"The Boys of Benchmark Talk About S.F.’s Tenderloin, Diversity and Artisanal Venture Capitalism"

From Re/code:

Recently, I made my way down to the relatively new offices of Benchmark in the still sketchy Tenderloin area of San Francisco for a visit with the foursome who now runs the famous venture firm. That would be Peter Fenton, Matt Cohler, Mitch Lasky and Bill Gurley, who feel a little like a band on a run.

Indeed so. With investments in such hits as Instagram, Uber, Snapchat, Twitter and New Relic, the group is trying to style itself as an “artisanal” VC rather than a corporate one.
Bokay, I’ll bite into the over-priced cheese!

Here’s the first part of our conversation — which was recorded and only slightly edited for clarity in a few places — which came just as the firm closed its eighth fund of $425 million. (I will publish the second part tomorrow):

Re/code: So why did you move here?
Fenton: I think it was behavioral more than strategic. We were spending so much time in San Francisco, it begged the question that we are a field-based business — our customers, the people we serve are the entrepreneurs, and two-thirds of our investments since I joined the firm in 2007 were in San Francisco.
So between the commute time, really being in the climate and serving the entrepreneurs, it was better to be closer than farther away. And I think there is a structural set of reasons that led to San Francisco being more the epicenter today than it was in the past. We believe they are durable.

The Google and eBay and Yahoo and Facebook buses — which are of course of great notoriety today — allowed young grads, engineers who have a choice of living in the city or suburbia, they’ve invariably picked here. So that created a pool of engineering talent that when they went on to start new companies, they are more likely to do it in San Francisco than in some strip mall in Mountain View. And so we followed the entrepreneurs in that respect.

John O’Neill/Wikipedia Market Street in the Tenderloin

And we picked a particular neighborhood that challenges us to engage with the city’s non-technical, non-technology population. and it’s at times uncomfortable. This is not a neighborhood that’s gentrified and may never be. The Tenderloin, in particular, I think because of the SROs, may never be and we are at peace with that in the sense that it forces us to engage with the city that has a set of challenges that it has to overcome.

What does that mean, to “overcome”?
Fenton: There aren’t great ladders between the community and the technology world. Over the next 10 years, our hope is that we can build those. We start with education, in and around the Tenderloin, taking advantage of the fact that you have some of the most extreme success of our country juxtaposed to abject poverty. And I think there is an opportunity in San Francisco to try and form some integration rather than just root out and make them the “other” and not engage.

But it’s hard. This city challenges your ability to move in any linear direction, with all the different agendas that exist. I mean free Wi-Fi was a battle … and why is that?

What is the set-up here?
Cohler: We are a small partnership; we’re a small fund and pretty focused on one thing. So, we have some space here that we use, we have some space here that we sublease out to Quip, Bret Taylor’s startup, that Peter is on the board of. The short answer is that we have three floors, which makes it seem like we have some massive enterprise, which is not the case at all.

What has changed in the VC community — is there a difference between a San Francisco-based one and a Silicon Valley one?
Lasky: I’m not sure there is much of a difference between an SV venture firm and a San Francisco venture firm. But I think the constituency I am trying to serve here [has been impacted by] what’s happening — and I think we have Jeff Bezos to thank, or to blame — that infrastructure is no longer, you don’t need the same physical infrastructure. The Valley served that period in the market.

Now, it is much more about design and the second order of things that are really making the difference in terms of the San Francisco startups....MORE