Benchmark Capital Teardown

Silicon Valley stalwart Benchmark has added Jasper Technologies to its tally of $1B+ exited investments. Benchmark also was early to invest in unicorns such as Uber, Snapchat, and Docker.

Prominent Silicon Valley venture capital firm Benchmark recently announced the addition of former Behance CEO Scott Belsky as its sixth general partner. Benchmark follows a unique model in which all partners have an equal stake in the firm’s success. Based on the data, the formula seems to be working.

Here we will dive into Benchmark’s investment and exit trends as part of our investor “teardown,” drilling into Benchmark’s activity.

Notes:

Where’s the data & viz from? 100% of the visualizations and data you see in this teardown are directly from the CB Insights platform’s Investor Analytics tool.
What’s a Teardown? A product teardown is the act of disassembling a product to understand its parts, functionality, etc. An investor teardown is analogous. We’re trying to understand a firm and what makes it tick by analyzing data around their financing strategy, investment thesis, key people, exit history, investment syndicates and more.

We’ll discuss trends and highlights in Benchmark’s portfolio over the past few years by analyzing the following dimensions:

Recent Financing Activity
Recent Exit Activity
Funding History
Notable Partners
Industry Strategy
Geographic Strategy
Stage Strategy
New vs. Follow-On Investments
Deal Size
Investment Syndicate Analysis

Financing activity – funding and deal slowdown

Benchmark slowed down their investment activity in 2015 year-over-year compared to 2014. The firm’s investment pace has been steadily declining, with the firm participating in under 30 deals in 2015 compared to at leat 35 deals in 2014.

Despite the slowdown, Benchmark had some recent notable investments, a few of which are included below:

Urban transport app Citymapper raised a $40M Series B, marking Benchmark’s first investment in 2016
Interior design marketplace Laurel & Wolf raised a $25M Series B at an $100M valuation in September 2015
HR software Greenhouse Software raised a $35M Series C in August 2015. Benchmark also participated in their Series B round in March 2015.

Exit Activity

Benchmark continuously finds itself invested in top exits. Since 2013, they have been involved in 7 IPOs, including those of Zendesk, Hortonworks, and New Relic. Additionally, Benchmark has had 4 mega-exits ($1B+) since 2013, including the IPOs of Twitter and GrubHub Seamless, with the acquisition of Jasper Technologies adding to their list of mega-exits as of February 2016. The data highlighted below details some of Benchmarks high-profile exits from the last 14 months.

Internet of Things company Jasper Technologies was acquired by Cisco Systems for $1.4B. Benchmark placed their bet early, investing in Jasper’s Series A in 2005 and continued investing through the company’s Series E in 2012.
Business analytics company Pentaho was bought by Hitachi for $600M. Benchmark was an investor in Pentaho’s Series B and Series C rounds; Pentaho’s exit was in February 2015.
Fashion community site Polyvore was bought by Yahoo for a reported $200M. Benchmark was invested in the company starting with their Series A financing in 2007.
Testing and upgrade automation software-as-a-service provider Panaya was bought by Infosys Technologies for a reported $200M. Benchmark was an early investor, participating in their Series A back in 2006.

Unicorn hunters

Its worth noting that Benchmark has a strong unexited portfolio and is an early investor in various unicorns as well. You can see a visual of some other top VC “unicorn hunters” here.

Photo sharing and messaging application Snapchat has raised $1.33B in disclosed funding. Benchmark invested in their Series A back in February 2013.
Container software provider Docker has raised $179M in disclosed funding since inception. Benchmark got in early, investing in their $10M Series A in March 2011.
Lastly and most notably, Benchmark is an early investor in popular ride-sharing app Uber, which has raised over $8B in disclosed funding. Benchmark participated in Uber’s Series A in February 2011 through their Series C in August 2013.

Fund history

The following table details Benchmark’s most recent fund history. Most recently, Benchmark raised smaller funds in February 2015 and January 2016. Benchmark’s most recent notable fund was Fund VIII at $425M, which it raised in December 2013.

Notable Partners

Benchmark has a small team of GPs with a unique structure, as previously mentioned. Here are a couple of the notable folks:

Matt Cohler joined Benchmark in 2008, after working previously at Facebook and LinkedIn. As one of Facebook’s first employees, Cohler was an integral part of Instagram’s sale to Facebook in 2012. His interest in consumer internet companies is on display via his investments which include Tinder, Quora, Asana, Dropbox, Edmodo, and 1stdibs. Cohler also sits on the boards for companies like Xapo, Greenhouse, and Domo.

Peter Fenton joined Benchmark in 2006 after spending seven years as a partner with Accel Partners, where his investment interests included software, digital media, and technology enabled services. He currently sits on the boards for companies such as Docker, Quip, Optimizely, and Cockroach Labs. The following table shows other investors with whom Fenton shares boards, taken from his profile on CB Insights.

Mitch Lasky has spent more than two decades in the mobile gaming, new media, and interactive entertainment business. Prior to joining Benchmark in 2007, he served as executive vice president of mobile and online at Electronic Arts. Earlier in his career, he practiced law, worked at the Walt Disney Company, and started a multiplayer online game company. Lasky currently sits on the boards of Snapchat, Cyanogen, Engine Yard, and PlayFab.

Bill Gurley joined Benchmark Capital in 1999 after spending two years as a partner with Hummer Winblad Venture Partners. Before entering the venture capital business, he spent four years on Wall Street as a research analyst. Gurley sits on the boards for Uber, Nextdoor, Stitch Fix, and Vessel, among others.

Industry Strategy

Benchmark’s investment in internet companies has remained strong while mobile & telecom has overtaken software and computer hardware as the firm’s second-most frequent target for investment. Companies in the non-internet software sector still remains prominent in Benchmark’s investment strategy behind internet, but computer hardware investment has lagged.

The industry heatmaps below show the changes between these two time periods. The size of the box represents the number of deals and the darkness of the blue represents total funding amount.

Diving into the industries within mobile & telecom, Benchmark has slightly shifted away from telecom services and focused more on mobile software & services. Within the latter industry, the firm has recently funded Quip, Amplitude, and Cyanogen.

Benchmark continues to invest in the internet software space with recent investments in Optimizely, Greenhouse, and CloudPassage

Geographic Strategy

Benchmark primarily focuses their investments domestically with the bulk of their activity going to US-based companies. Within the US, although Benchmark still overwhelmingly invests in California-based companies, New York is an area Benchmark looks in for opportunities. WeWork and Farmigo are some of the New York-based companies they have placed bets on recently.

Perhaps the most surprising state receiving investment was Utah, which counts Domo and DAZ 3D as Benchmark portfolio companies.

The geography heatmaps below, taken from Benchmark’s profile on CB Insights, illustrate the firm’s increased interest in New York and Michigan. The size of the box represents the number of deals and the darkness of the blue represents total funding amount.

Stage Strategy

Benchmark has maintained a relatively balanced portfolio in terms of stage, with deals skewed a bit more towards Series A and B stages. Series C, D, and E+ stage companies account for 50% of deals while just Series A and B deals receive the the other 50% split evenly as seen below.

The size of the bubbles represents the number of deals and the darkness of the blue represents the amount of funding.

New vs. follow-on investments

Benchmark’s investment pace is more measured than many other Valley firms and so the firm’s follow-on rate is quite high as it leans into its winners.

In fact, Benchmark’s Q4’15 investments were 100% follow-on financings with bets placed on One Medical Group, Quip, and Optimizely. Meanwhile, Q3’15 had several new deals such as investments in Bugsnag, Outpost Games, and Amplitude.

Finally, looking at the first half of 2015, the firm had about 83% follow-on and 17% new investments for Q2’15, compared to 63% follow-on and 37% new investments for Q1’15.

The following graph, taken from CBI’s Investor Analytics, illustrates the ratio of new and follow-on investments for each quarter for the past five years.

Deal Size

Benchmark’s average deal size has been relatively stable for the last five years but spiked in two quarters: Q4’14 and Q2’15. The jumps in average deal size can be attributed to the participation in large financing rounds to WeWork ($355M) and Snapchat ($486M) in Q4’14, and Docker ($95M) and WeWork ($434M) in Q2’15.

The graph below illustrates the trends in Benchmark’s average and median deal size for each quarter.

Investment syndicate analysis

Benchmark Capital’s top syndicate partner in deals is DAG Ventures, a “coattail” fund, which has figured out that Benchmark is a good fund to co-invest with. The two firms have invested together in 41 companies across 80 rounds making DAG the largest co-investor by a wide margin.

Benchmark’s other co-investors includes Smart Money VCs like Greylock Partners and Accel Partners. The top feeder of deals to Benchmark is Lowercase Capital, followed by Y Combinator.

The tables below show the investors that Benchmark often invests after or with, taken from Investor Analytics on CB Insights.