Friday Letter: We need more Bill Gurleys above the crowd

Love him or hate, Bill Gurley has been sounding the alarm on the state of venture capital for years.

We had venture news this week that was not related to covid-19 or the economic slowdown when we learned Bill Gurley will not be a partner in Benchmark’s $425 million 10th fund, which the firm is currently marketing to LPs, according to the Wall Street Journal.

You can read our story here.

One of my favorite books about venture capital is eBoys, published in 2000 and written by Randall Stross. Stross got some front-row action into the inner workings of the young firm in the late 1990s, and he writes in detail of how the partners debated over which businesses to back amid the emergence of the internet economy.

The book is subtitled “The true story of the six tall men who backed eBay, Webvan, and other billion-dollar start-ups.” Gurley himself is 6-foot-9 and a former college hoopster at the University of Florida. Gurley is not only a tall character in eBoys, he’s been a tall advocate of VC throughout the years.

Bill Gurley, Benchmark Capital
Bill Gurley speaks at a VCJ conference in October 2012. Photo by Oscar Urizar, RedEyeCollection, for VCJ.

Gurley spoke at our conference in San Francisco in October 2012, expressing concern about LPs pouring too much money into multi-billion-dollar funds. This was about five years before SoftBank launched its $100 billion Vision Fund. Since that fall day eight years ago, we’ve seen mega-funds rise in prominence while valuations and mega-deals also soar.

In August 2015, Gurley, a former tech analyst on Wall Street, went off on a tweetstorm when he speculated that the venture business was nearing the end of a cycle and that investors need to refocus on business model viability and paths to profitability.

Later in 2015, Gurley spoke up again and sounded the alarm on the state of the investment environment. During the Wall Street Journal’s tech conference in Laguna Beach, California, Gurley said “Silicon Valley has entered into a period that’s speculative and unsustainable” in reference to soaring valuations and unabated investment activity.

“If we continue down this path, there’s going to be even more damage if we don’t correct sooner,” he added. “I’d like to see this thing settle down a bit.”

Gurley also compared start-ups holding out on the public market as college undergrads in their 7th or 8th year. These start-ups need to graduate, and that means going public, he said.

IPOs were another topic of interest last year when he held a symposium on direct listings in a somewhat secret meeting that included CEOs, investors and bankers. Part of Gurley’s argument in favor of direct listings is that all the proceeds from the stock’s sale to the public go to founders, employees and investors, rather than the buyside community.

I’m just touching the surface here. Of course, Gurley may be more remembered for him leaving the Uber board in mid-2017, just after CEO Travis Kalanick resigned following months of controversy over that company’s workplace culture.

And when you’re outspoken, you have detractors. Marc Andreessen said he couldn’t stand him and used a reference to the TV show Seinfeld when he described Gurley as his Newman in a 2015 New Yorker article.

Gurley’s blog is called Above the Crowd, and he hasn’t posted since since February 2019. But I hope he continues to speak up publicly about VC.

Inside tip

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