Bill Gurley, Benchmark general partner and venture capitalist, talks about his concerns of a bubble in the venture capital industry, the challenges faced by Uber's CEO, and the reasons why the ridesharing company is unlikely to go public in the near future.
The best entrepreneurs thrive in bubbles as they can easily raise money, but abundant funding can attract entitled and less talented startup founders and unwanted government regulation.
Uber's success has led to intense competition but also positioned them with one of the best product-market fits, potentially changing the face of car ownership.
The excessive use of disruptive claims without profitability or adherence to regulation can invite government regulations, leading to negative consequences.
Deep dives
The philosophy of investing in successful entrepreneurs
Bill Gurley believes that the best entrepreneurs are deserved by bubbles, as they can raise money easily in any environment. He focuses on finding companies that have a competitive advantage and can disrupt markets. He looks for network effects and ways to measure and exploit them. Gurley acknowledges that venture capital is a challenging field and that luck plays a significant role. He believes in challenging established rules and knowing which rules to break at the right time.
The early investment in Uber
Benchmark Capital was involved in the early investment in Uber. They initially passed on the seed round but later became aggressive in front of the Series A. Gurley admits that at the time, they did not envision Uber's potential impact on the car ownership market. Uber's success has led to intense competition and subsidy battles with deep-pocketed competitors. Despite this, Gurley believes that Uber has one of the best product-market fits and the potential to change the face of car ownership.
Investments in next-door and the importance of local networks
Another investment that Gurley finds exciting is Nextdoor, a social network for local neighborhoods. He believes that as local advertising avenues such as radio, newspapers, and magazines come under threat, there is a need for a platform that allows microcast advertising in neighborhoods. Additionally, having a social network in the neighborhood provides opportunities for implementing various features and services over time.
The Dangers of Outlandish Promotion and Disruption
The podcast episode discusses the importance of avoiding outlandish promotion and disruption in the tech industry. The speaker argues that excessive use of words like 'trillion' and claims of disrupting every industry without adhering to profitability or regulation can invite government regulations, leading to potential negative consequences.
The Risks of Overpromotion and Excessive Capital
The podcast episode highlights the risks associated with overpromotion and the excessive capital in the startup ecosystem. The speaker discusses how the current landscape of aggressive fundraising and discounted selling in online lending and virtual reality startups can potentially lead to a downturn, emphasizing the need to focus on profitability and sustainable business models. The importance of considering asymmetric returns and the impact of low interest rates on investment behavior are also mentioned.
Benchmark general partner Bill Gurley talks with Recode's Kara Swisher about life as a venture capitalist and why he's still worried about a bubble, a topic he has written about extensively. Great entrepreneurs could raise money at any time, Gurley argues, but when funding is easy to come by, it invites in entitled and less talented startup founders, as well as unwanted government regulation. He also discusses sitting on the board of Uber, challenges faced by its CEO, Travis Kalanick, and why the ridesharing company is unlikely to go public "any time in the near future."
