The Matt Cohler Exit Interview

Early Facebook executive Matt Cohler announced his departure today to join top tier venture fund Benchmark Capital. I spent nearly half an hour this afternoon talking to him about his decision to join Benchmark Capital, his predictions for Facebook and a variety of topics that we touched on via various non sequiturs. Joining us was Benchmark Capital General Partner Bill Gurley as well.

This was a surprising move in many ways. Cohler was definitely one of the “inside guys” at Facebook, gets along well with new COO Sheryl Sandberg, and wasn’t generally expected to leave. But as he says below, he’s always had an itch to be a venture captialist, and frankly there is no better place to be for a young partner than Benchmark. They are top tier, but unlike their peers Sequoia Capital and Kleiner Perkins, each partner shares the profits equally. A junior partner at a competing firm is unlikely to get much of the pie for many years. Cohler, though, will now bring home the same paycheck as the other Benchmark partners.

I’ll also highlight Gurley’s comments around the 4:20 mark talking about Benchmark’s strategy for hiring new blood periodically to keep things fresh. The firm has unorthodox hiring and compensation practices that seem to work.

At one point in the interview we talk extensively about the future of Facebook, and whether the Zuckerberg/Sandberg duo can take the company to the next level (meaning, frankly, IPO). Cohler seems optimistic, and clearly remains a fan of both executives.

A transcript is below the video.


Michael Arrington: I am here with BG and MC. Bill you are a general partner with Benchmark captial, Matt you are almost a general partner with Benchmark capital. You announced today that Matt will be joining you in the fall, officially. However we are here in the Benchmark offices today. So does that mean you are sort of here now?
Bill Gurley: No he just stopped by for this meeting.
Matt Cohler: Yes I just stopped by to talk with you. I will be full time with Facebook until the fall.
MA: Your current role at Facebook is VP of Product Management. When did you first join Facebook?
MC: I joined Facebook in early 2005.
MA: Had the company moved to Silicon Valley at that point?
MC: Yes it was. I was in silicon Valley, at LinkedIn, prior to joining Facebook; when Mark and Dustin were the two core co-founders of the company, dropped out of Harvard, and moved out to SV. I actually met Mark for the first time the summer of 2004 when we happened to be at Peter Thiel’s office talking with Peter about potentially investing in the company. This was the first, practically angel round of financing. He did end up making the investment, and asked me to come over form LinkedIn to Facebook after he did.
MA: So you joined once it was sort of… safe?
MC: (laughter) It’s still a very rapidly growing company, there’s a lot of really interesting things going on now, so in a lot of ways Facebook is still a start-up environment
MA: How many employees were at Facebook when you joined?
MC: If you count the two founders, at the time I agreed to come aboard there were 3 or 4, and when I actually started there were 5 or 6.
MA: How many are there now?
MC: There are between 550 and 600
MA: You announced today that you are leaving Facebook in the fall and joining Benchmark, yet you are going to stay on as a special advisor at Facebook. What does that mean? Because it doesn’t mean anything as far as I can tell. Does it mean your stock will continue to vest?
MC: Well I can’t comment on that, but what we are going to figure out over the summer, while I am still at Facebook, is two things: one is to transition my operational responsibilities at Facebook, and we are going to figure that out in the coming weeks.
MA: You’ll hire somebody from Google to take over.
MC: (Laughter)
MA: The Googlization of Facebook is something I wanted to talk about.
MC: It’s all to be determined. The other thing we are going to get more precision around is what exactly is going to be involved in my ongoing relationship with Facebook. I know directionally, at a high level, that’s going to be to continue to give counsel to Mark and to the management team and to the company about the overall company direction, product strategy in particular, and just the overall course of the organization
MA: Okay. Let’s talk about Benchmark for a second. So Bill, Benchmark was founded in the early 90’s, before you joined. You put yourselves on the map in 97 when you invested in a company called eBay. I think you put 6.7 million dollars into eBay. How did that work out for you?
BG: Pretty good. As you know already.
MA: It turned into, was it over 5 billion dollars?
BG: I don’t remember the numbers
MA: It was one of the most, if not the most profitable venture investments in the history of Silicon Valley.
BG: Probably correct. I don’t know the exact numbers.
MA: One thing that I heard is that eBay never cashed that check, or they cashed it, but never spent it. Is that correct?
BG: Bob was the board member on the deal not me, but I have heard the same thing.
MA: You joined in 1999?
BG: That is correct.
MA: What are some of your investments that have done well.
BG: Currently, I would say probably JamDat and which, both of which went public and sold. Those are some of the more recent ones. I am currently involved with OpenTable, SecondLife, NanoSolar… so a lot of companies that are doing pretty well.
MA: So I was just looking at some of the investments you guys have done, I mean you guys are clearly and top tier venture fund, but I mean its eBay, Juniper Networks, Redhat, MinusQL, OpenTable, Second Life, TellMe, Yelp, Zillo, and FriendFeed, just some of the highlights, some of the companies I would have covered, so clearly some great startups, but I noticed that Facebook isn’t on here, and I am wondering, is there some kind of deal with Matt where he had to give you some of his Facebook stock?
BG: No, we didn’t get any Facebook stock. Benchmark is a venture firm that has a rather unique structure that we talk about from time to time, it’s an equal partnership structure, so there’s not a lot of people in this office. Most importantly we don’t have what you would call a farm system for bringing talent on, so a lot of the other firms hire a lot of young people out of MBA programs, they develop them, they let them ride shot gun as they go to board meetings; they have a way to promote people
MA: But they don’t make a lot of money, they don’t get a lot of carry necessarily.
BG: Exactly. Here, for reasons that the founders felt would create a much better team working environment, we split the pie equally.
MA: So how big was the pie last year would you say?
BG: I am not going to answer that.
BG: But anyway, as a result we have to find an alternative way to create generational change and bring new partners on. You can’t sit around with the same partners forever if you want a venture firm to be successful year in year out. Plus, we have a very strong philosophy that young people are going to have a big impact on the industry, and always will. When I came on board I was 32.
MA: Matt you are 31?
MC: Yes.
BG: We have a constant desire within the firm to think about who out there is going to be a strong venture capitalist, and also comes from a younger generation. It is something that we also feel helps raise the bar, because if you are going to divide the pie equally, you only want to bring on people who you think will make the pie bigger. So you ask why we weren’t in Facebook… we have had Matt on the list for well over a year now, so he is someone that we have been impressed by.
MA: Who else is on that list? Am I on that list?
BG: (laughter) You might be on the list, it is a confidential list.
MA: Is there some sort of initial period where Matt has to prove himself, bring in a big initial investment? He is just in? If he sort of does nothing, you can’t get rid of him?
BG: That is right, but we have a high degree of confidence that that won’t happen.
MA: Which of your partners really aren’t carrying their weight at this point?
BG: You would be surprised that equal partnership creates a lot of peer pressure to actually perform.
MC: I can tell you I feel that already and you look at the people at this firm and the unbelievable success that they’ve had and what a great group of venture capital investors they are, frankly I feel pretty humbled and also definitely feel motivated to…
BG: And let me quickly speak on Matt’s behalf because I doubt he would do it on his own, but some of the things that give us confidence about that – I just think about some of the skills that we believe are important in being good at venture capital. A strong network. Matt is probably one of the most connected people in the world, probably because he was at Facebook and LinkedIn.
MA: Yeah, all he needs to do is login to LinkedIn.
BG: The leverage of technology. Right? (laughter) I think he’s shown extremely good judgment. He’s been at three startups, including one in Asia, that have all done extremely well.
MA: Well the first one went public. Is that right?
MC: Yup.
MA: AsiaInfo – Is that right?
MC: Yup.
MA: And then you were on the founding team of LinkedIn and obviously they’re doing quite well with the recent billion dollar valuation. And then obviously very early at Facebook, so…
BG: Early signals would suggest he has a good eye.
MC: Luck. There’s a lot of luck in life. I honestly believe that.
MA: Well, I think some of the most successful people are also the humblest, but obviously you had your choice of startups. You decided to leave LinkedIn, you decided to go there in the first place, you’ve been at Facebook, you know those were good decisions. Some people who are humble also made some really bad decisions.
BG: Well that’s the third thing I would say about Matt. He has an incredible personality and style about him that fits in. And personal fit in any private partnership is a big, big deal.
MC: That’s really important.
MA: Well, great. You were actually approached by Peter Fenton. Is that right?
MC: Yes.
MA: When was that (roughly)?
MC: I don’t remember exactly. It wasn’t that long ago. There’s sort of two parts to the answer of that question. I’ve known Peter for years, I’ve known Bill for a long time too, but I’ve known Peter for many years. Since well before I was at Facebook actually and we talked about startups and philosophies around startups and investing and things going on in the Valley for a long time. So in some sense there’s been an extended conversation that’s gone on over a period of years. In regard to this in particular it was recently. I don’t remember exactly when it was, but it was pretty recently.
MA: Interviewed, made the offer and you decided to come on board. When did you make the decision? Was it this week? Was it today or yesterday?
MC: It was quite recently. It wasn’t yesterday or today, but it was quite recently.
MA: Who did you tell first at Facebook. Did you tell Mark?
MC: Yeah.
MA: How did he take it?
MC: Again, there’s two parts to the answer of that. Mark knew that this was something I’ve always been thinking about as a likely long term trajectory for me.
MA: To become a venture capitalist?
MC: Yeah, if you look at the things that I’ve done in my career so far, such as his, it’s really basically been about one core thing. Try and find really interesting companies, and try to help great entrepreneurs to help build companies that are going to last and can have a meaningful impact on people in the world. I was unbelievably lucky to do that with Reid Hoffman, who is a phenomenal entrepreneur and then I get to do it again with Mark Zuckerberg at Facebook. I always knew that that’s the thing at the core that I’m most passionate about, is that process. It’s something I want to keep doing for the foreseeable future. Mark and I talked about that as kind of a trajectory.
MA: So you’ve been talking about that for awhile.
MC: Yeah, actually I probably talked about that before I even joined Facebook, so a few years ago. In terms of the specific timing, I wasn’t thinking about leaving Facebook. I wasn’t out looking at other things. I think Facebook still has a tremendous growth trajectory ahead of it, I love the people, I love the company and I love the product. I was just incredibly lucky that this came my way, and the timing on it, frankly, took me by surprise. It wasn’t about leaving Facebook, it was rather more about joining Benchmark. It is an incredible opportunity, and for me personally, as Bill said earlier, when you are in a private partnership, the philosophies and the personalities and the values have to really resonate
BG: Not to overstate this, there are a lot of great venture firms out there, but, like you said, he is being invited in as a full equal partner from day one, even though he has never practiced in venture capital
MA: This is a tough question that you may not answer, but maybe you will. Facebook is a hot start-up, if not the hottest start-up in Silicon Valley right now. But they have had, since the beginning, significant executive departure. Sean Parker the founding president left, Owen Van Natta left, Adam D’Angelo, the CTO left. Now you have left, and I can’t help but feel that is a little odd. You probably agree with me, when a startup is this hot, pre IPO, and everything is going great, for the senior people to leave, particularly on the product side, it is a little bit odd. Is there an explanation that, while maintaining your confidentiality to some extent, makes some sense of this?
BG: I’ll say two things and then I’ll turn it over to Matt ‘cause I don’t know what he’s going to say. First of all, We didn’t consult with Facebook about our timing, he’s right, so we were on our own independent clock to come after Matt, so there was no correlation there. The second thing I will tell you is from my own experience, and this doesn’t relate to Facebook so much, but I have noticed in the valley there are a number of young people who have come to really come to value that early stage part in a company, and any time a company goes through the growth that these guys have… your just going to find people who aren’t willing to or are interested in… and I’ve had that happen in my own company, so I do think that there’s more of that in the Valley than is perhaps looked at.
MC: Let’s say, it’s different, it grows, I mean the challenges are different, I mean Facebook has always ben a rapidly growing company. There’s always been challenges, you face different challenges in different points in time, it is absolutely true. On one hand that a bigger an organization gets, that’s not where my passion lies, I never wanted to be an operating executive with a large scale company, I always knew that, and I always told everybody that, whoever cared to ask me. That said. I’m also am very personally and emotionally attached and invested in Facebook, and the people in the company and the product. And so, I really had no thought of moving on at any point, and part of what made this decision easier was Benchmark’s willingness for me to stay structurally with Facebook in an Advisor role and I know that that sounds like media speak too…but that’s not something…we don’t exactly know what it is either what we know is that at a high level, it’s about staying connected to the company and helping to do some of the things that I’ve had the good fortune to work on there in the past, which is to work with Mark, and to work with the leadership team, and wok with employees across the company…just think about how the organizations going to evolve and the product strategy and company strategy.
MA: Does Mark have what it takes to be the long term CEO of Facebook?
MC: I think the most important thing for a product centric company, which Facebook of course absolutely isn’t, but most of the great internet companies are, is that the CEO of the company be somebody who is deeply, deeply understanding of the product. And has really strong vision around the product, and Mark is the real deal. He really… you know this wasn’t just a bunch of lucky coincidences. Since the time I first met him, he’s always had an extremely strong vision for the direction he wants to take the company, the direction he wants to take the product in, the end of the day, that’s really all a great CEO’s job is.
MA: Well you also have to run a company, like Google has structured things with Eric Schmitt. They obviously brought in a great manager as well, and Eric’s no slouch when it comes to strategy, but is Sheryl Sandburg ,you know ,the right, right hand person, do you think their the right team that in sort of the long run take that company forward? Again your personal opinion.
MC: First thing I’d like to say is that there is a whole team of people there and Sheryl’s phenomenal , but there’s also a whole group of other people there who are a part of that. I think that we’ve always tired to bring great people into Facebook and I’m thrilled that we’re still bringing great people into Facebook
MA: Right, and I didn’t mean to belittle the executive team, but form just a point of view form his right hand person in managing the company, do you think she’s the right person? Really, the executive of the executives. Right the day to day is she…is that the right team on the long run?
MC: Well I’m biased because Sheryl and I are good friends, and Mark and I recruited her into the company, but I think she’s absolutely incredible.
BG: Yea, and speaking from the outside I’d have been thrilled to have her run any of our companies. She’s very impressive, and she has an incredible reputation for what she does.
MA: But, why didn’t you offer her a partnership here?
MC: I actually…no I talked to her about that, that’s funny, but not in that specific context, but one of the things I’m disappointed about for kind of, having to step out of an operational role at Facebook, is I was really looking forward to working closely with her for a long time, and obviously this to me, personally, is so compelling, and nothing is perfect in life and you have to make some sacrifices with everything. But we were joking about it and I said, Sheryl if you were in the job I’m about to take, you would tear your hair out, and she laughed and agreed, cause she is, to your point, and operator, who can scale as an operator, that’s not what I’m passionate about. I think in the role one plays as an early stage investor and venture capitalist, the kind of… I mean, what do I know about it, I’m brand new…my sense of it and understanding of it, is that there’s a certain way to think about things and look at things, and a certain role you have to play, which is I think is probably pretty comparable to the sort of role that I played with Mark and with Reed, and with others. And, I think she’s much more somebody who wants to build, and lead large teams of people in a day to day operating context, so I feel this would be the right job for her.
MA: You’re going to hate this question, so you see Mark and Sheryl, as closer to Eric slash Larry and Sergey, than let’s say Yang and Decker?
MC: Well, I mean I’m not an expert on those other organizations.
MA: But I’d love your opinion, and since we just segwayed and you brought it up, I’d love your opinion, so what do you think of Yahoo as a long term, do you think that they can turn it around?
MC: I mean, for the valley, and the spirit of the valley, I hope they can.
MA: Yea, me too. Bill what do you think about Yahoo?
BG: I think that there is incredible number of assets there, I think the world of Jerry, and what he can accomplish, and I think the big key question is, can you get the team in place, and the productivity up so that you can continue to extend what you are doing. It’s the number one challenge for large organizations, you know, is to keep the ball moving forward. I actually think ideas are rather easy, it’s to sit up there and say “they should do this” “they should do that”, but it’s hard when you have a code base and billions and billions of page views, and existing users, to move that needle. I mean it’s the number one question you hear about EBAY or anybody who’s large, is how do you keep the innovation going?
MA: Well but Yahoo, I don’t want to go off on a tangent, but, all the big companies sort of have that period…they do really well, and they usually enter a period of arrogance usually, they have a fall.. That’s what happened over and over again in Silicon Valley, Yahoo had that fall, and they sort of came out of it and they had that rise, and early in this decade but now they’re doing it again. Google’s never had that Microsoft has been up and down over the decades, I mean this is pretty bad, what’s going on right now, and I think we’re all kind of rooting for them. But I think the real question is do you think Jerry can still stay CEO?
BG: Oh, yea I do.
MA: Oh really? Do you think Yahoo’s a good buy right now whatever it is 23, 24 dollars a share?
BG: I don’t know. Are you buying it?
MA: No I don’t go Long…I don’t buy public companies stock. So matt which company will have a liquidity event first? LinkedIn? Or Facebook?
MC: Oh I don’t know, I think neither one of the companies is really particularly focused on that or the timing of that, which as a shareholder in both companies make me really happy, because I think that both LinkedIn and Facebook are both companies that really understand you have to build and deliver on a great product that solves real problems and that delivers real value to people, to end users and then the rest will follow. And I’m really confident on the path that both are on there, so well see. I think it’s fair to say that neither company is really focused on that.
MA: One or two more questions, let’s get back to benchmark for a second, what’s your focus going to be here, who should be pitching you?
MC: So I think at a general level, as I’ve said to a couple of other people, I’m pretty sure what it’s not going to be, I’m pretty sure it’s not going to be semiconductors, and optical networks and switching, and things I don’t know a lot about. The things I spent my time in, that I’m most passionate about, are around internet related products and services and now that mobile and the web are converging I probably kind of brings those things together, in that idea. And also to some extent the technologies that imply those things and enable the creation of those products and services, and both of those areas of course are Benchmark’s head. Some really interesting investments , we talked about the things that happened a while back, but there’s been some really interesting things that have happened recently, we talked about some of those, but on the enabling technologies side, MySQL is a great example of a technology that for Facebook has been enormously important and enormously valuable and I think we’re actually in a time now where there’s a lot of innovation happening around open source enabling technologies and I think there’s exciting opportunities there. But at the end of the day the thing that is most core for me is the products and services that exist on the internet and through mobile, that enable people to have better lives in one way or another.
MA: What do you think about Facebook’s open strategy, they haven’t really embraced the iPhone platform, android or anything? Will we see something from them on the short term?
MC: Facebook’s done a lot with iPhone actually.
MA: With the actual SDK? On the phone software, nothing’s been announced right?
MC: That’s still a process in development.
MA: Sure, but I would have loved to see them up on stage, you know, it seems to me that social networking is such a natural for a mobile device.
MC: No, we think that mobile is really important, and we’re really excited about all things mobile, and Facebook’s actually very active in mobile. You touched on the i-phone, but there’s also Facebook applications that are available on a lot of other mobile devices We have a website, that is very high traffic, all across the world SMS and MMS services built into the Facebook Applicaton, which is very popular.
MA: So, I guess to end, surprised you don’t talk much about China, you’ve spent a lot of time there, you have so much experience there, does Benchmark have any investments in China? Do you see that as a potential focus in the future?
BG: We haven’t done any direct investments in China, we’ve made several trips, in fact it was a trip 5 years ago to China where I met with T C when they were private that led me to comeback and invest into second life. So one of the reasons we’re ahead of the crowd from I think from a digital item type business model is because we were over there paying attention. We had a China deal present here on Monday at the partners meeting, I will be selected, you know MySQL was a European deal we ended up doing here out of this partnership. To the extent that you’ll be traveling across the globe, we’d really like there to be a reason for our involvement, and we’d probably like to partner with a local player, that kind of thing. So we will look at deals over there. I’m blown away by the spirit of entrepreneurs over there. You’d be blown away, it takes a day and a half to where you realize, this guys working 70 hours a week, their pumped, they think they can change the world, and it’s energizing and it’s an important movement, there’ll be ton of success there. We’re less convinced that we should take half our partners and put them on planes to China and fill our portfolio with deals, just because we believe that early stage investing, Bob likes to call it the shoe leather business, you have to be on the ground touching these companies if you’re going to add value, it’s hard to do from far away.
MA: You invest as little as a hundred thousand on your deals right?
BG: We have…
MA: And up to 15 million or so?
BG: We have, but actually we’re not hardcore we have to be series A but it turns out it’s about 75-80% of what we do, occasionally we’ll make a deal we’re super excited about, we may have missed or we know an executive that’s going in, or we’ll do something later, but it’s not our core business model.
MA: Well you guys have given me a lot of your time, I really appreciate it, thanks very much. Congratulations to both of you.
BG: Thank you we’re super excited
MC: Thank you.