20VC Most Downloaded Episode of 2017 Peter Fenton, General Partner @ Benchmark

Summary Notes


In the final week before Christmas on "The 20 Minutes VC," host Harry Stebbings presents the most downloaded VC episode of 2018, featuring Peter Fenton, General Partner at Benchmark. With over 350,000 downloads, Fenton shares his journey into venture capital, driven by curiosity and competitiveness, and discusses how he supports companies like Twitter, Uber, and Snapchat. He emphasizes the importance of nurturing founders' radical potential over focusing on valuation during investment decisions. Fenton also reflects on his evolution as a board member, advocating for engagement and trust over presentations, and highlights his recent investment in Zenly, illustrating his belief in the potential of location-based social networking. Special thanks are given to Jonathan Abrams for his role in making the episode possible.

Summary Notes

Introduction to 20 Minutes VC Christmas Schedule

  • Harry Stebbings announces a special schedule for the Christmas period.
  • Normal episodes will resume on Wednesday, January 3rd.
  • Special episodes include the most downloaded VC and Founders Friday episodes.

"The schedule for the show will be slightly effective for the Christmas period following this week's episodes. The show will return to normal on Wednesday the 3 January and we will be back with the bang with killer episodes from Sam Altman, Dick Costello and Snapchat investor Jeremy Lew at light speed, just to name a few."

The quote explains the temporary change in the podcast's schedule due to the Christmas period and teases upcoming episodes with high-profile guests.

20 Minutes VC Awards Week

  • Harry Stebbings shares plans for the 20 Minutes VC Awards Week.
  • The week will feature the two most downloaded VC episodes and the most downloaded Founders Friday episode.

"The 20 minutes vc awards week with the two most downloaded vc episodes today and on Wednesday. And then on Friday we'll be having the most downloaded founders Friday episode."

The quote announces the special awards week, highlighting the most popular episodes from the podcast.

Introduction of Peter Fenton

  • Peter Fenton is introduced as the guest for the most downloaded VC episode of 2018.
  • His role as a general partner at Benchmark and his notable board positions are mentioned.
  • Peter Fenton's success and ranking on Forbes Midas list are highlighted.
  • Harry Stebbings expresses personal gratitude to Peter Fenton for his support.

"Peter Fenton, general partner at Benchmark, one of the world's leading vc funds. With a portfolio including the likes of Twitter, Uber, Snapchat, eBay, WeWork, Yelp and many more revolutionary companies."

This quote introduces Peter Fenton and his association with Benchmark, a leading venture capital fund with a prestigious portfolio.

Acknowledgment of Sponsors

  • Namely is introduced as a sponsor, providing an HR platform for companies.
  • Eero is mentioned as a sponsor offering a Wi-Fi system that ensures coverage throughout the home.

"Namely brings employees together on the HR platform that everyone loves to use."

This quote describes the role of Namely as a sponsor and its product offering.

Peter Fenton's Background and Venture Capital Foray

  • Peter Fenton discusses his upbringing in Silicon Valley and exposure to entrepreneurship through his father.
  • He describes the venture industry in its early days and the variety of backgrounds among venture capitalists.
  • Peter's education focused on nurturing his curiosity, which was seen as a pathway to success.
  • He mentions competitiveness and curiosity as traits that define venture capitalists.
  • Peter shares advice he received about practicing venture capital early in his career.
  • He reflects on the continuous learning curve in venture capital.

"And through that, I had a window into just the opportunity and really, I think, maybe best ever potential enablement of humanity, of entrepreneurship."

This quote reflects Peter Fenton's view on the transformative potential of entrepreneurship and the role of venture capital in supporting it.

Peter Fenton on Learning and Career Growth

  • Peter Fenton emphasizes the importance of continuous learning in venture capital.
  • He shares his journey from joining Accel Partners to moving to Benchmark.
  • Peter discusses the advice he received about the importance of starting early in venture capital.

"And if I viewed this as a 20 to 30 year career, the sooner I got started, the better."

The quote captures the advice given to Peter Fenton about the benefits of starting a career in venture capital early to gain experience over time.

  • Peter Fenton and Harry Stebbings talk about the concept of tech cycles and the end of certain trends.
  • They discuss an article by Elad Gil on the end of cycles and the search for new opportunities.
  • Peter gives his perspective on the difficulty of defining the end of a trend and the uniqueness of each company.
  • He also mentions the shift in distribution channels for consumer products and the challenges it poses for new companies.

"We resist defining the end. And I think Eli's comment was that I believe, and I share this point of view, that one of the major oxygen supplies for consumers especially is free and open distribution."

The quote discusses Peter Fenton's agreement with Elad Gil's view on the importance of open distribution channels for consumer products and the challenges faced when such channels are no longer freely available.

Snap's Unique Position in Achieving Distribution

  • Snap's ability to achieve rapid adoption and distribution is notable in the current challenging environment for new companies.
  • The difficulty for new companies to gain rapid adoption does not preclude the possibility of it happening again.
  • It is important to identify unmet human needs that new products can fulfill to allow for dynamic, broad uptake.

"And I think Snap really stands out in that field of companies to be able to achieve distribution."

This quote highlights Snap's success in overcoming the challenges of achieving distribution, setting it apart from other companies.

"But I think in general, it's a pretty difficult environment for a new company to sort of cross the threshold into rapid adoption."

This quote acknowledges the overall difficulty for new companies to achieve rapid adoption in the current market environment.

Zenly's Innovative Use of Smartphone Capabilities

  • Zenly leveraged the ubiquity of smartphones and their features to change human interactions.
  • The innovation of low battery consumption for location tracking allowed Zenly to create a social layer on top of location.
  • Knowing the location of friends and who they are with is a primitive human interest that drives repeat usage.
  • Zenly's core demographic numbers show the success of addressing this primal human need.

"In the case of Zenley, we had a point of view that we now have ubiquity of smartphones, and there's a set of enabling features inside of those phones that could really change how we interact with people in the world."

This quote explains the rationale behind Zenly's approach, which is to capitalize on the widespread use of smartphones and their built-in features to innovate social interactions.

"And I actually think one of the primitive truths of existence is where are your friends and who are they with in knowing that?"

This quote emphasizes the fundamental human curiosity about the whereabouts and company of friends, which Zenly tapped into to drive user engagement.

The Potential for New Global Networks

  • Messaging apps like WhatsApp and Telegram have become global networks beyond the Apple ecosystem.
  • Snapchat has replaced the traditional camera for many users due to its network and dynamic experience.
  • Zenly's approach to maps and location-based services indicates the potential for new product development and consumer delight.
  • The combination of different factors, rather than a single social trend, contributes to the success of companies like Zenly.

"You could look at messaging and say, okay, well, WhatsApp or Telegram have clearly been the open version of iMessage."

This quote points out how certain apps have expanded beyond the confines of proprietary systems like Apple's iMessage to create global networks.

"The camera has been replaced by Snapchat because it's plugged into a network."

This quote illustrates the shift in how users perceive and use the camera function on their phones, with Snapchat providing a more connected and dynamic experience.

Investment Philosophy: Focusing on Potential

  • Investors should fall in love with the team, opportunity, and potential of an investment.
  • It is crucial to believe in the potential of a company while setting high standards for execution.
  • Early-stage investments should focus on the purpose and job for consumers rather than obsessing over potential risks.
  • Losing clarity of purpose can derail a company's mission.
  • Authentic purpose is vital, and investors work with companies to maintain this essence.
  • Docker's pivot to software containers is an example of returning to the company's original purpose.

"So when I look at an investment like Zenley and we go into an investment, any new investment, we, of course, have risks in our mind around things that could go wrong, but we don't obsess on them in a way that's like staring at the guardrail when you're driving."

This quote suggests that while being aware of potential risks is important, an investor's focus should be on the possibilities of what could go right to avoid being hindered by fear of failure.

"And so much of what we try and do in who we work with, and really the companies we work with, is to become a more crisply defined version of themselves, as opposed to trying to be somebody else."

This quote emphasizes the importance of companies maintaining their authentic purpose and identity, which is a key factor in their success and a focus area for investors.

Valuation and Investment Decisions

  • Valuation should not be the sole reason to turn down a company; it can be a mental trap.
  • Understanding the full potential of a company is key, even though it may seem irrational.
  • Fund return dynamics are defined by involvement with the few companies that significantly impact a decade.
  • A fair trade in valuation acknowledges the potential for a wide range of outcomes.
  • The underlying question should be what the company looks like at its radical full potential.

"But in hindsight, it wasn't the valuation that drove the return."

This quote conveys the idea that the success of an early-stage investment is not determined by the entry valuation but by the actual realization of the company's potential.

"And what strikes me is that that thinking so dominates the trade, the negotiation, the back and forth with an entrepreneur."

The quote criticizes the focus on valuation in negotiations, suggesting it can overshadow the more important considerations of a company's ultimate potential and fit with the investor's belief in its success.

Ownership Stake and Returns

  • Ownership stake is a critical determinant of returns, especially in early-stage investments.
  • Over time, ownership stakes at entry have been decreasing.
  • The competitive environment is healthier for entrepreneurs, allowing them to choose investors based on value and fit rather than just funding.
  • Passion for a company is a significant factor for investors when deciding on a good fit.
  • Valuation is sometimes an "escape hatch" when other necessary variables are lacking.
  • Investors should consider the company's full potential and their conviction in it when negotiating valuation.

"And I think ultimately that is a bigger determinant of returns than anything related to the valuation going in."

This quote emphasizes the importance of ownership stake over initial valuation in determining investment returns.

"It's far more likely that we'll say in the spectrum of things that we can work on, are we more passionate about your company than the next one?"

The quote highlights passion as a key decision-making factor for investors when considering different investment opportunities.

"And valuation ends up becoming an escape hatch for a lot of people when some of the variables that are needed are not present."

This quote suggests that valuation becomes a secondary concern when other critical factors for investment are not met.

Market Creation and Investment Process

  • The quality of the entrepreneur is central to assessing market creation and potential value.
  • Entrepreneurs with a unique perspective and sense of purpose can define new markets.
  • Successful startups often begin in narrow or undefined markets.
  • Understanding the entrepreneur's vision and the emotional needs the product serves is crucial.
  • The subtlety of product design can indicate the depth of the entrepreneur's thinking.
  • Investment negotiations balance risk, potential, and fair value sharing between the investor and entrepreneur.

"It centers almost entirely, at least in my case, on the quality of the entrepreneur."

This quote underscores the importance of the entrepreneur's qualities when evaluating investments in new markets.

"What was Snap really doing with disappearing photos, ten-second photos for what have turned out to be late teenage dominant female versus male, and you would have said, well, how big could that be?"

The quote reflects on the challenge of assessing the potential market size of a novel product like Snapchat at its inception.

"So we negotiated a price. We certainly were conscious of the risks that that future state that we thought of was possible but not guaranteed."

This quote illustrates the balance of risk and potential in investment negotiations, aiming for a fair valuation that reflects both parties' interests.

Board Membership Development

  • Being a great board member involves asking tough questions and applying critical thinking.
  • Development as a board member can be transformational, moving from being didactic to employing the Socratic method.
  • A high-functioning board benefits from diverse perspectives and active participation from all directors.
  • Effective board meetings engage directors in dialogue rather than presenting at them.

"And David pulled me aside a few times and encouraged me to exercise a little more of the listening part of my psyche."

This quote indicates the importance of listening and the impact of mentorship on developing as a board member.

"And I then, in a way that was, I think, nothing less than transformational, became a student of great board members and interviewed a number of the people in the venture business who I really respected and entrepreneurs, and said, what does it look like to be extraordinary at this?"

The quote reflects a deliberate effort to learn from experienced board members and entrepreneurs to improve one's own board membership skills.

"So a lot of what I've done on that front is to make sure that we have a frame to engage the board the right ways."

This quote suggests the proactive steps taken to ensure board meetings are engaging and productive, moving away from passive presentations to interactive discussions.

Board Meetings

  • Effective board meetings begin with a detailed, prose-written preread containing essential thinking, challenges, opportunities, and operating metrics.
  • The first third of the board meeting is dedicated to ensuring everyone is on the same page.
  • The second third dives into the most critical topics, leading to impactful and harmonious board meetings akin to a well-coordinated band.
  • It's crucial not to overemphasize the importance of board meetings since much of a company's activities occur outside these meetings.
  • Directors should work closely with entrepreneurs, encouraging frequent and vulnerable communication between board meetings to build trust.
  • Building trust between directors and management requires clear communication without meddling or getting too involved, especially when internal political agendas are at play.
  • Continuous improvement and discipline are key to becoming exceptional in board governance.

"And that preread should capture the essence of their thinking, the challenges, the opportunities, what's on their mind, what keeps them up at night, but have all the operating metrics and data in there."

This quote emphasizes the importance of a comprehensive and thoughtful preread document that provides a clear overview of the company's status and the entrepreneur's mindset, setting the stage for a productive board meeting.

"And then the second 3rd, we can dive into the topics that matter most."

This segment suggests a structured approach to board meetings, where time is allocated to first align everyone's understanding before tackling the most pressing issues.

"Much of what happens in our companies occurs outside of the board meetings."

This statement recognizes that while board meetings are important, they are not the sole arena where company decisions and progress are made; ongoing engagement and support are crucial.

"So I think it's also essential that the directors, and specifically our role, is to make sure that we're working shoulder to shoulder with the entrepreneur, so that they can call us frequently between board meetings, but be vulnerable with us."

The quote highlights the necessity for directors to be accessible and supportive to entrepreneurs, fostering an environment of trust and openness.

"And I think a huge component of successful board is the trust between the directors and between the management team and the directors provokes both honesty, but sort of high levels of vulnerability around what their own event horizon looks like."

Trust and honesty are underscored as critical components of a successful board dynamic, with vulnerability seen as a strength that can lead to more effective governance.

"And that's a line which I've learned, certainly over time, that you don't want to cross where you're in there knowing too much about the company, because you sort of get a warped perspective, especially if there's agendas, political agendas, amongst the CEO's reports."

This quote advises caution against directors becoming too entangled in the internal politics of a company, which can lead to biased perspectives and hinder effective governance.

Intellectual Enrichment

  • Books are valuable, but podcasts are seen as the most interesting area for intellectual enrichment.
  • Podcasts provide expansive knowledge and can be integrated into daily routines, like walking or driving, offering more enrichment opportunities than traditional reading.
  • Curating a personal list of 15 to 20 podcasts can lead to significant intellectual growth and is highly recommended.

"I think that the most interesting area for intellectual enrichment today is not books, although there are great books, but rather podcasts."

This quote expresses a preference for podcasts over books as a medium for intellectual enrichment, highlighting the modern and versatile nature of podcast consumption.

In-Group Bias

  • The implicit bias test reveals subconscious biases that contribute to the notion of 'the other,' which can be racial, socioeconomic, or gender-based.
  • Eradicating the notion of the other is a defining trait of humanism.
  • Teaching children to be inclusive by encouraging them to reach out to others who may feel excluded, such as a new student from a different background, can be a valuable life lesson.

"I think one of the defining traits of humanism is an eradication of the notion of the other."

This quote discusses the importance of overcoming subconscious biases to treat all individuals equally, a fundamental aspect of humanism.

Founder Characteristics

  • Great founders are uncontrollable, prefer risk-taking over conservative decisions, and can envision possibilities beyond logic.
  • A key moment for companies is when they have the opportunity to sell; great founders often defy logic and choose to continue growing their company.
  • The decision to not sell and pursue greater ambitions is seen as a heroic act that defines the character of exceptional founders.

"The best founders make me feel like, number one, I can never control them, and I never want to control them."

This quote describes the independent and uncontainable nature of great founders, which is both challenging and inspiring for investors and board members.

Investment in Zemlians

  • The investment in Zemlians is based on the belief that knowing where friends are and who they are with is a primitive yet to be fully explored in product experiences.
  • Zemli's low power GPS reporting innovations have the potential to open up new opportunities for product innovation.
  • High user engagement and positive cohort analysis indicate that Zemlians addresses a fundamental need for connectivity and closeness among friends.

"Logic of the investment, as we talked about earlier in the podcast, centers on this belief that one of the primitives that's not yet built in a product experience in the world is where are your friends and who are they with?"

This quote explains the rationale behind the investment in Zemlians, which is based on the untapped potential of integrating social connectivity into product experiences.

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