November 28, 2023 • 1hr 29min

Peter Fenton & Victor Lazarte - Purpose and Partnership - [Invest Like the Best, EP.354]

Invest Like the Best with Patrick O'Shaughnessy

This episode features Peter Fenton and Victor Lazarte, both General Partners at Benchmark Capital. Peter is the longest-serving partner at Benchmark, while Victor is the newest, having recently joined after founding and building Wildlife Studios into a major mobile gaming company. They discuss Benchmark's unique philosophy, what drives great entrepreneurs, and their perspectives on the current technology landscape.

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Key Takeaways

Benchmark has a unique model focused on making very few, high-conviction investments and being deeply involved partners to founders
The firm intentionally stays small (6 equal partners) and raises smaller funds to maintain focus and avoid conflicts
Great entrepreneurs are driven by a generative purpose to create and build, not just financial rewards
Amplifying founders' ambition and helping them stay connected to their original mission is a key role for VCs
AI and large language models are creating a new wave of opportunities, especially for applications built on top of foundation models
Gaming is entering a "golden era" as AI tools make game development more accessible to smaller teams with creative visions
Mental health and human flourishing are increasingly important considerations in technology and company building

Introduction

This episode features Peter Fenton and Victor Lazarte, both General Partners at Benchmark Capital. Peter is the longest-serving partner at Benchmark, while Victor is the newest, having recently joined after founding and building Wildlife Studios into a major mobile gaming company. They discuss Benchmark's unique philosophy, what drives great entrepreneurs, and their perspectives on the current technology landscape.

Topics Discussed

Benchmark's Unique Model (06:28)

Peter Fenton explains Benchmark's distinctive approach:

The firm intentionally stays small with just 6 equal partners
They make very few investments (about 10 per year) but are deeply involved with each company
There is no hierarchy or "alpha" partner - the structure is flat and equal
The focus is on partnering with entrepreneurs, not building Benchmark as a franchise

Fenton notes: "Accepting the finitude of the project, I think protects you from investing ego and identity in aspects of the firm that don't connect with the core work, which is working partnering with an entrepreneur."

Victor's Transition to Venture Capital (04:18)

Victor Lazarte discusses his move from founder to investor:

After 13 years as CEO of Wildlife Studios, he was attracted to the breadth of learning VC offers
He misses the deep connections with a long-term team, but gains exposure to many industries
Benchmark's commitment to founders aligned with his goals: "We say that we don't make bets, we make commitments to founders."

What Drives Great Entrepreneurs (29:18)

Peter Fenton outlines three key drives in entrepreneurs:

Aggressive drive - competitive desire to win
Pleasure drive - seeking rewards and enjoyment
Generative drive - desire to create, serve, and build

He emphasizes that the best founders maintain their generative drive even as they achieve success: "There are a few entrepreneurs that come out that have protected their generative drive, protected their curiosity, their creativity, as they manifest their aggressive drive."

Amplifying Founder Ambition (51:08)

Victor highlights a key role for VCs in pushing founders to think bigger:

Ask questions like "What would it take to be 10x bigger?"
Help founders reconnect with their original ambitious vision
Jeff Bezos story of wanting board members more ambitious than himself

Victor notes: "A great board dynamic is when your board comes in and asks you, like, what would it take to be ten x bigger? Asking that question puts you back in dreamer mentality."

Benchmark's Approach to Fund Size (42:28)

Peter explains why Benchmark intentionally raises smaller funds:

Forces discipline in establishing non-monetary relationships with founders
Avoids pressure to deploy large amounts of capital
Allows them to stay focused on early-stage, high-conviction bets

He states: "By forcing the structural discipline to not buy our relationships, but to earn them, that it keeps it clean."

AI and Large Language Models (1:01:14)

Victor and Peter discuss the opportunities created by AI:

Natural language interfaces will enable new types of applications
There will likely be multiple $500B+ companies built on top of foundation models
AI may disrupt both technology and distribution models for software

Peter notes: "I'm predicting that there's a sub 30, probably sub 25 year old founder that is imagining, in a generative sense, an experience that is deeply missing today around human connection, that the use of these technologies will fill that void."

The Future of Gaming (1:14:53)

Victor shares his perspective on gaming trends:

AI tools will make game development more accessible to smaller teams
This will enable more creative visions to be realized
Free-to-play will likely remain the dominant business model
New technologies enable new gameplay patterns (e.g. short mobile sessions vs long PC games)

He states: "I think we're entering a golden era of game development. And the reason I think about that is game is a creative endeavor. And I think what this new wave of technology allows for is game development tools that make the creation process so much better."

Mental Health and Human Flourishing (1:24:06)

Peter highlights the importance of considering mental health impacts:

Many social media products leave users feeling worse after extended use
Future successful companies may address these "pathologies"
Mental health challenges are common among founders during difficult periods

He notes: "I think we're going to be more aware of the sources of human flourishing in the ethic of the companies that we're building and how we think about the choices we make when we fund them and how they get built."

Conclusion

This wide-ranging conversation offers deep insights into Benchmark's unique approach to venture capital, emphasizing deep partnerships with a small number of ambitious founders. Both Peter and Victor highlight the importance of maintaining a generative drive to create and build, rather than focusing solely on financial outcomes. They see significant opportunities ahead, particularly in AI applications and gaming, while also emphasizing the need to consider mental health and human flourishing as technology continues to shape society.