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Benchmark Capital: Setting the Standard

Benchmark Capital is often recognized as the hallmark of Internet venture capital. The numbers speak for themselves; in 1999, 15 of the firm's partner companies debuted in the public marketplace. Among the IPO stand-outs were Ariba (ARBA), Juniper Networks (JNPR), Kana Communications (KANA), and Red Hat Software (RHAT). The combined market capitalization of those four companies' alone equals almost $100 billion. Seven of Benchmark's partner companies were sold during the same year including Accept.com, acquired by Amazon.com (AMZN).

It's clear that Benchmark is attracting the best entrepreneurs with the best Internet models and market opportunities. So it's safe to say that public market investors should be watching the firm's moves closely for clues on markets, models, and companies to invest in.

Reporter@Large had the opportunity to sit down for an exclusive interview with Bill Gurley, a General Partner at Benchmark Capital. Like Softbank's Bill Burnham, Gurley worked as an analyst on Wall Street before entering the venture capital business. In fact, he was the lead analyst on the Amazon.com IPO.

Reporter@Large: Let's talk about traditional venture capital firms vs. the new-age incubators of today's Internet economy.

Gurley: A lot of people are out there talking about the incubators. The problem with incubators is the following: name an Internet Capital Group (ICGE) partner company CEO...you probably can't. But you can name a bunch of the ICGE guys.

We don't see the world that way. We're not at the top of the pyramid with everybody underneath us with puppet strings moving them around. We see ourselves as service providers to entrepreneurs. We want Keith Krach to be a hero as the CEO of Ariba. We want Meg Whitman to be a hero as the CEO of eBay. I think that if someone has a killer idea, they want to have our company building expertise, the brand building, and the network of contacts we provide in order to make them the best possible company they can be.

Reporter@Large: Benchmark seems to have developed a specific business-to-business (B2B) e-commerce investment strategy.

Gurley: We've played B2B pragmatically. We've chosen to focus on horizontals with products and services that cross verticals as opposed to independent vertical exchanges (i.e. SciQuest.com, SQST). In a lot of ways I see the independent vertical exchanges like some of these more narrow-niche business-to-consumer (B2C) categories (i.e. CDNow, CDNW). The more narrow a vertical, the less of a market opportunity.

Reporter@Large: So where is Benchmark in B2B?

Gurley: We've done three enormous B2B deals. One of them is Ariba, already public. Two others are Impresse and TradeOut (both now in registration for IPO). Impresse is an online printing exchange which obviously crosses multiple industries. TradeOut is an online marketplace for businesses buying and selling excess inventory and idle assets.

Reporter@Large: One investment of Benchmark's that is quite interesting -- and you're a board member of the company is Nordstrom.com. A little clicks-and-bricks strategy here?

Gurley:



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