Benchmark's Peter Fenton on investing in French startups

Zenly, Sorare... and more. Peter Fenton, General Partner at Benchmark Capital has invested in multiple French startups during the past years without having a team in Europe. To learn more on how he is managing its investments and what he is looking for, STATION F interviewed him.

How did you become an investor?

I grew up in Silicon Valley and my dad was a startup CEO. In a sense it was in the blood that I would be attracted to entrepreneurship. In my youth my dad would really criticize these people giving him advice with no contact and they were called venture capitalists. Seeds were planted, that's what I needed to become. The reality is he eventually became a venture capitalist at age 50. I was already in college and had the ability to learn through his practice in the business how fulfilling it could be and I was really curious about venture capital, particularly where we are less looking at data and spreadsheets trying to come to some numerical truth, rather than taking a bet to back an entrepreneur in realizing their full potential and the vision they have for the future. 

I got into venture in my mid twenties after running a startup for a couple of years because I felt from my father’s advice that you can’t be fully effective as a partner if you haven’t walked a mile in the shoes. Then I started at Accel Partners. I was very fortunate to be there when we did the Series A investment in Facebook so I got the chance to see what radical success looks like. I was there for 7 years before coming up to Benchmark. 

How do you identify those killer teams and projects?

Part of what Benchmark - and I by extension - looks for is an extraordinary entrepreneur who has a bold vision while being hyper pragmatic because if the vision discouple from the reality you get into loads of trouble. When the vision is that you want to build a company to make some money or sell to a bigger company, you don’t unlock the full potential of the humans who are serving the purpose of the company. We look for that balance. 

One of the secrets of venture that is not well known is that it’s not a high technology business. High-tech investing is a whole category but the vast majority of companies that stand out started out with less than 5 people building a product, it didn’t require 5 years of research and development but in fact started in 9 months or less. This is true for all the big companies that we know of today. Not all I should say! But all the breakout trillion dollars market cap companies being Apple, Google, Facebook or Microsoft. Part of what we stand for in early stage venture is the idea that it’s never too early. In Benchmark we are happy to invest if there’s only one person. About a third of my investments have been in companies with 3 people or less, with no product and without PowerPoint slides. We don’t use slides anymore! People used to believe they only need a slide deck but actually not! Typically it’s a story. So 3 people and a story looks just fine for us. 

What advice would you give to early-stage founders? What do you look for at Benchmark? 

Know your business and demonstrate your potential! The opportunities tend to do better when there are some measures of uptake, when the experiments have been run and the feedback loop is not conceptual but empirical. This is especially true for consumer facing companies. The really successful consumer internet companies have been able to prove that traction before they took venture capital and they used venture capital to scale. 

I have invested recently in Paris into consumer facing companies: Sorare and Zenly. Both of them, with very little money, were able to get from conception to launch in a year or less. Also, both companies tackle a predominant and global need, not a niche. Both Zenly and Sorare have that foundation you typically see for the breakout companies, the ones that really achieve grand scale. Obviously, there is a set of preconditions that have to be in place before you can launch. We get to the market timing question which is: when is the market ready? If you think about the remaining best ones (Twitter, Instagram, Uber, etc), they all came up with a precondition of a broadband, mobile, mini computer called the smartphone. The smartphone allowed you with the hyper connectivity, the camera, the GPS which were preconditions to create businesses that were impossible to imagine 5 years prior to the 2007 launch of the iPhone. I think blockchain does stand out as one of those precondition technologies and unlocks a set of possible applications that don’t really exist. 

Was it not a bit different for Zenly?

In the case of Zenly, the precondition was more psychological and it was around people feeling more comfortable sharing their personal information with their closed and trusted friends. Most social networks that were successful felt like a violation of privacy at the beginning. But once you have overcome that and you are live, it is hard to go back as the benefits are so profound. Not everybody chooses that path. What we look for is that precondition to be sufficiently disruptive that the incumbent doesn't know what to do about. When we look for disruption we look for that special something where the incumbent can’t respond. For instance, let’s look at one of the most compilent startups of the last decade which is Telegram. What Telegram has been able to pull off is impressive in the product execution standpoint. If you look at WhatsApp you could believe it is pretty much the same. It is not. Telegram had the ambition to be reinventing the incumbent which was slow and sticky. In many ways what people felt about Yahoo relative to Google is what I feel about WhatsApp relative to Telegram. 

You mentioned you invested in two hot French startups. However, Benchmark doesn't (yet) have an office or a team in Europe. How did you spot these deals in Europe?

As a venture firm we build relationships outside of our little geography, mainly with European venture firms. A good example is my investment in ZenDesk which came out through Point9’s team who pointed out to us. A venture firm is not tied to place. Our network is, I think, as strong in Europe as it is in the US. It is not particularly strong in China tho. So those opportunities are coming from this global virtual network of relationships.

The other part is open-source continuing to play an important role in everything we do. Especially in that world we live in, what we look for is everyday a little less place dependent and more content dependent.