If in the past Benchmark defined a set of “classical VC” templates through a sense of ritual, values, concepts, strategies and amazing performance, then the current “stock speculation” decision is an attempt to overturn the investment experience that it believed in in the past, and even It is reshaping VC’s definition of “value”.
Editor’s note: This article is from the micro-channel public number “cast the net” (ID: China-Venture), Author: Gongxiao Zhen, editing: Dongli Han.
In 1996, Sun Zhengyi invested $100 million in Yahoo, accounting for 35% of the shares. In 1997, Benchmark invested $6.7 million in eBay’s A round, accounting for 22.1% of the shares.
This can be regarded as an early meeting point between the two parties. From here, in the next two decades, Sun Zhengyi and Benchmark shaped the two-pole gameplay of venture capital. One wins by investing large sums of money and holding large stocks, and the other depends on investing early and getting famous.
One wants to define values, and one wants to define values.
Years passed, Sun Zhengyi, who was on a rampage, had a big somersault and retreated again and again; but unexpectedly, the Benchmark would no longer be the Benchmark.
In 2011, Benchmark invested US$11 million in Uber’s A round. In 2018, Sun Zhengyi invested US$8 billion in Uber Series C in one go.
If Benchmark and Sun Zhengyi are walking on two parallel lines, this is fine, but when they appear at the same poker table and wrestle their wrists, the sense of drama comes out.
In the first round of the confrontation between the two sides, Benchmark failed.
In 2017, Sun Zhengyi is preparing to invest in Uber, which is on the cusp of the storm. At this time, Uber was caught in a series of scandals such as #deleteUber#, sexual harassment, theft of Google’s Waymo self-driving technology, and executive resignation. Uber CEO Travis Kalanick resigned under the leadership of the majority shareholder Benchmark.
Before Sun Zhengyi’s entry, Benchmark firmly opposes. SoftBank valued Uber at $450. Benchmark said that Uber’s market value will exceed $100 billion in the future. To prevent former CEO Travis Kalanick from expanding his board of directors, Benchmark also took him to court.
But in the end Benchmark compromised, dropped the lawsuit, and sold $900 million worth of stock to SoftBank and other investors. In January 2018, Uber accepted an investment from SoftBank. SoftBank accounted for about 15% of the shares and replaced Benchmark as Uber’s largest shareholder.
Practically speaking, the scale of capital management between the two parties is hundreds of times different, and Benchmark will not be shabby even if it retreats for a while, but it is still just like a capital.Ben beats the story of vision. Even though he was also an investor who used money to change the destiny of a company, then Benchmark partner Bill Gurly could not help but satirize Sun Zhengyi’s money as a “capital weapon.”
And this kind of story is not new anymore. Chinese Benchmark apprentices have also tasted a similar taste. For example, Liu Qin of Wuyuan Capital, an early investor in Xiaomi, said after his investment was easy to lose to Didi, “A genius idea lost to 10 billion. US dollars.”
There are so many Chinese VCs with Benchmark as the benchmark, but they can’t escape large-scale competition, and they all go further and further away from the “Benchmark” model in different dimensions.
In addition to five sources, such as Lightspeed China, this VC completed the largest fundraising in its history of 560 million US dollars in 2019; Qiming Ventures, which pursues decision-making equal rights like Benchmark, also abandoned the classic VC style last year. , Qiming’s new US dollar fundraising scale is 1.2 billion US dollars, plus the RMB fund’s single-period scale exceeds 10 billion; there are also innovation workshops that have clearly called out the “Chinese version of Benchmark”. After the completion of the previous fund raising in 2019, AUM It has also reached 15 billion yuan, and the investment strategy is also changing. In Zhihu, which just went public, they have followed the angel round to the D round.
But what about the Benchmark deity? On the surface, they still define the “classic VC”.
Such as scale. The number of funds raised in the previous period was US$425 million. In the 20 years after 2000, the largest fund they raised was only US$550 million.
For example, after casting. Benchmark also maintains a proactive management style. Even though Sun Zhengyi is so uncomfortable, in September 2019, WeWork’s IPO failed, and its valuation shrank from US$45 billion to US$8 billion. Benchmark still wants to stand with Softbank and replace Neumann.
Like culture. Like his predecessors, Bill Gurly announced his retirement from Benchmark near the 50-year-old mark.
But the facts don’t stop there. Benchmark has an option that has been seen but not widely noticed-they announced that the new foundation will allocate 20% of its investment to the secondary market.
If in the past Benchmark defined a set of “classical VC” templates through a sense of ritual, values, ideas, strategies and amazing performance, then the current “stock speculation” decision is an attempt to overthrow the investment that it believed in in the past. Experience is even reshaping VC’s definition of “value”.
The ritual sense of classical VC
Last year, Benchmark Capital’s newly established 10th fund,425 million US dollars.
There is no change at all. Since 2000, the single fund raised by Benchmark has never exceeded US$550 million. The name Benchmark is full of three words, “Sense of ritual”.
VCs all over the world are expanding, but Benchmark is not expanding. There is a reason that a fund of more than 1 billion US dollars was raised in 1999 and suffered a loss, so I think “big fund is not a good business.”
At that time, less than 5 years after its establishment, Benchmark ushered in a bright moment. Established in 1995, invested in eBay in 1997, and listed on eBay in 1998. By 1999, Benchmark’s book return on this project was at least US$4 billion.
This has gained great favor from LP. In 1999, Benchmark raised $1 billion in capital, which is nearly 10 times more than the first phase of 1995, which was $113 million.
In order to unearth the secret of Benchmark’s short-term success, a reporter from “The New Yorker” spent two years as an investor in Benchmark, followed reports, and wrote the book “eboys”. The six partners of Benchmark were once As the “Godfather of Silicon Valley.”
Benchmark also began to expand outwards, building teams in Europe and Israel. In 2000, Benchmark Capital Europe raised 390 million euros, and in 2004, it raised 290 million euros.
This proves that even in a completely unfamiliar market, Benchmark is recognized. Techcrunch has reported that Benchmark was once one of Europe’s largest venture capital companies.
The same expansion occurred in Israel. In 2001, the first phase of the Benchmark Israel Fund was established with a scale of 240 million US dollars. In 2005, the second phase of the fund was established with a scale of 250 million US dollars. This surpassed the fund-raising capacity of Sequoia, which was established in 1972. At the same time, the second and third phases of Israeli funds raised by Sequoia were both US$200 million.
But soon a turning point occurred. In 2006, the third phase of BenchmarkEurope fund raised 430 million euros, showing that Benchmark no longer participates in dividends. In 2007, the European office announced its independence and changed its name to Balderton Capital. In the same year, the Israeli office was also split.
In 2008, Benchmark’s sixth phase fund raised 500 million US dollars, and the follow-up became smaller and smaller, and the multi-phase fund maintained a scale of 425 million.
But compared with a decade ago, the value of US$425 million today is even smaller, and asset prices are getting more and more expensive.Maintaining this scale is undoubtedly playing a game with a smaller win rate.
The retirement of partners is also how Benchmark maintains a sense of ritual. They repeatedly convey the confidence of letting go.
It is hard to imagine that this 26-year-old VC with no CEO and only partners has completed a whole round of inheritance.
In 1995, there were four partners who formed Benchmark. They were Kevin Harvey, who later invested in Proofpoint, Bob Kagle, who invested in eBay, and Juniper Networks. People Andy Rachleff (AndyRachleff), WeWork investor Bruce Dunlevie (BruceDunlevie).
But you have long been hard to see them in the spotlight. Some are obsessed with wine, some become LPs, and some teach at Stanford Business School.
Last year, joined in 1999, and partner Bill Gurly, who invested in Uber to help Benchmark earn at least $8 billion, also announced that he would no longer lead the investment. This means that the first batch of Benchmark veterans have completely faded out.
Bill Gurly is different from a few early partners. His exit choice is not like wealth freedom to open a new direction in life. He set up a new fund and plans to invest in the secondary market.
Can’t you continue to stay in Benchmark and open up a new path? After all, Benchmark’s new fund has to invest 20% of its money in stock speculation. But Bill Gurly did not choose this seemingly possible path. Because “handing over power” is rather a greater sense of ritual, Benchmark’s label of equality and iteration is constantly being strengthened.
Strongly managed post-investment dispatch
Although the size of the fund is limited, in terms of post-investment management, Benchmark has left a strong impression.
The strength here does not refer to posture and style, but because it has sufficient voice on the board of the invested company, and has made a lot of money by superimposing it with strong active management.
Benchmark has helped dig out vital people on both eBay and Uber projects, and even led the replacement of CEOs.
In 1997, when eBay had only 30 employees and annual revenue was less than $4.7 million, Benchmark recruited Harvard Business School to graduate. The former Walt Disney Strategy Officer Margaret Whitman (Meg Whitman) replaced founder Olivia as eBay’s CEO.
An investor in Founder’s Fundarvey) in phase. After joining Benchmark, his most well-known case was his investment in Twitter C round in 2009.
Matt Cohler, who joined in 2008, invested in Instagram and Dropbox, and also discovered Snapchat, has taken a step back in 2018 and has now left Benchmark to work as an LP at Yale University Endowment Fund. Sarah Tavel, the female partner who joined Benchmark in 2017, is more like to replace him.
Their professional experience is somewhat similar. Matt has served as an assistant to the CEO of former social media platforms LinkedIn and Facebook. Sarah Tavel previously worked as a partner at Greylock, but in the past was a product manager for the social platform Pinterest.
Eric Vishria has also been a partner at Benchmark for a long time, for about 7 years. The Rocktmelt company he founded in the past was invested by A16z and acquired by Yahoo. According to media reports, A16z founder Mark Anderson spoke highly of Vishria, and Vishria just said nothing
Chetan Puttagunta, who joined in 2018, is more focused on the field of corporate services. Bill Gurly wrote in his blog that Chetan is called “MVP of the board of directors” by the investment company. He has led investments in Mulesoft and MongoDB, the former sold to Salesforce for $6.5 billion, and the latter listed on NASDAQ.
And Miles Grimshaw, a partner who joined Benchmark last year, is very young, only 29 years old. He graduated from Yale and previously worked at Thrive Capital, which invested in Instagram, and was responsible for fund raising.
The change of the team reflects the clues of some changes, but this is not a result. The talents in the VC industry are so important that it can even be said that the impact on the results is fundamental.
The most important change in Benchmark comes from its investment strategy. The use of 20% of the money to invest in the secondary market mentioned above can be called a part of Benchmark’s experiment.
The account is clear enough to be understood. What is 20% of the $425 million? 90 million US dollars. If it is placed in the primary market, according to the Internet company’s A and B rounds of about 10 million to 20 million US dollars, about 4 to 9 companies can be invested. With the accumulation of benchmarks, the competitiveness is strong enough.
But is the US$90 million participation in the secondary market investment in the hope of forming a huge influence and appeal in a short period of time? Definitely Not. On the one hand, there is no experience in the past, on the other hand, the capital is obviously not large enough.
But Benchmark can choose this method to find out according to the diagram, and it has become a trend to strengthen the primary and secondary linkages. Sequoia is doing similar things. SEC information shows that in August last year, Sequoia established a new fund to invest in the secondary market; Sun Zhengyi also established an asset management company Northstar to speculate in stocks; and Union Square Ventures, which has the same streamlined team as Benchmark, is also involved in the secondary market.
Observations on the secondary market are generally considered to feed back early investment and establish newer and more complete judgments. But the problem is that Benchmark has always been closely linked to the secondary market by holding companies such as EBay, Twitter, and Uber. That is to say, they have been sitting on the board of directors of a group of most important public companies, so they will not lack Understanding of the secondary market.
So, to speculate about the reason for actively intervening in the secondary market, there is probably only one explanation: the new Benchmark team hopes to sail into the sea that was not familiar before, and is ready to re-establish a set of perceptions and standards to welcome the next era. .