Why is "Benchmark" a legendary presence in VC? (Part 2)

In one venture capital (VC) firm, there is a dinner that lasts for over three hours, held almost every week. While many VC firms tend to strictly set up regular meetings, documentation, and decision-making processes, this firm's approach is quite unique. There is no formal agenda; they simply enjoy "free conversation" while sharing a meal. This time is said to deepen trust among investors, stimulate intellectual curiosity, and foster an unwavering sense of solidarity.

The partners I actually interviewed were from Benchmark, a leading Silicon Valley VC. They have created numerous legends by investing in the early stages of companies that grew to market capitalizations ranging from hundreds of billions to trillions of yen, such as Uber, Twitter, Instagram, and Snapchat. Despite this, they go out of their way to have a dedicated dining space in their office and hold long dinners almost every week. Why? It is not just to create a "buddy club," but because it is designed precisely as a "place to spark creative fire."

1. The "Equal Partnership" advocated by Benchmark: All 5 GPs are on equal footing

What is noteworthy about Benchmark is the complete equality in the partnership. In typical VC firms, there is often a hierarchy of senior and junior partners, and it is not uncommon for investment deals to be pre-arranged, memos to be circulated, and top-down decisions to be made under the guise of a "consensus system." However, at Benchmark, none of this exists. Everyone has equal voting rights as an equal partner (GP), and they maintain strict rules such as "no pre-arranging" and "no long investment memos for decision-making."

• Investment proposals are better discussed "live" than in memos
  Their Monday meetings have no agenda, and they don't even have internal CRM (customer management software). Even when a founder gives a presentation, instead of writing a logical investment memo, they insist on a style where "the whole team talks directly to the founder and seeks the truth on the spot." They strip away so-called materials as much as possible and focus on deeply understanding the business vision and the founder's humanity.

• What is more important than prestige is "who will be the next GP"
  Benchmark is characterized by being operated by "5 to 6 partners at a time" in principle, and they do not recklessly increase the number of partners. They are unrelated to so-called expansion because they believe that "the more people there are, the more ambiguous decision-making becomes and the more responsibility is blurred." On the other hand, the criteria for inviting a new GP are strict. It is said that the most important thing is whether they are "someone who has actually been on the same board and gone through hell together for hundreds of hours," and the "field experience" gained through working together is the key, rather than just an impressive background or label.

2. Why don't they create a massive "growth stage" fund?

A recent trend in venture investment is the movement to establish large-scale additional investment funds called "growth funds" in addition to initial investments. It is not uncommon for the same VC to follow up with large additional investments every time a rapidly growing company like Uber or Airbnb moves through Series B, C, and D stages. The general view was that by creating a system that can quickly provide large amounts of capital, one can increase commitment to successful projects and maximize returns.

However, Benchmark clearly keeps its distance from this trend as well.

• What is more important than large-scale additional funding
  According to them, "There is more value in committing firmly to the first investment than in chasing with large funds." Every time a decision on additional investment is made, if the VC side develops an interest such as "wanting to buy the stock at the lowest possible price," the trust relationship with the founder tends to be strained. While the company wants to raise funds at a high valuation, if the existing shareholder (VC) is in a situation where they "want to make an additional investment on favorable terms for themselves," the intentions of both parties will slightly diverge. In Benchmark's case, that does not happen. Once they decide on the first investment, they take an unwavering stance of "supporting until the end," and in the next round, they do their best to help the company bring in external investors on the most favorable terms. As a result, the founder's shareholding ratio is easily maintained, and the company can choose the best investor. Their incentives remain aligned.
  

• The importance of "focus" over the benefits of multiple funds
  Of course, for a venture capital firm, creating a huge growth fund can increase fee income, and having the option for additional investment can potentially lead to huge "total cash returns." Even so, Benchmark asserts that "our passion lies in walking deeply with early-stage founders" and dares not take the expansion route.
  If they have a huge number of personnel and peripheral businesses, communication and transparency between partners will fade, and they will be chased by the administrative work of "allocating the huge funds raised." Because the answer to the question "What do you really want to do?" is narrowed down to "supporting early-stage founders," they do not step into the world of growth investment.

3. The reality of fundraising: The "first meeting" determines the outcome

So, how exactly can you extract funds (get investment) from Benchmark? Here, I will organize the "unique fundraising flow" that the company's partners emphasized.

1. Pre-memos and pre-arrangements are prohibited: Focus entirely on the "first meeting"
   In general VCs, it is common to circulate an "internal investment memo" and reach an agreement before listening to the founder's pitch. However, at Benchmark, because there is a principle of "no pre-arrangements," they receive the founder's presentation in a place where all partners are present at once. In other words, the founder meets everyone at the same time, receives questions all at once, and the investment consideration proceeds in the raw atmosphere of that moment.

2. Focusing more on "founder's insight" than logic
   According to them, quantifying business models in detail in the early stages of a startup is usually meaningless; rather, it is important to determine whether they "have market hints or a vision of the future that no one else has noticed." In particular, they focus on "the unique discoveries and vision that the founder talks about in the first three minutes," and say that whether that makes sense is the key.

3. Investment decision-making is surprisingly fast
   They are also the type to "do it immediately once they decide to do it." It is surprising that there are cases where they "decided to invest within one day." This is because the trust between partners is strong, and since everyone participates in the first meeting, no additional internal process is required.

4. Post-investment support: "Full operation with one phone call"
   They believe that the real battle is after the investment. There is even an episode where they are "willing to fly to Europe" if called by an emergency phone call in the middle of the night. The Benchmark philosophy is that the role of a VC should not be just a money provider, but the "strongest advisor" who supports the founder's decisions at key points in management.

4. A culture that even honors "big failure cases"

Also, Benchmark's uniqueness appears in their attitude toward cases where investments do not go well. They look back on cases that did not go well despite investing large amounts of money, such as "Webvan (an early online supermarket)" and "Docker (failure to build the initial business model)," as "not bad investments."

• "If it was the path to take, it was worth the challenge"
  Even if the result ends in failure, the idea is that "if a clear future could be seen there, it was an investment worth taking." Especially in the world of technology, trial and error in the process of creating impactful products is extremely important. Eventually, there is a possibility that it will bloom in another pivot or the founder's next challenge.

• Chasing the "Front Lines of Change" Where Uncertainty is High
  The true thrill of startup investing lies in betting on early-stage ventures with the potential for massive growth, rather than strictly estimating success probabilities with numbers to avoid risk. If a VC firm becomes too cautious here, they risk missing out on the next Uber or Instagram. The attitude of chasing cutting-edge changes without fear of failure and committing fully to them is the reason they have built a treasure trove of successful projects.

5. Future Outlook and Expectations for "Disruptive Innovation"

In the VC world in recent years, investments have spread to unprecedented areas such as crypto assets, AI, biotech, and space business. Even at Benchmark, regardless of whether their past portfolio was skewed toward "consumer services" or if the next wave leans toward "enterprise," their policy of continuing to pioneer new fields with "thorough curiosity" remains unshaken.

What is important, they say, is not expertise in that field, but "whether you can spot the seeds of disruptive innovation and engage with the founder from the heart." The founder themselves has deeper insight into that domain than anyone else and possesses the passion to move the market significantly—sitting at the same "table" as such a person and talking for hours. It is through that process that the first step toward opening up a new world is born.

The "weekly dinner" held by the VC firm Benchmark involves deep human interaction that transcends the boundaries of business and investment. The fact that they narrow down their investments, avoid managing massive funds, and pour all their energy into early-stage investment can be said to be for the sake of protecting an environment where the interests of the founder and the VC do not clash, and where they can immerse themselves in projects that essentially change the world.

For founders seeking funding, "first gaining mutual understanding through dialogue with their partners" is more important than anything else. It is not about the numbers, but about what kind of insight the founder has and what kind of social issues they are trying to solve and how. If Benchmark's capital is involved, it becomes easier to gain an advantage in subsequent additional fundraising, and a structure is obtained where they themselves become the "seller" and can choose the optimal investors.

In an era where cutting-edge tech is evolving rapidly, the key to corporate growth lies more in "what kind of partner with what values will stand by you" than in "which VC you receive funding from." Benchmark's dinner is a "place to share curiosity" that symbolizes this. Talking together over a long period of time and building a close solidarity—that analog approach is what is cultivating the soil for startups that will repaint the world.

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