In this episode of the 20 minutes VC, host Harry Stebbings interviews Peter Fenton, a general partner at Benchmark and a top-ranked venture capitalist on Forbes' Midas List. Fenton, who has served on the boards of Twitter, Cockroach, Optimizely, New Relic, and Zendesk, shares his journey into venture capital, starting from his childhood exposure to entrepreneurship through his father, to his early career at Accel Partners, and his philosophy on investing and board membership. The conversation delves into the current state of the tech industry, the challenges of new company distribution, the importance of company purpose, and the dynamics of board meetings. Fenton emphasizes the significance of founders with a clear vision and the potential to make bold, transformative decisions, as illustrated by his recent investment in Zenly, a social mapping app that leverages low-power GPS technology to connect friends. Throughout the discussion, Fenton advocates for a Socratic approach to board governance, fostering trust and engagement, and the importance of looking beyond valuation to the broader potential of startups.
Today is a very special episode here on the 20 minutes VC with me, Harry Stebbings at H. Stebbings on Snapchat. Now, I always consider myself truly lucky to do what I do here, but today is one of the episodes where I'm just very, very honored and grateful to have the opportunity to interview such a special individual.
This quote opens the episode, setting the tone of excitement and gratitude for the interview with Peter Fenton.
Well, I was born in the Silicon Valley and my dad had been a startup CEO for the bulk of my childhood. Through that I had a window into just the opportunity and really, I think maybe best ever potential enablement of humanity, of entrepreneurship.
This quote provides insight into Fenton's formative years and the influence of his father's entrepreneurial career on his own path.
And at the time, this is in the late seventy s to mid eighty s, the venture industry was very much in its beginnings. And there was a mixture of people who had some operating experience, but it was just as likely you'd run into someone who had a financial investor background.
This quote provides context on the state of the venture capital industry when Fenton was first introduced to it, highlighting its nascent stage and diverse backgrounds of its professionals.
It's an interesting lens. As you look at our investments, as they cluster around trends or sectors or phenomenon, I think we end up putting a little bit more structure on the phenomenon than reality merits meaning.
This quote emphasizes Fenton's view that while investments may seem to follow trends, each company is unique and should not be oversimplified as merely part of a broader trend.
"And in the case of Zenley, it's the location variable, which, with both ubiquity and their innovation on having a very low battery consumption to signal where you are, that you have a chance to build a social layer, a human communications layer, on top of place."
The quote explains Zenly's innovation in using location services efficiently to create a new layer of social interaction based on users' locations.
"You could look at messaging and say, okay, well, WhatsApp or Telegram have clearly been the open version of iMessage. I think the cameras, now, in many cases, for most people who are heavy users of Snapchat, like myself, the camera has been replaced by Snapchat because it's plugged into a network."
This quote highlights the evolution of apps like WhatsApp, Telegram, and Snapchat that have grown to serve broader functions beyond their original scope by leveraging network effects.
"So when I look at an investment like Zenley and we go into an investment, any new investment, we of course have risks in our mind around things that could go wrong. But we don't obsess on them in a way that's like staring at the guardrail when you're driving."
Peter Fenton emphasizes the importance of focusing on the potential success of an investment rather than being overly preoccupied with what could go wrong.
"And that provoked a transformational idea in his thinking around software containers, and he completely reinvented the company."
Peter Fenton describes how Docker's return to its foundational purpose resulted in a significant pivot that transformed the company’s trajectory.
"But in hindsight, it wasn't the valuation that drove the return."
Peter Fenton discusses how valuation is not the key driver of investment returns and how focusing too much on valuation can detract from understanding a company's full potential.
"I think that it becomes a more competitive environment. I think it's better in that ways for entrepreneurs, they can both shop the market for what's a fair price, but then within that, they got to recognize that they can shop the market for who's an extraordinary investor."
This quote emphasizes the shift towards a more dynamic and competitive market for early-stage investment, which empowers entrepreneurs to seek not just financial backing but also a partnership with investors who provide exceptional value.
"It centers almost entirely, at least in my case, on the quality of the entrepreneur."
Peter Fenton highlights the importance of the entrepreneur's qualities when evaluating investments, especially in the context of market creation, where the market is not yet well-defined or visible.
"I then, in a way that was, I think, nothing less than transformational. Became a student of great board members and interviewed a number of the people in the venture business who I really respected and entrepreneurs, and said, what does it look like to be extraordinary at this?"
Peter Fenton describes his journey from being a subpar board member to learning from others and transforming his approach to become more effective by focusing on asking the right questions and fostering board engagement.
"So a lot of what I've done on that front is to make sure that we have a frame to engage the board the right way."
This quote reflects Peter Fenton's approach to improving board meetings by encouraging a more interactive format that involves engaging directors in a meaningful dialogue rather than relying on presentations.
So the first third of the board meeting, we can all make sure we're on the same page. And then the second 3rd, we can dive into the topics that matter most.
This quote explains the structured approach to board meetings, with a clear division of time between aligning on data and metrics and discussing key issues.
Much of what happens in our companies occurs outside of the board meetings.
Peter Fenton points out that the real work of a company often takes place outside the formal setting of board meetings, highlighting the need for continuous engagement.
I think a huge component of successful board is the trust between the directors and between the management team.
Trust is identified as a foundational element for a successful board, emphasizing the need for honest and open communication.
About 15 to 20 podcasts that I find indispensable in my week.
Peter Fenton explains his personal approach to intellectual enrichment, highlighting the role of podcasts in his weekly routine.
I think by having podcasts as part of your daily routine, it's expansive in ways that I wish for everybody.
This quote promotes the idea that podcasts can broaden one's horizons and fit seamlessly into daily life.
I think one of the defining traits of humanism is an eradication of the notion of the other.
This quote reflects Fenton's view on the importance of recognizing and addressing implicit biases to promote inclusivity and humanism.
What I begged of him was to be the one, and we've all felt this in our past, the individual that crosses the divide to grab you and pull you in.
Fenton shares a personal anecdote to illustrate the concept of overcoming biases by actively including others.
The best founders make me feel like, number one, I can never control them, and I never want to control them.
This quote captures the essence of the founder-board member relationship, emphasizing respect for the founder's autonomy and vision.
Most every great company, at some point in its early to midlife, is given a chance to sell. And that's the specific moment where that founder entrepreneur has to say, in a way that defies logic and conservative linear thinking, what might happen, what might go right.
Peter Fenton discusses a critical juncture in a company's journey, praising founders who choose to pursue their vision despite lucrative offers to sell.
Zenly's innovations on low power GPS reporting have opened up this whole field of opportunity.
Peter Fenton explains the rationale behind the investment, focusing on the innovative aspect of Zenly's technology and its impact on social connectivity.
A product that has that kind of dynamic has the potential to be one of those fundamental tools that you use every day.
This quote highlights the potential of Zenly's product to become an integral part of users' daily lives due to its engaging nature.