Benchmark (venture capital firm)

Founding, partner structure

Benchmark was founded in 1995 Bruce Dunlevie, Andy Rachleff, and Val Vaden. The firm is noted for creating the first equal ownership and compensation structure for its partners, where there are no "junior partners" or "senior partners," and there are also no CEO-like position held, differing from other VC firms which are named for their founders and are structured hierarchically. The firm has stated the reason for maintaining this approach is to "force discipline and accountability to focus on what matters" for its founders and limited partners, as their profits are driven by investment performance as opposed to management fees. The collective decision-making structure also means that Benchmark shares responsibility for the performance of the companies the firm invests in, not just the single partner who joins the company's board of directors.

Prior partners with the firm include Bill Gurley (who stepped back from his position after serving with the firm for twenty-one years), Mitch Lasky, and Matt Cohler (who each stepped back from their roles as partners after each spending more than a decade with the firm).

Investments

The firm's most successful investment was a 1997 investment of $6.7 million in eBay for 22.1% of the company. In 2011, it invested $12 million for an 11% stake in Uber, worth $7 billion in 2019 and $9.4 billion in 2023.

Benchmark’s first eight funds, raised and invested between 1995 and 2019, returned more than seven and a half times the money invested, net of fees and carry.

The firm has made exits from several companies, including Amplitude, Asana, Confluent, eBay, New Relic, Nextdoor, Red Hat, Snap, Stitch Fix, and Uber.

Controversies

Founder Relations and Board Actions

Benchmark Capital has faced scrutiny regarding its relationships with company founders and its role in leadership changes at portfolio companies. The firm's actions have raised questions about the balance between investor oversight and founder autonomy in venture capital.

Uber Litigation

In August 2017, Benchmark filed a lawsuit against Uber co-founder and former CEO Travis Kalanick, alleging that he had misled the board in order to gain control of additional board seats. The lawsuit sought Kalanick's removal from Uber's board of directors and was described as "unprecedented" in Silicon Valley venture capital circles. The litigation was eventually dismissed in January 2018 as a condition of SoftBank's investment in Uber.

Pattern of Founder Departures

Beyond Uber, Benchmark has been involved in leadership changes at multiple portfolio companies. According to media reports, Benchmark partner Bill Gurley assisted the board at Nextdoor in replacing founder Nirav Tolia as CEO. Additional reports have documented the firm's involvement in leadership changes at other portfolio companies, including solar technology company Nanosolar, where founder Martin Roscheisen was removed from his position.

Roscheisen later characterized Benchmark as "the backstabber of all founders" and stated he would never accept investment from the firm again.

Impact on Startup Community

The Uber lawsuit and other founder departures generated significant criticism within the startup community. Following the Uber litigation, several entrepreneurs expressed reluctance to work with Benchmark. Gabriel Puliatti, founder of startup Emptor, stated there was "no way" he would accept investment from Benchmark, saying he "empathized a lot with Travis" during the events.

Venture capitalists and entrepreneurs predicted the lawsuit would have a "chilling effect" on the next generation of talent, with industry observers noting that Benchmark would have to answer "awkward questions in a lot of deals for the foreseeable future." Investor Hazem Awad commented that "any entrepreneur would naturally feel nervous about working with Benchmark, at least for the time being," citing concerns about "what will happen if things get that bad."

The controversy prompted discussion on social media, with entrepreneurs expressing concerns about Benchmark's approach to founder relations. One entrepreneur in Hong Kong, Larry Salibra, wrote that the "cost of accepting investment from Benchmark just went through the roof in minds of founders everywhere."

Delian Asparouhov of Founders Fund criticized Benchmark's approach, stating: "I don't know how you explain to founders, 'Hey, the way I do early-stage investing is — I bet on founders,' and then you have this track record of explicitly not betting on founders." Asparouhov argued that venture capital firms with a history of removing founders could lose access to the most sought-after deals.

Some industry observers defended Benchmark's actions as necessary corporate governance. Mark Suster of Upfront Ventures stated: "There are people who are old enough and wise enough, to have a long enough lens, to say, 'You know what, governance matters.'"

In popular culture

Benchmark Capital was featured in the Apple TV+ original TV series WeCrashed starring Jared Leto and Anne Hathaway. In the show, Anthony Edwards portrays Benchmark co-founder Bruce Dunlevie, who became WeWork's first major investor on the 1st of April in 2012 when Benchmark led WeWork's $17 million Series-A seed funding.

Benchmark was also featured in the Showtime original Super Pumped starring Joseph Gordon-Levitt. In the series, Kyle Chandler plays former Benchmark general partner Bill Gurley, portraying his involvement in leading Ubers' $11 million round of fundraising in February 2011.

References

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