Benchmark (venture capital firm)

Based on Wikipedia: Benchmark (venture capital firm)

In 1997, a small venture capital firm wrote a check for six point seven million dollars to an obscure online auction site. That investment in eBay would become one of the most legendary bets in Silicon Valley history. But the firm behind it—Benchmark Capital—would later become equally famous for something else entirely: suing one of its own founders.

This is the story of a venture capital firm that broke all the rules, made billions doing it, and then found itself at the center of a controversy that forced the entire tech industry to ask an uncomfortable question: When investors bet on founders, who exactly are they betting on?

The Partnership That Broke the Mold

Benchmark was founded in 1995 by five partners: Bob Kagle, Bruce Dunlevie, Andy Rachleff, Kevin Harvey, and Val Vaden. On paper, this sounds like any other venture capital firm launch. In practice, they did something radical.

They made everyone equal.

To understand why this matters, you need to understand how most venture capital firms work. Traditional firms operate like law partnerships or investment banks—hierarchically. There are senior partners who made their names decades ago, junior partners still proving themselves, and associates doing the grunt work. The senior people get the biggest share of profits, the best deal flow, and their names on the door. The founder's name becomes the brand: Kleiner Perkins, Sequoia Capital, Andreessen Horowitz.

Benchmark rejected all of this. No senior partners. No junior partners. No CEO. Everyone shares equally in the profits. Everyone has equal say in investment decisions.

This wasn't idealism—it was strategy. The firm's reasoning was elegant: if everyone shares equally, then everyone is equally accountable. There's no hiding behind a famous name or coasting on past successes. Your compensation comes from investment performance, not management fees. If you're not pulling your weight, your partners feel it directly.

The structure also changes how the firm relates to its portfolio companies. At most venture firms, a single partner "owns" each investment. They join the board, they manage the relationship, and if things go wrong, they bear the responsibility. At Benchmark, the entire partnership shares responsibility for every company. When a partner joins a startup's board, they're not acting alone—they're representing a collective.

The Numbers That Made Legends

For two decades, this model produced staggering returns.

That 1997 eBay investment? Benchmark put in six point seven million dollars for twenty-two point one percent of the company. When eBay went public and grew into a commerce giant, that stake became worth billions. The fund that made that investment reportedly returned over one hundred times the money its limited partners had entrusted to Benchmark.

But eBay wasn't a fluke. Benchmark's first eight funds, raised and invested between 1995 and 2019, returned more than seven and a half times the money invested—after subtracting fees and the firm's share of profits. In an industry where doubling your money is considered respectable and tripling it is excellent, seven and a half times is extraordinary.

The firm's portfolio reads like a who's who of tech success stories: Red Hat, the company that made Linux commercially viable. Snap, the social media platform that pioneered disappearing messages. Elastic, whose search technology powers countless applications. Asana and Amplitude and Confluent—companies that most consumers have never heard of but that other businesses pay millions to use.

And then there was Uber.

The Ride That Changed Everything

In 2011, Benchmark invested twelve million dollars for an eleven percent stake in a scrappy San Francisco startup that let people summon rides from their smartphones. The company was called Uber, and it was run by a brash, aggressive founder named Travis Kalanick.

Kalanick was exactly the kind of founder that venture capitalists love to talk about: relentless, ambitious, willing to break rules and fight regulators and bulldoze anyone who got in his way. Under his leadership, Uber grew from a luxury car service in one city to a global transportation platform valued at tens of billions of dollars.

Benchmark's investment grew with it. By 2019, that twelve million dollars was worth seven billion. By 2023, it had reached nine point four billion.

But the relationship between Benchmark and Kalanick had curdled long before those valuations materialized.

In 2017, Uber was engulfed in scandals. Former employees alleged a toxic workplace culture. The company was accused of using software to evade regulators. A video surfaced of Kalanick berating an Uber driver. The board was in chaos, and investors were growing desperate.

Bill Gurley, the Benchmark partner who had led the Uber investment and joined its board, found himself in an impossible position. He had championed Kalanick for years. Now he was watching the company implode under Kalanick's leadership.

The Lawsuit That Shook Silicon Valley

In August 2017, Benchmark did something that venture capital firms almost never do. They sued their own founder.

The lawsuit alleged that Kalanick had misled Uber's board in order to gain control of additional board seats. It sought his removal from the board of directors entirely. In the genteel world of Silicon Valley venture capital, where disputes are usually resolved through quiet negotiations and carefully worded press releases, this was the equivalent of detonating a bomb in the middle of a dinner party.

Industry observers called it "unprecedented." And they weren't exaggerating.

The unwritten rules of venture capital are built on trust between investors and founders. Investors provide money and advice; founders provide vision and execution. When things go wrong, everyone is supposed to work together to find a solution. Lawsuits are for bankruptcy courts and failed companies, not for disputes between partners who are still sitting on billions of dollars of shared value.

Benchmark had broken the code.

The lawsuit was eventually dismissed in January 2018, part of the conditions that allowed the Japanese conglomerate SoftBank to make a massive investment in Uber. Kalanick was out as CEO but remained on the board for a time. The company eventually went public. Everyone made money.

But the damage to Benchmark's reputation was done.

The Backstabber Question

Here's the thing about venture capital: it runs on reputation. The best startups—the ones most likely to become the next Uber or eBay—have their pick of investors. They don't need Benchmark's money; they need what Benchmark supposedly offers in addition to money: expertise, connections, and partnership.

After the Uber lawsuit, founders started asking a different question: What happens if Benchmark decides I'm the problem?

The Uber situation wasn't isolated. Media reports documented Benchmark's involvement in leadership changes at other portfolio companies. Bill Gurley reportedly helped the board at Nextdoor—a neighborhood social network—replace its founder Nirav Tolia as CEO. At Nanosolar, a solar technology company, founder Martin Roscheisen was removed from his position.

Roscheisen didn't mince words about his experience.

"The backstabber of all founders," he called Benchmark. He said he would never accept investment from the firm again.

Gabriel Puliatti, founder of a startup called Emptor, put it more simply. There was "no way" he would take Benchmark's money, he said. He had "empathized a lot with Travis" during the controversy.

A Hong Kong-based entrepreneur named Larry Salibra wrote that "the cost of accepting investment from Benchmark just went through the roof in minds of founders everywhere."

Delian Asparouhov, who works at Founders Fund—a rival firm that explicitly brands itself as founder-friendly—articulated the critique most sharply:

"I don't know how you explain to founders, 'Hey, the way I do early-stage investing is—I bet on founders,' and then you have this track record of explicitly not betting on founders."

The argument was simple: venture capitalists who remove founders lose access to the best deals. The founders who have the most options—the ones building the most promising companies—will take their business elsewhere.

The Case for Governance

Not everyone agreed that Benchmark had done something wrong. Some industry observers argued that the firm had done exactly what boards of directors are supposed to do: protect shareholders when management fails.

Mark Suster, a partner at Upfront Ventures, offered a defense:

"There are people who are old enough and wise enough, to have a long enough lens, to say, 'You know what, governance matters.'"

This points to a genuine tension in how startups are funded and governed. Venture capitalists aren't just writing checks—they're joining boards of directors. They have fiduciary duties to other shareholders, including employees who hold stock options and limited partners who entrusted them with retirement funds and endowment money.

When a founder is driving a company into the ground, what should a board member do? Look the other way because founders are supposed to be supported unconditionally? Or intervene, even if it means conflict?

The Uber situation was messy precisely because there were no clean answers. Kalanick had built something remarkable. He had also, by many accounts, created a workplace culture that was unsustainable. The company's value and its dysfunction were intertwined, and separating them required choices that would inevitably hurt someone.

Benchmark chose to act. Whether that was courage or betrayal depends entirely on whose perspective you take.

The Hollywood Version

The drama proved irresistible to entertainment executives.

Benchmark's role in the WeWork saga—a different troubled startup where the firm was an early investor—became a plot point in the Apple TV Plus series "WeCrashed," starring Jared Leto and Anne Hathaway. Anthony Edwards portrayed Benchmark co-founder Bruce Dunlevie, who led the firm's seventeen million dollar Series A investment in WeWork in 2012.

The Uber story got its own treatment in the Showtime series "Super Pumped," with Joseph Gordon-Levitt playing Travis Kalanick. Kyle Chandler—best known for playing Coach Taylor in "Friday Night Lights"—portrayed Bill Gurley, showing his journey from enthusiastic backer to reluctant adversary.

There's something fitting about these stories becoming prestige television. The venture capital industry has always mythologized itself, telling stories about visionary founders and the brave investors who believed in them. Benchmark's controversies revealed a messier truth: the relationships between investors and founders are complicated, the incentives don't always align, and sometimes the story doesn't end with everyone getting rich and staying friends.

The Firm Today

Bill Gurley stepped back from his position at Benchmark after twenty-one years with the firm. Matt Cohler and Mitch Lasky also departed after spending more than a decade each as partners. The firm continues with new investors, new funds, and new portfolio companies.

Whether the Uber controversy permanently damaged Benchmark's ability to win the best deals is hard to know. The firm still exists. It still raises money. It still makes investments. The question is whether the founders of the next Uber or eBay will choose Benchmark—or whether they'll remember the lawsuit and look elsewhere.

In venture capital, as in so much of business, reputation is everything. Benchmark built its reputation on returns that seemed almost impossible. It risked that reputation when it decided that governance mattered more than founder loyalty.

The bet on eBay paid off a hundred times over. The bet on Uber paid off too, financially speaking. But the bet on removing Travis Kalanick?

That one is still being counted.