Monday, March 17, 2014

"The Boys of Benchmark, Part 2: Snapchat Is More Than Sexting and Other Investment Theories"

Following up on "The Boys of Benchmark Talk About S.F.’s Tenderloin, Diversity and Artisanal Venture Capitalism"
In that first post I should have mentioned some of the firm's portfolio companies:
Twitter is probably the most famous name along with eBay, Uber, Snapchat and, for the older crowd, Juniper.

From re/code:
As part of an occasional series of deep-dive interviews with tech and media players — you can read one on Disney’s Bob Iger here and VC Reid Hoffman here — I posted the first part of a long interview I did with the four partners at Benchmark. That would be Peter Fenton, Matt Cohler, Mitch Lasky and Bill Gurley, who now preside over the storied Silicon Valley venture firm.
In that, they discussed the diversity in the industry (not much!) and their move to the Tenderloin of San Francisco (uncomfortable, but needed) and characterized themselves as “artisans” rather than, you know, VCs.

Here’s the second part, in which they discuss investments (Benchmark hits include Instagram, Uber, Snapchat, Twitter and New Relic), the state of the market and where it’s all headed:

Let’s talk about your theory of investment these days.
Fenton: In our investment portfolio, there is a common theme that we fall in love with a person and their mission beyond their sector or theme.

Gurley: A lot of times you rationalize where you focus after the fact.

Fenton: In each investment, we get very passionate about it, dreaming about it in its full potential. I can’t stop talking about Snapchat, because it’s created such a phenomenon where, from a distance, particularly people who don’t use it can’t understand how it can be used for anything but sexting. Yet people who use it are using it at a level where we’ve never seen. The geometric growth of Snapchat into a person’s life as a form of primal communications is really interesting.

And this idea of ephemerality, in a world where we have been trying to become celebrities of our own life and you document it on Facebook and it gets put up by everyone to see: Snapchat flipped all that around and said, “You’re in control of communications,” and it’s about capturing now moments.

And, to me, that gets back to how do you stay relevant, which is how are the patterns of people’s use of technology shaping the way they live in the world. And this cuts across everything, from the way they’re sharing pictures to how you find a mate, and you’re going across the spectrum of the different things you are doing in the world, and so that leads you to some of the things Matt talked about.

The remote control to the world is now your phone, so there is a set of things that build off a successful investment like Uber, where you start to build off the person who comes in and talks about the next version of that. Although we are not backing any “Ubers for X.”

Gurley: I actually view it as a negative sign from a cyclical standpoint, because people don’t do that in market troughs, they don’t fund all these near-variants. That kinda copycat behavior only happens …

Fenton: It can be a head fake, too. I was at Accel when I was pitched YouTube, and it was pitched as “Flickr for video.” So, when people start to write “don’t say this for that,” it turns out YouTube was YouTube for YouTube.

Lasky: To your point, we’re not unaware of the massive move toward mobility and toward the cloud that I think are churning, like the protocolization of currency, that are creating the kind of grinding glacial movement that are a lot of what Peter is talking lies on top of a lot of those trends.

So you mentioned bitcoin — is that a focus?
Cohler: I think we’re all interested in bitcoin, because it is a fundamental enabling technology disruption: In payment, in the way the financial structure we have today works, beyond payments in all kinds of ways. It touches on all kinds of things. We’re working on all kinds of things. It helps to be long on the price of bitcoin, but you don’t have to be long to believe in the enabling technology.

What else is interesting to you?
Gurley: The rise of this smartphone as an embedded system is not how people describe it, but anybody that wanted to do anything prior to this smartphone that had anything to do with an embedded system had to go to basically develop a device that cost $2,500 to land.

So now, all of a sudden, you write an app for free and you get to leverage all this stuff, including the maps and stuff. So companies like Zillow are spending 50 percent of their R&D on realtor-facing apps that are all on these devices that are in the field.

And Uber would not be possible without it. There’s all this white space that would not be possible without this, that are based on this embedded system that is so cheap to develop for. So a lot of our companies are spending a lot of their cycles on putting apps in people’s hands out in the field at the time that they would be doing things....MORE
I get a kick out of the "...Artisanal Venture Capitalism" in the first post, it reminds me of one of our favorite Climateer headlines, "Ye Olde Artisanal Information Retrieval Algorithm Shoppe"