eBoys
Two years embedded inside Benchmark Capital.
Summary
Stross was given access to Benchmark Capital during 1997 to 1999 and sat in on partner meetings, board meetings and negotiations. The result is a documented account of venture capital decision-making during the internet boom.
The firm's central investment was eBay, where Benchmark invested six and a half million dollars and the position became worth billions, one of the best returns in venture history. Stross covers the diligence, the decision, the recruitment of Meg Whitman as chief executive, and the initial public offering. He also covers investments that went badly, including Webvan, where Benchmark participated in one of the period's largest failures, and several others.
The value of the book is the process detail. Stross records the partner meetings where deals are argued, the way partners defer to whoever will take the board seat, the negotiation of terms, the pressure to move fast when a deal is competitive, the handling of a portfolio company that is failing, and the internal disagreements about whether valuations had detached from reality. He shows the partners knowing that prices were unsustainable and continuing to invest at them, which is the most useful observation in the book.
Benchmark's partners cooperated and the account is not adversarial, though Stross records enough of the failures that it is not promotional either. It stops in 1999, before the collapse, so the reader knows what the participants did not. The specific market conditions are entirely of that period.
Key takeaways 7
- Venture partnerships defer substantially to whichever partner will take the board seat, which means individual conviction rather than collective judgement drives most decisions.
- Competitive deals compress diligence to days, and the partners know this degrades the decision and proceed anyway.
- A single investment can return a fund many times over, which means the portfolio construction question is about not missing those rather than about avoiding losses.
- Recruiting the right chief executive into a portfolio company is frequently the venture investor's largest contribution, and Benchmark's recruitment of Whitman to eBay is the demonstration.
- Partners recognised that valuations had detached from any defensible basis and continued investing at them, because not investing meant not participating.
- Board involvement in a failing company consumes far more partner time than a successful one, which distorts how attention is allocated across a portfolio.
- Marketplace businesses with network effects were identifiable as structurally different from ordinary e-commerce at the time, and the firms that saw this earned the period's best returns.
Who should read it
Founders and venture investors who want a documented view of how partnership decisions actually get made under competitive pressure.
About Randall E. Stross
Business historian and journalist, longtime professor at San Jose State University; wrote reported histories of Edison, Microsoft, Google and Y Combinator.
Each book reports one organisation from inside over a defined stretch of time: a year among Y Combinator's batch companies, Benchmark's partners through the dot-com IPO wave, Edison's Menlo Park laboratory. The result records how venture firms and inventors actually spent their days, which reads as evidence rather than retrospective summary.
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