Benchmark Raises $425M Fund, Signaling New Era Focused on AI Startups

Benchmark, a prominent venture capital firm, is raising $425 million for its eleventh fund, dubbed “Benchmark 1,” signaling a new era focused on artificial intelligence startups.

Key details of the new fund: Benchmark’s five equal partners aim to make around 30 early-stage investments from the new fund, maintaining the same fund size as its previous funds since 2013 to ensure discipline and focus:

• The partners include Midas Listers Peter Fenton, Eric Vishria, and Chetan Puttagunta, as well as Sarah Tavel and Victor Lazarte.
• While the official fund size is $425 million, the total capital available for deployment will be effectively more than $500 million due to the considerable amount of capital contributed by the firm’s partners.

Benchmark’s investment strategy and partnership model: Known for its bespoke approach, Benchmark has a unique partnership model that prioritizes a small, tight-knit team and significant equity stakes in startups:

• The firm typically takes a 20% or more equity stake in a startup and a seat on its board, focusing on only one or two companies per year per partner.
• This model has proven lucrative, with early investments in companies like Uber turning small initial stakes into billions at IPO.
• Benchmark’s partners claim that no other firm is executing their strategy, which eschews the growth and expansion seen in many rival venture capital firms.

Investing in the AI boom: Benchmark’s partners believe we are at the dawn of a new technological era, and the firm has already made several AI investments:

• These include Sierra, an AI agents startup led by former Salesforce co-CEO Bret Taylor; automated worker startup 11x; AI circuit board maker Quilter; legal software maker Leya; and video generator HeyGen.
• All of the firm’s partners are expected to look at AI companies within their typical areas of focus, such as consumer tech, cloud computing, or crypto.

Analyzing Benchmark’s future: As Benchmark enters this new fund and era, questions remain about the long-term durability of its unique partnership model:

• The firm has seen generational change, with several high-profile partners stepping back in recent years, including Bill Gurley, the lead Uber investor.
• The continued involvement of veteran investor Peter Fenton, who has driven investments like Twitter, Yelp, and Sierra AI, will be key to the firm’s ongoing success.
• Despite these changes, Benchmark remains committed to its distinct investment philosophy and partnership structure, even as the venture capital landscape evolves around it.