Benchmark Capital's Matt Cohler On Jane Austen, Mobile Penetration And Dodging Questions Like A Pro

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Here’s the last of our Davos Tech Interviews: Former Facebook exec and current Benchmark Capital general partner Matt Cohler sat down with me for twenty minutes on the last day of the event to talk about Facebook (no comment), Twitter (no comment), LinkedIn (no comment) and Zynga (nada, and he’s not even a stockholder in that one).

Frankly, he was much more forthcoming the last time I interviewed him, on the day he left Facebook and joined Benchmark. See The Matt Cohler Exit Interview from June 2008.

In another year or so he’ll be ready to go into politics. He can dodge questions like a pro.

But Matt did answer some other questions, and that’s where things got interesting.

He’s made just one direct investment at Benchmark so far, Asana, which was founded by former colleague and Facebook co-founder Dustin Moskovitz. But Matt is also involved in Benchmark’s other investments, including a February 2009 investment in Twitter.

The most interesting part of the conversation was near the end, when we talked about mobile social networks like Gowalla and Foursquare. After passing on my first question, I rephrased and we dove right in:

MA: Do you think Facebook has waited too long to address FourSquare, or do you think …

MC: I’ll point you back to [Facebook COO] Sheryl [Sandberg] on that one.

MA: Yeah, I’ll ask it differently. How important do you think Foursquare-type, Gowalla – do you think this is a real trend or a fake trend that we’re seeing with people using these services.

MC: I think it’s a real trend, and I think it’s an instance of a broader trend that is the emergence of mobile, which is something we’ve been talking about for a decade. And I actually don’t think we’re there yet, but it’s really close.

MA: You don’t think we’re there yet because of the hardware, the phones aren’t there yet, or that they haven’t quite gotten the model of checking in?

MC: The market adoption isn’t there yet. So when you think about what you need to have that really be a compelling user experience in several dimensions, to just look at a couple of them, location and 3G — Let’s just look at 3G as kind of the lowest common denominator, there’s only about twenty percent 3G mobile handset penetration in Western Europe and North America today.

Matt’s argument is that it’s still too early to start declaring winners in mobile social networking because smartphone penetration is still only 20% in Europe and North America. Until that increases, there’s still plenty of time to wait and get things right.

I also learned that the movie Clueless was an adaptation of Jane Austen’s Emma:


MA: But do you think the Gowalla/ FourSquare model is the right one? Do you think that they have found, yknow, you sort of check in, there’s games, they get you to pull your phone out when you places and do things. Do you like that model? Do you think that’s a winner? Because two years ago people were still messing around with Dodgeball, which you know is the Foursquare guys, Loopt has been messing around with it, and I think it’s BrightKite, none of them really took off.

MC: I think it’s too early. I just think it’s too early.

MA: You think it’s too early because of market penetration, but…

MC: I think, both Gowalla and Foursquare, there’s really a stream of momentum there, they’re interesting companies, they have slightly different approaches to – the problem that they’re basically trying to solve is, how do we create the right set of dynamics for people to want to check in.

MA: And to create content, basically.

MC: Well that’s a form of content. And so both of them are answering that question, basically, with more game dynamics. They have different approaches to how they address those game dynamics. But Josh is a great designer, a great product designer. And Dennis is a great entrepreneur too. So it’s fascinating to see what’s going on with both of those products, but as an instance of the sort of thing that is going to be possible when everybody has mobile. It’s really very exciting. The thing about these social products is that there’s a dynamic that tends to happen where they flip from being socially awkward to socially necessary. And if you think back to the US in the late nineties, it was sort of a stigma to carry around a mobile phone. If you remember the movie Clueless, which is an amazing movie…

MA: One of my favorites.

MC: Yeah. An adaptation of the Jane Austen novel Emma, and there’s a recurring joke in the movie about the fact that these kids have mobile phones, have cell phones. It’s like, ha ha, isn’t that funny, they have cell phones. Today it’s just assumptive that you have a cell phone in your pocket all the time. I was in Asia in the late nineties when I came back to the US.. When I was in Asia, everyone was already using a cell phone. When I came back to the US, all my non-tech friends were mocking me for having a star-tac in my pocket.

MA: Nobody was text messaging in the US because you couldn’t.

MC: You couldn’t, exactly. Not even interoperability between two carriers. There was also just very little market adoption. And at that point it was basically socially …

MA: I loved that star-tac phone, by the way.

MC: Yeah, it was a good phone.

MA: Twenty minute battery life. Literally. Twenty minutes.

MC: Oh yeah, I remember. What happened is, that flipped to being socially required. And when you think about that in the context of privacy and information sharing, the issue becomes – there’s a cost to opening yourself up. If you broadcast your location that means people can get at you that you may not actually want. And that cost is always present. If you carry a mobile phone in your pocket, someone can call that phone number or send you a text message. You may not want to be reached at all time. But as long as everybody else is opting in to that dynamic as well, you still bear that cost, but the benefit exceeds it, because you can reach all these people. So in the early days of these devices, yknow, there’s more pain than there is gain from adopting, and what needs in order for them to really take off is you need large scale, kind of market-wide adoption of the device. And then the benefit exceeds the cost and the dynamic flips. And we saw that dynamic flip with mobile phones, I think we clearly saw that dynamic flip with use of the web and identity of the web, and sharing of information of the web. I think we’re going to see it in the mobile ecosystem over the next couple of years, and I’m excited about that. The thing I’m most excited about that’s driving that is Android.. I’m really excited about what Android can represent. Android is great because Android is free, and that’s a really, for the consumer. That’s a really big deal. To the extent that Google can subsidize the cost of distributing really high end mobile devices into the market quickly, that’s going to very rapidly move the market forward. I’m really hopeful that’s going to happened.

And there was one last gem at the end. Matt says Android phones will eventually outnumber iPhones:

MA: Do you think that there will be more Android phones than iPhones at some point in the next couple of years?

MC: At some point. I don’t have a crystal ball, I don’t make kind of sweeping predictions about the future. I think it’s highly likely that there will be more Android devices in the market than iPhone and iPod touch devices in market at some point in the foreseeable future, be that six months, twelve months, twenty four months, thirty six months, I have no idea.

The full transcript is below:

Michael Arrington: I’m here with Matt Cohler, a partner at Benchmark Capital, hello Matt.

Matt Cohler: Hey Mike.

MA: Thanks for joining me.

MC: Sure, thank you.

MA: So this is the first time I’ve interviewed you at Davos. I usually am able to talk to a few of the people from Silicon Valley have been sitting down with me every year talking about the conference, and also what’s going on with things back home. So, I appreciate you doing that.

MC: Sure.

MA: So, I actually interviewed you when you left Facebook.

MC: You did.

MA: Which was a year ago, a little over a year ago.

MC: Just over a year ago, yeah.

MA: And you left Facebook, left some stock on the table I assume, you were one of their earliest employees and you left to become a partner at Benchmark Capital, one of the top firms – Venture firms in Silicon Valley. Possibly best known for investing in eBay, at – what was it? – five thousand percent return.

MC: I don’t know…

MA: They never even cashed the check, did they.

MC: So the story goes.

MA: We talked about this – was it Bill Gurley? – we talked a little bit about that. But obviously Benchmark has come a long way since then as well. What’s it like being a venture capitalist?

MC: It’s great. It’s awesome. It is! It’s a lot of fun. It’s not for everybody, for sure, but I always thought it was for me, and I still think it is. It takes a long time to figure it out, I’ve been doing it for a little over a year, ugh, the cycles are long cycles because you see a company through from the very days until everybody is much more mature, so I don’t think that I have a full picture of it after just a year. But so far I’m having a great time. As with everything in life, it’s all about the people that you’re with every day, and it’s a great group of people.

MA: What’s it like at Benchmark? It’s one of, or the only firm, that’s completely communist, right, in the sense that they split evenly the management fee, and the carriet (?) and everything. If you’re a partner, all partners are equal, and these are guys that have been doing this for twenty years now, right?

MC: Right. We’re all General Partners of the fund, and we’re all managing members of a management company.

MA: It must be great.

MC: Ya, it’s terrific.

MA: A young partner at another firm, even top firms, you’re still fighting for a long term position, and sometimes they shed partners. Benchmark just seems like you’re sort of stable.

MC: Yep.

MA: Sorry, I’m getting a few messages here. My Nexus One is …

MC: I like mine. Its…

MA: The Nexus One is your phone?

MC: I have it… it’s one of my phones.

MA: What’s your go-to phone?

MC: Blackberry.

MA: What’s a day like at Benchmark?

MC: I want to answer your last question too. Because it is a unique model, you’re right. And I think it’s great because it really enables us to stay focused on the one thing which really matters for us, which is –

MA: Making money?

MC: No- helping entrepreneurs to build great companies.

MA: Yeah.

MC: I mean, really. That’s what gets us up in the morning, that’s why I do what I do, and that’s why all my partners do what they do as well. So, it makes for a great day-to-day working environment, but it also means we can put all of our energies into finding great investment opportunities, finding great entrepreneurs, and helping those entrepreneurs to build great companies.

MA: So Benchmark isn’t an investor in Facebook, although I assume you still hold stock in Facebook.

MC: Benchmark is a small investor in Facebook, now, through the FriendFeed acquisition that occurred back in…

MA: Oh yeah, of course.

MC: Benchmark is not – was not an early venture investor.

MA: Right. But Benchmark is a major investor in Twitter.

MC: Right.

MA: And you’re not the board member for that, but I assume that – What do you think of Twitter, you know, as an investor – you guys got in, was it the last round? The billionth round?

MC: The prior round.

MA: Twitter was valued at, what was it, 300 million.

MC: I can’t comment on that.

MA: But they announced it. The rumor was that that was a round at a 300 million dollar valuation, something like that. What do you think of the business?

MC: I think it’s a great company. Ev is here, so you should talk to him about the company. If you haven’t already! Maybe you already interviewed him this week.

MA: I don’t know if you remember last year, I posted some documents from Twitter. And Evan and I are now talking again, but it’s not like we’re BFF and picnicking together, so, but you know, the question I’m asking isn’t what’s the revenue or anything, it’s – let me ask it a different way. What do you think of Twitter, really compared to, say, a Facebook, in terms of, is it Facebook without pictures? Is it – how is it different, is it competitive?

MC: Ev asked us to (mumbled) this sort of questions.

MA: To not answer them at all?

MC: To turn them over to him. So I’m gonna direct you back to him.

MA: Oh that’s right.

MC: I want to be a good partner to the company. So you should talk with Ev, he’s here. But it’s a great company.

MA: Do you think Facebook and Twitter are competitors?

MC: I don’t think Facebook ever thinks of itself in terms of other companies out there on the market, and I think Twitter is probably the same way.

MA: Can we talk a little about how you see Twitter becoming a billion users, a 500 million users?

MC: I don’t want to talk about it at all, I’m sorry.

MA: Okay, let’s change gears, then. Talk about the investments you’ve made so far. I know you’ve made at least one. Talk to me a little about those, and what you think of those companies.

MC: Right. So first, at Benchmark, because of the way we’re set up, we all do everything as a team, so we don’t really think about investments in terms of my investments, and Peter’s investments –

MA: Are you on any boards?

MC: I’m on a board. Ya. So I’m on the board at Asana, which is a new company started by Dustin Moskovitz and Justin Rosenstein. Dustin was a co-founder of Facebook, the true co-founder of Facebook, I know him very well and we’ve worked together for four years. Dustin was an engineering manager at Facebook and I’ve worked closely with him as well.

MA: Benchmark invested in that round.

MC: That is correct. We led that round.

MA: And tell me about that company, let me know what you think.

MC: Yeah. That’s a great company, it’s still very early. They raised a relatively large venture round early in their life cycle simple because there was a lot of interest in the company from the venture world. But what they’re trying to do is create a fundamentally better – an order of magnitude better – approach to enabling enterprises and organizations to collaborate. So it’s a reinvention from the ground up, starting with the technology, up, of how people communicate with one another and collaborate with one another in organizational contexts. And the company’s very early. A lot of people have said ‘is it in stealth mode, is it .. yknow, it’s really not in stealth mode, it’s just early in its life cycle and early in its development. But they’ve already developed some really compelling technology, and they’re going to be talking about that in the near future, and I’m really excited to see where it’s gonna go.

MA: So just one formal investment that you’ve made since you joined.

MC: Well I’ve helped out with all the investments that Benchmark has made since I’ve joined, but that’s the only board that I’m on.

MA: I’ve heard that venture capitalists can usually handle about 10, 12 board seats at a time, I mean, do you see, do you think that in a couple years you’ll be up to that? You really think, one or two a year –

MC: You know, as great opportunities come, and to the extent that I can …

MA: You don’t have a quota.

MC: No. No, there’s no…

MA: Benchmark sounds like they’re a pretty frickin’ cool place to work.

MC: Oh, I’m very lucky.

MA: Can I .. do you think they need an official blogger? Can I be a partner there?

MC: I think you’re doing just fine with what you’re doing.

MA: I think what you’ve got going on is a little better than what I’ve got going on.
Do you think you’ll do this the rest of your life, or do you think at some point you’re going to get the bug – maybe ten years, but – you’ll get the bug to be an entrepreneur and start your own company?

MC: I don’t know. That’s a great question.

MA: You’ve never started your own company.

MC: I have never started my own company.

MA: You were at LinkedIn?

MC: Yep, that’s right.

MA: Where were you before LinkedIn?

MC: I was at McKinsey in Silicon Valley before LinkedIn, and then I was at a startup in Beijing China before that. I was at McKinsey in 2001 and 2002 during the nuclear winter of Silicon Valley –

MA: Good times.

MC: Oh yeah, great times. No traffic on the 101, that was a huge plus, but other than that…

MA: Of course, I didn’t know that because I moved out of Silicon Valley because we sold our company and I’d moved to England for a few years which, it wasn’t much better there.

MC: Yeah. What you said is right. I’ve never started a company. That’s part of why I became a General Partner is Benchmark is that I’ve never really been a founder, I’ve always joined startups, I joined LinkedIn, I joined Facebook, before either company had raised any venture money, and then just sort of helped out as they got older as an advisor to the entrepreneur, do whatever needed to get done to help build the company, I think that’s relatively close to what venture investors are supposed to do as well. So I couldn’t imagine a better place to be than Benchmark. So I assume that if they’ll put up with me, this is a great place to continue to do really the same sort of thing that I’ve been doing. For an indefinite period of time. How long is that? How long is life? Who knows?

MA: What’s Benchmark’s current fund? How much money are they playing with right now?

MC: The current fund is roughly a half billion dollars.

MA: And you’re making investments, I mean, you guys make investments in super early stage, or later stage, with Twitter I’d call that later stage, I don’t know, some of them would still look at that as early stage, you guys are just out there looking for the right opportunities, it doesn’t matter, like it could be a month before going public or two days old.

MC: Ya, we’re opportunistic. And that said, if you look at the three dimensions which define venture investment decisions, stage, sector and geography, we’re essentially kind of 80 to 90% Series A, Series B, Ninety percent Silicon Valley, ninety percent information technology, and that’s the whole information technology, from semiconductor IP up to companies like Twitter, um, but that other ten, twenty percent, if we think there’s a really compelling upside opportunity in the company, we think there’s still a ten to hundred X opportunity in the company and there’s still really exciting company building to do and we really believe in the entrepreneur then we absolutely make exceptions from time to time.

MA: Without disclosing any information that you have privately and I know you wouldn’t anyway, but I assume you don’t, who goes public first, Facebook, LinkedIn, or Zynga? Just asking an expert.

MC: I have no idea.

MA: You think all three will be public within twenty four months?

MC: I have no idea.

MA: Do you see the public markets opening up a little bit?

MC: That is an interesting question. There’s chatter about it, y’know, investment bankers are talking about it nonstop, now they obviously have an incentive to talk about it nonstop, so I don’t know what to read into that and what not to read into that. I’ll say this: There’s a lot more talk about public markets opening up then there are S –ones getting funded. So until more S1’s are filed, we’ll see. There’s more S1’s being filed, and we had a portfolio company Open Table go public in 2009, which I think was a very successful IPO, so I think there’s cases here and there where…

MA: What’s Open Table’s market capital?

MC: I don’t track it on an hour by hour basis, but I think it’s roughly in the fix, 600 million dollar range.

MA: Do you think Facebook has waited too long to address FourSquare, or do you think …

MC: I’ll point you back to Sheryl on that one.

MA: I know you can’t answer some of these questions because you’re a shareholder.

MC: And I’m an advisor to the company.

MA: Yeah, I’ll ask it differently. How important do you think Foursquare-type, Gowalla – do you think this is a real trend or a fake trend that we’re seeing with people using these services.

MC: I think it’s a real trend, and I think it’s an instance of a broader trend that is the emergence of mobile, which is something we’ve been talking about for a decade. And I actually don’t think we’re there yet, but it’s really close.

MA: You don’t think we’re there yet because of the hardware, the phones aren’t there yet, or that they haven’t quite gotten the model of checking in?

MC: The market adoption isn’t there yet. So when you think about what you need to have that really be a compelling user experience in several dimensions, to just look at a couple of them, location and 3G — Let’s just look at 3G as kind of the lowest common denominator, there’s only about twenty percent 3G mobile handset penetration in Western Europe and North America today. The good news is about twenty percent…

MA: But in certain communities it’s a hundred percent.

MC: In certain communities it’s a hundred percent…

MA: But in Silicon Valley, the people we hang out with…

MC: Absolutely. But if you’re building social products you really need a mass market to have access the platforms that those social products are built on.

MA: Meaning the door is still wide open, theoretically, for others.

MC: I think we’re going to see many of the companies that are leaders on the web also become leaders in mobile, and I think the distinction between “web” and “mobile” is going to blur.

MA: It already is for me, personally.

MC: It already is, ya.

MA: But do you think the Gowalla/ FourSquare model is the right one? Do you think that they have found, yknow, you sort of check in, there’s games, they get you to pull your phone out when you places and do things. Do you like that model? Do you think that’s a winner? Because two years ago people were still messing around with Dodgeball, which you know is the Foursquare guys, Loopt has been messing around with it, and I think it’s BrightKite, none of them really took off.

MC: I think it’s too early. I just think it’s too early.

MA: You think it’s too early because of market penetration, but…

MC: I think, both Gowalla and Foursquare, there’s really a stream of momentum there, they’re interesting companies, they have slightly different approaches to – the problem that they’re basically trying to solve is, how do we create the right set of dynamics for people to want to check in.

MA: And to create content, basically.

MC: Well that’s a form of content. And so both of them are answering that question, basically, with more game dynamics. They have different approaches to how they address those game dynamics. But Josh is a great designer, a great product designer. And Dennis is a great entrepreneur too. So it’s fascinating to see what’s going on with both of those products, but as an instance of the sort of thing that is going to be possible when everybody has mobile. It’s really very exciting. The thing about these social products is that there’s a dynamic that tends to happen where they flip from being socially awkward to socially necessary. And if you think back to the US in the late nineties, it was sort of a stigma to carry around a mobile phone. If you remember the movie Clueless, which is an amazing movie…

MA: One of my favorites.

MC: Yeah. An adaptation of the Jane Austen novel Emma, and there’s a recurring joke in the movie about the fact that these kids have mobile phones, have cell phones. It’s like, ha ha, isn’t that funny, they have cell phones. Today it’s just assumptive that you have a cell phone in your pocket all the time. I was in Asia in the late nineties when I came back to the US.. When I was in Asia, everyone was already using a cell phone. When I came back to the US, all my non-tech friends were mocking me for having a star-tac in my pocket.

MA: Nobody was text messaging in the US because you couldn’t.

MC: You couldn’t, exactly. Not even interoperability between two carriers. There was also just very little market adoption. And at that point it was basically socially …

MA: I loved that star-tac phone, by the way.

MC: Yeah, it was a good phone.

MA: Twenty minute battery life. Literally. Twenty minutes.

MC: Oh yeah, I remember.
What happened is, that flipped to being socially required. And when you think about that in the context of privacy and information sharing, the issue becomes – there’s a cost to opening yourself up. If you broadcast your location that means people can get at you that you may not actually want. And that cost is always present. If you carry a mobile phone in your pocket, someone can call that phone number or send you a text message. You may not want to be reached at all time. But as long as everybody else is opting in to that dynamic as well, you still bear that cost, but the benefit exceeds it, because you can reach all these people. So in the early days of these devices, yknow, there’s more pain than there is gain from adopting, and what needs in order for them to really take off is you need large scale, kind of market-wide adoption of the device. And then the benefit exceeds the cost and the dynamic flips. And we saw that dynamic flip with mobile phones, I think we clearly saw that dynamic flip with use of the web and identity of the web, and sharing of information of the web. I think we’re going to see it in the mobile ecosystem over the next couple of years, and I’m excited about that. The thing I’m most excited about that’s driving that is Android.. I’m really excited about what Android can represent. Android is great because Android is free, and that’s a really, for the consumer. That’s a really big deal. To the extent that Google can subsidize the cost of distributing really high end mobile devices into the market quickly, that’s going to very rapidly move the market forward. I’m really hopeful that’s going to happened.

MA: Do you think that there will be more Android phones than iPhones at some point in the next couple of years?

MC: At some point. I don’t have a crystal ball, I don’t make kind of sweeping predictions about the future. I think it’s highly likely that there will be more Android devices in the market than iPhone and iPod touch devices in market at some point in the foreseeable future, be that six months, twelve months, twenty four months, thirty six months, I have no idea.

MA: Thank you for your time.

MC: Sure, absolutely.

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