20VC: Benchmark's Victor Lazarte on Why Portfolio Construction is BS| Why SaaS Spreadsheet Investing is Dead | Why China is a Stabilising Force for the US | Three Traits All the Best Founders Have & The Lie All Big Tech Companies Have Been Telling

Becoming CEO talking about, oh no, AI is not replacing people. AI is actually augmenting people's abilities. It's like this bullshit. It's fully replacing people. But then the first question that we ask is, if models get a lot better, is their company worse or is your company better? Like is there a bubble? Are people getting paid for the risk they're taking, right? What I'm telling you is in the next three years, someone will start a company that is gonna be worth for $3,000. So I think on average buying the winners today, we'll work out. - This is 20 VC with me Harry Stebings. Now I heard so many wonderful things about this guest for a long time from Pat Grady, Bruce Dunlavi, Peter Fenton, some of the best. And so I'm thrilled to welcome Victor Lazarte to the hot seat today. Victor is a general partner at Benchmark, one of the most renowned venture firms in the world. Now at Benchmark, Victor has led deals in the lights of Hey Jen Ann McCore, which recently announced its scale to a hundred million in error in just 11 months. As an angel, he was the first investor and board member of Brex. And as a founder, he scaled wildlife studios, bootstrapping it to become the largest gaming company in Latin America with about four billion downloads. But before we dive in today, turning your back of a napkin idea into a billion dollar startup requires countless hours of collaboration and teamwork. It can be really difficult to build a team that's aligned on everything from values to workflow. But that's exactly what Coda was made to do. Coda is an all-in-one collaborative workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. Now at 20 VC, we've used Coda to bring structure to our content planning and episode prep. And it's made a huge difference. 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Yeah, sure. So yeah, I bootstrapped a mobile gaming business, and it makes for a good story, but the reality is, we tried really hard to raise money. We didn't bootstrap by choice. Why don't you think you could raise? What did you do wrong in hindsight? I wasn't very business sophisticated. I mean, this was like 2011 in Brazil. So the venture capital scene there wasn't as developed, right? But the idea was like, I loved mobile games, and I thought it was going to be a good business, but there wasn't like a very strong, well-fought-out thesis. And I guess that's why the best term sheet that we got is someone offered us $50,000 for half the company, right? Which obviously we couldn't take. That's a relief. We had Oscar on the show from Glovo in Europe, and they sold a third for 100,000 euros. Yeah. There's so many horror stories from investors in Brazil at that time. So I wasn't very sophisticated, but there were people that were even less sophisticated. So I had friends that they raised money in Brazil, and they agreed to like a 20 times liquidation preference, which seems like, oh, there's this clause in the contract, but don't really know what it is. And yeah, people do that, and they end up losing their own company, their whole company, right? Absolutely not. OK, so you're like, shit, we can't fundraise. No one's giving us money. We need to build this business just naturally. What happens then? So I think that the core, I can college, we loved video games. And it initially was like, hey, let's do the company to compete with Nintendo, but that sounded like a really bad business idea. But then we looked at our own. It was like, hey, what's working in the world? We saw that app downloads. This was 2010. We're starting the market, and app downloads had grown 42 times. From 2008 to 2009, mobile app downloads had grown 42 times. And I was like, wow, this growth is insane. So we should make mobile apps, and we love games. So let's make mobile games. So I think that was a great insight. And so we started the company, and the first few games we did everything ourselves that we didn't have any employees, just not shape your thinking on market timing. Because what you basically just wrap 100%. I think when people want to start companies a lot of times, they're trying to predict the future. But it turns out it's very hard to predict the future. It's much easier to understand the present. A good or a good thing is like, hey, what's working right now? And there's the famous story that Jeff Bezos, he was a D-shock, and he saw the internet was growing like 23 times a year. And he said, hey, I need to make a business on the internet. That was the initial insight. And then what's the insight right now? And it's quite clear. LLM usage has grown 100x in the last two years. So if you measure in the number of flops, it went from one x of flop to 100 x of flops now. And of course, this data is not very precise, but it's directionally correct. I think the first thing is understanding what's happening today, what's working, and then how can you boot on top of that? So the year of 2000, building an internet company was an amazing thing. In 2010, building a mobile gaming company, building any app company was a great thing. And that's why you have some mobile gaming companies that were successful. And all the companies that were even more successful, like Uber, and Instagram, and all that, they were all started on the same time. And now, like LLM companies, it's quite clear. It's the best time in over a decade to start a company because we have this insane phenomenon of adoption, like adoption of LLM inference. We started like, what's the thing in LLM that is working? I think a year and a half ago, those basically like two things that were working, I think those like Chatchy PT and Character AI, I'll say, I'll say Character AI was one of the things that was really working. And now I think you can argue that there's like, Character AI, Chatchy PT and Cursor. Okay, what are the things that are working that people love? There's a lot of usage, like tens of millions of users, right? And what does things that come on? And a lot of times, like the great opportunities is they're adjacent to things that are working today. So I think a great place to start is just like having a very profound understanding of what's working. - And then build a Jason's, he's to it. - Yeah, or like build things that are inspired by it, right? When you look at the history of the best companies, like the most impactful companies, like Facebook was not the first social network when Zach built Facebook, there was a Myspace and Friends there before it. But you could see that there were things in that direction that were working. And so the thing that I'm most excited right now, like I think that frankly, the company that love most love to work on is an AI company. In a few years, we're gonna look back and we're gonna say that character AI was friends there. And what I mean by that is there's gonna be a company that is gonna be very important and we'll look back and say character AI was the precursor of that. And the reason I believe that is, before the internet, the way business is interacted with people was like through physical branches. And then you have the internet and business interactive websites. And then in 2010 you had mobile ads. and then like business interact with like mobile apps. And now the really cool thing that we have is agents. And this is just starting, but the smartest businesses, they realize that the way customers will interact with the businesses, it's as if they were able to talk to the business owner. Like they've talked to this thing that feels like a person that knows everything about the business and is able to like solve anything you want and sell you anything you want. So this agents, right? Like I think some of the incumbents will reinvent themselves to have like an agent interface. But whenever you have a shift, like a UI shift of this magnitude, a lot of the businesses that they don't adapt. And so I think there's an opportunity to recreate a lot of the successful business of today in an agent format. So I think there's three categories. Like does the category of incumbents that will adapt? Does the category of incumbents that will not adapt? And then startups will just recreate those businesses but on an agent's first framework. And then there's a third category, which is businesses that weren't possible before, but now are possible because the agent interface is the right one. But on that topic, I think social networking. And we now have software that makes us more efficient at connecting with our friends. You know, like you have WhatsApp and you have like Facebook and Instagram. What does an agent for that look like? What's an agent for your social life? I mean, is it not bluntly the removal of other humans? It's a 24 hour day constant companion that understands how you feel, responds to you in real time and is your continuous on-demand friend. I think it's a really powerful idea. Do you notice, sounds me, Vitt? Honestly, I'm sorry. You said beforehand, you wanted something conversational. And I agree with you. I'm terrified about the mental health pandemic that we have today. Young men are more likely to dive suicide than they are, cancer. That is a terrifying statistic. And what I find astounding is that really the largest mental health company is what? Calm, respectfully, it's not a huge business. Being a one and a half billion, it's not a huge business. Yeah. If our job is to solve humanities biggest problems, what's going, where's the disconnect? I would even make like a larger claim. And the claim is, what do people want? And like, in the end, people just want to be happy. And there's a lot of study on like, what makes someone happy, right? And turns out that wealth makes people happier. Like the more much your wealth you have, they have where you are. But it's actually, it's not like a linear relationship. It's like a blog linear. So if you get to like $75,000 a year for a US household, like a subject taper off. And so making people wealthier actually does not affect their happiness that much. And then what does technology do? Like technology helps us be more productive, which is like, hey, it makes us wealthier. And it makes us achieve the goals that we want better, right? So it makes us more productive. But research shows that the biggest predictor for happiness is like the quality and depth of your relationships, right? And technology has not attacked that. The really cool thing now is we're able to have a digital friend. And I think that'll be fantastic. I think you look at the studies and like, like religious people on average are happier than the non-religious people. A lot of the difference is explained because like religions people, like they have the stronger ties with the community. But also religious people, they have a relationship with God. So God is this friend that you never see, like you talk to God, but God doesn't talk back. And so to me, that's like existence, that proves that you can have this entity that you never see that is an important relationship to you. That makes you that much happier. I say actually that the death of religion is the thesis for CPG and consumer brand investors today. And you're like, what? We've shifted cult like worshipping from God Buddha and these day-its figures to Hierarchs and CrossFit and Taylor Swift and Lulu Lemon. And they are ironically in the minds of modern consumers, a community which consolidates beliefs and brings unity. Soul cycle, it is this feeling of togetherness, which is extraordinary to say that's replaced God and maybe is the signifying of society. But I think about that a lot. Question, would you not say that social has brought more high quality in depth to relationships? If you think about your ability to follow your friend's wedding on Instagram. Yeah, I think social is definitely positive. And like a person started interacted with my wife. I met my wife like three years ago and a person interacted with her like through Instagram. We had like friends in common. So I started following her and like commenting on her stories. Maybe a relationship wouldn't have happened because of Instagram and she's the biggest source of joy in my life. So incredibly, incredibly grateful that that that this thing exists. But I think this thing just scratches the surface. I think the way Instagram is set up, it does not help you connect nor near the way it would be able to. When you think about why is it adaptive to have friends? And a lot of it is like, okay, we need to have a story that helps us understand what's happening with us. Like we create our own like internal narrative. And when you have a friend, like you explain your narratives to your friends and your friends comments on your narrative and helps you shape it. And that makes you better able to understand yourself and where you're going. Right? So humans, they have this intense need to feel seen and understood. And this is very adaptive. We're at a point where AI is able to do that for you. Like AI is able to help you shape like, okay, what is your personal narrative? Like I have a very strong belief that five years from now for the majority of people, the person that we understand you the most is going to be an AI. It's not a world you want your kids to grow up in. That's like, that's where I disagree with a lot of people. I think we're always very afraid of technology. Like humans are always very afraid of what's coming next. I actually think it's going to be wonderful. People feel isolated. And like being isolated is bad for a bunch of reasons. Because like you feel like you don't understand yourself. Like if you have a challenge, you have a hard time thinking about this challenge. Like imagine you have this hyper capable friend that helps you understand yourself. Like knows everything about you. And whatever situation you have, he helps you like figure that out. So you feel supported. Like if you feel like you're never alone. Even more than that, I think a lot of people say, oh, this is very dystopic. Because like once you have this AI friends, like you won't have like regular friends, I think this is very true. Because in the end, like this is, we still want to see people in person. And your AI friend, not only will help you like understand yourself, but will help you connect with great people. Will help you like find out like, hey, I know you really well. And turns out that there's 100 million people that I know really well. And I'm going to connect you guys, but it's going to function like very much in the way that a person introducing you to someone else's functions, which is like you get the zincho, but you have a common friend. So you know you have to behave well. Because if you don't behave well, it's like, hey, I'm going to tell you, if you're a friend that you're an asshole, and your AI friend's never going to introduce it to anyone anymore. Speaking of AI friends and the quality and depth of relationships, when I bluntly spoke to so many people about you, there was one relationship in particular with struck me, which was when I spoke to Pedro at Brice about you. And he mentioned a number of things, which just really highlighted the depths of your friendship. You invested pre-product. - Yeah. - Pre-revenue. Can you take me to that? What that journey has taught you about investing, company trajectory? Yeah. So the way I met Pedro is, so I was building my company in Brazil. We bootstrap the business, like we eventually grew it, some over-billion users. And there were very few people building technology companies in Brazil at the time. And then Pedro had a problem with an investor. When he was 16, he created his first payments company in Brazil. Turns out that his signed deal that he shouldn't have, and he lost control of the company, and the investors made it impossible for him to capture any value. So I spent a ton of time with him, and like, with lawyers and say, "Hey, how do we get out of this?" And I had no shares. I was just like, "Man, I just hate this kid. He's so smart. This kid is so good. He deserves to succeed." So I really wanted him to succeed. And then after a while, I was like, "Hey, man, I'm selling my mobile gaming company. It was sell things in the US, and the US is a much better market. You should just let go of the company that you have, and should go build something similar in the US." And so eventually he agreed to it, and so he moved to the US, and he started Brex. And then when he started Brex, he was like, "Hey, can you invest on my seed ground, and can you be my first board member?" And I was like, "Yeah, of course. I love to do that." So I think our relationship came in from this shared distrust of investors, and this idea that, "Hey, we're going to have each other's back." And the other part that I really enjoyed is like, to me, it was so fun spending time with this young kid that just loved business so much. And frankly, I don't think I would have invested in Mercor if I hadn't invested in Brex, because when I met the Mercor guys, at first glance, the business are so different, but I met the Mercor guys, and the company was doing a million dollars in annual revenue. But Brandon reminded me so much of the Brex founders. Because there's these two traits that I look for in entrepreneurs that they both have, and these two traits that they rarely come together. So I like to invest in founders that they're very open-minded, but they're very disagreeable. Normally, if someone is very open-minded, like, "Okay, you say something, and he wants to learn more, and he's very curious about what you're saying, like you make your whole argument." And then it starts feeling, "Oh, okay, like I convinced this person, because it's just so interesting in what I have to say." But then by then, it's like, the person says, "No, I actually think that the opposite is true." So this idea that I'm interested in what you have to say, but I have no problem disagreeing with you to the point that it's going to upset you. And both Pedro and Brandon had that, like a very high high degree. And the other thing is like, I think a great way to understand founders is like, as thin like, how do you spend their free time? I think if you understand like how founders spend their free time, like you got a very deep window into into who they are. When you ask that, how do the best display themselves? What are the variants of ounces? And to be honest, like, does that trick, does that trick that that I stole from a urea millner? So I was having breakfast with urea and I was like, hey, like, what makes you a good investor? And he was telling me like, oh, you know, when I'm in a founder, I asked him like, hey, what's your day like? But it's not like, oh, what tell me two or three things? I don't know what time you wake up. What is the first thing you do? And then walk through the entire day and then like, what time you go to bed and what are you doing? That the choices that people make on their free time are the ones that that really tell you who they are. And for Pedro, it's like, hey, on my free time, I love sitting in front of my computer, tracking the packages that iOS, that the iPhones send to servers. Because like, have we ever understand how that architecture is done? Because if it pay enough attention, I get a chance to like hack it. And like, that's how he, he found like one of the one of the jail breaks that back in the day, he was, it was the first person to find one of the jail breaks that for the iPhone, right? But he did that for like no reason. Like, you know, like, he didn't make money out of it. It's just like, okay, I like going very deep on this technical thing. And then with Brendan, you know, like our first conversation, like the guys, okay, the guys 21 years old, but you're talking with him about business. And it feels like you're, it feels like you're talking to your peer about business. He was telling me, you know, like, what is it like to work with Bill Gurley? Like, I've read all the blog posts. Man, like, why would you read like all of Bill Gurley's blog posts from like years and years and years ago? And again, like a hard-to-out podcast and like, there wasn't a specific reason for the person to do that. But it's like, hey, I just love like studying, studying businesses and like how does business work when you have very young people that they spend a ton of time on something that are just an intrinsic passion for them. Like, this thing compounds really well over time, right? So, so to me, it's like, hey, resmarqued, in a very promising space, but it's a kid that is not just smart. It's like very, very special because of this almost obsessiveness of like understanding businesses, right? And then literally, I know that Mercor and Brendan would have something else in common, which is Brex went from like $0,300,000 in revenue in like an 18 months after launch. And Mercor went from like a million dollars in revenue when I invested to like over 100 million, like in 11 months. I wanted to talk about the revenue scan. Do you just want to talk about actual emotional maturity? I look back to myself when I was 21. I work with 21 year olds. As brilliant as they are and as insightful as they are, in my mind, you gain scar tissue nuance, just a little bit of wisdom with age. And you can plant that with great mentors. But do you find you have to change the type of investor that you are, the board member that you are, the coach that you are, with a younger founder? Yes. Like I think 100%. And you know, I think a lot about what's the what's the role of a board member? I think it's related to like what's what's special about Silicon Valley? And you know, I was trying to come up with a number. But if you start a company in the West Coast of the United States, like you were a thousand times more likely to be a tech giant in the West Coast of the United States, then you are anywhere else in the world, right? The raw math is 70% of like all companies in the world. We're starting the West Coast of the United States, Bayer, Seattle. And I think 0.1% of people leave theirs. Like you do them at the office like roughly like a thousand times more more likely. So why is that? Because people are just as smart like in Silicon Valley that they are in Europe or like in Brazil. But the big difference here is there's so much knowledge about how companies are built. And when someone starts a company like is able to access all that knowledge, right? So when when Zach did a Facebook like a higher adventure people from Google and like had board members that had been at other places, a lot of them, the role of a board member is like how do you catalyze that? How do you help a founder access all the knowledge of what has worked before? I think the way a board member adds adds values like it's a bunch of two things. One is like how expose have you been to hyper growth in the past? And then how much time do you put into actually understand the context of the company that you're able to draw from the right lessons? Do you like being a board member? I love being a board member. I wish that was the job. How many companies do you meet a week on average? Netney. I probably meet like one or two companies a day. So like five to ten a week. Yeah. Interested. How many of those are raw and bound? Like people emailing me like one one a week. Yeah. So one in bound nine outbound. Is that good? Do you do active outbound? Like where you were like, huh? So the so the so the majority like the majority of what I do is like outbound. Like the majority of them. Yeah. Everyone thinks you join benchmark or you join Sequoia and just deals come to you. Deals just come. Does that happen? So there's a lot of things that come to you. But the question is are the deals that that you want to do? Are they coming to you or not? And in my I think as you build like as you build your network and like I'm up from Silicon Valley and frankly like I've been a founder for 13 years and I've been an investor for like a year and a half. So a lot of people don't think me don't think of me as an investor. So very little of what I want to do just comes in bound and sounds like hey go meet this company. Most of the time you're talking to really high quality people and you ask them like hey what has impressed you mostly or you get you get super interested in a in a sector and then say okay like what are all the we go to someone's and say hey like what are all the companies in the sector and you do a little homework and then it's like oh okay this is this is an interesting company. I think I've done four companies since it started benchmark three have been this way and then the fourth one the fourth one I actually I'm a co-founder. I started the company with some of that that I knew for a long time. You started a company? Yeah we're still we're still in stealth so like we're not we're not talking too much about it but maybe I hear from that I'll come back and tell you all about it. When we go back to McCorme Bryce as you said that their revenue scaling I think Bryce was 18 months to 100 million because 11 months in saying that you know what I'm sure I have is have revenue rules broken in terms of scaling expectations and have we lied to a generation of founders that triple triple double double and now that's just not the case. I think SaaS was a moment in time where like a rule based investing investing works really well I got you 10 million dollars in in revenue like your your category winner I think this is no longer true why? I think it's because the nature of the revenue I think a lot of the AI revenues experimental and the other is it's now incredibly easy to take Chatship T and say okay water companies using Chatship T for let's say their lawyers are using Chatship T to write the man letters so okay I'm going to meet this very thin workflow around Chatship T and then I'm going to go after like every law firm that that writes the man that says hey like buy my tool and you are going to get revenue like you're going to get you're going to get millions of dollars but if that's all you're doing there's just no enterprise value the reality is like as the models get better like the workflow you're building becomes less valuable so one task that we always do is when a company comes in and pitches first you have revenue growth like it's still worth something it's not worth what what it was worth before but it's like hey we have revenue growth okay we should pay attention but then the first question that we ask is if models get a lot better is their company worse or is your company better and if your company is worse then it's going to be very hard to touch it but if your company is like hey as the models got better my company gets better then it's like oh like that's that's a great that's a great place to be in right so for example on my core well got me excited is so first like one thing that I think is super exciting right now is like just replacing people it sounds really bad when you say this way but it's the most exciting opportunity and venture right now and it's actually going to be fantastic for humanity so it's like okay figure out like what's what's a profile of person that does knowledge work that you can like replace with a model and and my core is like replacing a human like replacing a recruiter it's like oh like that's pretty cool I think models are going to be better interviewing than people and like the recruiting process now is just so inefficient that if you have like a a a model interviewing like that's going to make it a lot better but then there's there's a few things that make it super interesting which is interviewing someone is that have very hard problem you talk to the best founders in the world like Elon Musk like Bayzos they always spend a ton of time interviewing because like figuring out like who's the right person you continue to have like gains to quality so okay this is a very this is a problem where we already have value now but continues like as you get better it continues to be valuable and so investing a lot of money so in that specific problem is valuable and then if you get specific data like you hire people you see how they perform you adjust your model like having that model is just incredibly valuable and the other thing is you have this network effects with like okay there's a platform everyone is coming into the platform so you have this marketplace of people so to me it's like okay at the time they didn't have a lot of revenue like they had a million dollars but as I go this is a place where AI's we're gonna do a much better job than humans and you have like a lot of defensibility we speak what kind of quality of revenue and applying that to McCool I had them on the show loves the guys people were like not revenue it's not like ARR Harry and I had like smart people in my DMs be like Harry that's not revenue is it revenue is it not revenue was I wrong No, it's revenue. It's revenue for sure. Is it aero? You don't have an annual contract that people are signing this annual contract. It's a run rate. So some people criticize and the criticism that I hear is you have this recruiter and your building is platform. And a lot of the growth is coming from labs. And the labs, they need before there were three stages of language models. I think the first stage of language models is you just take text from the internet, you train your model, and you have like GPT-3, which is very cool, but people didn't want to use it. And then first, you had RLHF, which is models produced. So you take your base model, you produce a bunch of answers, and then you have humans pick what they like best. And then you build a model that give answers that humans like a lot more, and then I have Chatchy PT. That was the big Chatchy PT innovation was like RLHF. And now we're getting to the third moment in models, which is like pure RL. I think this is the most interesting thing happening right now in AI, which is models, if you're not getting a model to be better in something, what you do is like you find a deep experts in that subject. And the expert will create a question that the model is not able to answer. And then instead of like giving the model the answer, it will create a rubric to tell the model is like, "Hey, for any answer to that question, here's how you're going to rate it." And then once that's done, the model produces like a very large number of answers, and then you have this very large number of pairs of question and answers that are graded and use that to train your model. So this is the most interesting thing happening in RL. And this is a big in AI, and this is a big deal, because what this means is we're getting to a point where if you're able to create a benchmark for any task, then through reinforcement learning, and just through throwing a lot of compute at it, you're able to create a model that surpasses that benchmark. Where does Mercor come in? It turns out that to create questions that the models are not able to answer, and to find people that are able to create this rubrics, this evaluation criteria, it's very hard. You've got to be an amazing interviewer to find this people. That's the interviewing that Mercor does. Mercor helps like all the labs get a lot of the really best people. And then so the president's like, hey, is this recurring? It's not an annual contract, but the reality is for as long as humans are better than computers at any knowledge task, you're going to need people to create the Z-Vaus so that you create this RL environments that will make better models, right? Completely on the sound and agree. My question to you is, am I getting paid for the risk that I'm taking? And when you have a reduction in revenue quality, like revenue run rate versus enterprise error or I'm just like take a, hey Jen, a lot of it, like other people in the space, it's experimental revenue, it's not super sticky service now revenue. You need to be paid for the risks that you're taking. Do you think we're getting paid for the risks that we're taking, giving the price premiums that AI companies are demanding? It's very much on a case by case. Like, hey Jen and Mercor, I think they're like very cheap rounds and you know, I feel so lucky that I was able to like, do you think two billion was cheap? I was talking about the round that I did. Ah, right. Yeah. And then, but then like just a framework to talk about like the rounds in general, right? I think as an asset class, like is there a bubble, are people getting paid for the risk they're taking, right? So think about like, I don't know, like, and tropic at 60 or you think about perplexity at 15, right? I think the reality is, AI is a big shift. I think AI is much bigger than mobile. Maybe like it's all the other magnitude of the internet. And then if you take a basket of the winners, it's going to work out. What I'm telling you is, in the next three years, I'm sure someone will start a company that is going to be worth a trillion dollars. How do you make sure you're in this company? It's like, okay, where's the best place to find this company? It's like, what are the interesting spaces that have great teams and it's working. So, okay, there's this trillion dollar company is out there. And the space, like, okay, the early winners, like, they're not that many, right? So I think smart investors are saying, hey, if software's spending in the US is like a trillion dollars, but labor spend is like 10 trillion. And now like the AI companies are going after the labor spend. And so the outcomes are going to be like, insanely larger than they were before. So, okay, there's going to be huge winners. So we've got to make sure that we're there. Like, we're going to make sure that we're in this company. So I think on average buying the winners today will work out. Are there some winners that are overpriced? In retrospect, Dan's will be yes. There's a girl he's spoken before about passing on Google on price and his lessons from that. And I always think of that. The question is, if you see this shift in budget from labor to technology spend, something that I just worry inherently about is like the increasing chasm between rich and poor and the inequality that comes as a result. Even if there are 5,000 people in that company, this worth a trillion dollars, it could replace a trillion dollars of spend on labor. Do you share my concern? And is that just in an average full progression? 100%. What percentage of knowledge work as we know today will exist in 10 years? Like, if you define the knowledge work as work you do behind a computer, I think it's probably like 1%. And you know, the thing that I worry most about is if you're college, if you're someone coming out of college, what are the things that you can do? Like if you're coming out of law school, like what are the things that you can do that that in more than won't be able to do like in three years? There's not only that many things. And at the same time, like companies would be more valuable because they're going to reduce costs so much. So people that own companies, people that own shares will get richer, founders will get way richer, even if this trillion dollar company is being done by very small teams. So that's a very destabilizing force. And that's something that is something to worry about. And I think all the things that controversy, so like you see this big leader stalking like the big company CEO talking about, oh no, AI is not replacing people. You know, like it's fully replacing people. That my favorite line that we get on the show, which is not hiring you. But we're keeping everything as is. And you're like, really? Yeah. You know, that, that, I think this would be tremendous for society because companies actually manage his best invention. And if we need less people to create companies, like we're going to have more companies, right? So I grew up in Brazil and Brazil is not a great place to grow up in. And then I moved to the US and like the Bay Area turns out it's a fantastic place to live. And the principal difference between Brazil and the Bay Area is the quality of the companies. So overall, it's going to be fantastic for society. But then there's a huge problem of, okay, how do you distribute that wealth? I don't buy you be I by the way. I think that is fundamentally lacking. No, humanity requires purpose. If you add you be I you remove purpose. And people say, oh, we're going to fish and we're going to paint. I promise you that is not how human psychology works. That's why we have addiction. That's why we have drugs. That's why we have gambling. That's why we have prostitution. Sorry. This is the dark side of humanity. We will not paint and write poetry. Yeah. Well, I think we either have you be I or it's the end of democracy. Talk to me about that. Like imagine this society where there's a lot of abundance, a lot of wealth, but the majority of the people are not accessing that wealth. Like that wealth is very concentrated, but it's democracy. And turns out that it's not know what we have today. It's going to get way more extreme. And the other thing is it's going to be much harder for politicians to not do what's best for the entire population. Because the entire population will have a very powerful as system on their pockets. So they will know like they'll just ask the assistant is like, hey, this politician, like this stop. That he voted on is that good for the general population or not? And then someone who come in and we have an agenda that is like, hey, big distribution of wealth. It's like a very popular is like a very popularist agenda. And then I think people if people very selfishly ask their a eyes, like, hey, is this politician better for me or not? Like is this politician going to get me more material wealth or not? I think people that want to restrict the distributed law, like they'll they'll get full. So I think that's very destabilizing for democracy. And then a lot of people there in control, there was, hey, like right now, like you have people there in control. Like are you going to like just see control? Are they going to be less powerful? Are they really going to like let go of all the influence that they have? But I think there's one. So I think a eyes of destabilizing force because it makes the entire population way more informed and knowing like what's best for them. And at the same time, it concentrates wealth, which makes the scenario like more propense to like, hey, the population wanted to like get more. I think China is actually a very stabilizing force because I think the US right now has this external threat. And the US cannot cannot spend a lot of time like with internal conflict. We're at a very important moment in time. We're like someone who got you to powerfully I very soon. And it needs to be the US because like we want to leave in a world where like we're like powerfully eyes controlled by the US. And if we spend too much time like an internal conflict China will do it right. So I think China is actually a very stabilizing force for the US. The best way to unite is to have a common enemy that said I don't feel the US is winning the race against China. I think China are absolutely crushing the US. I mean Europe's not even in the fucking race. Yeah. When you look at the investments that China have into the education and for structure systems and the depths that talent. Respectfully. And the work I think they have. It just completely destroys anything we have elsewhere on the planet. Yeah. I think China has better work. and have more people. So they have more people working harder, but I'm still so bullish in the US because there's so much knowledge here. I think our advantage is, it's like the true network effects of the city, right? So we have Silicon Valley. And you say, hey, I think China's winning. I think by all measures, the US is winning. If you look at all the AI products, like Chatchy PT is the most used AI assistant in the world, I'm sure you can talk about like, how about DeepSeek and this and that? Do you guys think like Chatchy PT still is the best product out there? Yeah, I mean, what's better than Chatchy PT? I completely agree with what you say. I do not trust or believe anything that China says. And I think they have an armory of weapons, AI related, that they do not show the world, that they have ready to go. I think TikTok is a weapon of consumer data aggregation and acquisition. They are so strategic and smart in how they've leveraged China and TeamU as well. I, that infrastructure investments in Africa, I think people don't spend enough time on. It's a shit answer for me because I'm not really giving you one. I'm just saying, I don't underestimate them. And I know that they are doing strategic things, which I don't even know about, which I think we're not doing. No, I agree. It's a very, it's like a very serious competitor. Like, 100% agree with you. I think we're still in the lead, but we cannot afford to waste time on anything else. You know, like, we cannot afford to waste time into like, like, internal disagreements and stuff like that. Can I ask you, you know, I think it's very easy for us to get excited by, you know, transitions, by improvements in human lives and how we won't be doing mundane tasks that we all kind of fucking hate doing anyway. But then it's very easy to get caught up in the kind of short term. Do you think we overestimate adoption in the short term and underestimated it in the long? Or do you think this will happen much quicker than we think? - I think there's a lot of wisdom and saying like, hey, we overestimate what we can do in a year and understimate what we can do to 10, right? I think there's a lot of truth to that. I still think in AI, you look at three years ago, like we didn't have Chachipit and now, there's like close to a billion people that use it every month. And they have like a meaningful different experience, right? So in the next, not in the next year, but in the next five years, like lives would be menifly changed. So I think AI is gonna happen like way faster than people believe. - What crazy thing or what thing do we do today that we will look back on and go, that's crazy? Like remember, like, hey, you'll find your loved one on a dating app. Bullshit, you won't. Hey, you put your credit card details and see internet. No way. What's that? - I think this thing that will happen quite soon is, like we're gonna have an app and like you're gonna wake up and you're gonna look at your app and you're gonna read what it says and you're just gonna do it. The app will tell us like go do this, you're not gonna understand, but you're just gonna do it. And you're gonna do it and turns out that you're gonna be happier after you do this thing. And over time, like you just learn to trust app. It's gonna be that complete reversal. Like you're not going to apps to make it easier to do the things you wanna do. For example, like, oh, I go in Instacart to like get my groceries. Like you know what you wanna do. You go there and it just makes it easier for that to happen. It's like you go to the app for the app to tell you what to do. And it just blindly trust and this whatever the app says. - How far away do you think that is? - We see glimpses of this, right? So you know there's this companion app. Like there's a, it's like cinch or like this like self-care pets. You know, it's like, oh, I'm gonna be your accountability buddy. I'm gonna help you like exercise every day and like I'm gonna help you like make sure you're drinking water and like taking your meds. So I think it starts with like this simple things. You know, like you open up your app. So for example, I try to work out every morning for like 20 minutes, but a lot of times like, you know, like I wake up and I just don't have the energy. But I'm just like you wake up and say, hey, it's your 20 minutes. Like remember, 'cause like if you do that for like X days, you're gonna be better. And then like you're just, just get into this routine. Like it's gonna, like this apps, like they're helping you like form routines. So that's like, I think that's the beginning. Like this apps that are helping you form routines. They're telling you what to do. And we'll get to a point where like, AIs are gonna be smarter than us. Like AIs gonna be smarter than us on most things. And they're just gonna learn how to trust their judgment. They have contacts on you. They know what your long-term goal is. And so you wake up and say, hey, go spend an hour like reading this book. And like you just do it. Now like go meet with that person and just do it. - It's funny, I got asked the other day, what advice do you have for me? I'm leaving university. Sorry, I'm leaving school about to go into university. And I said, very simple. Become a brain surgeon or a dentist. Promise you'll be safe for about 20 years. And minimum, what advice would you have? - I have the opposite. I think go study computer science. - Really? - Yes. - And to me, it's like the antithetical to what everyone is saying. That's a fascinating piece of advice. - Yeah. There's a go-and-computer science. Like to me, it's very, I feel very strongly about that. Before I had calculators, machines, like we had human calculators. Like if you saw they're like a Apollo movie and like they're typically women. And they're like calculating these like tables. Right? Or people that are just like doing math. And then calculators were invented. And then like when calculators were invented, it's not like, oh, like people shouldn't study math. No, people should study math. And if you study math, the reality is like, you're studying math in high school and like you're studying math in college. Like the first few years of college, you're doing stuff that computers can do, but it doesn't matter. 'Cause like first like you're understanding the technology and two, like there's so much transfer learning. When we train models to code, they get better at a lot of other stuff. Why I advise people like, hey, go on computer sciences. The transformation right now, it's technology transformation is an AI transformation. So go study computer science. 'Cause like even if you're not gonna be a developer and like you're probably not gonna be a developer, but just having the basis to understand like how that's done, it's gonna be extremely helpful. And then like the transfer learning of like, hey, just being very logical and be able to take a big task and break down in small tasks and be very rigorous, I think they'll continue to be very valuable. - When you look at the AI companies at the last 18 months, you're in several absolute bangers, which one are you nodding that you had the chance to and you just missed? - Yeah. - So we may like participate in one round of cursor, but I think the coding space is very interesting. I think like that's an interesting one. You participated in one round. I'm just interested. Bunchmark are famed for like the leading the A. How do you think in the partnership now about plasticity around stage and whether you have to lead? You know, I obviously know Fountainwell and he did our table, I think the C. Gioherli has had flexibility around. How do you think about either rigidity of no, we have to lead the A? - I think rigidity is nonsense. Frankly, what defines benchmark? We wanna be a part of the most important company is being created, which is similar to most venture firms out there. And I think the difference is we wanna be the first skull. Like we wanna be the first skull to like every, every entrepreneur that we work with. And in order to do that, like the easiest way to do that. - It's not gonna be a dick as your friend. Every VCs does that. I don't even wanna be a first cool. Like your mom should be your first cool. (laughing) - Nothing is there. I wanna be your worst cool in terms of like when the shit really hits the phone, cool me. - Yeah. - Never happen, but that terrible time on the person he's gonna help me. - Yeah, all else being equal, I think everyone wants to be the closest partner. But I think the part that changes like the all else being equal, right? I think it's like, hey, we're willing to take a lot of trade-offs in order to be a very close partner, right? So why does benchmark make very few investments? It's because we spend more time with our companies. And you know, you're saying like, all investors wanna be their first skull. I don't think it's true, 'cause the reality is if you're a financial investor, you don't wanna be the call. You wanna, okay, you made your investments, you wanna find the next company. And like there's a lot of investors that are all really smart investors, they say, hey, you know what, like I hate the board work. You know, I wanna write the check. And there's some investors that say, hey, like that's not the product that I have. Like I put my check in and that's it. - Do you think an investor can move the needle for a founder? And Keith for a boy says that, you know, the best founders don't need you. - Yeah, if you call the people that I work with, and you should call them. - I did. I think you can. (laughing) - Right? - So one thing that made me very happy is, like a few months back, like Peter came to me and said, hey, man, I'm so grateful that you've been a partner on this and I get the closest thing that I have to a co-founder outside of the company. - Right. - And can you make a difference? I think it's actually very hard to make a significant difference from the outside. But the way you do it is, founders need a thought partner and founders need a way to like access all the knowledge and ecosystem. And you can catalyze that. But I think like the good founders, like they have access to a bunch of people, the good founders, they don't work on isolation, they have access to a bunch of people. But the difference, like the thing that you can do as a board member that is very hard for all the people to do is, you know, like I've been at the Brexport for, I don't know, like seven years. And for every important hire that he did, like I discussed that with him. And I've done like so many say, like close calls with candidates that once he has a problem, like he calls me just because I have way more context than he does, than all the people do it. So I think like, how do you add value? Like what's the way to add value? He's like, hey, you have a lot of context. But the thing is, it's just very costly to have context. And like that's why we, the reason we do very few deals is because gaining context on the companies like takes a bunch of time. If you're then flaxy on your insertion point, maybe participating in the course around a month. doing it later around, do you have that ability to add context even because you're probably not on the board? Not in all, when we're participating, we don't have that ability. And that's why we don't do it. So normally, and the reason we do it sometimes, like, hey, maybe this is a way to start building a relationship with a founder and over time we'll grow our position and build a relationship. But the reality is, if you write a small check and you don't make any difference, it doesn't matter how smart you are. But do you feel the weight of the benchmark GP role? When you come into any investing role, it's a lot of responsibility. Respectfully, you're GP benchmark. That's your first investment. I know you're like a billion dollar founder, but it's still like a steep position to come into. Yeah. You know, the thing that I love about benchmark is, so I came in and the partner said, hey, you're coming here to co-founder for like, there's a lot of tradition, but a venture firm that is sticking to its tradition is soon going to be very relevant. So we believe a lot in creative destruction. And he feels like, oh, okay, you almost feel like really? And then I met with the founding partners at benchmark and they're like, hey, yeah, the only way we continue to be a great firm is if we have no attachment to just how the way things were done. And I actually think this is a big advantage for benchmark because we don't have any process and we have a small team. It's easier for us to like change things. So anything ventures changing, I think ventures changing a lot. How do you think ventures changing? Something a big difference is when you think about like a couple decades ago, like the role of a born member was like governance. It's like capital is so scarce. They say, hey, once you put capital into a company, a lot of your jobs is like managing the downsides. Like, hey, make sure that this come like this guy is not going to like lose all your money. It's understandable because there had been like less big outcomes in tech. So people that invested their kind of a frame, you know, like fast forward to today, like everyone knows investing in technology. It's a great thing. People should do that. And it turns out that it's more important to like maximize the upside than it is to manage your losses, right? So in the way this changes the role of a born member is you're not that concerned. It's like, oh, like some of your investments like I'm going to lose money. And your role is not governance. Like your role is not there to say, hey, like founder, like you can do this or you can know, your role is to like maximize what the founder wants to do. So it goes from like oversight to like catalyzing, like to amplifying the founders ambition. Really? If you, I agree with you, but like officially the job of a born member is to, you know, have a fiduciary duty to shareholders. Because you should duty to shareholders is not always the same as maximizing a founder's ambition. How do you think about that? So I think if you're taking a lot of decisions and isolations like, oh, okay, like in this case, I believe that if we do this, like it's going to be better for the shareholders. But if you look at it and aggregate that your policies, I'm going to choose the best founders. And I'm going to trust them. And my fiduciary duty comes in at the moment where I write the check. Like I'm underwriting that person's like, Hey, do I think this guy will be a good CEO? And once you're there, it's like, I'm just, I'm here to enable this guy. And like even when I disagree with him, I'm just going to like help him do what he wants to do. Have you ever lost faith in a founder? Describe, describe a lost faith means. When you no longer believe that actually they are the right person to drive the company and actually don't trust the decisions that they make are the best decisions. Yeah. So the reality is like the reality is I have an internal investments, right? But I've done a couple of like I've done a couple of engine investments where it didn't go well. Like one of the things that I learned like after joining benchmark and I work a lot of Peter and Peter sits on two of my boards and I sit on two of his boards. And you know, like you see this company's go through these apps and downs. I think the thing that I learned is like, we don't give up. It's like, Hey, as long as the founder wants to do it and it's completely un-economical, completely un-economical. So I was talking to Peter and like, there was a company that wasn't doing well and it's like, I know what we have to do. A lot of venture capitalists say, Hey, like just cut it loose, you know, I forget about this thing. We should double the frequency of the board meetings. It's like, okay. And it's because we're here for as long as the founder wants to try. So it's like, you made the commitment to the founder and from that point on, you tried to be through to this like unconditional belief in the founder. You mentioned Peter there. What would you most change about the current process benchmark has for investment decision-making? It's a very lightweight process, which is very good. So the way we work is, you know, if I had a company, if you like it, you need to like get your partners, your partners opinion, but you don't need to get your partners approval. Do you bring them into early meetings with team with founders? Do you kind of hunt as solo? How does that work? It's a high team. It's all optional. It's like all optional. The one thing that is not optional is like you have to present the idea to the other partners. And I think that was optional. But the way it typically works is like you meet a founder, do a second meeting like where you bring another partner in. So you guys can have a discussion. But then like if you know you want to do it and you like it, typically like you bring the company in everyone talks to the company and then people vote, but it doesn't matter what the vote is. If you really want to do it, you can do it. And so why vote? And the vote is just a temperature gauge. So the vote is to disambiguate what people actually think. So you got to clear signal because you know, you're going to bring a company in. It doesn't matter what the company is. There's always like a ton of reasons to do it. And a ton of reasons not to do it. And then people are like, they were all on both sides. So you force them to like put a number to it. That number carries a lot of information. So like we vote from one to 10 and I can come vote five. I asked Peter, what should I ask him? And he said, the one question I'd really want to know from Victor is if you look back in 10 years, in what ways do you want to meaningfully change benchmark to prevent its extinction? I don't know if like prevents the extinction as the function we're trying to maximize. I think the function we're trying to maximize is like, there's going to be 10, 3 and a half companies created in the next decade. How do we make it so that we're in a large number of them and we have a deep relationship with those founders? I think that's a maximizing function. And to me, it's just like, it works backwards from how are you like obviously the right choice for the founders that have a ton of choices. And right now, benchmark, when we want to do something, we typically do it. We have the chance to partner with the companies that we went apart. But the problem is, because we're small forum, because a lot of stuff that we don't even see. And then sometimes people are raising around that doesn't look like a benchmark round. And I think that is the thing that is most important for us to change. It's like a lot of times people think, oh, this is a benchmark round. Like, this is not a benchmark round. What it means, like, it needs to be clear to everyone's like, hey, what's a benchmark round? And a benchmark round is when there's a founder that is very capable going after a very big market. As long as you have that, like, that's a benchmark founder. It doesn't matter if you're raising like 5 million or if you're raising like 200 million. It's a fun size. It's an hour constrained. The constrained always was beautiful to everyone. It was craft of benchmark. In today's AI landscape, the rounds we just see are so big that 25, 50 million to start. Shit, if you want 15% ownership, you're putting 10% of the fund out on the first check. My first check at benchmark was a $55 million check into a agent, right? So this was my, this was my $55 million. Yeah, I wrote it. Yeah. - We're 55 million dollar checks. And yeah, cause, you know, it's like, hey, we gotta be true to-- - No, I never did that. That's 10 and a half percent of the fund, if it's a 500 fund. - It's actually a 600 million dollar fund. - That's a law. I mean, that's amazing. - Yeah, I think a lot of funds, like they think about, you know, portfolio construction, and this and that. But they were guys like, "RLPs, they're the same OPs in all funds." So if you want to do like, like, one like $3 billion funds, or if you want to do like $500 million funds, like, for RLPs, like, is actually the same. And so I think the fun size has never been a constraint. I think the constraint is where we can make a difference is like in the beginning. So it's like early. And we work best with founders that wanna have a relationship. Some founders are like, "Hey, I do think it's Vanibruj, "that I have a sounding partner "that is gonna have a lot of contacts on the business." And if you believe in that, then it's like, yeah, Benchmark is a good fit. And most early rounds are less than 50 million. But you know, we've done things there later, like we've done larger checks. And like, sometimes we're gonna do a lot and larger check, like we do on SPV. But the check size, it's not, it's never been a constraint. Final one for a quick file. Does like Brat Taylor come in and pitch to partnership? Like, he's a special dude, Sierra's a special company. I think Brad's case is like, I think I had dinner with the partners. It was more like a conversation than a pitch. I think Brad Taylor's case, you know, I think it's a good example. I was like, hey, the guy's so accomplished. Like he could race from anyone, with whatever he wanted. But I think he valued, like he valued the relationship with Peter. And it's like, hey, like I think it's gonna be valid, which you like have you along this way, right? And because it's a legal partnership, it's like, hey, this people, they're gonna be part of this in this company. So it's like, it's like, it's like, get to know you much more. And it's like, hey, like I'm pitching you, right? - That is insane one. Like Brad could fund it himself for the rest of eternity in many respects. But he values Peter so much that he brings him in at that stage. That's pretty special. And I think it's a smart choice. And I think the best people, what they're gonna maximize for is like, hey, how the hell do I do it? I get my conditions, my initial conditions, right? How do I get the smartest people around the table? Because in the end, the initial conditions, like they affect so much, what do you can actually do? - I could talk to you all day. Do you mind if we do a quick fire round? And then I'll let you actually get on with some proper work. What do you believe that most around you disbelieve? - I believe that pretty soon we're gonna have an app, and like we're just gonna wake up and do whatever the app tells us to do. In a way, we're gonna be your begins to machines and we're gonna love it. - Single biggest lesson from working with Peter Fenton. - I think the thing that Peter does better than anyone I've met is he can understand people, and like he can get people to open up. So lots of times before we decide to work and a founder, like Peter takes people to dinner, and a lot of times like I want to introduce people to Peter and like I think Peter to dinner with someone. So for example, I took the Braxia Welch at dinner with Peter, and it's someone that I've known for many, many years. At dinner like that, tune off our dinner, I felt like I knew the person a lot better than I did before. Peter does this thing where he's able to make people open up in a way, and the effect that it has is like people leave the dinner and instead of wow, I just had a really special dinner, right? So I think it's a super power, and I think it's kind of known that this thing happened. So a lot of times like if you wanna spend time with someone and like it's kind of hard, a lot of times I think like hey, like you wanna go have dinner with Peter and I, and most times people say, yes. People say yes, they have a fantastic experience, and then they'll tell them more people's like, you forget the life thing. I would love to find out that it's like nah, sorry I'm washing Netflix. (laughing) - I'm sure you'll happen at some point, but that hasn't happened yet. - I don't think it's gonna happen, don't worry, that's just too funny. You can buy and hold one public company stock for 10 years, what do you buy and hold? - Duolingo. - Why? Help me understand that. - It's like, man, AI's gonna change people's lives in really important ways. One really important thing is like, the way we're gonna learn is gonna be the way AI teachers. And Duolingo, I think it's very sneaky, it's nicking in a good way. Like they're starting with this language app, but they're making like, they're making your AI friend that teaches languages, and then they're gonna teach more stuff, and Louis the founder is a total genius. So I think it's going to make a free AI tutor for everyone that's gonna be incredibly important to humanity, and it's gonna be a very valuable company. - You can invest in one seed fund and one growth fund. I'm not choosing A, 'cause that's tough for you. Who do you choose? - There's an objective answer to that. It's like, I'm an investor in green oaks. I think they're pretty good. - Neil Mason just taped me already. I mean, God, this man is brilliant. (laughing) - That is amazing. I really like him. And then I'll go, like, I'm already, I'll go with conviction, 'cause I think Sarah's great. - Totally agree. - She's done in a short time frame for a new firm. It's incredible. Final one, when you think about the next 10 years for you, if we do this in 2034, why do you wanna be then? Now, what do you wanna have achieved? What does Victor Lazarte look like then? - I wanna be an important part to the most important companies created. And that can be a early board member, and that can be a co-founder, but I wanna look back and say, "Hey, AI's gonna solve so many of humanity's biggest problems." You know, like, from education, to security, this company is being created now, to companionship. And I wanna be an important part of their story. - I am so glad that we have this schedule that I completely ignored. And I think you saw that it was a much more free-flowing discussion. I so appreciate you rolling with the free-flowing discussion. You've been fantastic to have on. Thank you so much for joining me, man. - Thank you, man. This was a lot of fun. I mean, that was such a special show to do with Victor. If you wanna watch the full episode, you can find it on YouTube by searching for 20 VC. That's two zero VC on YouTube. And before we leave you today, turning your back of a napkin idea into a billion dollar startup requires countless hours of collaboration and teamwork. Instead of bouncing between different tools, we can keep everything from guest research to scheduling and notes all in one place, which saves us so much time. With Coda, you get the flexibility of docs, the structure of spreadsheets and the power of applications all built for enterprise and has got the intelligence of AI, which makes it even more awesome. To try it for yourself, go to coder.io/20VC. Today, and get six free months of the team plan for startups. Meaning way less cars going abandoned and way more sales going into the business. Winner. Trust. Vanta helps businesses achieve certifications like SOC2 and ISO 27001, turning months of tedious work into this beautifully fast and straightforward process. Their platform automates compliance across over 35 frameworks. As always, I so appreciate all your support and stay tuned for an incredible episode with Jason Lemkin coming on Thursday. Where we break down the latest fundraisers, acquisitions, IPO opportunities, it's a fantastic conversation coming this Thursday.