the interview that-
Turner Novak:
Was it the Ben Thompson?
Eric Vishria:
Ben Thompson did it.
Turner Novak:
Okay.
Eric Vishria:
Yeah. Ben Thompson did it for Stratechery. Ben's a very good commentator. I wouldn't say he's the best interviewer. But what I hear in that is Zuck is also he's paying attention to the market. He's understanding what's happening in the market. He has lessons. One of the most interesting things to me about what he said was I think he has a lot of remorse on not owning the mobile platform. And so, one of the reasons, because one of his questions was how long and is he going to continue to open Source Llama, and why is he spending so many billions of dollars investing in Llama? And one of his things is like, "Look, I don't want there to be another platform that is owned by somebody else that I have no control over." And I think there's obviously a lot of frustrations with Apple and a lot of tensions on that.
And I thought it was just an interesting... But then you start to understand the psychology of, "Okay, that makes sense. So he doesn't want OpenAI or Anthropic or whomever else to have the model and that to be the platform. And then, Facebook is riding on that platform in some way. Or Facebook is leveraging that platform for their ad assets and for their..." So it kind of makes sense. As soon as he explained it, you're like, "Oh, that makes sense."
So the point of it is, you're building all this company and then a lot of the company as time, especially as the business gets bigger and bigger, a lot of the company is there to make the company work, make the business work. And part of what that does is it should free up the founder to be able to lift up their eyes and have a longer strategic view and understand how things are developing and changing. And typically, that's what a founder's superpower is. And so, I think that those things kind of fit together to me.
Turner Novak:
On the notion of building businesses and in that just general theme, how do you think that's going to change in the future? We just kind of talked about there's this whole joke of one person can build a billion-dollar company. And maybe it's not quite a joke anymore. I don't know.
Eric Vishria:
Yeah. Yeah.
Turner Novak:
How do you see that kind of changing in maybe your portfolio companies or what you've observed?
Eric Vishria:
I think it's going to be really... I think there's going to be some very weird and unexpected twists and turns on this journey. I don't know.
Turner Novak:
What's the most interesting thing you've seen in terms of-
Eric Vishria:
I mean, I'll tell you like, one kind of crazy thing is in our portfolio, in the benchmark portfolio, the number of companies that we're working with, which are going to be sub 100 people and started selling say, I don't know, 12 to 18 months ago and are over 100 million in run rate is just insane. It's not twice as fast as SaaS companies, it's not three times. It's like five to 10 times as fast, like certainly five to eight times as fast, and it's not exactly the same run rate's different than ARR. A lot of it could go away, A lot of its experimental, et cetera, et cetera. All the caveats aside, it's still insanely impressive, both from a human efficiency perspective and from a rate of growth perspective. And part of that's AI, like a huge part of that's AI. And so yeah, I think it really matters.
Turner Novak:
So I mean, what's different? Because I think you actually tweeted this a couple months ago. There's that rule of in SaaS, you get to a million in revenue in ARR.
Eric Vishria:
Yeah, that's cute.
Turner Novak:
And then you go 3X, 3X, 2X, 2X, maybe I did it right.
Eric Vishria:
I think it's like, I don't know, triple, triple, triple, double, double, whatever.
Turner Novak:
Yeah. Yeah.
Eric Vishria:
I don't know. Some stupid, yeah.
Turner Novak:
And then you can go public and you got like a 100 million in revenue. They're not hearing like-
Eric Vishria:
Yeah. All of that. Every part of that is broken out. Every single one.
Turner Novak:
That's monthly now.
Eric Vishria:
Literally every single element of that is broken and especially the going public part.
Turner Novak:
Yeah.
Eric Vishria:
But yeah, every single part of it is, and that was cute. That was I think the tweet.
Turner Novak:
So what's the reason that these companies are going faster? Is there more market demand? Can you sell-
Eric Vishria:
This is, I think the only I think, thing that we can conclude, I don't think there's a lot we can conclude yet, but I think the one thing we can conclude is that customers are finding the product experience to be magical and therefore they're willing to spend money on it. Now how long are they willing to spend money? Is it substitutable? Are there moats? Is this durable? All of those I think are open questions and really vary a lot like company to company and product to product. But anytime you see something growing that fast in a new category with a new capability, I think you have to say there's something magical about the offering. And so that's kind of, that's my takeaway. It's like, okay, there's something magical about these offerings. They're really, customers are like, that solves a real problem. I'm willing to spend money on that. Here you go. Take my money.
Turner Novak:
Yeah.
Eric Vishria:
And okay, that tells us something.
Turner Novak:
What is the fastest growing product that you've seen and maybe you're allowed to talk about? Maybe, I mean, maybe ChatGPT is like the-
Eric Vishria:
I mean, ChatGPT would have to be the fastest I think of all time.
Turner Novak:
Yeah. What about second or third? What's the fastest thing that you think you can comment on publicly?
Eric Vishria:
I mean, like I said, I think we have, there might be half a dozen companies that have gone zero to over 100 in 18 months, like literally zero. That's really fast.
Turner Novak:
So how does that usually play out? Do you get one big million dollar deal? There's 100 really big customers. Is it a lot of-
Eric Vishria:
Oh, I think it varies a lot, right? If you look at the Cursors of the world or whatever, I think that's really like-
Turner Novak:
Millions of people.
Eric Vishria:
$20 at a time. Right. Or whatever, $240 at a time or whatever the way to say it is, I think that there are definitely companies that are doing this $10 million blocks or $5 million blocks. So I think there's every variant of it. It's astonishing the extent of how many different flavors there are and how many different ways it works.
Turner Novak:
Yeah. So then if I'm an investor or even a founder, just thinking about business model durability, like I want this thing to be here in 10 years. I'm trying to build a company that changes the world, solves one's problems, billions in revenue, however you want to talk about it. How would you think about just assessing revenue quality when you're thinking about and looking at just everything that's going on right now?
Eric Vishria:
One of the things I find like, the best founders seem to be pretty optimistic, pretty paranoid. They're optimistic about what they can do and what the business could do, everything else. They're pretty paranoid. And as a result of their paranoia, they are like, they move with expediency. Right. And so they have the expediency and they're also pretty intellectually honest in their heart of hearts. Whether they say, whatever they externalize or not may be different, but they're pretty intellectually honest. They might say, Hey, you know what we have, like this is where the moats are and this is where the moats aren't. And they're talking about those things. And right now with a bunch of the AI companies that are growing really fast, the moats are pretty thin, but there is a speed boat and so they're just moving faster and they have a lead that's tiny and they're moving faster than other people. And could that translate into things over time? For sure. And I think it does.
Turner Novak:
Yeah. And to your point about the being limited moats, it's interesting to think about just what are actual enduring moats in a world where certain things can be automated, like you might think switching costs or something. I'm going to switch you from Salesforce over to my new CRM thing, and there's a bunch of agents that just go and literally rip out every single piece of data, copy and paste and put it in. And we have automated all the integrations and it's literally, it's clone Salesforce. I don't actually know if this is a good business or not-
Eric Vishria:
Yeah. Yeah.
Turner Novak:
But it's like are there no switching costs? Have you figured out anything, framing of how to think about how these-
Eric Vishria:
Well, I'll give you a great example of like, I think we would say the greatest business of all time is probably search, right, is-
Turner Novak:
Probably. Yeah.
Eric Vishria:
Probably Google search. Right. And from a consumer perspective, what's the switching cost of a search engine?
Turner Novak:
It's like a lot, but also nothing at the same time. Yeah.
Eric Vishria:
It's nothing. It's nothing. Especially early days. Again, if we go back to early days, we had you're too young, but there was-
Turner Novak:
Ask, ask.com.
Eric Vishria:
There were so many search engines.
Turner Novak:
I used that one.
Eric Vishria:
The Ask. I mean, but dude is-
Turner Novak:
AltaVista was one.
Eric Vishria:
Yahoo.
Turner Novak:
Yeah, Yahoo.
Eric Vishria:
Lycos, AltaVista, Infoseek, a dozen others that I've forgotten. And ultimately we got Google and literally we switched between them.
Turner Novak:
Yeah.
Eric Vishria:
We switched between them and so-
Turner Novak:
And then the question could be why did Google win?
Eric Vishria:
Well, it was definitively the best product-
Turner Novak:
Okay.
Eric Vishria:
At that time. You experienced it and you were like, this is better. The search results were better. So like, and whether that was page rank, whether it was their crawlers and indexers and they index more to the web or whatever it was. Okay. So that was better. Two, I think the user experience, it was fast, matters, performance matters. I think that's one of the things that we learned from them over and over again. It was definitely faster. Three, it wasn't littered with crappy display ads. That matters. And so I would say that. So the search results were better for whatever reasons, maybe a couple of reasons for that. It was way faster, which turns out really matters and the experience wasn't cluttered. And so you put those three things together. Okay. So that's a start of a theory.
Turner Novak:
Yeah. Well, and I think the interesting too is if you think about search versus display ads, like they're better or more profitable, higher margin. You could charge more for them.
Eric Vishria:
Everything's better about them. Yeah.
Turner Novak:
Yeah.
Eric Vishria:
Totally.
Turner Novak:
So better product, but also way more revenue.
Eric Vishria:
Yeah.
Turner Novak:
So it's again just-
Eric Vishria:
But keep in mind, AdWords didn't come along for three years. I think Google was founded in 98. I think AdWords launched end of 01. And again, it wasn't their idea. And just like these are some interesting evolutions of this. They implemented it better. They had the volume of search, so forth. But that came out of Bill Gross, I think.
Turner Novak:
So you think then just the answer to just kind of all of this, is just build a better product that is a magical experience?
Eric Vishria:
Well, I think, but that isn't a static or point-in-time thing.
Turner Novak:
Okay.
Eric Vishria:
It's build a better product and then stay better for a sustained period of time.
Turner Novak:
Okay. Yeah.
Eric Vishria:
Which turns out to be a lot harder.
Turner Novak:
Yeah, true. That's the hard-
Eric Vishria:
But yeah, I think it's like both of those. At least, I don't know if that's true in everything. Obviously the social networks had network effect. Google had in the end, I think they had two-sided network effect with advertisers and everything else, which probably cemented it. Then obviously they started controlling all the distribution in terms of the browsers and the origin. So they-
Turner Novak:
And they've got an operating system, they've got TV ish. Actually they don't have TV. Well the Chromebooks.
Eric Vishria:
Right.
Turner Novak:
That's actually blown my mind as my daughter uses her Chromebook all the time in school.
Eric Vishria:
Oh, sure. Yeah. Yeah.
Turner Novak:
And it's pretty crazy actually of what they've done.
Eric Vishria:
It's pretty crazy. Yeah. And they went down in education and owned the funnel. So I think there's lots of ways to cement it over time. And so that should lead us to understand that stuff.
Turner Novak:
Yeah. And actually I take back what I said. They do have TV, they have YouTube, so yeah.
Eric Vishria:
Yeah. Yeah.
Turner Novak:
I mean-
Eric Vishria:
Yeah. They have a lot of things.
Turner Novak:
They basically put their tentacles on everything.
Eric Vishria:
We shouldn't look at them. I think it's unfair to look at them 2025 and compare them to AI startups in 2025.
Turner Novak:
That's true.
Eric Vishria:
We should look at them in 2002 or one or 2000 and see what they said. And I would say their, like the at least superficial moat from the outside looking at it would be like, yeah, it's a marginally better search engine that's a little bit faster that doesn't make money.
Turner Novak:
Yeah. But I think it does give you a roadmap though.
Eric Vishria:
Yes, it does.
Turner Novak:
It does tell you what-
Eric Vishria:
Yes, it does.
Turner Novak:
Probably the next couple of decades-
Eric Vishria:
Yes, it does.
Turner Novak:
Could look like.
Eric Vishria:
Could look like.
Turner Novak:
Which it gives, yeah, I mean, I think, I don't know. I think when you look at kind of where the markets with AI right now, like some of the credit we're giving companies for what the future growth might look like. Some of them are like, I don't know about that. But some of them are like, ah, it's actually kind of reasonable.
Eric Vishria:
Sure. Yeah. Yeah.
Turner Novak:
You never know how this is going to go, but.
Eric Vishria:
Well, one of the things I think about on that front is I think on most of these things that seem crazy on the surface, I can make the case at for or against, which is kind of a horrible place to be honestly, because-
Turner Novak:
It's like, come on. Take a side.
Eric Vishria:
Yeah, pick a side. But you could make the case for or against. And part of the reason you can make the case for, against is because the markets are so big and the values potentially is so, they're so valuable, right, if they work and they actually realize their promise. And of course we see the rate of evolution of any of these products and you're like, wow, those things are evolving so quickly. So, and in terms of their increased capability. And so if you kind of think of it in that way, it's like, well yeah, sure. If it realizes potential, it's not that crazy.
Turner Novak:
Yeah. How do you feel about just the margins of some of these products? I know that's a big sticking point against, is like I think OpenAI's negative gross margins or something. Maybe that's changed in the past-
Eric Vishria:
I haven't looked at their financials of course. But I would say in general, I don't really worry about it that much. At least most of the margin cost is on inference. The cost of inference is going down so rapidly. So it's kind of like, would you bet on, it's not Moore's law, but would you bet on Moore's Law? That turned out to be a really good bet. And so I don't think that's a reason for concern. There's also pricing pressure, which I think there is real commoditization. There is this other dynamic which is the model cost development does continue to increase. Maybe that's going to plateau as pre-training becomes less important and post-training becomes more important. So I think there's arguments again that the gross margin thing is not really a problem, but to the extent the gross margin challenge or whatever and at this point in time is inference, I don't think that's an issue at all. I think that's probably a positive if you're willing to stomach it, because I think just a little bit of time is on your side.
Turner Novak:
Yeah. Okay. How do you think then about if you were running a company, maybe you raised, you have 24 months of runway. I don't know, maybe you have 36, maybe you have 12. Just how do you think about what the danger zone is maybe with this kind of a thing? Because you don't know exactly how fast some of this stuff is going to improve.
Eric Vishria:
Yeah, I mean obviously each company is different and you're kind of constantly dialing it. I think if you have momentum or escape velocity or anything else, I think you can run it pretty close to the wire because those are pretty fundable. They're just fundable.
Turner Novak:
People want to give money to companies that run fast. Yeah.
Eric Vishria:
Yeah. People want to give money to those companies. And despite the kind of stock market volatility and everything that we've seen over the last couple months, there's so much money available for AI companies. So I don't really worry about that. I think if you don't have momentum or escape velocity or a great narrative as to why you don't, then I think, then that's a little trickier, obviously.
Turner Novak:
Where do you think most of the value is going to accrue in AI just over the next decade? I don't know if we're going to be done in a decade, but if you just go to kind of the end of this, what do you think the most valuable companies will be doing or maybe look like?
Eric Vishria:
It's so funny because it's just, like if you go back to the 90s, infrastructure companies, like enabling infrastructure companies, the Ciscos, the SONs, SGS, like those companies were the initial runaways.
Turner Novak:
Yep.
Eric Vishria:
Right?
Turner Novak:
Didn't NVIDIA class they have 90 competitors, 93 competitors-
Eric Vishria:
Oh. I mean, I think there were tons for GPUs for four, like I'll get wiped out. So many of them got wiped out. Right. And it's like, but even just the runaway successes of that era, like the big market cap companies and everything were so many-
Turner Novak:
Even like AOL. Would you consider AOL like an infrastructure company?
Eric Vishria:
Sure. You can call it infrastructure company, just enabling access. Right. It's like, and so there were just so many of those at that time before we got the giant and durable consumer companies successes. Right.
Turner Novak:
And is it probably because as the infrastructure got to scale, the cost came down, which then enabled the consumer companies to scale or?
Eric Vishria:
I think of them as really integrated loops, exactly what you just said. And it's like, I think it's not a coincidence that YouTube popped when YouTube popped. It's just like broadband tipped in the United States and YouTube popped. Makes sense. You know what I mean? And they did not take anything away from them. They did a bunch of amazing things in terms of embedding video and pages and whatever.
Turner Novak:
Yeah, but did they beat Google video? Google had to require them. Yeah.
Eric Vishria:
But yeah, Google beat them, right? And so, I mean, and Google acquired them. And so, but it was just like timing matters on these things in terms of the enabling infrastructure and then the consumer thing happens behind it. It's not a coincidence that Instagram I think came before Snapchat. Pictures came before video.
Turner Novak:
Oh, yeah.
Eric Vishria:
Right. And it's just like it makes sense that it happened that way given iPhones, and I forgot if it was 3G or LTE or whatever, but also like you needed the camera phone to get there and then you needed enough bandwidth on the network for you to be able to send videos to your friends very quickly. And so these things all happen and they're interlaced, right, in terms of they feed each other, the cycle does. And so I think you'll continue to see that pattern. Right now, obviously the biggest of round one say of AI, the biggest winner has obviously been NVIDIA. I don't think there's any other question about it. It has to be NVIDIA.
You can look at Mark's and everything else. But I'm just saying, I think Peter Till had said this, which I think is right, is NVIDIA has 125% of the profits of AI so far. And so-
Turner Novak:
Because everyone else is negative.
Eric Vishria:
Yeah. Yeah.
Turner Novak:
And they're like, yeah. Yeah.
Eric Vishria:
And that's probably understated. So like-
Turner Novak:
Probably. Yeah.
Eric Vishria:
And it's like, so okay, so we're going to have an infrastructure ones. In the end though, will there be a giant consumer company? Obviously. There has to be at least one. And I think there'll be tons and tons of B2B companies too that do well in all of these different verticals. So I'm very bullish on just the amount of stuff that this will impact.
Turner Novak:
Where would you want to invest today? We just talked about maybe how these different waves intersect and infrastructure and infrastructure company is at the peak. Maybe we're peak in video, maybe we're not. But what's interesting today then just thinking about how things are probably going to start playing out over the next couple of years?
Eric Vishria:
One of the cool things about our job is I very much resist the top down, oh, you're this opportunities-
Turner Novak:
You don't have your crystal ball out?
Eric Vishria:
It's like a crystal ball.
Turner Novak:
Yeah.
Eric Vishria:
It's so dependent on an individual or set of individuals, a set of founders who has an insight on a cool market and really understands where the tech is and is able to do something with it. But one of the things I have been thinking about that is really different in the AI world versus the SaaS world is in the SaaS world over and over again, you had people who really understood the customer and the problem and then they understood a domain, they understood what the technology was more or less capable of, but it wasn't a real question. So it wasn't a real question of if you could build something. Let me give you an example. You take Salesforce or PeopleSoft or ServiceNow. CRM existed before Salesforce. Right. HR management or whatever existed before PeopleSoft. And so you kind of go through that. And same thing with ServiceNow. So in every case, like in Salesforce, in Workday, I meant Workday. I think I said PeopleSoft, but Workday followed PeopleSoft. Salesforce followed Siebel. ServiceNow followed these companies, Peregrine and Remedy and others. So they were just kind of cloud SaaS versions of the prior generation product.
Turner Novak:
And the prior generation just didn't build a browser, native product, didn't build an internet native software.
Eric Vishria:
Yeah. And they had all of the problems with it. And it was on-prem.
Turner Novak:
Okay.
Eric Vishria:
And it was on-prem. So all the engineering is spending time dealing with customers, various environments and version minus two compatibility.
Turner Novak:
It's like license based. Yeah.
Eric Vishria:
License based stuff. Everything that we all know and why the world moved to SaaS. They just understood the customers, they understood the problem and they were just like, here's a better version of this. Right. And that evolved a little bit over time in SaaS land, but that's what it is. And so product development in that way was done by people who really understood the customer and the problems and then just took advantage of the next wave.
Turner Novak:
It was a new technology really at the end of the day.
Eric Vishria:
Yeah, it was a new technology, but it wasn't rocket science. It was like, okay, yeah, we host it for you. I'm being a little dismissive, but it's-
Turner Novak:
Yeah, it's pretty easy.
Eric Vishria:
It's pretty easy.
Turner Novak:
Relatively. Yeah.
Eric Vishria:
At that time, by the way, I think most of the initial V1 SaaS companies, like they weren't multi-tenant. It was wasn't so crazy. It was just like we run it for you, make it better, et cetera, web-based, blah, blah, blah.
Turner Novak:
Yep.
Eric Vishria:
And so product development happened in this cycle that I think is really different. It's almost diametrically opposite of product development in the AI era. Whereas I look at the teams that are having the most success today and they have intimate knowledge of the models. They are right on the frontier of understanding which models are better at what and why and when, and what they're going to be good at and what they're not going to be good at. And then what they are spending their time on is figuring out how do I apply this capability of this model to this domain or to this user. So they're actually working inside out or technology out versus customer problem in.
And it's kind of like a, of course they understand the customer problem and a lot of times they have firsthand knowledge of it, but they're really close to the metal and capability and they're applying it out. And I think this is a really different way to develop products in some ways. I started my career as a product manager a long time ago, and it's almost the opposite of everything you learned. It's like, hey, listen to the customer or talk to them, understand it, then bring it back to engineering and tell them.
And we came back to engineering and it's like if you did that right now and you asked a bunch of customers what they want out of AI and you brought it back, for the most part, it may not be possible today with today's technology, whereas the teams that are winning right now really understand the technology and are applying it out. And so I think this reversal matters. I think it's a big difference in terms of how companies are getting built and maybe even the types of entrepreneurs that will be successful. I'm not sure. And so I think you're seeing some real change there.
Turner Novak:
It makes me think probably technical founders have an advantage of usually intimately understanding-
Eric Vishria:
Sure.
Turner Novak:
How technology's changed.
Eric Vishria:
Absolutely. Yeah. I think you look at the Bret Taylor's at Sierra and you're like, that's a super, super technical founder who really gets it, like Brett and Clay, really, really get it. You look at Michael and his co-founders at Cursor, like they're super technical founders and they get it.
Turner Novak:
Yeah.
Eric Vishria:
And they're like, they really understand what these things can do and what they can't do, and they're taking them out. And so that's a pretty different dynamic relative to the way a lot of the best SaaS companies got built.
Turner Novak:
And speaking of that, when I had Spenser Skates at Amplitude on the podcast, I don't think he mentioned your name, but he was saying, one of my board members, which before we started recording, he said it was you, said that you haven't really seen many kind of legacy B2B SaaS, like this whole prior wave. You haven't really seen many that are actually fully taking advantage of AI. It's like a chatbot basically or adding some auto complete, like generative AI into the products. What is the best example of maybe one of those incumbents using it?
Eric Vishria:
You know what's funny is I think there's a set of companies which were not working, and they kind of pivoted into it. They just were like, burn the boat. Yeah.
Turner Novak:
We have to do it.
Eric Vishria:
We got to do something. And they got something. I think there's some really, and there's a bunch of stories like that. I think the Glean story is a little bit like that, which is kind of amazing. And what they've been able to do is incredible.
Turner Novak:
Because that's internal corporate search. You can just kind of-
Eric Vishria:
Yeah, internal corporate search and I think it was kind of, sort of working and then you layered LLMs in it and it was just like-
Turner Novak:
Juiced it.
Eric Vishria:
Rocket fuel. Yeah.
Turner Novak:
Yeah. Okay.
Eric Vishria:
Just kind of amazing. And so I think there've been a few of those where, but in terms of companies that had something, like had a good SaaS business and then AI came along and they were able to take advantage of it, I think that number is much more limited. And actually it's very hard to come up with stories of that, but I think part of the reason is exactly what I was saying before, which is I think the product development cycle just switched and it inverted. And the way you do that inverted, the pace inverted. They also feel like they have something to protect, which they actually don't, so they shouldn't protect. They should just go, but.
Turner Novak:
Why don't they have anything to protect?
Eric Vishria:
As one of my partners said, "I think you have two options. You can trade it two times or AI."
Turner Novak:
Okay Yeah.
Eric Vishria:
Right. It's just like the growth is decelerated, and I should say this because it's really important and it's part of my mentality, which is a whole bunch of it just not their fault. It's nobody's fault. It's just like the world just changed on us.
Turner Novak:
You're saying the market is saying your worth this and that you're not change that really.
Eric Vishria:
Yeah, the market changed and the market changed so they're growth decelerated, there's a new hotness that came along and people are spending their energy and time there and there's risk of getting disrupted from that. And so those are the choices. I...
Turner Novak:
Yeah. How would you think about those new technological waves, just understanding as a founder what you should kind of be leaning into? Because when I just think of maybe the last five years, right, we had AI, we had Web3-
Eric Vishria:
This one's super easy, man. Well just AI's here.
Turner Novak:
Yeah. Okay.
Eric Vishria:
It's here. It's not a two or three year thing. It's not a five-year thing. It's like a long time thing. And it's just, it is what it is.
Turner Novak:
So then how do you dissect that and you know that AI is really actually fundamentally changing how we're making businesses? Is there a certain thing or was there a moment where you were like, okay, this is actually like, we are able to do it faster, cheaper, better product, et cetera? Was there a moment where you were able to figure out internally, okay, yeah, this is a real change in the environment?
Eric Vishria:
I guess it's just like you looked at the pace of evolution of them and of the companies and you were like, oh, there's just too much capability getting added too quickly for this not to just really do stuff, and just more and more people are doing useful things with this, so you get excited about that, we should get excited about that. But I think it's here to stay and I think it's really what's going to matter. I think it's going to impact a lot of other things. I think we're going to see AI in bio and AI in material science and AI in mech E, and obviously AI is impacting things like robots and other stuff too. The best analogy I have, and historical analogies are always risky because they're fraught with all of this other weight and everything, but I think it's a bit more like the transistor than anything else, which is it's like-
Turner Novak:
What is a transistor, for people who don't know?
Eric Vishria:
A transistor is a switch, it's a one/zero basically, that exists in every single thing that we can ... it exists in this microphone, it exists in these headphones, it exists in every these cameras-
Turner Novak:
Every electronic thing.
Eric Vishria:
Every electronics and every one of our ... our phones have billions of transistors.
Turner Novak:
Is this is what code's binary, so zero/one you're saying?
Eric Vishria:
Exactly, yeah. And it processes logic. And so these transistors, it was an enabling technology in the fifties that started out as vacuum tubes, well, the core idea started as vacuum tubes before it became a transistor. And then it got small and portable and you could do all this stuff with it and it infiltrated everything. And I think AI is a little bit like that, which is it's going to infiltrate everything in all sorts of different ways. And so if you think of it as an enabling technology, then you start to realize the possibilities and the surface area of what it's going to impact. This is really tremendous.
Turner Novak:
Yeah, I mean, even thinking about just when we're recording this podcast, the microphone will just auto tilt to better capture you or the camera will change, the lighting, if your lighting, if the sun hits the window differently, the camera will just adapt and keep the picture good. Anything can have it in it.
Eric Vishria:
Anything can. Every one of our lights switches now actually has transistors in them. Just everything has it and so it just impacts everything.
Turner Novak:
So one more question about AI. How are you using it personally? Do you use it in any specific ways?
Eric Vishria:
Oh God, every day, yeah.
Turner Novak:
What kind of use cases it might be beyond just ChatGPT or anything specific that you use it for?
Eric Vishria:
I'm a very simple person, so I would say in that way I don't have ... it's not like I do sophisticated financial analysis or anything else because most of the companies I look at are brand new, so it's not like that kind of stuff. But you're using every form of it, whether it's ChatGPT or Claude or Perplexity or whatever. And I use them on different models. I play around with the coding things just for fun and to learn. I use the advanced voice modes on these things all the time.
Turner Novak:
Oh yeah. I feel like you said you use voice more than anything.
Eric Vishria:
Yeah, I use voice a lot, I use voice a lot.
Turner Novak:
So if somebody's never used voice before, how would you recommend using it? Do you just switch it on in ChatGPT and you just-
Eric Vishria:
Yeah, just switch on and just talk to it, yeah.
Turner Novak:
You just talk instead of text?
Eric Vishria:
Yeah, just talk instead of text. And it's actually amazing with my kids honestly. They'll have questions and it's just like a third person in the room and you're just like-
Turner Novak:
Yeah, why do polar bears do this thing?
Eric Vishria:
Totally, totally.
Turner Novak:
And your kids can go crazy, just whatever they want to learn, yeah.
Eric Vishria:
They can go crazy. My 10-year-old's super into black holes and he's listening to these podcasts and everything on black holes and he's trying to understand the event horizon or some other characteristic of a black hole. And it's just like, here you go, it's amazing.
Turner Novak:
Have they used Suno at all, the song one?
Eric Vishria:
Oh yeah, yeah, totally.
Turner Novak:
Okay. Yeah, my daughters love that one.
Eric Vishria:
Yeah, it's so fun.
Turner Novak:
Just like make a song about their favorite TV show or daddy going on a trip and getting home or anything. They just love those.
Eric Vishria:
Totally. Amazing. Yeah.
Turner Novak:
How do you feel that venture has changed since you first got into it? Because it was 2014.
Eric Vishria:
2014 is when I got into venture.
Turner Novak:
Okay. Yeah. What have been some of the biggest changes that you've just noticed?
Eric Vishria:
I mean, it's much more competitive now. There's just a lot more sources of capital at a lot more different levels. So in that way it's probably changed a lot. Companies use a lot more capital now than they did then I would say.
Turner Novak:
Why do you think that is?
Eric Vishria:
To some extent the markets are bigger, and so the prizes are bigger. Some of it's probably inflation. Some of it's that we probably printed a lot of money. All of these things, I'm sure, contribute at different levels. I don't know exactly what the ratio is. But there's a lot of players and a lot of dynamics that way. But I look at it and I think, well, on the other hand, the outcomes are bigger, the chance is I think there's going to be more impact. We have a new technology wave. You put that together and you're like, yeah, it's not irrational.
Turner Novak:
So on a net basis you're like, "It's all pretty even," or do you feel like we're over/under supplied on capital?
Eric Vishria:
I just think it's good. We should want more innovation, it's good for humanity for there to be good innovation. We should want science innovation, we should want fundamental science innovation, we should want commercialization innovation, which is what I think of as venture as technology commercialization innovation. And so I think we should want every bit of it, it's good.
Turner Novak:
I was doing a presentation to the old school I went to, presented to the finance class, what is venture capital, venture capital 101. I think the second slide it was just list of the top 10 largest companies in the world. And I think seven of them raised venture at one point.
Eric Vishria:
Apple.
Turner Novak:
This is Apple, NVIDIA, Google, Facebook, Tesla. I feel like there's maybe two more in there.
Eric Vishria:
Microsoft.
Turner Novak:
Yeah, Microsoft. And it's another tech company I think. But anyways. But it was like, oh wow, that's actually ... VC actually has a pretty big impact on some of these companies that are getting done.
Eric Vishria:
Oh yeah. No question, no question about it.
Turner Novak:
Because you maybe think it being in, I don't know, in the trenches maybe, we're not really in the trenches as investors, but you're seeing it every day, but then when you also step back and explain to someone, you're like, "Oh yeah," this is a pretty simple analogy or comparison you can make and show somebody, this is the industry that I work in, this is what happens from it.
Eric Vishria:
By the way, if you go to the next level down, so that's the biggest companies, but if you look at companies that are worth more than 25 billion or 50, pick a number, whatever, 25/50 billion.
Turner Novak:
Yeah, just the next hundred largest companies or something.
Eric Vishria:
Yeah, the next hundred largest. I think the percentage would be even higher.
Turner Novak:
Really? Okay.
Eric Vishria:
Yes. You'll be astonished at how many companies are worth ... Take it down to a hundred. And you'll be like, holy smokes, there's so many companies. And that's just incredible. You'll have Uber and ServiceNow and Palo Alto Networks. I mean, you start listing these things, Palantir, and you start listing all these companies and you're like, holy smokes, there's so many.
Turner Novak:
How do you think the industry is going to change going forward?
Eric Vishria:
I don't know. I think, look, one of the nice things with every new turn, there's new opportunities. So if you look at some of the traditional firms, the biggest brands, I think Sequoia was largely founded with the dawn in the semiconductor era, Benchmark was really founded in '95 with the beginning of the internet era, Andreessen Horowitz was really founded in 2009 I think in the mobile era. And these companies, these firms were made, they were newcomers that came along in that era and did it.
And of course, Sequoia's continued to be relevant, we've continued to be relevant, I think Andreessen continued to be relevant and we just whatever. And so that's a nice thing about it, it's like a self rejuvenating pool.
And then the other thing about it is it's a hustler's business. I think one of the things that people, it's easy, we're glorified executive recruiters and salespeople basically.
Turner Novak:
Yeah, money salesmen basically.
Eric Vishria:
Yeah, we're money salesmen. It's a hard thing to sell. And so if you think of it in that context, it's a hustler's business, and obviously it can be lucrative and so forth, but if you think of it in that context, it's also naturally ... people naturally move on or they retire, whatever, and it makes it ... And there's going to be intense competition, which is great, and we should all welcome that.
Turner Novak:
And I think Benchmark historically, when most people buck at you, they say you guys do series A, but you did mention something earlier that maybe you're investing a little bit earlier. Does it still make sense to invest at series A? Especially when you got these companies that are like, you start it and then a hundred million in revenue a year later, you're like-
Eric Vishria:
What is series A?
Turner Novak:
Yeah, exactly.
Eric Vishria:
Nobody knows. I think the answer is you know it when you see it. I think of it as just maybe invest in the best companies as early as possible. That's probably the right way to say it. So yeah, I think of series A, define that, I think of that as the first board partner. And so I would say that's probably 80% of what we do. But what exactly is series A? And is it a seed or is it an A or is it B because there's a pre-seed and a seed? Who knows? I don't know. I don't know the answer to it.
Turner Novak:
Have you guys changed your approach at all lately because of how the market's changed?
Eric Vishria:
I mean, I think when the market is this way and there's so much quick growth and everything else, I think you just have to open your aperture and be more flexible in terms of what you're doing, how you're thinking about things. So I think in that way we've probably changed things. Of course, prices have gotten higher, check sizes have gotten a little bigger, all those things are probably true too.
Turner Novak:
Do you guys say, "Oh shit, these prices ... valuations are going up, we need to hit certain targets to return the right kind of capital, we should go a little earlier"?
Eric Vishria:
No.
Turner Novak:
"We should upsize our checks"?
Eric Vishria:
No.
Turner Novak:
How do you think about that?
Eric Vishria:
There's nothing that we do that's particularly quantitative or deliberate in that way. Literally nothing.
Turner Novak:
Really? Why not? Because don't people say you got to follow these rules?
Eric Vishria:
You know what, people say that you have to follow these rules, but here's the bottom line. Finding an extraordinary company is hard enough.
Turner Novak:
Yeah, fair.
Eric Vishria:
That's it. If you find extraordinary companies and invest in them as early as possible, you'll be just fine. And that is actually ... The rare thing isn't the ownership, it isn't the price, it isn't any of those things, the rare thing is the extraordinary company.
And I think part of what happens actually, and if you're trying to scale it and you're trying to have all these layers and you're trying to ... One of the nice things is now there's four of us who are active investors, there are four to six of us at any given point in time at Benchmark, you're like, there's four of us, it's very high trust between us, we're equal partners, so everyone's incentives are exactly the same. We're not trying to scale anything. And so as a result of that, you can just have a high conviction and you don't have to be ... we can just search for the extraordinary, not worry about it.
I think when you are trying to scale it and you have all these layers and everything, you put all these guidelines and rules in place to prevent mistakes, prevent big holes, prevent ... but I think the rarest thing is just the extraordinary company. And so you just don't want to lose focus, the first, second and third order things we're looking for is that.
Turner Novak:
So then why do you think it's gotten to that point where everyone has all these rules and stuff?
Eric Vishria:
Because I think they're trying to scale. I think it's just like if you have 20 investors at different levels, everyone's trying to make a career, incentives are misaligned and you're trying to control things and you don't want ... Because it's really easy, someone said it's really easy to write checks.
Turner Novak:
You can literally go to any founder and it's like-
Eric Vishria:
Here, take my money.
Turner Novak:
... there's a price that they would probably take money whether or not it makes any sense.
Eric Vishria:
Yes, right. And so it's really easy to have money go out the door. It's a lot harder to get money to come back in. And so you set these ... It's like why does a company ... When a company first starts and you have a few founders, there's just high trust in everything else. If someone goes and travels for a conference, they don't have an expense policy, the company just started.
Turner Novak:
They could in theory spend a hundred grand on a party, host Snoop Dogg performing or something.
Eric Vishria:
They could, they could. But in general there's trust between the founders, there should be, there's trust between the founders, and you understand, hey, it's just like it's our joint viability and we're working together to try to achieve this outcome and everything else.
Now as the company starts to scale, what you do is you start to add controls. You start to add policies. You start to add like, hey, fix this, hey, you can't do this, you can only spend a hundred dollars on a hotel room, and you need to take UberX instead of UberBlack, or whatever it is. If you fly more than 17 hours, then you can take a business class seat or whatever. You have all these policies. But at the beginning you don't have any of that.
And it's the same kind of thing I think in venture, which is as you get bigger and you're trying to scale and you have more funds and you have more investors and you have more people who are doing things, then you add more policies, process.
Turner Novak:
So you think about it as just the current investment policy or strategy of Benchmark is find generational companies, do billion dollars in revenue.
Eric Vishria:
It's the current, it's the past and it's the future.
Turner Novak:
That's it.
Eric Vishria:
It's very-
Turner Novak:
It's almost too easy. I feel like someone would want to-
Eric Vishria:
It's both so easy and so difficult. It's so hard.
Turner Novak:
Yeah, I feel like you get a consultant in here, like a McKinsey consultant, like, "No, no. We need to make a 30-page checklist and all these guidelines and stuff."
Eric Vishria:
Yeah, it's really funny because it is actually what venture is, I think, at its essence, which is back the best entrepreneurs with the biggest ideas and then go after it. That's it. Not that hard.
Turner Novak:
You talked a little bit about there's other funds out there, they're a lot bigger, different incentives. I think it's a common question that comes up with if you have a smaller vehicle of capital, it's probably funny, somebody in the nineties, I think the last Benchmark fund was 600 something million?
Eric Vishria:
Yeah, it's about half a billion dollars.
Turner Novak:
Yeah, that's relatively not that large compared to some of the other ones out there.
Eric Vishria:
Yeah, sure, yeah.
Turner Novak:
How do you guys articulate what you do differently when you're coming up against one of these massive funds that, like what we talked about, they can just be like, "Oh, we'll give you twice the money, three times better deal," how do you usually stack up in those?
Eric Vishria:
I mean, I think the way, and I inherited this just to be clear, I inherited a great brand and great results for a really long time, as did basically most of the current partners at Benchmark, and so we're beneficiaries of that, and so it's just worth acknowledging that point. So I think people understand it's not the fund size and deployment and all this stuff is not really a restriction for us. We have flexibility in that context in a way that maybe others don't. So I think that part of it's not really the thing.
The biggest thing though for us is, because there's a small number of us and we care very deeply about deep partnerships with entrepreneurs, we make a smaller number of investments. We just make a smaller number of investments than most firms. And so you're working on that partnership with a special set of entrepreneurs. And then you're going to pour your heart and soul into helping that company be successful. And so that's the dynamic. And I think by and large entrepreneurs feel that difference and they feel that spirit of partnership and they feel that contribution. And that's when it works, it's magical.
Turner Novak:
But couldn't the counter to that argument be there's only one of you or maybe four people on the team, maybe you have some partner, Emiratis, a couple of people around the table, but some of these other funds, they have a bunch of recruiters that can help you, marketing people that can help you.
Eric Vishria:
Oh yeah, totally, sure.
Turner Novak:
There's an army that can come. Don't some founders want that?
Eric Vishria:
Maybe, yeah.
Turner Novak:
Yeah. Okay. But it's not necessarily someone who'd work with Benchmark wants more of the board member that's going to spend a lot of time?
Eric Vishria:
I think that one of the things that I really believe is, at the end of the day every company does ... any successful company is going to do their own recruiting, is going to do their own engineering management, is going to do their own sales, is going to do ... that's part of what the company is.
Turner Novak:
So is it all just bullshit VC's saying that they do this?
Eric Vishria:
No, I don't know that that's bullshit. There could be bootstrap stuff in it. I'm sure there's actually value in other things. It's like do we make customer intros? Sure, sometimes we make customer intros for people. It's all bootstrappy stuff.
But in the end that's not the end state of it. And look, there's so much amazing content, everyone's going to listen to all of your podcasts, and so they're going to have all of this founder information downloaded into their brains. And they're going to have hopefully a network of people that they're talking to and everything else. And especially now relative to 10 years ago or 20 years ago or 30 years ago, there's infinitely more resources available to entrepreneurs, which I think is super positive, in terms of blogs and podcasts and advice and content and success stories. So all of that's available.
The hard thing is having somebody who knows enough about your business and the context of your business and the people inside your business that are making decisions and everything else and your market and everything else, but also isn't in the trenches every day.
Turner Novak:
So they're enough removed to give you an outsider's-
Eric Vishria:
So, enough removed to give you perspective, but have enough knowledge where they can actually be useful in it. Because I think at the end of the day, for a founder making a decision, a hard decision, by the very nature as it starts to scale, they have something that's like 51:49. It's a hard decision. Reasonable people could disagree. And they've read the blogs and they've listened to the podcasts and they've listened to all the advice. And so it's generic advice on that isn't useful.
What's useful actually is a sounding board that knows enough of your business, but also is removed enough and has some maybe other patterns that they can be like, "Hey, have you thought about this? Maybe here's a new way to think about it." "Okay, that makes sense," Or whatever. And so that's the way I think about it. And I think that's a pretty special thing that people feel. And it's really hard to explain. I'm struggling to explain it obviously here. It's really hard to explain a priori. But I think it becomes very evident when you experience it.
Turner Novak:
Yeah. Is there anything unique about the partnership model that you have where it's equal partners, is that truly a differentiator, do you think or is there something more than that?
Eric Vishria:
Well, I think it's a differentiator in terms of how we work and then that probably manifests in different ways. Which is, it's a flat equal partnership, so a dollar comes in, we split it five ways or four ways, depending on how many people there are. And each of us owns a quarter or a fifth or a sixth of the firm. And so when you're in that kind of model it's just like it's equal control, equal say, equal economics, all incentives are aligned. It's just a really special way to work. Partnerships are weird dynamics in that-
Turner Novak:
Like a four-way marriage almost or something.
Eric Vishria:
Yeah, it's weird that way. But I think of it as a communist collective of capitalists. But it's a really special structure that the founders set up. And I think allows us to recruit the best, obviously to join us. And also just is an incredible platform that aligns everybody so everybody's incented to help every company.
Turner Novak:
Yeah, that's what I thought was interesting, where it's not "someone's deal." I also hate that word, when people are like, "What deals are you looking at right now?"
Eric Vishria:
I know.
Turner Novak:
I don't even think about it as a deal.
Eric Vishria:
Yeah, you don't think of it as a deal.
Turner Novak:
It's inhumane. But yeah, it's interesting where everyone's incentivized to help someone else's portfolio companies, which, I guess, this was surprising to me when I heard it, is sometimes you don't want to actually help portfolio companies if we're the same firm.
Eric Vishria:
Yeah, that's crazy.
Turner Novak:
Crazy to me.
Eric Vishria:
And the deal thing is also weird too because it's like I think of this as like, you mentioned Spencer's, I've been on the Spencer's board for 10 and a half years I think, it's more than a decade. That's a long time. And you're working with these people for a really long time. And so don't cheapen it. And that would be the advice I'd give any founder also who's looking at investors, is these are really long-term decisions. It behooves you to get it right.
Turner Novak:
So then with that dynamic of there's four people all making the decisions, how do you make an investment decision at Benchmark, is it everyone has to agree on something?
Eric Vishria:
It's not everyone has to agree. The answer is, so when you meet a company that you like, you want to get other perspectives on it. So you're going to start calling people who might be knowledgeable in the area. You might be doing references on it. But you'll definitely have other partners meet. And it's actually reasonably common for us to have two or three partners meet in the first meeting. We do that all the time.
Turner Novak:
Nice.
Eric Vishria:
If someone's referred us in a way that they're like-
Turner Novak:
You should strongly consider this?
Eric Vishria:
Yeah, then we'll put people in a meeting. People like, "Hey, this is really interesting, it could be more interesting for you than me," or whatever. We'll get a couple partners together. And that's a very special thing. And so you'll have other partners meet. And then the partners will ask questions. Like, this is what I would think about, these are the different dynamics and whatever. But it's an advocacy model. It's a high trust advocacy model. So ultimately the sponsoring partner or the lead partner or whatever on it, it's like they're taking all this feedback from all these people and putting it, from the partners and everyone else, and putting it together and trying to make the best decision for the firm. And then we do a vote and all this other stuff. But I think the vote and ... Everything is irrelevant relative to the advocacy and the conversation.
Turner Novak:
That makes sense. Okay. One thing I wanted to step back a little bit, go maybe back to your backstory. I read that you, your senior year of high school, you didn't do senior of high school.
Eric Vishria:
I did not. That's correct.
Turner Novak:
So what happened there?
Eric Vishria:
I ran out of math and science at this school. I grew up in Memphis, Tennessee.
Turner Novak:
I feel like you still have a little bit of a southern accent. I don't know if I can say southern. But it's like it's not really there.
Eric Vishria:
If I drink a little bourbon it really comes out.
Turner Novak:
Well, I'm Canadian and I don't have my ... I say sorry and I say mom, but you probably couldn't tell unless I told you that I'm Canadian.
Eric Vishria:
Yeah, I would not have guessed. Yeah, yeah. So yeah, I grew up in Memphis, Tennessee. I came out to college after my junior year and then been here in California ever since.
Turner Novak:
And then you did, you went to USC for a-
Eric Vishria:
I went to USC for one year, and then I transferred to Stanford, and then I studied mathematical and computational science at Stanford. And it was like I graduated in '99, which was just an amazing time just because-
Turner Novak:
And then you did banking, tech banking, the high-
Eric Vishria:
I did tech banking for seven months, which was a good way to learn a little bit.
Turner Novak:
What was just the general takeaway just from that time period?
Eric Vishria:
I'd never taken a finance class or an accounting class or anything else, so I just learned so much of the basics of that then, I mean, whatever you can learn in a few months.
Turner Novak:
You learn, within the first six months you have a basic understanding of what's going on.
Eric Vishria:
Yeah, I think you have some idea, which I think ended up being really fruitful for me and useful. And then I joined Mark and Ben at Loudcloud. I started as Ben's assistant, Ben Horowitz's assistant.
Turner Novak:
How did that come about? Was he hanging out at the bank and he's like, "Hey, I need that guy, come"?
Eric Vishria:
No, it's a long, convoluted story, but basically a cousin of mine, who actually is a tech founder as well, he's the CEO of Prophet Security, Kamal, his classmate or friend was at Loudcloud. Loudcloud was still in stealth at the time, and they were looking for somebody to be Ben's assistant and he sent my resume over.
Turner Novak:
And then just clicked.
Eric Vishria:
Yeah, I clicked and met Mark and Ben. It clicked, and there we go.
Turner Novak:
What was Loud Cloud again?
Eric Vishria:
Loud Cloud was literally the first cloud. It was just pre-virtualization so it didn't quite work out that way, yeah.
Turner Novak:
What does that mean, pre-virtualization? You could only rent one computer, not multiple?
Eric Vishria:
Yeah, exactly. Exactly.
Turner Novak:
Okay.
Eric Vishria:
Yeah, yeah. You have each computer was separate. Virtualization enabled ... That extraction of virtualization really unlocked AWS.
Turner Novak:
Okay.
Eric Vishria:
Allowed AWS ultimately to exist.
Turner Novak:
They could have one server that 1000 people rented.
Eric Vishria:
Yeah.
Turner Novak:
You had to rent one server to a cloud client.
Eric Vishria:
Yeah.
Turner Novak:
Okay.
Eric Vishria:
You basically are building these stacks. Yeah, that's what Loud Cloud was. That was '99. AWS really, S3 I think was '07. It was early.
Turner Novak:
Oh, wow. Yeah.
Eric Vishria:
Yeah.
Turner Novak:
It was seven years then.
Eric Vishria:
Yeah, yeah.
Turner Novak:
Then you joined, I saw on your LinkedIn, January 2000. This was the top of the-
Eric Vishria:
Yeah, I think it was January 2000, yeah.
Turner Novak:
What was that like, just that process of joining a tech company?
Eric Vishria:
It was so fun. It was so fun. It was a special company, the talent there was just amazing. B ut it has its ups and downs. The company evolved, then we had to pivot as a public company and switch from Loud Cloud to become Opsware. Then continue to grow that as a software company for many years, for five or six years, until we were bought by Hewlett Packard in 2007.
Turner Novak:
What exactly was the pivot?
Eric Vishria:
It went from being actually a cloud provider to selling the software that made the cloud.
Turner Novak:
Other cloud providers bought your software?
Eric Vishria:
Yeah, exactly.
Turner Novak:
Okay.
Eric Vishria:
Other people who were managing large data centers, yeah.
Turner Novak:
What caused that? Was it just a better product to sell?
Eric Vishria:
Yeah, less capital intensive.
Turner Novak:
Okay.
Eric Vishria:
A better model, especially for that time.
Turner Novak:
Then probably less capital intensive was probably important-
Eric Vishria:
Yeah, at that era.
Turner Novak:
... as the capital markets dried up.
Eric Vishria:
Yeah.
Turner Novak:
Yeah.
Eric Vishria:
Yeah, totally. Yeah. Then it was just the world was I think more ready for that than it was for Loud Cloud at that point in time.
Turner Novak:
Do you see any parallels or differences between where we're currently at and maybe parts of the '90s or the early 2000s?
Eric Vishria:
People want to draw these things and I hear a lot of AI-internet analogies.
Turner Novak:
Yeah.
Eric Vishria:
I actually used one I guess, in terms of Google. They're each quite different. I think one of the big differences is the internet was a distribution mechanism. It wasn't just a technology. AI is a technology. It's not a distribution mechanism. Mobile was a distribution mechanism in addition to a technology as well. I think that matters actually in this dynamic. I think they had distribution. That's part of why I like the transistor analogy better.
I think part of the reason that people used that is because it was a lot of people were alive during that era. They have some memory of that evolution happening. I really do mean it, there's a recency bias in it, but actually, there's probably better analogies. There may be even one if I went back to the abacus or something like that, that would be even better. I think the transistor was very capital intensive, big initial investments, ultimately infiltrated everything. Really, technology forward versus outside in. I think there's a lot of dynamics that are very consistent with the transistor.
Turner Novak:
I think some feedback I got from people just talking to them before we recorded this. A lot of them were like, "Oh, Eric would be a great CEO. He should go back and be a founder."
Eric Vishria:
No, I definitely should not.
Turner Novak:
But you actually did do it once, right?
Eric Vishria:
I did.
Turner Novak:
You started a company.
Eric Vishria:
I did.
Turner Novak:
What was the company?
Eric Vishria:
It was RockMelt, it was a social browser. I did do that. It was very hard.
Turner Novak:
What was the general thesis and product? I don't remember this. I was in probably sophomore year of high school. 2007, that was my sophomore year of high school.
Eric Vishria:
Yeah, okay. We started, I think we launched in 2010.
Turner Novak:
Okay.
Eric Vishria:
Then we were bought in 2013.
Turner Novak:
Okay. My college years.
Eric Vishria:
Yeah. It was a social browser. It was literally a browser. Chromium had come out, Chrome had come out, and Chromium was an open source project on Chrome. It still is. We took Chromium and we basically built chat into it, we built sharing into it, we built notifications. We built cloud sync. All features ... We all sign into our browsers today and everything, but at that time we didn't. All of this was we-
Turner Novak:
It was a sign into your browser type of product?
Eric Vishria:
Yeah, sign into your browser, your friends were on one side, notifications and feeds were on another. You had share. You had sync across devices, all the stuff existed.
Turner Novak:
You brought in AIM or-
Eric Vishria:
It was Facebook Chat.
Turner Novak:
... a Facebook Chat type of a thing?
Eric Vishria:
Yeah, exactly.
Turner Novak:
Okay. Then you had a feed, an RSS feed?
Eric Vishria:
Yeah, RSS feeds and social feeds into it.
Turner Novak:
Okay. You would have a Facebook post, a tweet, and an RSS from a blog post all on the same feed?
Eric Vishria:
Yeah. It worked a little differently than that, it's a little hard to imagine.
Turner Novak:
Okay.
Eric Vishria:
But yes, it worked differently than that.
Turner Novak:
Okay.
Eric Vishria:
But yeah, the same ideas.
Turner Novak:
Okay. It was a browser?
Eric Vishria:
It was a browser.
Turner Novak:
You just go browse things?
Eric Vishria:
Yeah.
Turner Novak:
Okay.
Eric Vishria:
Yeah.
Turner Novak:
Then I think you sold it to Yahoo, if I'm remembering right?
Eric Vishria:
Yeah.
Turner Novak:
Okay.
Eric Vishria:
Yeah.
Turner Novak:
Then you joined Benchmark pretty soon after that. It was a year or two?
Eric Vishria:
About a year after. Yeah, about a year after that, yeah.
Turner Novak:
How did that come about? Because there's probably a lot of people that they're like, "Oh, how did you get a job at Benchmark?"
Eric Vishria:
Yeah.
Turner Novak:
How does that happen?
Eric Vishria:
Look, most of these things are long-standing relationships that you have with people. I had gotten to meet Peter Fenton and Bill Gurley many years before. I'd pitched to them obviously over the years when I was an entrepreneur. I got to know them a little bit through that. That's the beginning of it, I would say.
Jim Goetz at Sequoia had told me in 2008, had suggested that I consider venture and he planted that seed in my head. Then six years later, it came back and itched at me and was like, "Oh, maybe I should really do that." That was influential and I'm very grateful to him for that.
Turner Novak:
How did you decide Benchmark, versus maybe other options that were out there?
Eric Vishria:
I think it was a perfect fit for my personality. It's a perfect fit for my personality. As I said, one of the nice things about the equal partnership and the dynamic is it's really hard to be to say no. It was a good fit for me, I really liked the people. Then you're like, "Oh, well, you're an equal partner here." That's a pretty good thing for someone who's never invested.
Turner Novak:
Yeah, it was a pretty generous-
Eric Vishria:
Yeah. Yeah, it's super generous. It's super generous on the way in.
Turner Novak:
Yeah.
Eric Vishria:
It's super generous on the way in.
Turner Novak:
Then speaking about getting in, I think your first investment that you made pretty quick after you joined, what was that one and how did it go?
Eric Vishria:
Yeah. The first investment was Confluent.
Turner Novak:
It's public now, right?
Eric Vishria:
Yeah. Yeah, Confluent's a public company. That was amazing. It's been really tremendous to be able to work with Jay and Neha and Jun, who are the co-founders of Confluent. That was one of these ones that walked in, they had an open source project, Kafka. We invested and here we are, and turned it into a billion dollar-plus revenue business. Kind of amazing.
Turner Novak:
Yeah.
Eric Vishria:
Yeah. The second one was Spencer and Amplitude.
Turner Novak:
Another public company. Two for two.
Eric Vishria:
Another public company.
Turner Novak:
You should have just retired right there.
Eric Vishria:
Yeah. I've gotten to work on a bunch of really great ones.
Turner Novak:
What all did you learn from Spencer?
Eric Vishria:
Oh, God. The thing that I really appreciate, he talked about learning mentality. He's a learner, he's a professional learner. Really, a first principles thinker. I just really appreciated ... Actually, I think it's a characteristic of a lot of these MIT guys or MIT people. They really think from first principles and reason out. I really appreciated that about him.
Turner Novak:
I think there's another one that you've done a little bit more recently. It's called Fireworks. I'm probably going to butcher this description of it, but it's tools for developers to incorporate a bunch of models. I don't know if I described that correctly.
Eric Vishria:
Yeah, I think of it as inference cloud. I think of it as inference cloud. Lin Qiao, who ran PyTorch engineering team at Facebook from the early days to at scale. Her and a bunch of her collaborators came out and formed this company, Fireworks. Originally, it was going to be a PyTorch cloud. Actually, it's about a two-and-a-half-year-old company. It was going to be a PyTorch cloud, and then gen AI was happening. She realized, "Hey, we need to move up a layer in abstraction and basically provide all these open source models, and custom models, and tailored models for people and can run them." It turns out running large models is not trivial. That's what they've done and they've done outstandingly well in scaling that business. It's one of our faster scaling companies.
Turner Novak:
It's in that five or six companies?
Eric Vishria:
It's in that five or six companies that have scaled tremendously quickly.
Turner Novak:
Maybe dumb question, but what do people pay when they're paying for something like that?
Eric Vishria:
You pay for tokens.
Turner Novak:
Okay.
Eric Vishria:
A lot of the pricing model is basically tokens.
Turner Novak:
Do you think that's going to change at all at one point?
Eric Vishria:
Yeah. Yeah, I think all these business models are going to evolve. You go from paying for commute to paying for tokens, maybe you pay for something else over time.
Turner Novak:
What do you think is the end state of business model?
Eric Vishria:
Hard to say. I think for a lot of the application companies, they're going to charge consumers I think on an outcome basis. I think one of the things that Sierra is doing for customer service is they're charging on an outcome basis, which is when a ticket's resolved. It's like, hey, instead of paying for labor or instead of paying for tokens, you just pay for business outcome. What do you care about? Tickets resolved. Okay, we'll pay for that. I think that's cool with the application layer.
The question at the infrastructure layer, you normally go down a level. I think that'll continue to evolve and change.
Turner Novak:
Yeah, it's interesting because there's a very clear ROI if somebody knows what things are worth to them-
Eric Vishria:
Yeah, totally.
Turner Novak:
... about knowing what they are comfortable paying. I could see that being an actual faster sale maybe, too.
Eric Vishria:
Sure.
Turner Novak:
Getting a buyer.
Eric Vishria:
Yeah. Yeah, it's low risk and incentives are aligned.
Turner Novak:
Yeah. Yeah, where it's not just you hear these horror stories of somebody leaving AWS, a container running.
Eric Vishria:
Yeah.
Turner Novak:
I think Coinbase had a $55 million Datadog bill because they did something. It showed up on an earnings call-
Eric Vishria:
Yeah. Yeah.
Turner Novak:
... once, because it was just such a massive amount.
Eric Vishria:
Yeah, totally.
Turner Novak:
How has your perception of investors changed after becoming one yourself?
Eric Vishria:
I think you realize it's a really hard job in its own way. It's a very different job than being a founder.
Turner Novak:
What did you think the job was back when you were pitching everyone or working with VCs?
Eric Vishria:
Well, I think you realize the job then. I always thought that the job, the hard part of the job would be picking. I still think the hard part of the job is picking. I gravitate towards the supporting, I would say, in trying to work with founders, it's what I love. But I think the hard part of the job is picking. That's definitely the hardest part of the job. I think it's hard in its own way. But yeah, the job, it's very different. I would say the highs are less high than being a founder. The lows were less low than being a founder. You have this perpetual obtuse stress that's very long-lived.
Turner Novak:
You're saying as an investor?
Eric Vishria:
As an investor. Whereas I think as a founder, you have very acute stress on a daily basis. It's just a very long-lived obtuse, dull stress.
But it's really cool if you like learning. I love learning. Every meeting is a chance to learn about a new market, learn about a new technology. Try to understand the psychology of an individual. There's so much alchemy in that and I love those elements of it.
Turner Novak:
One thing that I saw Ji at Benchling mention was he said you've been really helpful on just building a management team and recruiting. If I'm a founder and maybe I just raised 20 million bucks, it looks like we might have something here.
Eric Vishria:
Yeah.
Turner Novak:
There's just a couple of us. Or maybe we have a couple BDRs, we want to hire a head of sales. Or we want to bring on a new head of engineering. It's pretty abstract, but how would you approach just starting to think about doing some of this heavier executive recruiting and building a management team?
Eric Vishria:
Well, one, I'm a big believer in the team building and a very big believer in leadership building, just building out in the leaders in the company. The rarest thing inside a company isn't people to do work. The rarest thing is leaders to lead work. The first step of it is actually to define what you need. Really defining what you need, it's easier said than done. It's really defining what do you need.
Turner Novak:
How do you do that?
Eric Vishria:
Well, it's understanding who are the customers that you're going after, what's the type of sale, what is the motion if you're talking about sales. What is the motion? How quickly do you think you can scale? Those elements of it. What is the culture and personality of the company? All of those characteristics and really getting clear-eyed on that.
Then you want to meet a variety of people that fit different profiles to see what that is. Survey the landscape a little bit so that you can understand, "Okay, this is what it is." One of the tricks is you want to hire for strength, you want to hire for someone's superpower. You don't want to hire for lack of weakness. Lack of weakness is a path to mediocrity, it's a path to not great results.
Turner Novak:
You'd rather hire somebody who's really, really good?
Eric Vishria:
Yeah, totally.
Turner Novak:
Best in class of something.
Eric Vishria:
100%.
Turner Novak:
But they suck at something else?
Eric Vishria:
Yeah. Hopefully, the valleys aren't that deep.
Turner Novak:
Yeah.
Eric Vishria:
Yeah, yeah. Sure, yeah.
Turner Novak:
Okay.
Eric Vishria:
You hire for strength, not lack of weakness.
Turner Novak:
Interesting, okay.
Eric Vishria:
You're building those teams. You'll always compensate and have to do that. The mediocrity thing is bad.
These companies, they don't want to exist. The world doesn't want startups to exist. The world doesn't want these startups to succeed. The world's indifferent to them. The very act of existence or growing is an act of will. Will requires spikes, and it requires fight, and grit, and spikes. You got to be hiring for those spikes. You're looking for those spikes.
Turner Novak:
How do you find those? Or maybe in other words, how do you avoid mediocrity?
Eric Vishria:
Well, you're going to end up ... There's a set of executive recruiters that I always like to work with because I think they help manage everything, which is amazing. I love using Andy Price at Artisanal. We used him in a bunch of searches and I've worked with him 20 times probably over all these searches. There are others of course, too. Basically, you want to work with them because they help manage the process and help you run it. Then you just really want to get a clear-eyed picture of what you're looking for and then really evaluate against that. Then you want to reference the hell out of them.
Turner Novak:
How do you reference someone?
Eric Vishria:
You do front references, backdoor references. You do everything, you call them. Then you ask them around the characteristics that you're looking for. You ask people to get specific and you spend time on it, and you do them yourself.
Turner Novak:
Do a lot of people outsource it for those types of references?
Eric Vishria:
Well, a lot of times the recruiter does a lot of references.
Turner Novak:
Oh, yeah.
Eric Vishria:
And stuff like that. Yeah, that happens a lot.
Turner Novak:
I didn't realize that.
Eric Vishria:
Oh, yeah, totally. Yeah, recruiters, especially as companies get bigger, recruiters do a lot of the references.
Turner Novak:
I could see the incentives of that.
Eric Vishria:
Yeah, totally.
Turner Novak:
Of let's just make sure this guy gets hired. I need to get paid.
Eric Vishria:
Yeah. Yeah, totally. 100%.
Turner Novak:
Okay.
Eric Vishria:
Yeah.
Turner Novak:
I heard you say something once that I thought was kind of interesting. You said "the best CEOs make all the new mistakes."
Eric Vishria:
They make all new mistakes.
Turner Novak:
Yeah, all new mistakes.
Eric Vishria:
Yeah.
Turner Novak:
I have an idea of what that might mean, but I just thought it was an interesting line. What does that mean?
Eric Vishria:
It relates to the whole learning thing. I guess it's the opposite of it, which is if you're learning, then you're not making the same mistake over and over again.
Turner Novak:
Yeah.
Eric Vishria:
You're just making all new mistakes. That's what it means.
Turner Novak:
They might not make that many mistakes, but they're always new, never repeating.
Eric Vishria:
Look, any of these things, these companies are hard. Again, you should be making mistakes. I don't think we should be afraid of mistakes. We should be making mistakes.
Turner Novak:
Yeah.
Eric Vishria:
Every one of these companies is all messed up. Every one of these hyper-growth companies is messed up. It feels chaotic internally. There's things that are wrong. They're hard.
Turner Novak:
How do you identify what are okay problems and what are existential, this shouldn't be messed up type of a problem?
Eric Vishria:
Yeah. I think you really have to understand is this a problem that's a result of scale or quick growth, or whatever. Or is this a problem as a result of we're in a strategic cul-de-sac? If you're in a strategic cul-de-sac, you need to find a way out of it.
Turner Novak:
Strategic cul-de-sac, what does that mean exactly?
Eric Vishria:
You're literally, for whatever reason, you've ended up in a place that-
Turner Novak:
Only a dead end?
Eric Vishria:
Yeah, a dead end. It's unlikely to exist longterm.
Turner Novak:
Interesting, okay.
Eric Vishria:
Yeah.
Turner Novak:
You had one thing earlier that you referenced about companies going public.
Eric Vishria:
Yeah.
Turner Novak:
I wanted to ask about it earlier, but it didn't make sense. What do you think about the current landscape of should there be more public companies?
Eric Vishria:
Yes.
Turner Novak:
Okay.
Eric Vishria:
Yes.
Turner Novak:
Why are companies not going public?
Eric Vishria:
Well, we've been in a very weird market environment. A lot of companies went public in '21. There was a hangover as a result of that. Economy slowed, and all this other stuff. Now we're in our own chaotic environment. I thought it was going to open back up. Obviously, CoreWeave went public, which is cool. There was more coming and then that, whatever. Yeah, we're in this place where we're a little bit stuck on it. But yeah, I think it would be good if companies went public. It's going pro. It's like going to the big leagues. I think it makes the companies better, honestly. It's hard. The stocks are volatile, and whatever it can be often times, and you get bounced around. You mentioned the biggest tech companies in the world, they're all public companies.
Turner Novak:
Yeah, fair. What's the argument on the other side though? It's that you have to go through all these different regulatory, you have to do audit stuff.
Eric Vishria:
The regulatory stuff. Yeah, but I don't know. These companies are big enough where it's not like if you're a big private company, you're not doing audits. You should be doing audits. You should be doing audits and doing that kind of stuff. Sure, there's whatever, 10 more people in finance and legal. Who cares? It's their realm.
Turner Novak:
You really don't think it's that big of a deal?
Eric Vishria:
No, I don't think it's that big of a deal.
Turner Novak:
Interesting. Because that's actually, it feels like to me, it feels like that's a big argument against.
Eric Vishria:
I don't know.
Turner Novak:
Or do you think it shouldn't be?
Eric Vishria:
It shouldn't be an argument against.
Turner Novak:
Yeah.
Eric Vishria:
If you're 1000-person company, who cares? That's irrelevant. I think the bigger argument, there's real volatility, you're doing stuff. I think people would make an argument that you're focused on the short term versus the longterm. I feel like that's the argument that you hear the most.
Turner Novak:
Being public, you have to focus on quarterly earnings?
Eric Vishria:
You focus on quarterly and short term, and you deal with the volatility associated with that. Whereas longterm, as a private company, you don't have to deal with that volatility. You do have to deal with stock price volatility and that's a real thing.
Turner Novak:
Yeah. I guess the other argument is there's just so much capital in the private markets, too. Maybe it's easier. Is it easier to raise privately?
Eric Vishria:
I don't know. Look, there's a set of really exceptional private companies. I think there's four or five of them that can raise a lot of money in the private markets.
Turner Novak:
Is this Databricks, OpenAI, SpaceX?
Eric Vishria:
Sure. Maybe Stripe.
Turner Novak:
Stripe maybe, yeah.
Eric Vishria:
Maybe there's four, I don't know.
Turner Novak:
I feel like maybe people put Anduril in there now maybe.
Eric Vishria:
Maybe, yeah. Okay. There's 1000 other companies that are interesting and at some scale.
Turner Novak:
Yeah.
Eric Vishria:
What are they going to do? By the way, I think the capital raising thing is also not ... Hopefully, all of those companies at this point are making money. They should be. Maybe OpenAI isn't, but most of them are making money.
Turner Novak:
Yeah, at least have certain product lines or different business segments that are profitable, and you're investing in growth.
Eric Vishria:
Right.
Turner Novak:
There's capex in this new business.
Eric Vishria:
Right. Yeah, they should be able to do that. If you look at the best founders of all time, and you look at what Bezos was able to do, it's not like Bezos was unable to start new businesses. He started new businesses all the time, he continued to innovate. Elon's done that at Tesla. Obviously, Google's done that over and over again, Microsoft has done that over and over again, Apple's done that over and over again.
Turner Novak:
Yeah. Is there anything that you've learned from public market investors as an early stage?
Eric Vishria:
Oh, yeah. Tons of things, yeah. Probably the most important thing on ... The painful lesson from 2021 is even great companies can be overvalued.
Turner Novak:
Oh, yeah. That's fair.
Eric Vishria:
Yeah. That is singed in my brain now.
Turner Novak:
How do you thinking about valuation then? Is there certain things where you see something that is objectively probably overpriced?
Eric Vishria:
Well, I think about valuation at scale, that's very different than valuation at the early stages. Valuation at the early stages is really about what do you think the potential outcome is and are you getting paid for the risk-reward. That's what it is, really. That's a very subjective thing. That's very hard to put a number. It's not quantitative at all. Valuation for public companies is a little bit different because there are more metrics, there are things you can look at. There's a quantitative element around it and then there are arrow bars. That's how I think about it anyway.
Turner Novak:
Well, yeah, this was a lot of fun.
Eric Vishria:
Awesome. It was so fun. Thank you so much for having me.
Stream the full episode on YouTube, Spotify, or Apple.
Find transcripts of all other episodes here.