20VC Benchmark’s Chetan Puttagunta on The One Question To Ask When Analysing Market Size, How To Compete in Today’s War for Talent & Why We Have Seen An OverRotation In Running Businesses Based on Metrics

In this episode of the 20 minutes VC, host Harry Stebbings interviews Chaitan Putagunta, a general partner at Benchmark, exploring his journey from NEA to Benchmark and his insights on venture capital, startup growth, and the importance of product focus over metrics. Putagunta shares his experiences working with Peter Fenton and emphasizes the significance of product-market fit, customer engagement, and the potential pitfalls of over-relying on metrics for early-stage companies. They discuss the nuances of remote work, talent acquisition, and the evolving landscape of innovation, with Putagunta highlighting the entrepreneurial energy in Silicon Valley and Europe. The conversation also touches on the strategic value of going public and the impact of competition on startup strategy.

• Chetan Puttagunta is a general partner at Benchmark, a successful venture capital fund.
• Benchmark's portfolio includes high-profile companies like Uber, Twitter, Dropbox, WeWork, Snapchat, Stitch Fix, eBay, and others.
• Chetan has previously led investments at NEA in companies like Elastic, MongoDB, and Mulesoft.
• Chetan's introduction to Benchmark was facilitated by a connection made over three years ago.

"I'm thrilled to welcome to the show Chaitan Pudagunta, general partner at Benchmark, one of the most successful funds of the last decade, with a portfolio including the likes of Uber, Twitter, Dropbox, Wework, Snapchat, Stitch Fix, eBay and many, many more incredible companies."

The quote highlights Chetan's current role at Benchmark and the fund's impressive investment track record.

• Chetan has an engineering background from Stanford.
• Early exposure to Silicon Valley's ecosystem fueled his interest in technology and innovative businesses.
• He worked in financial services before becoming a general partner at NEA.
• Chetan joined the board of Elastic, where he met Peter Fenton, a fellow Benchmark partner.
• His experience with Peter Fenton on the Elastic board was a significant factor in his decision to join Benchmark.

"I trained as an engineer at Stanford, and being in the area at such a young age, you get very exposed to the ecosystem here. [...] I had to jump. So it's been about a year since I've joined Benchmark and it's been an incredible experience."

The quote explains Chetan's educational background, his early career, and the pivotal moment leading to his move to Benchmark.

• Chetan observed Peter Fenton's approach to being an effective board member.
• Peter Fenton's preparation for board meetings and his engagement with founders and executives stood out.
• Chetan learned the importance of being prepared, engaged, and strategic to push companies forward during board meetings.

"He spends an incredible amount of time ahead of every board meeting, diving deep into the materials, having the conversations with founders and executives about questions that arise in his mind as he's reviewing the materials."

This quote describes Peter Fenton's meticulous preparation for board meetings, which Chetan admired and learned from.

• Chetan believes there is an overemphasis on running businesses strictly based on metrics.
• Entrepreneurs are often pressured to benchmark themselves against other companies.
• There is a tendency to interpret signals from small data sets, which can disconnect a company from its core purpose.
• Chetan emphasizes the importance of product engagement and customer connection over early sales efficiency metrics.

"I think there has been, frankly, an over rotation into just running businesses simply on metrics. [...] I think you lose the connection with the purpose of the company."

The quote reflects Chetan's view that an overreliance on metrics can detract from understanding and fulfilling the company's purpose.

• Chetan Puttagunta warns against an overemphasis on metrics in early-stage companies.
• He believes there should be a stronger focus on product and customer engagement rather than purely on metrics.
• Chetan advises founders to concentrate on the product's purpose and mission.

"And so by really just focusing on metrics at these early stages, you miss the feel for the product itself and the customer engagement point."

Chetan Puttagunta is expressing concern that an overemphasis on metrics can lead to a lack of understanding and connection with the product and customer experience, which are critical in the early stages of a company.

• NPS (Net Promoter Score) and customer satisfaction are crucial, particularly in the early stages of enterprise software companies.
• Chetan emphasizes the need to collect data on customer interest, value derived from the product, and user demographics within the organization.
• Understanding customer feedback is essential for product development and enhancing customer engagement.

"NPS and customer, and whatever metric you like to use to measure customer satisfaction is critically important, especially in the early stages."

Chetan Puttagunta highlights the importance of NPS and other customer satisfaction metrics as critical tools for understanding customer engagement and product reception in the early stages of enterprise software companies.

• Chetan discusses the 'agency problem' where users and buyers of a product may be different individuals or groups.
• He suggests fostering user champions to influence the buyers positively.
• Understanding the user-buyer relationship is key to conversions, renewals, and expansions.

"If they're two different people, you have to create engagement within the user to the point that they become your champion, such that when the buyer enters the decision making process, the user is heavily influential on your behalf as a champion of your product."

Chetan Puttagunta is explaining the importance of creating strong user engagement, so they advocate for the product to the actual buyers, which is particularly relevant when users and buyers are distinct entities.

• Chetan advises founders to focus on product fundamentals when dealing with competition.
• It's important to assume competitors have unique insights into the market and to learn from their strategies.
• Understanding competitors' product strategies can reveal new market insights and guide product development.

"I think the optimal strategy about competition is to really, again, orient towards product."

Chetan Puttagunta recommends that the best approach to competition is to focus on one's own product and to learn from competitors' insights and strategies to improve and adapt one's own product offerings.

• Chetan notes that operational rigor increases as companies prepare to go public.
• Being public introduces discipline, improves forecasting, and enhances execution due to the scrutiny from shareholders and the market.
• Public markets are receptive to companies investing for long-term growth if the investment story is well articulated.

"I think the level of discipline and rigor that's introduced by the idea that, hey, you're going to have a very large shareholder base, and every quarter you're going to have to come out and talk about publicly how you just did, and all your customers are going to know how you just did."

Chetan Puttagunta explains that the transparency and accountability required by public markets lead to increased operational discipline and precision, which is beneficial for the growth and maturation of a company.

• Chetan observes a trend in Silicon Valley towards long-term thinking and building companies with visions extending over decades.
• He believes the entrepreneurial ecosystem is characterized by big dreams and a focus on building meaningful companies.
• The introduction of cloud and new technologies presents a unique opportunity to create valuable, long-lasting enterprise components.

"The just big dreams that people are thinking about on a daily basis and the idea of wanting to build companies that go for 10-20 plus years is something that I think is actually becoming more common than not."

Chetan Puttagunta expresses optimism about the entrepreneurial mindset in Silicon Valley, where there is a noticeable shift towards building companies with a long-term perspective and substantial impact.

• The recruiting market for startups is extremely competitive.
• Talent in engineering, product management, sales, and marketing is in high demand.
• Startups must effectively communicate their mission and purpose to attract employees.
• Remote working cultures are expanding the competitive landscape beyond Silicon Valley.
• Recruiting is now competitive globally, not just in traditional tech hubs.

"If you're a talented employee at the moment and you're looking at the opportunity of startups to go work for, the opportunity set is really, really large at the moment."

This quote emphasizes the vast opportunities available to talented individuals in the current job market, particularly within startups.

"And as more and more companies start to embrace remote working cultures, which I've been a huge fan of and I think is a great way for startups to build from day one."

Chetan Puttagunta highlights the growing trend of remote work culture and its benefits for startups, especially when implemented from the inception of the company.

• Remote teams are common in traditional field sales models.
• The location of customers can necessitate remote sales teams.
• Best practices for managing remote teams exist and should be considered.
• Concerns regarding remote sales and marketing teams may not be necessary.

"I think it just depends on the kind of customers you're selling to."

Chetan Puttagunta suggests that the necessity and effectiveness of remote sales and marketing teams are contingent on the customer base's location and needs.

"So I think, Harry, you should be more open minded about it."

Chetan Puttagunta encourages Harry Stebbings to reconsider his concerns about remote sales and marketing teams, implying that there are successful precedents for such structures.

• Silicon Valley has a high concentration of experienced and talented individuals across multiple functions.
• Talent from Silicon Valley can significantly contribute to a company's growth.
• Recruiting experienced talent from Silicon Valley is important for startups at some point.

"So as a result, I think regardless of where your company starts, there is going to be talent in Silicon Valley that you can attract to your company that's really going to push your company forward."

Chetan Puttagunta argues that Silicon Valley's talent pool can be a critical asset for any company's progress, regardless of the company's initial location.

"And so folks like that are, I believe, only available in the Silicon Valley ecosystem."

Chetan Puttagunta asserts that certain highly experienced and versatile professionals are unique to Silicon Valley, making it a valuable recruiting ground for startups.

• Companies are moving toward remote work, and talent has access to global opportunities.
• Cost arbitrage is not a sustainable hiring strategy for remote workers.
• Compensation should be competitive and reflect the talent's market value.

"I think you really have to just go for the best possible talent that you can attract."

Chetan Puttagunta emphasizes the importance of prioritizing talent quality over cost savings when hiring remotely.

"You have to pay and think about compensation in a way that's generous and attractive and will make sure that the person you're hiring feels like they're compensated well."

Chetan Puttagunta advocates for fair and attractive compensation to ensure remote employees feel valued and to attract the best talent.

• Investors face the challenge of accurately assessing market size.
• Historical market sizes may not reflect future potential.
• Startups can create shifts in market dynamics, especially with technological advancements like cloud computing.

"And so I think tam analysis is the first step to that mental trap where you can look at historical or legacy markets and say, well, the last ten years or the last 20 years this market has been this small."

Chetan Puttagunta warns against relying solely on traditional market analysis, which may overlook the potential for significant market expansion or shifts.

"And in some markets the spend will probably multiply by ten x or 100 x."

Chetan Puttagunta highlights the potential for exponential market growth in certain sectors, which is crucial for startups to consider.

• Venture capitalists must support their portfolio companies through highs and lows.
• The state of a company can quickly change, and board members should be prepared for this.
• A venture capitalist's reputation is built on support provided during both successful and challenging times.

"And so as a board member, you have, I think, an obligation to be there for your entrepreneurs through both the good times and the rough."

Chetan Puttagunta speaks to the responsibility of venture capitalists to support entrepreneurs consistently, regardless of the company's current performance.

"And I personally think that your reputation is made by both how you behave and how supportive you are as a board member in both the good times and the times when things feel like they're going sideways."

Chetan Puttagunta believes that the conduct of venture capitalists during challenging periods is a significant factor in their reputation within the industry.

• Venture capitalists aim to work on partnerships and make them successful.
• Success in partnerships can vary; some don't work out, while others can be incredibly successful.

"Partnership that you're working on and to make them as successful as possible. And sometimes it doesn't work out and that's just fine. And sometimes it works incredibly well."

This quote highlights the variable nature of venture capital partnerships and the acceptance of both successes and failures as part of the process.

• Benchmark has historically been opportunistic about investing in Europe.
• European startups have successfully expanded to Silicon Valley.
• The firm is open to innovation from any region, not just Europe.
• Recent investments in Europe are coincidental, reflecting the current innovation climate.
• Benchmark values the potential for startups to scale and become significant.

"If you look at the historical track record of benchmark, we've always been quite opportunistic in Europe in terms of opportunities."

Chetan Puttagunta explains that Benchmark's engagement with European startups is part of a long-standing openness to global opportunities, not a new strategic shift.

• The team's respect and dedication to the venture capital craft are paramount.
• Acknowledging the difficulty of building startups, Benchmark commits significant time and energy to each opportunity.
• The culture within Benchmark is centered on dedication and high-level practice of venture capital.

"I think it's the group of folks that are assembled here and our respect and dedication to the craft of venture capital and to practice it at a high level with dedication and a lot of energy exerted against that craft itself."

Chetan Puttagunta emphasizes the collective commitment and culture at Benchmark, which he believes sets the firm apart.

• The volume of innovation today is overwhelming.
• Engaging with numerous entrepreneurs and projects is a significant challenge.
• The venture capital industry requires creating time to experience all the innovations being developed.

"I think it's just the volume of innovation is so great today that just being able to meet with all the entrepreneurs have the ability to go see everything and spend time with everyone that's working on really interesting projects is a challenge."

Chetan Puttagunta discusses the difficulty of managing the sheer amount of innovation and the challenge of giving adequate time to each entrepreneurial venture.

• Opportunities in venture capital can arise unexpectedly.
• Being open to ideas and entrepreneurs is crucial.
• Experience in venture capital reveals the unpredictable nature of opportunity discovery.

"I think that one of the things that become more obvious as you spend more time in venture is that opportunities just come out of nowhere."

Chetan Puttagunta reflects on the unpredictability of opportunities in venture capital, emphasizing the importance of openness to new ideas.

• Duffel is a London-based company creating API-led infrastructure for the travel industry.
• Benchmark was compelled by the strength of Duffel's team and their technical approach to solving problems.
• The investment was also driven by Duffel's potential to address a significant pain point for customers.

"The most recent investment was a company called Duffel, which is based in London. They're building really interesting API led infrastructure for the travel industry."

Chetan Puttagunta explains the rationale behind Benchmark's recent investment in Duffel, highlighting the team's capabilities and the market opportunity they are addressing.

• Chetan Puttagunta is appreciated for his role in the venture capital ecosystem.
• Promotional mentions include Chetan's Twitter handle and Harry Stebbings' Instagram.
• The episode ends with promotions for Airbase, Culture Amp, and Terminal, which offer various services for startups and growing businesses.

"As I said at the beginning, such a wonderful player in this ecosystem. And if you'd like to see more from Chaithan, then you can find him on Twitter at chathanp."

Harry Stebbings offers a personal commendation for Chetan Puttagunta and provides information for listeners to follow him and engage with the content further.