Full transcript: Benchmark partner Sarah Tavel on Recode Decode

On this episode of Recode Decode, hosted by Kara Swisher, Benchmark partner Sarah Tavel talks with Kara and Recode’s Teddy Schleifer about her career in tech companies and venture capital. Her resume includes stints at Pinterest, Bessemer Venture Partners and Greylock Partners, but last year she became the first woman partner hired at Benchmark, where one of her focuses is cryptocurrencies.

You can read a write-up of the interview here or listen to the whole thing in the audio player above. Below, we’ve also provided a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

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Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode. You may know me as the person who decides what price bitcoin sells at, but in my spare time I talk tech, and you’re listening to Recode Decode, a podcast about tech and media’s key players, big ideas and how they’re changing the world we live in. You can find more episodes of Recode Radio on Apple Podcasts, Spotify, Google Play Music or wherever you listen to podcasts, or just visit recode.net/podcasts for more.

Today in the red chair is Sarah Tavel, a partner at the venture capital firm Benchmark. She was the first woman ever hired as a partner by the firm and that was in May of 2017. She previously worked at Bessemer Venture Partners, Pinterest and Greylock Partners. Sarah, welcome to Recode Decode.

Sarah Tavel: Thank you so much.

KS: And joining me here today for the interview is Recode’s senior finance and influence editor. Is that your new title?

TS: My fancy title, right.

KS: Teddy Schleifer. He writes a lot about venture capital firms like Benchmark. Hey, Teddy.

TS: Hey.

KS: How are you doing?

TS: Good.

KS: I’ve known Sarah for a while, I guess, and she was also one of our Recode 100 winners.

The very tail end but I’ll take it.

KS: Take it, you’ll go ... I guarantee you a higher rating this year if you do well, especially with bitcoin. Why don’t we start talking a little bit about your background, because you worked at a lot of places and you’re a relatively young person, but you’ve been a venture capitalist. You worked in ...

Yeah, I started my venture career one year out of college, which is pretty atypical.

KS: Why don’t you go through that? Because I know, we’re not going to overly focus on the woman issue, but there’s not that many women venture capitalists and I want to talk about why that is a little bit later. But why don’t we talk about your journey and where you went?

I got into venture ... Taking a step back, I was a philosophy major in college, so I had always been interested in investing but didn’t really even know what venture capital was until basically the week I applied to a venture job.

KS: But why that after college?

So what happened is, I was at a strategy consulting firm that was a startup and I had joined this firm because I’d done a bunch of entrepreneurial things in college and just wanted to be part of a startup.

KS: Like what?

It sounds quite random, but I started a house-painting company, an exterior residential house-painting company that ended up expanding into more kind of general contracting. I sold ads for all these random publications. I was kind of like a local ad sales rep, and I just realized ... I knew how to sell and so I kept on selling ads to the same people for different products, basically. And so I was kind of more focused on making money in college than I was going to classes. And it ended up being that I joined this strategy consulting firm, and it kind of went up.

And then as it often does, one of our biggest clients had some budget problems and we started to thrash and I started to look for a new job. And I’d always been interested, actually, in investing. My dad was a public equity investor and I started to look into equity research jobs and then had the really good fortune of talking to one of my friends who I had known in college and she was like, “You know what? You love investing and you did all these random entrepreneurial things in college. You should look into venture capital.”

And I was honestly like, “Well, what’s venture capital?” And so I went out ... There’s this bookstore in Harvard Square called the Co-op and I bought the “Vault Guide to Venture Capital.” And it was one of those things that the more I read, the more I realized that this was what I wanted to do. It felt super exciting to get to work with founders in the early stages of a company and still be doing investing. And I knew the lowest rung of the ladder in a venture capital firm is this sourcing role, where you’re cold-calling founders and you’re trying to get them to take a next meeting and take your money eventually. And I knew through my ad experience that I could do that. I knew how to do 20 calls in a day and sell people. So I ended up applying to Bessemer.

KS: Which is based there.

That’s right. So they have a place upstate in Larchmont, New York. And it was super lucky timing because they were looking to hire an analyst at the team at the same time that I was looking to jump ship, and it’s really thanks to the random work experience I had in college that I ended up getting the job and joining .. I think I was the first woman they hired in probably 10 years. And it was supposed to be a two-year job and ended up being six for me.

So I was five years in the New York office. I was working with one partner, Jeremy Levine, I don’t know if you know him. He’s really an awesome person. So I was there. I was working on sourcing deals in the beginning for software as a service companies. Companies like Cornerstone, OnDemand and Mindbody and others, and then worked on a bunch of companies that really range from deep in the stack to hire, kind of consumer stuff like diapers.com. I moved to the West Coast about five years in.

KS: Because you had to?

No, I grew up in Manhattan and there was a combination of being a little sick of New York, and also I started to realize that New York City was a local maxima. Like if I really wanted to build my career in technology, I wanted to be in the global maxima. I wanted to be in the place where the best were.

And so I transferred from Bessemer’s New York office to the Menlo Park office. And actually what ended up being really fortuitous is that I had been tracking this one company, Pinterest. I was an early user of the product and just really, really loved what they were doing, and I had actually met the founders, actually Paul Sciarra, when they were working on the precursor to Pinterest called Tote.

KS: Oh, wow.

So as Pinterest came out, I started to play with it. I loved it so much and reached out to them basically the day I moved to San Francisco and we ended up sourcing the investment for Bessemer. We did the series A. It was a four-person company at the time. It was really minuscule. And then, as you know, I ended up just loving the company so much that I decided to jump ship and join.

TS: I’d love to get a little bit more into just the experience of being a young person at a venture capital firm, not being a general partner or something. When you talk to people today, there is occasionally frustration that there’s people who steal a deal or market the deals there. As are people who will say it’s hard, some folks in venture don’t feel that it’s a meritocracy, being a young person at a firm. What was it like being at Bessemer? What was it like in general? You’re still fairly young, but being somebody who’s been in venture for a long time and growing up in the business about being an analyst or an associate at a big top tier venture firm, how did you succeed there?

There were a bunch of different factors that really influenced my early days at Bessemer. First of all, I was coming into a venture capital firm with really no experience in technology and no actual investing experience. Everything was really new to me and I was the only woman in a 25-person firm. I felt physically the smallest. It felt very different.

I’d never been in a context where I was the only woman, actually. So it was one of those things. I didn’t really know what to expect and it ended up feeling hard in the beginning. And the nice thing, though, about the analyst job in a venture capital firm is that the measure of merit is very objective, which is, “Do you source good deals?” And so it was the type of thing that I didn’t have to politic to get ahead. I just had to do what I knew I could do, which is call a lot of companies, work really hard.

KS: But how did you evaluate them?

In the beginning, you know, when you’re an analyst, you actually are supposed to orient towards companies that are already kind of working, and so you end up meeting companies and you learn what questions to ask, how are they ... I was doing a lot of software as a service companies. Where is their monthly recurring revenue? How much does it cost to acquire the customer? How fast are they growing? How much have they raised?

And so then there’s like those things that are pretty objective also. And then what we would do is, every Monday, we would have an analyst meeting where basically the analyst would present the two or three most interesting companies that they spoke to the prior week and that was how you circulate or socialize the company to the partners and then they would do the next step. You would be part of the diligence process for that company and that was how you started to develop your own pattern recognition and learn how to diligence the company and then ultimately which companies to invest in.

KS: To Teddy’s question, most of the younger people source the better things because they’re on the ground. What do you need them for?

What do you need the young people?

KS: No, the old.

Well, in the beginning you don’t know what’s good.

KS: Right.

Right? As a young person. What you do know is, the way I think of it is that you get very, very good in the early days of knowing what are the 50 companies that the firm should meet with every year. And then as you’ve progress, you go from knowing what the 50 companies are that you should meet, to then you get a little bit better, and you know what are the 30 that you should be spending time with. And then it’s, what are the 10, but ultimately the hardest decision is what are the two that you invest in?

KS: Right.

That’s where the gray hair really helps. And then it’s also, as you know, it’s winning the deal. It’s a lot harder to do that when you’re a year out of college.

KS: Right.

TS: And so you felt like being a young person at a venture firm the same way that a GP is evaluated based on their returns individually. You felt like if you were one of the people that sourced, you know, you presented the list of 50, you presented a list of 10, and the company succeeded they would say, “Sarah sourced this deal. She was the analyst and she gets points.”

That’s exactly the way.

TS: Do you think that’s still true today in venture? Do you think that there’s ... Obviously there are some folks who kind of walk in the door at a GP level or at a higher level than someone in their 20s. But you think that’s still kind of the path to success for someone who is fresh out of college or maybe has an MBA?

If you’re joining a venture firm in the more junior roles, but even if you join as a principal or a VP, at the end of the day, it’s so much about seeing the right deals. That is really what it comes down to, and again, there’s so much subjectivity in who gets credit for a deal.

KS: That’s all we do as reporters.

It’s really hard.

KS: “I did Uber!” “No I did Uber!”

Exactly.

KS: “Last year I didn’t do Uber.”

Right. Right. Yeah. And you know, success has many fathers, as they say, and ... you even look at the Facebook story, and there’s three people who claim having sourced that investment. So there’s still always that question, but it’s a very objective way for a young person to say that they’re doing a good job. And then also to build their own personal brand and ultimately ...

KS: They have the relationships with the founders.

Yes.

KS: Was that harder as a woman?

I would assume so. It’s so hard to know, because I don’t have an A/B experiment. But I don’t know the answer to that.

KS: When you pal around ...

I mean, I didn’t pal around too much.

KS: Not too much drinking and going to clubs. So you got interested in Pinterest and went there?

Yes, that’s right.

KS: So what caused that?

I’d been in venture for six years, actually, by the time I left.

KS: Which made you ancient?

Which made me ancient, and it was one of those things where I knew a couple things. I knew that I had basically locked in a career in venture. Like Pinterest was just ... I mean super lucky, it was an incredible, like it was already really growing. And I believed so much in the product from the very beginning that I just had a lot of conviction that this was going to become a really important company. And at the same time, I always had this voice in the back of my head, which was that I wanted to experience myself in the company and I wanted to know what it was like to be in the company.

It was partially just my own experience, like I’ve always been on sports teams. I was captain of the rugby team. I loved being a part of a team and leading a team and wanted to know what that was like to do it in the big leagues, in a real company. And then I also always felt like I would go to board meetings and there were something that felt almost a little inauthentic to me, that the CEO would ask for advice on something and I could come from a very rational, analytical place, but I didn’t feel like I could come from a place that was from the heart. And that’s kind of more who I am, like I really want to be able to have that empathy, come from that ...

KS: Board meetings can be Kabuki theater.

There’s definitely a part of that. And so there was a voice in the back of my head for a long time and it just got louder and louder, the more time I spent with Pinterest, like at the time I was doing anything I could to help make the company successful. When we invested, it was a four-, five-person company growing really quickly. And there was just so much to get done that they didn’t have enough people around the table to do it. So I was chasing domain squatters for Ben, trying to find engineers, doing whatever I could and just realizing that you could only do so much from the outside. And so I just realized, you know ... Do you know the Bezos regret minimization framework?

He has this great video where he talks about ... I remember watching this video as I was making this decision of making decisions today that minimizes the regret you have in the future. And I realized that if I didn’t kind of throw my hat into the ring and try to join Pinterest — I didn’t know whether Ben would have any interest in hiring me — but if I didn’t throw my hat into the ring or at least try, I’d always regret it. So I basically called Ben up one day and essentially asked for a job. I pitched myself as a BD [business development] person.

KS: Right, perfect.

I told him I was like, “I’ll get the ’pin it’ button everywhere.” And then he actually reverse-pitched me and said, “What I really need is someone to just fix problems for me.” He’s like, “I need a utility player. I need someone who will put structure around a problem, solve it, move on to the next problem, solve it, etc.”

KS: What’s that job title?

Well, the actual job title was Business Operations Specialist, but when I started at Pinterest, the first thing I had to do was help us localize Pinterest, like we had never launched internationally. All of the strings in our code were just English and so there was no way to actually swap in a different language for the strings, so I worked with an engineer and did that. Then it was, “Oh, we’re starting to get some interest for a series C financing. Why don’t you ... Here are some term sheets. Figure this out and close our series C financing,” which was actually our unicorn round, as it ended up being called, and then increasingly what ended up happening is that ...

KS: So you were the one they were paying attention to.

I remember like, this was probably just a couple of months after I joined in, and I felt like I was like, “Man, if I get fired tomorrow and I go back to venture, I’ll have already learned so much like from this.”

KS: What not to do, probably.

Yeah. What not to do. It is so interesting to see how different venture firms act during this process. It is not ...

KS: Can you give an example? Not say who did something ...

Sure. Yeah, there is one firm that has a reputation for being founder friendly and rightly so, because I was negotiating these deal docs with Rakuten, which is a Japanese firm. And as you can imagine, it was pretty tricky, because they were using an East Coast firm, they were in Japan. This was one of their first venture investments.

So I was very focused on executing the deal with them. And then at some point in the process you have to kind of bring the deal to your insiders and see if they have any changes. And one group had ... I call it death by a thousand paper cuts. It was like so many little tweaks and the other group was like, “Just when you need our signature just let me know and I’ll sign it.” And that’s a very big difference.

KS: Absolutely. Yeah. Yeah.

But then what ended up happening is that at the time that I joined Pinterest we had no product managers. Ben and Evan, the two co-founders, were actually against the idea of a product manager, and what ended up happening is that the daily stand-up for the engineers was basically the same every day. And I ended up kind of working with a bunch of engineers on a couple of projects. Those ended up shipping and kind of moving on track and so I ended up becoming really one of the first product managers at Pinterest.

KS: Right.

And I started the search team with one of the engineers. And that ended up kind of expanding into what we ended up calling our discovery team. So by the end of my time of Pinterest, I was responsible for search and all the recommendations on Pinterest, our computer vision team, our quality team and it was one of those things that’s like that, “Don’t ask what seat, just get on the rocket ship.” As a philosophy major, you feel like, “How did I end up being the product manager for really the most technical product team at Pinterest?”

KS: That’s very technical, right.

Yeah, but it ended up really working.

KS: Yeah. So why did you leave?

That was a hard decision. I really anguished over it. I mean what happened is that the Greylock team reached out to me, and I mean they were very savvy about it. “I’m not looking to leave. I’m super happy here.” And Jeff Markowitz, I don’t know Jeff, he’s fantastic. He was like, “Totally get it. But do you want to meet Reid Hoffman?” And so then you meet Reid and he’s just such a wonderful, amazing person. You come out and you feel like you’ve learned so much. And then, “Oh, that was a great meeting. Do you want to meet David Sze?” And then before you know it, you’ve met everybody on the team.

TS: They’re interviewing without you knowing it.

And it’s one of those things that it really starts to make you think like, “Gosh, this is an amazing group of people.” And I always knew I would go back to venture. I just didn’t really know when that may be.

KS: Did you want to stay through the IPO?

That was the thing I really asked myself. At the time the company was ... We had just crossed 100 million monthly active users and we were about 650 people. And I felt like I had been there from the very beginning. I was on the outside in the beginning. But then you do feel like you want to be there for the entire ride. And then at the same time, I also realized that ... I started to feel like I would have more impact on the venture side. And also that venture was the type of thing that ... You look at the careers of many of the best venture capitalists and they really start to do their best deals five or six years into it.

KS: Yeah.

People like Eric, my partner Eric Vishria, who did just unbelievable deals in his first year. Most of the time, it takes several years to get really good at the job. And I realized, if I want to be one of the best in the industry, which is what I want to be, I should start doing the job now. And so I make it sound easy. I really did anguish over this decision because leaving a company is a very unnatural thing to do and it almost feels like your senior year in college, first semester ...

KS: Right.

And everybody is getting excited for the best year and then you’re like, “All right, I just got my dream job. It’s time for me to go.” So I left, and gosh I can’t remember, I think it was July 2015, and joined the Greylock team as one of the partners.

KS: And then went to Benchmark. You’re a fascinating person to a lot of people.

That was obviously not planned. When I joined Greylock, it was a decision to be there for my venture career. What ended up happening is, I was on the consumer team at Greylock. I had led a couple of investments and then got to know the Benchmark team. And it was one of those things where they reached out to me and in a very similar fashion, you just start to get to know each of the members of the team.

KS: Right.

And then they kind of told me about their interest in really getting to know me. And I said no. Like it didn’t feel like the right thing to do at the time. And then I realized that, “You know what? I owe it to myself in a way, like this is what I want to do for my career. I owe it to myself to get to know how some of the best in the business do the job.”

KS: Right.

And it felt almost like, “What do I have to lose?” At the very least, it will make me better at my job at Greylock. And so I started to get to know the team. And then the more I got to know the team and the way they do the job at Benchmark and the way that Benchmark is structured, the more I realized like, “Wow. This is actually the way I want to do venture.”

KS: Such as what?

The way I would describe Benchmark is that it’s this very small partnership. It’s a very lean team, as you know, like there’s ... It’s the six ...

KS: I remember the old Benchmark. I was around for the first Benchmark.

The five tall guys?

KS: Oh yeah. They were real tall.

They were really tall. I definitely remember this meeting with them.

KS: I could only imagine.

But it was one of these things where you’ve got, like at the time, it was just five partners. I’m obviously the sixth, and you’ve got nothing else. No associates, no talent partner, no marketing partners, like they talk about investing being the only thing and there is just a complete clarity of we just do series A, series B investments. Our fund is the same size fund as it’s been since for the last, I don’t know, 15 years.

And then of course the equal partnership. Before I got to know the Benchmark team, I thought about the equal partnership as a compensation thing. Like, oh, isn’t it cool that as a new person, you get to make the same amount of money as like Bill Gurley? But what you end up feeling when you’re a part of the partnership is that it’s actually a cultural tenet of a quality like you come in and you feel like from the very beginning, that you are an equal. And that is such a different dynamic than it is in many other firms.

KS: Which is, you work your way up.

Yeah, you work your way up. You earn credibility over time. You have to prove yourself as kind of what you can field. And I came into Benchmark and I didn’t feel like I had to prove myself at all, and it was almost a scary feeling because I’m so used to ...

KS: Working your way up.

Yeah. And using that to drive you. And then you realize that actually the way that you do it at Benchmark is that you don’t direct that energy internally; you direct it externally. It just felt like a very different place. And of course, every firm talks about being team oriented. But when you have an equal partnership, it really actually does happen, like where you are all focused on just doing the best investments that we can as a partnership and then supporting those investments regardless of who is on the board of that company.

KS: Well, that’s the goal at least.

Yeah, but you really do feel it.

KS: All right. We’re here with Sarah Tavel. She is a partner at Benchmark and we’ve just heard about her very varied career in a very short time.

Yeah.

KS: I do like that you leave and go. I think it’s fantastic when that happens. I’ve done it myself. When we get back, we’ll be talking about some of her investments and her thoughts. We’re also here with Teddy Schleifer, who covers venture capital and influence for us.

TS: Apparently.

KS: Apparently, at Recode. And we’ll talk about where Sarah thinks the big investments are right now. She’s very involved in bitcoin and other cryptocurrencies. We’ll talk about that and more.

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We’re here on Recode Decode with Sarah Tavel. She’s a partner at Benchmark. She’s had a long career as a very young person at many venture capital firms, Bessemer, Greylock, she’s worked at Pinterest and now she’s at Benchmark.

Yes.

KS: And when you got there what did you decide, because everybody at Benchmark has certain areas and obviously this past year, all Bill Gurley has done is deals with Uber, with all three of your partners.

It’s been a full team engagement.

KS: Full team engagement, but you focused more on cryptocurrency. Can you talk a little bit about that?

Yeah, sure. I kind of always described Benchmark as, instead of, at Greylock or other firms, you have 20 people on the field. You have to choose a very specific position. At Benchmark, you’ve got six of you. So you get to take up a lot more space, so I definitely spent a lot of time in consumer. I’ve led two deals so far at Benchmark, one of which is a consumer marketplace. I continued to look in that space but the space that I ended up feeling a real gravitational pull towards was the cryptocurrency space. I read the bitcoin white paper when I was actually at Pinterest and I remember thinking, “God, this Satoshi guy, he’s a genius. But this feels like it will never work as a currency. It’s just ... it’s deflationary.” I kind of put it to the side. I didn’t really think much about it.

And then when I was at Greylock, I actually remember reading about ethereum and the DAO. And as a philosophy major, when you read about this idea of a smart contract, you know, this kind of code that self-executes to ... If you have some kind of contract and if it will execute something like payment or whatever it may be. That to me was like, “Wow, this is going to change everything.” And so I started to dig in more when I was actually at Greylock, and at one point I really got involved with a Greylock and Benchmark investment called Xapo. I don’t know if you know Wences.

KS: Wences? I just saw him the other night.

Everybody calls him patient zero of Silicon Valley.

KS: He was the first person. He made me buy bitcoin. And I did a story on it 100 years ago and I can’t find my bitcoin, but that’s another issue.

That’s so funny. I think a lot of people owe him a lot of money.

KS: They do. If I ever find mine.

If he could take carry on all of the winnings that people had from buying bitcoin.

KS: John the Baptist of bitcoin.

That’s right. And he actually was the first person I sat down with as I was trying to make sense of this ecosystem and just kind of like, “Give me the 101.” And so when I joined Benchmark, the ICO stuff was just starting to happen and I really ... it was one of those things that you feel this intellectual, gravitational pull. It’s also, one of the things that I always look for is where are the smartest people that I know spending their time?

And there’s just so much energy. You just keep on meeting person after person who is super intelligent and passionate about the space. And so, I spent the first few months of my time at Benchmark just doing a lot of reading, a lot of talking to people. You could read Medium post after Medium post, white paper after white paper, and still feel like you are just starting to figure it out. But it ended up being just a space that I think is still incredibly early. But there’s a lot of promising things happening.

TS: Did you feel like ... What’s the temperature of the Benchmark investors in terms of limited partners on investing in crypto? Obviously every firm is deliberating how much risk they’re willing to take. Benchmark obviously has the track record that should give people some comfort, but is that a tough sell to folks to say, “Hey, we’re thinking about investing in a token. We’re thinking about potentially even just buying a raw asset.” Is that a tough conversation or do they get it?

Well, first of all, we’ve been investing in this space for several years. We invested in Xapo in 2014. We invested in a fund called Pantera, and Bitstamp in 2014. So our interest in the space isn’t new to our LPs. And then at the same time, you’ve got a lot of other venture firms who are making exactly the same phone call to their LPs, so it’s not the first time that they hear about it. And as you said, I mean, we’re in a pretty privileged position with our LPs right now, where they trust us to make the call. So that hasn’t been hard and we have our documents all ...

KS: They’re throwing money at you. But not quite as much money as SoftBank.

That’s right. Yeah. The hard thing is when you keep your fund the same small size ...

KS: They’re going to roll over everybody.

That’s right. But what ends up happening is, within the partnership we have a spectrum of bullishness. I mean, Bill yesterday mentioned. He was, I can’t remember exactly ...

TS: He said it was nauseous talking. Everybody, this is at the Goldman Sachs tech conference with like hundreds of public investors, he says, “Everybody in this room is nauseous talking about crypto. So let’s move on.”

I saw that, I was like, “Bill.”

KS: Make the nauseous case. What’s this?

That nauseous case is a few things, which is, No. 1, when you actually look at the underlying, I mean, tear opener on bitcoin, “What dictates the price of bitcoin besides fluctuations in supply and demand?” We were actually ... I think part of Bill’s comment came from the, as a partnership, we actually just came back. We flew to New York City on Sunday and spent time with a lot of people that we respect in New York City that are on the private equity side, the hedge fund side, and as you can imagine, one of the most fun topics to talk about when you’re meeting with these people is, “What do you think about what’s happening in the cryptocurrency ecosystem?”

And so it ends up being this big topic of conversation. So people on the East Coast kind of can think about bitcoin as a trade. And then when you look at the promise of the blockchain, which is this idea that we’re going to have all these decentralized applications that people talk about, we’re going to have this decentralized Uber and you’re going to call a car from the cloud, that has been an idea ... They call them dApps, decentralized applications, which are basically applications that are built on a blockchain.

KS: Right.

That’s been an idea out there for several years and yet there’s nothing to show for it.

KS: Right. I think one of the things that’s interesting about it is, it’s like, I was at the early internet. And one of the facets of the early internet, there’s a lot of con men and hucksters.

Right.

KS: Very much so. Millions of them.

And that’s the same here right now.

KS: Except, you were using the internet, you understood the use of it. And I think one of the problems is I don’t even understand what it’s used for yet, or I don’t see any actual applications. And so to me, where the investments are are not necessarily in playing the currency game but what are the companies that are going to be the Google of.

Right.

KS: And I don’t know that.

No one really knows that.

KS: Why not? Like, I knew the internet. I was like, “AOL? Okay, I can see Yahoo.” I can see them, you know what I mean? It started to become very clear.

Adam, I don’t know if you ... At some point you should have Adam Ludwin on. He’s has some great blog posts on exactly this issue, which is that there are so many alleged use cases for the blockchain, but really what it comes down to is this idea of being central proof, that a lot of the use cases that make a lot of sense for using bitcoin or blockchain more generally are use cases where you couldn’t do it otherwise. As an example, I mean there’s definitely illegal use cases. There’s just kind of criminal activity, buying things that are ...

KS: Which is not a business you really want to get into.

Not a business you want to get into. But there are also, you’re in Venezuela and you need protection from an inflation ...

KS: Which is Xapo, which is Wences ...

Yes. Wences’s argument. You want to get money out of your country. There are use cases that do make sense there and I think actually a lot of the positive bumps that you probably see in bitcoin are as a result of some newspaper article talking about the people in whatever country it may be that are using bitcoin because they have nothing else that they do.

KS: Right.

And that is a real use case.

KS: Okay. It’s not the internet yet.

It’s not the internet yet. I think it’s like, we are in the infrastructure build-out phase of this ecosystem. Part of the problem is that if you think about executing a contract on ethereum or trying to build an application on ethereum, it’s just not at a point that can scale. And same with bitcoin. We have a number of challenges that have to do with scaling and therefore transactional costs, and they’re just kind of the fundamental ... Like the idea of having a decentralized architecture necessarily means that you have a less efficient architecture than anything centralized, right? There is some analysis I saw someone do that talked about how it’s, I think that it was 400 million times more expensive to execute a snippet of code on ethereum as it is to on AWS.

KS: Right.

So you have to have a very strong reason to do it, and the infrastructure to really let you scale doing that is still very new, which is what a lot of the ICOs are going towards. So it’s a trite conversation. But I think we’re in the ’80s. It just happened much faster and it’s a little bit like we need to let the creativity bloom and see what ...

KS: Does that mean the big companies will be the ones — or the banks — that will be taken captive of before that? Because it’s against the banks’ business. I mean if it works in the philosophical way, that it’s supposed to, you don’t need banks, you don’t need ...

That would be a very long-term.

KS: Really?

I think so. There’s just a lot of intermediate steps that have to happen before we’re ... I think often what happens is that in the very beginning of any new platform change, you think about disrupting kind of the incumbent stuff. But really, what ends up happening is that you kind of start to move into a more orthogonal area.

KS: Sure.

And then that ends up actually being like the third step, is that disrupts the incumbents.

KS: If you take it to the logic I assume, and I’m not a genius around this, is you don’t need governments. Because what do governments do? They provide currency and maybe an army. Ultimately if you strip it down.

Go ahead.

TS: Did you question whether or not a conclusion of this exercise will be, “Do you need venture capital firms?” I mean obviously, that’s kind of a paradox that all VC firms are in today, they employ people like you to look at crypto and should we invest in crypto, and how does Benchmark make money off of it.

Side by side, there are other venture capitalists who again have varying levels of worry about ... Not that every entrepreneur in 10 years is going to raise money through an initial offering, but some will. And do you worry about kind of the existential question about — you’ve been at this for a long time, you obviously love the gig — about whether or not it’s going to raise questions about the need for venture capital firms at all?

There was a period when this ICO craze was happening where you had to ask yourself that as a VC. And if you look at the stats in 2017, there was more money put into ICOs than seed investments. That definitely has to make you wonder. And of course you look at how much money some of these companies raise in their ICOs and it completely takes the business away from a VC. But I don’t believe that the ICO structure as it is right now is going to continue. I think that there was a lot of FOMO driving it. I think that it is very clearly a bubble to me, what’s happening at the ICOs. You’ve got all these people who made a lot of money in bitcoin, and later ethereum, who are kind of rolling it into these ICOs.

KS: They’re super smart.

They think they have the Midas touch. And by the way, like the bubble ... Everybody looks smart in a bull market. And so there are a lot of people who think they’re really smart right now. And then you’ve got all the people who have FOMO. I can only imagine what it must have been like in the internet bubble where you have all these people around you getting rich, and you’re like, “I want to get rich too.” And so what they end up doing is that they hear about a new blockchain project and they buy into the token offering and you’ve just got all these people raising a lot of money.

But there’s a couple of things. No. 1 is, I do think a lot of these projects are going to collapse. A lot of them have been complete scams. But even the ones that were very reputable had been blessed by a lot of the powers that be. Projects like Tezos have had pretty visible ... not quite implosions, but real problems with them. And then you’ve got like a lot of the money that’s just been floating around has been irrationally exuberant. It’s just going to go away. And what we’re going to be left with is that actually making these early stage calls is really freaking hard.

And they also ... For what it’s worth — and this may be right or wrong — I don’t fundamentally believe in the structure of the ICO. I don’t believe in a couple of engineers writing a white paper, trying to anticipate all the inflation rate that they want to have, all the incentives. I mean, it just seems like we’ve gone back in software development to the ’80s, where you had waterfall development. And really, to build these types of networks, you want to have a very iterative process. You want to be able to adjust the inflation rate.

I always think about War of Warcraft. Lik,e they had this gold. You know, they have gold in War of Warcraft, and they never could have anticipated some of the times when they had to have an inflationary monetary policy or a deflationary monetary policy. It took them a while to kind of get a sense for how gold was going to be used and mined to really know what to do.

So you’ve got people who try to anticipate everything. They write this long white paper. They then sell tokens to people and then they’re beholden to those people, and it makes it a lot harder to pivot, it makes it a lot harder to iterate from there. And so I think, if I were to guess, I think that you might actually see almost a kind of Open Source 2.0 type structure, where you’ve got people who want to create a new token project and they actually raise good old-fashioned equity for that company. They become the core contributors to the project. In the token offering, they get tokens on the balance sheet. And that’s their incentive to kind of continue to make that project go forward. And so you end up having a little bit more of a centralized-decentralized hybrid model that ends up, thankfully for me, still creating a need for venture capital.

KS: To invest in these companies.

Yes.

KS: And it will be the companies, not the bitcoin speculators, that will make them money. I remember there was a stock market bubble during the early internet for companies that don’t exist anymore. There was one that was a storage company. They made little things you stored stuff on. It was a bunch of companies like that and then they all went away. It was really ... And then there was Google years and years later.

I believe that.

KS: Later. Amazon later.

Right.

KS: It was interesting.

Right now the space is, I think, attracting the best and the worst of people.

KS: Right. Yeah I think when it becomes something that people use ... when businesses use ... when it really matters, but we don’t know that. We don’t know that yet.

And you would say, like I mean I think bitcoin itself as a store of value is a really important early use case, this kind of idea of payments like a digital ...

KS: If you can get it to people using it.

Yes.

KS: Who does that?

Well I can send you bitcoin right now.

KS: I know that, but who actually uses it for actual transactions?

Right. No one’s using it as a payment product. It’s more that people ... I kind of think of it as my dystopian hedge. People are preppers and this my version of prepping.

KS: Are you a prepper?

No, I’m not a prepper. But I do have bitcoin as my dystopian hedge.

KS: Because then you will then do what?

Well you know, it’s good to feel like you have a type of currency that exists outside of our government.

KS: I just have a big pile of gold.

That’s a good idea too.

KS: Beyond this, what else are you interested in? Is it cryptocurrency all the way? You clearly are obsessed with it.

I spend a lot of time there, but I’m always looking for new opportunities and consumer ... We at Benchmark still believe in the consumer space and obviously we have companies like Nextdoor and Discord and Marco Polo. And then when I was at Pinterest, I got to see the transformative impact of deep learning. My team, we started out with a plain vanilla computer vision, where I was spending nights and weekends drawing bounding boxes on pin images to try to create classifiers for, “These are boots and these are heels and these are bags,” and then we started to play around with deep learning.

And it was this tremendous step function in the experience that you could create. And so I know I’ve spent a lot of time thinking about, “Well, what are the applications both to business users and consumers that leverage deep learning in some way?” And then my partner Eric spends a lot of time there too. We’ve kind of gone up and down the stack with companies like Cerebro, which is like a chip-set company that makes it easier to train AI models, to some other companies that are I don’t think announced just yet.

KS: All right. They’re all the future stuff.

Yes.

KS: Anything else that you’re worried about?

I mean, I worry about the strength of the incumbents. It is really ...

KS: They’re pretty strong. Never before like this.

Never before. I didn’t realize how lucky I was to start my venture career in 2006. At the time, we had software as a service and it was almost the simplest roadmap. It was take an on-prem software product, put it in the cloud and you’ve got a public company. It was just kind of rinse and repeat. And then you had Web 2.0 and then mobile and you had going from kind of 3G to 4G, like you had all these wonderful technology transformations that created so much greenfield opportunity.

And here we are where you’ve got Facebook, Google, Amazon, Netflix, these kind of incumbents, Apple obviously, that are so strong and it makes it really, really hard for a founder to find the seam that they can exploit. And so yeah, there’s a little bit of waiting, kind of wondering when the next platform is going to emerge. Which is, I think, part of what drives a lot of people like me into crypto right now. It is a little bit kind of relative thing ...

KS: Which they don’t have their arms around.

Exactly. And there’s no incumbents in crypto. You could think of bitcoin and ethereum as the incumbency, but it’s not like there’s a Mark Zuckerberg running one of those companies. They’re decentralized protocols. And that means that there’s still a lot of opportunity in the market.

KS: Okay, we’re here with Sarah Tavel who is a partner at Benchmark. We were just talking about cryptocurrency. When we get back we’re going to be talking about a bunch of other things that she’s doing as a venture capitalist.

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We’re here with Sarah Tavel, a partner at Benchmark, and we’re just talking about her giant interest — her obsession, really — with cryptocurrency, which she’s correct to do so. But there’s other parts of her job. We’re going to be talking about.

Teddy, you had a question about ...

TS: Sarah, you’re involved with a group of women venture capitalists — in I think a couple of cities now, it’s not just here — where the idea is to basically get together and have a network for female founders to come to when they’re looking for advice. I’m curious. There’s been a lot of organizations of women in tech. I know it’s early, have you noticed any tangible impacts yet or if it’s still of the network of female VCs or what kind of the bigger picture goal is? What do you imagine the impact of this type of thing would be?

I think it’s important to give a little context on how we got started, which was ... It’s seems like so long ago now, but when all these sexual harassment cases were coming out with VCs and female entrepreneurs. And there was a little bit of ... I had been organizing these kind of monthly breakfasts with a bunch of women GPs, and then we all kind of would come to these breakfasts and feel a little shell-shocked about what was happening and then we actually ended up organizing a dinner, and it was kind of like, “Well, what can we do to make it better for female founders, to make it better for female VCs?” And it ended up being this really wonderful group of women.

KS: All four of you.

That’s the thing, actually, is when I started at Bessemer in 2006 ...

KS: I can’t believe the one in 25. That’s astonishing.

Yeah. And it felt like, you would look around and try to see who were the role models. And it was so small, the number of women.

KS: Mary Meeker.

I don’t think Mary Meeker was ... it was people like Theresia Gouw and Jennifer Fonstad. And there was a handful — like literally a handful — of female GPs. And then and we kind of reached this point — I mean obviously there’s so far to go as an industry — but we reached a point where it felt like all of a sudden we had a critical mass of women.

And I think that sometimes you’d hear that kind of early women in Goldman Sachs or whatever group it could be, because there were so few of them, they ended up being more competitive with one another. But instead what we have now is we have a group of women that really have come together because we want to help one another. We want to make each other more successful and we want to help make female founders more successful.

And so we came together, I think that the first dinner was maybe a group of 15 GPs or so, and there’s been a couple of blog posts about it, and then we ended up trying to think, “Well what are the initiatives that we want to take on to pursue this mission?” and Jess Lee from Sequoia, who is one of the new additions to the female partnership, she ended up kind of having this idea for hosting female founder office hours. I think it was probably something that she wished she had had when she was at Polyvore.

By the way, Peter Fenton, as you guys know, was an investor in Polyvore and so we ended up ... The first event we had was actually having office hours for female-founded seed companies. We did that in San Francisco. Then it kind took off and then we had one in New York, one in LA recently. We’re going to have one ... I think it’s next week for series A companies here in San Francisco. And who knows whether any investments come from that. But what is important that’s coming from that without question for me is that we’re increasing access of the female VCs to female founders and vice versa.

KS: So can I ask you, why do you have to do that? I mean honestly, on some level it’s insane, that you have to do it and then you get all these comments, which drives me nuts, when we’re doing it based on standards, but they aren’t. They 100 percent aren’t doing it based on standards.

Yeah. I mean there’s definitely ... I asked myself that question. I do already feel like there’s attacks on my kind of being a female VC and doing the job and then we end up taking on these other things. But we’re thinking about actually how now to ... Like there are so many, as they call them, male allies out there.

KS: Allies.

I know.

KS: We shouldn’t even look at them as allies. It’s their job.

There are many of them. And so how do we integrate them into what we are doing? Like, it shouldn’t just be a female founder pushing a female VC and that’s what it is. It should be a female founder pitching a VC. And one the top VCs ...

KS: Or just a founder.

Well, you have to start somewhere.

KS: Yeah. I guess.

That was one thing. Then the second thing is actually we co-hosted an event, I think it was actually last week, where it was something where we hosted a couple of panels. I hosted a panel with Rebecca Kaidan, who’s a GP now at USV, and Emily Melton, a partner at DFJ, on career trajectories for VCs, and we had 80 women in the audience who were in investing jobs in venture capital firms. And it was one of those things where I could only imagine if I had gone to attend one of those events, like when I was one or two years into the job, how inspiring that would be to me. Just seeing people who are succeeding and doing it makes you feel like you can do it too. So I think that there’s a lot of positive things coming out of it. It is a lot of work. Like we’re trying to figure out how to start to spread that around.

KS: Spread it around how, what do you mean?

Well, just getting more people under the tent to take on some of the things that we ...

KS: What’s the actual problem though? I mean besides rampant sexism across this globe? But what’s the actual issue? Because you are someone they’ve let in, you know what I mean? And now you have status at Benchmark and have the experience, but they seemed to like just have one, like a Mary Meeker or you or something like that. From your perspective what’s the problem? And I know you want to be nice about it, but what you imagine?

You mentioned the biggest problem, which is ...

KS: Rampant sexism.

Rampant sexism. There’s subconscious bias of course, which is a big thing. I think the subconscious bias is a really big thing, actually. If you look at ... I was just reflecting on this, you look at many of the female VCs that are in GP roles have followed career trajectories that are very similar to my own, which is that you come in a more junior role, which is a lower-risk role to hire for, prove yourself and then you can get the GP role. And it’s a little bit that kind of subconscious bias thing where men get promoted based on potential and women get promoted based on what they’ve achieved.

KS: Mm-hmm.

That is a bias of which women get into the ranks. It’s just easier when you’ve already proven yourself. But at the same time, that is starting to change. I mean, you see more and more examples of women being brought into these GP roles. And I think there’s all types of things, there’s the natural thing of homophily, which is we naturally hang out with people who are like us, and there’s nothing wrong about that.

But you have to make that extra effort to go beyond your natural network. And I think, people are just starting to realize that that’s what we need to do, both when we are looking to hire a VC at a firm but then also a female executive or female engineer or underrepresented minority in one of these fast-growing startups. It takes that extra effort because we’re starting from a homogenous nucleus and you have to try extra hard to break through.

KS: Right. Absolutely. At the same time, what’s interesting to me is that it’s an ongoing issue. It’s sort of fascinating because I do think a lot of women stay in operational roles at companies because it’s a better career path trajectory. Being one of anything is always difficult.

Can we shift to the venture business in general? I don’t want you to have to be the one to talk about it, speaking of wh, but it’s really ... you got real touted when you got hired. “Oh, we got Sarah Tavel.” “Wasn’t she just over here?”

TS: The same total number of women jumping from firm to firm.

KS: Sequoia next.

Just got that one.

KS: That’s right. What about Excel? Does Excel have one? Excel, you better get on it.

I am very happy at Benchmark.

KS: Good, good. So you eventually get Bill in general. Where do you imagine where we are and where it goes? I would tell you, you have SoftBank coming in.

Well that’s a big question.

KS: Just for those who don’t know SoftBank, Teddy?

TS: Sure. SoftBank is both loathed and terrorizing but also an opportunity for a lot of venture capitalists because they can mark up companies in your portfolio. But I think the bigger question here is like, obviously with valuations on the rise and SoftBank being a threat and to some extent an opportunity, how do you think about this? Does that make you think about the types of deals you do differently? Does it worry you about losing a deal because someone adds a zero to the end of the check?

It’s interesting to see that many other venture firms are having a little ... I don’t know if this is fair to say, but scope creep, where a lot of funds that have started out as kind of traditional series A, series B funds are starting to expand both into the seed world and into the growth world. And so they will end up kind of competing and feeling that pressure more than we do. We went through a period of time at Benchmark where we joke it was like the empire-building phase where we ...

TS: Israel.

Yeah. We had Israel, we had London, we had a bigger partnership, and our returns suffered during that time, and we ended up really trying to kind of come back to the core of Benchmark.

KS: People can’t help themselves.

A lot of people can’t help themselves. And so we kind of went through an experience where we came back and now are very, very clear on who we are and what we want to do, which is series A, series B investing, series A really being what we focus on. And SoftBank may come down to the series A one day. If so, God bless ’em.

TS: I definitely don’t think people should rule it out. I mean, the idea that they would do that.

If you are SoftBank ... SoftBank wants to put a lot of money to work and it’s very hard to do that at series A. So I think it’s unlikely that that will happen. And so like for us, we’re just focused on doing what we’ve been doing for 20-plus years now, which is being the first call and really kind of trying to shepherd these companies to their full potential. We can’t ignore what’s happening with SoftBank. Like we obviously were beneficiaries of that with Uber and WeWork. And then you’ve got Katrina Lake at Stitch Fix who raised $42,000,000 and went public and has a multi-billion dollar company.

KS: Which didn’t take that ...

$42,000,000. That’s just an unbelievable story. And so we hope to find many more of those companies.

KS: Can they resist that money? Because one of the things is you’re all investing in innovative and groundbreaking companies. Venture capital hasn’t been that. Everybody comes out remembering when Marc Andreessen came in and we’re going to change venture capital. Not really. It’s the same system, essentially. But what does disrupt venture capital?

I mean a lot of capital does disrupt the venture capital, right, which is the problem we’ve had as an industry. Bill obviously has been speaking about that for a while. He does a good job there. And it’s one of those things that you keep on expecting the problem to balance in the other way, and instead, it actually is just getting worse, obviously, with SoftBank as the most recent entrant

KS: Where does the money go?

The money is getting jammed into a lot companies, and I think it remains to be seen what the impact will be on these companies. Like I think about when you’re running a business, you have this decision, which is that you can turn the wheel towards growth or you can turn the wheel towards profitability, and it’s really freaking hard to turn the wheel towards profitability.

It’s like this active will every day of knowing what to say no to, which you have to say increasingly. But then when you have a SoftBank or you have just like this amount of capital available in the private markets, the amount of diligence you have to do to raise money in the private markets versus the process of going public, it’s night and day. It’s just so much easier. And so the companies can kick the can down the road by raising more money in the private markets, and then if they don’t have the same pressure towards profitability that they would otherwise have if they were public ...

KS: And then they run the risk of SoftBank giving their money to a competitor.

If they say no, that is the risk that they, SoftBank ...

KS: I think that was the movie “The Godfather.”

TS: Dara had a great quote yesterday at the Goldman Conference where he said yeah, “I’d rather have the capital cannon behind me than in front of me.” That’s like, kudos to them. I mean, it’s a strong negotiating tactic when they say we’re going to invest in Lyft if this SoftBank tender with Uber doesn’t go through, and then it works. I think it works.

KS: Although money isn’t always the factor.

And yet it takes a tremendous amount of discipline if you’re one of these founders, and then you have this tremendous war chest to then stay disciplined with how you use that capital. It’s just a bigger version of what we’ve faced in the earliest-stage markets, where ... I’m starting to sound like an old person, but when I started my career I remember, we were working on a series A investment and it was like a $5,000,000 investment, we were just like, “Oh my God. This is an expensive round.” And what’s it going to do with a company that have $5,000,000 at the stage of the company. And here we are where the series As are easily $15,000,000 but can be far, far bigger than that.

KS: Some of the numbers are ... You could also just put the money in the bank, I mean speaking of Pinterest, they didn’t spend a lot of their money, right?

Ben has thankfully, he has the DNA of a very disciplined ...

KS: He’s cheap is what I call it.

He’s cheap. Yeah. He is cheap, and I think that it is so easy to just spend money when you have it and it really does ... I am one of those people who believe that having a scarcity brings out the best in a company and really focuses you on what is core to the company and then you execute better. And so I liked that discipline and I think it remains to be seen what’s going to happen to these companies that get to raise a lot of capital.

KS: They may never go public.

They may never go public. That’s the fear ...

KS: What’s the next company to go public?

What’s the next one to go public? I couldn’t say.

KS: You couldn’t say. I say Airbnb, probably.

I don’t think so. I think there’s going to be someone else before that.

KS: Really? A good one?

Yes.

KS: Uber?

No.

KS: She says nothing. All right. Last question. And then Teddy, you’ll have a last question. If you were to give a tip for someone who’s become — and I don’t wanna say female, just any venture capitalist — what would it be? What is a mistake you made that you would say, “Oh I should’ve done that differently.” It can be something you did great, too. It doesn’t have to be a mistake. Like one thing that was critical to you.

For someone young in their career?

KS: Yeah.

For me it was absolutely finding someone like a Jeremy Levine, who takes you under their wing and teaches you how to do the job. People have for a long time talked about venture capital as an apprenticeship business. And there’s no question that’s what it is because it’s one of those businesses where ... I call it the learning cycle. Like the feedback cycle is not fast. It takes years for you to know whether you’re on the right track with the company. And so when you’re a young person and you don’t have that pattern recognition down yet, you have to bootstrap it from someone else’s pattern recognition. And it’s very, very hard to find a partner who is willing to invest the time in a young person to show them the craft.

I mean, I fight for 15-minute slots in my schedule right now, where if I spend an hour with someone that means I can’t spend an hour with a founder. Your time is very, very precious, and so to find someone who will make that investment, which is a very long-term investment, was critical for me. I was unbelievably lucky to get to work with Jeremy, because he’s not only just the great investor but he was a great mentor to me. I always tell people that when you join a firm, you want to make sure you’re going to be set up for success. And the biggest way is, who’s going to be that person? Who’s going to chaperone you? And you have to pick the right person.

KS: Walt Mossberg did that for me.

TS: So that’s your advice for venture capitalists. The corresponding question is you’ve now been at three firms, sounds like when you were at Pinterest you were dealing with firms. What’s your advice for CEOs who are potentially negotiating a deal or they have four term sheets, one of them is 15 percent higher. My point is, you’ve seen a lot of shops.

I always tell people two things, which is No. 1, you want to really make sure that that VC that you’re going to bring on to your board is going to be as much on the same side of the table as you are in terms of understanding what the strengths and weaknesses are for your business, what the vision is and where you want to go from there, because the last thing you want is to have that first board meeting and you kind of say, “Here’s the new initiative I want to do.” And the VC’s like, “I thought you don’t want that strategy mismatch.” That’s No. 1.

And then No. 2, and this is probably just as important, is references. The reference is like ... what I always tell founders is, if someone gives you a reference and it’s a hot company here, a hot company there, it’s so easy to be a fair-weather VC and it feels good to get to call Brian Chesky or whoever it is and do a reference. But ultimately the best references, the most useful ones will be the ones when it’s a company that has been going sideways or didn’t succeed or even the CEO is like, “Oh, talk to those people and you’ll really figure out what that VC is made of.” And you want to know, like you don’t want a fair-weather fan on your board. You want someone who will do the work.

KS: And there are lots of those.

There are a lot of those.

KS: There are a lot of those, which are weaker people or people who, they’re not necessarily malevolent ...

Just cheerleading, and when things are good they’re there and then they don’t do the hard work.

KS: Yeah. And also assholes, you shouldn’t go with that. They are easy to find.

I say no to assholes.

KS: Yeah, absolutely. Anyway, Sarah, this was great talking to you. It was an interesting discussion and I have a feeling you’re going to be running everything someday, it’s a sense. And thank you for coming on the show.

Thank you so much for having me.

KS: And taking your 15-minute slots. I really appreciate it. Now I feel badly for being late. And thanks to Teddy Schleifer from Recode for co-hosting with me today.

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This article originally appeared on Recode.net.