Reuters
- Tech investors face a radically different landscape after last year's downturn, Bill Gurley said.
- Higher interest rates and less liquidity mean lower valuations and greater onus on profits, he said.
- The venture capitalist questioned the metaverse's potential, and praised Jeff Bezos and Amazon.
Technology investors face a reckoning over how they value companies now that interest rates have climbed and funding has dried up, legendary venture capitalist Bill Gurley has said.
Gurley, a general partner at Benchmark Capital for over 20 years, counts GrubHub, OpenTable, and Zillow among his winning bets. He cast doubt on the transformative potential of the metaverse, lavished praise on Jeff Bezos and Amazon, and touted the value of Howard Marks and Warren Buffett's public writings during a recent episode of "The Tim Ferris Show."
Here are Gurley's 10 best quotes, lightly edited for length and clarity:
1. "Howard Marks and Warren Buffett archive their thought process, just as part of their own process. But it's quite kind if you're a learner in the field, to have someone of that capability who insists upon writing these letters and making them public." (Gurley was underscoring the value of Marks' periodic memos and Buffett's yearly shareholder letters.)
2. "Risk on happens very slowly, almost like a rollercoaster. But when it crashes it happens all at once, so it's more like a sawtooth than a sine wave, and it just crashes and it's painful. That just happened, and it looks like it happens every 7 to 15 years." (he was referring to the roughly 12-year boom in stocks and other risk assets that abruptly ended last year.)
3."Because things got so sloppy with interest rates being near zero, speculation so high, money everywhere, we taught a lot of people not only valuation things that will never be true again, but growth at all costs. 'Spend as much money as you can, you can raise money every nine months if you want to' — because you could. It couldn't be more dramatic how fast it shifted."
4. "Zoom's way better for a board meeting than making everyone get an avatar and sitting around. I just don't think that's going to happen. The premise they have is wrong. I don't think this becomes the next platform, the next smartphone. I don't see that." (Gurley was questioning the potential of the metaverse.)
5. "He's probably the best entrepreneur that I've ever been around or got to know. He's super curious beyond belief. He's willing to change his prior beliefs super fast if he gets something wrong. He has built a organizational framework to take what Jeff Bezos believes and run the whole company that way." (Gurley was talking about the Amazon cofounder and executive chairman.)
6. "Amazon Web Services is maybe a top-five business move in the history of the world. Just the notion that they launched that out of a consumer-internet company and became one of the most important enterprise companies — it's fairly unprecedented, it's just amazing."
7. "If there was a scale of financial sophistication between one and 10, and you would say a really smart person in New York is an 8.5, the average Silicon Valley person on financial literacy is a two." (He pointed to many tech startups' reliance on price-to-revenue ratios instead of discounted cash flows as a valuation metric.)
8. "There's a great reality in venture: you can only lose one times your money. And in a case like Google, you make, what? 10,000 times your money. That asymmetric result means you have to bias towards positive in a situation like that, because the odds are just ridiculously different."
9. "It's very easy to get into a trap in venture where getting 'no' right feels like a win. Obviously you can't do every deal, you can't do every investment, you'll go broke. But getting overly jazzed about correctly identifying a negative or a no, it's just not that big a deal. It's not the job. The job is to find the outliers."
10. "Have a really big tent. We're in a networking business where you're trying to look under every rock for the next possible deal. And cutting off avenues of information or flow is just a really stupid idea." (Gurley was emphasizing the value of a large and wide-ranging professional network for venture capitalists).