July 21, 2023 • 51 mins
Emily Chang and Bill Gurley discuss his keys to success over his decades-long career as a venture capitalist, whether the bubble has finally burst, and his favorite places for Texas BBQ.
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Speaker 1 (00:02):
You live here, now do I do? Move here about
a year Austin living. It's good. It's good.
Speaker 2 (00:07):
It's a lot different from northern Californy about it.
Speaker 3 (00:12):
I'm Emily Chang, and this is the Circuit. It's the
live music capital of the world, home to pulsing festivals,
dangerously delicious barbecue, and an emerging tech hub. Build as
an escape from the high taxes and lofty ideals of
Silicon Valley. It's now also home to one venture capitalist
(00:34):
who always stood above the crowd.
Speaker 4 (00:36):
What are the keys to your winning strategy?
Speaker 2 (00:39):
To be great at it requires a level of hustle
that's really hard to explain.
Speaker 3 (00:45):
Bill Gurley is famous for his tech investing, betting his
reputation on one of the industry's most controversial unicorns, Uber.
Gurley recently relocated to Austin not to escape anything, per se,
but to come home. I'm here to find out if
this consummate insider has a fresh perspective from the outside
looking in. Here's my conversation with Bill Gurley. You are
(01:11):
one of the most prolific investors in Silicon Valley history.
Speaker 4 (01:14):
You worked at Benchmark for a couple of decades.
Speaker 3 (01:16):
You invested in everything from Zillo to stitch fix to Uber.
And now you've made this big life change. You're living
in Texas, came back to your home state. Why the
big change?
Speaker 2 (01:28):
I think, truth be told, My wife had kind of
made it a part of the marriage acceptance. When we
empty nested. One day we'd come home. Her family's here,
my family's here. So it's actually been planned for a
long time. We bought a property about five years ago.
Speaker 3 (01:44):
You grew up a child of NASA. I think your
dad was one of the earliest employees at NASA. I've
heard you say half the dad's.
Speaker 4 (01:50):
On the street.
Speaker 1 (01:51):
Yeah, absolutely worked at NASA.
Speaker 4 (01:53):
What was that like?
Speaker 1 (01:54):
It was great.
Speaker 2 (01:54):
I mean, my father fell in love with model planes
in rural North Carolina, so he's playing with powered airplanes,
and he went to NC State, got a airn article
engineering degree, went to Langley Air Force Base, and shortly
after being there, they commissioned NASA and invited a bunch
of them to come to Houston. And I would say
that it's been more impactful later in life, because early
(02:17):
in life I didn't know any different. Like NASA was
our life, and like when the launches would go off,
we'd all just like in the movie, like Apollo thirteen.
You know, we'd go over to Summertown a lot like them.
I don't know about the corvettes and all that, but
it was a lot like the movie in terms of
how the families took it all in afterward, especially when
I was fortunate enough to be a part of Silicon Valley.
(02:38):
To imagine, you know, my father going from playing with
model airplanes in his backyard and then you know, and
that's when it's lesi. So he's born in thirty six,
so he'd be eighteen at fifty fifty four or something
like that, and then sixty nine they put a man
on the moon. That's a pretty short window of time,
(03:00):
and to be a part of that is pretty spectacular.
Speaker 4 (03:04):
Your mom was a teacher. My mom was a teacher.
Speaker 1 (03:06):
Yeah.
Speaker 2 (03:07):
The thing that she did which was amazing, and she
unfortunately passed away this past fall. She was just remarkably
dedicated to civic life and volunteering. So in addition she
was a substitute teacher, she was a city alderman for
the first eleven years. She helped incorporate the city. She
won all kind of awards for helping the school district
(03:28):
and helping clean up the town, and having just celebrated
her passing is a time to reflect on that as well.
And it was really really eye opening. I got a
lot of work to do to catch up with the legacy.
Speaker 3 (03:40):
Sheila, you had kind of an unconventional journey to Wall
Street and go to a fancy school, and then you
moved on to Silicon Valley.
Speaker 4 (03:47):
How would you describe it.
Speaker 2 (03:49):
I'll just tell you how it played out. My sister
was probably a big part of it. She was employee
sixty three at Compact, the computer company in Houston. She
was a double out of Rice, so that's really her.
It's a brand most people don't remember today, but pretty
big company. And I worked there in the summer, and
I went to work there for a couple of years.
And it was funny when I was interviewing there, I
(04:11):
was also interviewing at IBM. This kind of like classic
Silicon Valley stuff. And at IBM they put you in
an inside office and no one got a window because
they didn't want anyone out of fairness, and each engineer
had a chalkboard, and then if you worked there five years,
you'd get a whiteboard. And I thought, well, that's so
peculiar that you would mention that. And then at Compact
(04:32):
in Houston, every engineer had a window office with a whiteboard,
and I'm like, well, this is a little better here.
So I went there and I got a little board
as an engineer. After a couple of years, went to
business school and then just got enamored with thinking about
the business side of things and kind of begged my way.
It was a classic story, like just knocking on doors
one summer saying, please interview me, Please interview me.
Speaker 3 (04:55):
So do we need more good old fashioned grit and
less classic pedigree?
Speaker 1 (05:01):
I don't know.
Speaker 2 (05:02):
I think that a lot of successful people get there
via grit and kind of persistence and studying the history.
And I'm actually working on a book that's somewhat related
to a subject. There are certainly those that are kind
of born to it on first or second base. Not
that I had like an excessively difficult childhood or anything
like that.
Speaker 1 (05:22):
I was a middle class family.
Speaker 2 (05:24):
But I do think that those that climb or work
hard and have failure or struggle or you know, push,
end up having a lot of success. I think that's
a prototype.
Speaker 3 (05:38):
You started investing the dot com boom saw the carnage
of the dot com bust. How is twenty twenty three
going to go down in Silicon Valley history?
Speaker 2 (05:47):
It feels very similar. I mean, we could go through
what's similar and what's different, because there's some of both.
But I had a very, very kind of like almost
an awakening understanding of just how cyclical this venture business
is through I was having a conversation with Howard Marcus
that unlocked all this. But he asked me to explain
(06:08):
the tenants of the business, and when we got to
the end, he says, that's a horrible business. And I
said why, and he goes, it will always be cyclical.
But the way the funds flow work, the way that
limited partners commit to funds that used to be ten
years and now or fifteen means that and a very
low barriers to entry. So when things boom, everyone starts
(06:30):
a venture firm. Right in this past boom, in addition
to everyone's starting a venture firm, every venture firm started
multiple venture firms and growth firm and all that money.
Speaker 1 (06:41):
Gets piled up.
Speaker 2 (06:43):
You're slowly taking on risk and you don't realize it,
and it happens every single day along that path up
It's like the roller coaster goes nick nick Nick, and
you're taking more and more risk and you don't know
it because everyone around you is taking the same amount
of risk. Maybe FTX is the perfect pinnacle of this
past one where a bunch of legendary investors have made
(07:05):
five catastrophic risk assumptions where they've just ignored risk, you know,
and they wouldn't have done that in two thousand and nine.
And unfortunately, because the money flows come in so easily,
they're hard to go out. They're committed for fifteen years.
When that bubble finally burst, it's usually ugly, and it
(07:25):
happens fast. Like risk off is right away, risk on
is slow.
Speaker 4 (07:30):
Silicon Valley Bank collapsed in twenty four hours. Yeah right,
this is the bank.
Speaker 3 (07:35):
Two thousands of startups, thousands of firms, thousands of funds.
Speaker 4 (07:41):
How did we get here?
Speaker 2 (07:42):
Yeah, it's a great question. First of all, there's a
couple points I would make. So on March eighth, the
stock was trading at two hundred and sixty dollars a share.
So there are people that want to put this on
risk seeking, it risk taking in Silicon Valley or the community,
or Silicon Valley as a community. But Wall Street got
(08:04):
it wrong too, right, all of Wall Street. If everyone's
so smart, everyone should have been short to stock. It
shouldn't have been a two hundred and sixty dollars a share,
so the world believed that this bank was okay. I
think that it's unquestionably a black Swan event that relates
to interest rate movements. That and you know, just a
combination of variables that haven't been in this place before.
Speaker 1 (08:25):
And then you.
Speaker 2 (08:26):
Had a prototypical classic run on the bank. And there's
a question. There's a lot of questions about whether vcs
should have been calm and supportive versus you know, And
I can see both sides of the story, Like if
I'm the VC that told everyone get out and they
got their money out and they weren't at risk, I
look smart. But I can also see the argument like, oh,
(08:47):
you helped cause this by running out the door. And
I don't think there's a right answer, Like it's very hard,
but maybe because of social media and ability to communicate instantly,
the run on the bank can happen a lot more severe,
a lot more quickly than it ever could have.
Speaker 4 (09:05):
Before Twitter speed.
Speaker 2 (09:07):
Someone will have to write a book after the fact
about whether there were issues around the venture debt.
Speaker 1 (09:14):
Portfolio that was part of this.
Speaker 2 (09:16):
The early statements are not that what they had was
a duration mismatch on their loan portfolio, which any bank
could have made that mistake. I'm not saying that it's
okay that they made it, but any bank could. That
wasn't a Silicon Valley specific. That part wasn't so anyway.
So that's kind of how I look at the backdrop.
Then you get into these questions of, well, what's the
(09:39):
right thing to do. If you're going to allow every depositor,
every bank to be liable for their bank's solvency, that
puts an enormous burden on every consumer and every business owner.
Speaker 1 (09:56):
To need to be worried about that.
Speaker 2 (09:59):
And if all of Wall Street missed it, why is
it that every startup CFO is going to have this
mythical ability to judge the quality of a bank.
Speaker 1 (10:09):
I don't know how you can let that fall on them.
Speaker 2 (10:11):
And the second thing I would say is if you're
going to let these fail, and there's certain people out
there making that argument, then you got to be comfortable
with the consequences. Banks aren't set up to liquidate everybody
all at once. One other thing I would just highlight,
which I think is critically important, is in two thousand
and nine they're in a great financial crisis. You know,
(10:33):
there was a moment in time where Goldman was in
a difficult position. Warren Buffett did a preferred injection of
capital in that and after he put that money in,
the government bailed out Goldman shareholders. That was never even
considered here like Silicon Valley Bank shareholders and debtholders are
(10:56):
all white to zero. So there's a fairness question in
my mind of the people that are saying, oh, you know,
all the depositors should fail when it was back home
in Wall Street where they even saved the equity holders.
Right Like, if I were a Silicon buy Bank cherolder,
I'd say, why did Goldman get special treat what?
Speaker 3 (11:13):
Benmark, did you take your money out? Did you tell
founders to take money?
Speaker 1 (11:17):
We did not.
Speaker 2 (11:17):
We did not, and we did not kind of run
for the doors either. So we did not do that,
and we put our name on a lot of these
support letters of it. I think those were an effort
to try and get an acquire to come in and say,
you know, we'll support that which didn't happen, So I
don't know that that played a role.
Speaker 4 (11:35):
What about the folks blaming vcs, is that fair?
Speaker 2 (11:38):
I think it's an unanswerable question because it's that classic
prisoner's dilemma problem more hazard that they study in college.
You know, the only way you're you're going to be
safe is if everyone behaves like you do.
Speaker 1 (11:50):
And that's not what happened. Right Clearly we had it
run on the bank.
Speaker 2 (11:54):
And I can't blame an entrepreneur who has to make
payroll for his employeloyees or her employees, because I've seen
these people like for trying to get out first.
Speaker 1 (12:04):
I just that's their job.
Speaker 3 (12:07):
You know, you had some vic's giving out personal cash
to help companies make it payroll. Do you think, if anything,
this crisis will show founders.
Speaker 4 (12:16):
Who to trust.
Speaker 2 (12:18):
I'm able to talk more freely at the end of
my career than if I were at the beginning. That
every venture capitalist, when they open their mouth in front
of a microphone, which I guess I'm doing right now,
is talking to the entrepreneurs they haven't met yet. There
is so much important criticality in getting in front of
the right pitches that everyone wants to look like the
(12:40):
best actor, and so I'm not at all surprised that
you have these types of behavior. The problem is that's
the exact same type of behavior that leads to the
FTX situation because you take yourself out of a governance
role completely, because you just become the founder cheerleader, because
that does endear yourself to.
Speaker 1 (13:02):
A certain type of entrepreneur. So it's it's tricky.
Speaker 3 (13:06):
Well, there's this proposal that would hold vcs personally liable
for their startups mistakes that actually has some support.
Speaker 4 (13:13):
Is that something that are kind of reforming.
Speaker 1 (13:16):
Here's where I would come out on the whole thing.
Speaker 2 (13:18):
You know, if you take a look at the you know,
Fortune fifty over the past forty years, and I think
what you'll see is that that companies that are kind
of legacy companies in the US, like car companies or
insurance companies, slowly get replaced by these few venture backed
companies that become the Apples and Googles and facebooks of
(13:41):
the world. And you know, there is a bit of
a bet on the come notion that if we allow
the exercise of broad experimentation against company formation, that that
primordial soup will lead to these companies coming out and
having growth. If you take those out, you end up
where a lot of your your European economies are where
(14:04):
the companies that are big today are the ones that
were big, you know, forty years ago, and that has
an impact on growth, It has an impact on job creation.
If you make it harder or more difficult, or or
more liability to handing out dollars, it'll just raise the
cost of venture capital for the incremental entrepreneur.
Speaker 3 (14:25):
So when now that you can say whatever you want,
when that doest settles, how bad does this get?
Speaker 4 (14:31):
Like what is the wreckage left?
Speaker 1 (14:33):
I don't know.
Speaker 2 (14:33):
I mean, if if let's say that the FED hadn't
stepped up in Silicon Valley Bank failed and like a
whole bunch of startups lost their venture dollars, that would
have been an event that I think would have been
way worse than O one like that would have been catastrophic.
If it's funny, if you go back to the one
O two oh three time frame, in ninety nine, every
(14:57):
single major Wall Street firm opened an office on Sandhill Road.
All the publications Fortune Forbes, they all had people on
the ground. They were paying attention to everything. Everyone was
in on it. One two oh three, they left, like
the media left, the Wall Street firms left, like they
(15:20):
just kind of moved on and they focused on other
things and it got super quiet, and I actually loved
that environment.
Speaker 1 (15:27):
That's a great environment to work on. I hate the
manic stuff.
Speaker 2 (15:30):
But we're not there yet, and this one's going to
be slower because of the amount of money that's out there.
So you talked to a lot of inter capitalists. Most
of them will say something like eighty percent of our
companies have two years of cash. That wasn't true. In
one you didn't have these stockpiles. So I think you're
going to have a slower realization of the consequences of
(15:58):
the bubble that we lived.
Speaker 4 (15:59):
So could we be in for a slow spiral or
a slow.
Speaker 2 (16:03):
I think you could be on a slow, slow bursting right,
like where things like company bankruptcy or shutdowns or sales
for nothing happened slowly over the next three years rather
than all at once. This event with Silicon Valley Bank
could have been all at once moment.
Speaker 1 (16:22):
And you still may see.
Speaker 2 (16:25):
People just decide that Silicon Valley is a place that's
too risky, and it gets back to this like crazy
manic cyclicality that we go through, like because that's the
exact opposite of where everyone was three years ago, like
where I was.
Speaker 1 (16:41):
Being called a chicken little.
Speaker 3 (16:44):
Right people thought you were like the boy who cried
wolf right right right.
Speaker 2 (16:49):
Right, right right right, and you know, and I was
six years too early. But I didn't pull my chips
off the table, but I was worried. But this is
what happens. It's it's really unfortunate. I'd love to think
of out of way to preventing it from happening, because
I think the industry would be better off if it
were more stable, because in these moments, people start asking
(17:10):
questions like should you be more regulated, should you behave
in a different way? And I don't think that's helpful
to the fundamental premise, which is, let's invest money behind
great entrepreneurs and create lots of amazing things.
Speaker 3 (17:25):
Do you think when you think back, do you think
you were too conservative or do you feel vindicated right now?
Speaker 2 (17:30):
I don't think there's any value unfortunately, and this ties
into the cyclicality thing. There's a saying that came up
when I was talking to Howard Marx, which is the
best way to protect yourself against the downside is to
enjoy every last bit of the upside. Venture capital as
an asset category. So talking about it from the LPCE
perspective is something you can't measure in a small window.
(17:55):
You've got to look at it over twenty to forty years,
which is really bizarre because most firms don't have an
employees that long. But the vast majority of the returns
are in these periods at the top of these bubbles.
And so I can remember back in ninety nine, ninety
ninety five, ninety six, a couple of firms saying this
is too manic, we're getting off the field, and then
(18:17):
you missed the best performance possible. So no matter what
I'm saying about, what I'm worried about, or my psychosis
is dripping out of my mouth, you got to keep
executing because the returns at that window are too valuable
for the for the category, which isn't great either, right,
because it looks like you're you're being opportunistic.
Speaker 4 (18:37):
Do you think this is going to impact innovation? More uncertainty,
tighter funding.
Speaker 2 (18:42):
I don't see any reason that that it will impact innovation.
If the FED hadn't come through, and then then you
could see some type of regulatory reform that that might
actually impact you know, It's funny. I was telling you
this when we were talking about getting together. I'm at
the end of my career. One thing that I'm remarkably
(19:04):
aware of is just how rare success is.
Speaker 1 (19:08):
And we tend to.
Speaker 2 (19:10):
Fantasize that every startup can be the next Facebook, but
we know down deep that's not true, and actually the
odds are much more likely you're going to fail, and
the success is so rare. When we're not staring down
the barrel of a Silicon Valley bank problem, we often
talk about how do you get access to capital the
(19:31):
more entrepreneurs, how do you expand the diversity of people
that can get access to capital? And all of those
efforts are about making it easier to hand out money,
which is is what we see when we're not in
this moment of panic, which seems to be the attitude
people want to have to bring entrepreneurism to a much
broader array of possible outcomes. So I would hate that
(19:55):
if we just you know, went this other way, we
would kind of run contrary to that. But that's what
happens in these cycles. People get caught up in the
in the problem that feels right at the moment.
Speaker 4 (20:06):
What's your advice to startups?
Speaker 2 (20:07):
My advice is pretty simple, which is that thing we
lived through the last three or four years that was
the fantasy. Like some people sometimes I hear I'm gonna
go well as soon as things go back to the
way they were, that's a catastrophically disastrous like mindset, like
assume this is normal. And so unfortunately, there are a
(20:29):
lot of people that that mark themselves to market in
their brain, you know, at the top of the bubble.
Speaker 1 (20:35):
But it's gone.
Speaker 2 (20:36):
Even if something like that happens again, it's fifteen years
in the future. So you're not gonna You're not gonna
wait around for So you've got to recognize what the
reality is today, what your company really might be worth today,
what you know studied the public comparables in your in
your category, right, what are they trading at today?
Speaker 1 (20:54):
Those are the marks you're gonna have to.
Speaker 3 (20:56):
What about your advice to investors, It's gonna be an
string three or four years back in one the investors
that paid the biggest price for the late stage investors.
Speaker 2 (21:06):
So people that wrote really big checks at really high evaluations,
and it was fairly catastrophic for a lot of those.
Like I said, I think this is going to take
three or four years to play out, and so it's
going to be hard to know historically. And when you
say investors, it's hard to know whether you're talking about
a venture investor, a growth investor, or an LP that
(21:27):
might invest in venture Historically, the cohorts that are kind
of scarred are kind of scarred universally, even across the
better venture capital firms. The best venture firm might have
funds that are ten x or more in a good time,
but in bad time there'll be one x, right, and
(21:50):
so good times help almost everybody, but bad times hurt
almost everybody. It's probably a really good time to commit
money to a new venture fund, especially someone someone that
has experience and is leaving another one because they're not
shoveling any you know stuff.
Speaker 1 (22:09):
You know, they don't.
Speaker 2 (22:10):
Have the workload, because there's a lot of work right
now that's very feels counterproductive, that is just cleaning up.
And if you were new and writing new checks in
this environment, you didn't have the baggage, that'd be pretty interesting, interesting,
and I suspect the cohort from here forward will be
pretty good.
Speaker 3 (22:30):
Actually, well, you did have a lot of success navigating
the ups and downs. You generated more returns than any VC.
Speaker 4 (22:41):
It's a lot. You made a lot of money. How
much was it more than a billion? Or Moth said
it was more than a billion.
Speaker 2 (22:50):
I've never I've never had that conversation before, but it's
less than that.
Speaker 3 (22:54):
Okay, it's a lot. The way you did it is
you know, people revere you. What are the key to
your winning strategy?
Speaker 2 (23:03):
The first thing I would say before I answer this
question is there are a lot of amazing venture capitalists
and they tend to come.
Speaker 1 (23:11):
From very different backgrounds.
Speaker 2 (23:13):
So, you know, I think about the way John dor
executed the business. It's very different than the way Mike
Maritt executed the business. And they're both legendary, right and
both wildly successful. John comes from more of a sales
background and is an unbelievable champion for his companies. And
I always thought of Mike's approach as more kind of
(23:35):
analytical cerebic, Like they're just all these different backgrounds. So
I don't know that there's a right answer to the question,
But for me, the thing that I tried to do
is just study and learn and read. I think anyone
in any industry or any field can benefit greatly by
studying the history of the people that have come before
(23:59):
them and thee I did a speech at University of
Texas here a few years ago, and I looked.
Speaker 1 (24:04):
At Bob Dylan and Danny Meyer.
Speaker 2 (24:06):
I read it, and they both went very deep on
the historic artisans in their business, and they.
Speaker 1 (24:15):
Tried to meet them, and they tried to hang out.
And I think that a lot can come from that.
Speaker 2 (24:20):
The other thing I would say about venture is and
one of the reasons why I eventually decided to step
away from new investments is to be great at it
requires a level of hustle that's really hard to explain.
And the reason is you're trying to maximize the optionality
that you get in front of a home run pitch,
(24:41):
and to do that, you have to look under every
rock you possibly can. And so if you're not at
the incremental conference, if you're not calling on the incremental
product manager, if you're not studying some new business model
or new platform, you know AI, if you're not just
in every meeting, then you're lowering the chance that you're
(25:04):
going to be successful. It's an exhausting game, and there's
amazing people at other firms doing the exact same thing.
Speaker 3 (25:11):
I mean, there's this whole debit do you have to
be technical or not? Do you have to be a
founder or not? Are you saying there's just no?
Speaker 1 (25:16):
I don't think that's true.
Speaker 2 (25:18):
I think that's all back to what I said earlier,
which is someone talking their book hoping to spell that
narrative out. There are a few great vcs that used
to be operators. I'd say there's.
Speaker 1 (25:32):
More that aren't.
Speaker 2 (25:33):
Actually, you know, Writs wasn't really I mean, Door wasn't.
Spending two years at a company doesn't really count as
like running something.
Speaker 3 (25:41):
So what about this is the stuff that it took
to be a good investor the last decade going to
be different than the stuff it's going to take in
the next I doubt it.
Speaker 2 (25:49):
They're part of it's being great at investing, And that's
where I think studying the history not just a venture
capital but of investing generally is super helpful. Like understanding
how great investors think is important. The people that end
up buying the product that we helped create and Shepherd
(26:10):
is actually Wall Street right, and so understanding what matters
to them matters. The problem that many operators have, and
I've worked with some great was like Mitch Laski, who
became a great venture capit as a benchmark. I was
on his board. But the operator struggle at first with
two mistakes. One they actually think they can put their
hand on the wheel a lot more because they had
(26:32):
it on the wheel, but I never had that feeling,
so I'm not actually trying to take it over. And
then two, sometimes they imagine themselves in the seat and
don't do enough analysis of whether the individual is capable
of becoming a CEO.
Speaker 4 (26:47):
Interesting.
Speaker 2 (26:48):
Interesting, And I think the flip side to make that
argument as well, which I'm sure many would is some
operator founders feel like the investor only VC doesn't have
the right level of empathy for the day to day job.
So I'm sure that's a fair argument as well. But
there's no analytical data point that suggests only one kind
(27:10):
can do it. There's winners of all backgrounds.
Speaker 3 (27:13):
You covered Amazon as an analyst in the nineties before
Amazon was, you know, barely more than a bookstore.
Speaker 4 (27:18):
What really sticks with you? You saw Jeff Bezos up close.
What sticks with you from those days.
Speaker 2 (27:25):
I had been at CSF First Boston and I was
I was covering PC hardware and software and I was
literally about to leave.
Speaker 1 (27:33):
I was going to go to the to.
Speaker 2 (27:34):
The Byside and for a Capitol Group work for Capital Group,
and Frank qua Trone called me, and I don't remember
who gave me my name, but he was leaving Morgan
Stanley and starting this new bank.
Speaker 1 (27:45):
You know.
Speaker 2 (27:45):
I told him I think I'm kind of done with
equity research, and he said, well, you know what, if
you come to work for me, I'll and I'll bring
you to Silka Vallee, I introduce you to everyone I know,
and you can cover whatever category you want. So the
Internet was starting to emerge, and I said, okay, Well
I eventually he said okay, And at first I was
terrified because I really.
Speaker 1 (28:06):
Didn't know what I got myself into.
Speaker 2 (28:08):
But I've been very fortunate in a very short career
as salesia analysts to meet Michael Dell, to meet Bill
Gates and just hanging out with them and having a
chance to have dinner or whatever. Then you're looking in
this new category and you meet someone like Jeff, and
it's clear that, oh this is like that. I'd say
it's easier than it sounds like. Getting the meeting might
(28:31):
be hard, but like understanding that he's way different than
the other entrepreneurs wasn't that hard. One other thing I'd
say about Jeff that I still believe is true today.
Because he came from D E. Shaw and because he
came from Wall Street, he understood how to talk to
shareholders in a way that no one else did. So
if you reread his s one where he writes a letter,
(28:53):
it's titled to our shareowners, and he talks a lot
about them. All the entrepreneurs followed Jeff that wrote that letter,
we're kind of like, screw you, Wall Street. I'm going
to run it my own way. And it's not actually
what Jeff says. And he says I'm going to run
it for the long term, but he says I'm doing
that for you, which is very different, whereas the other
(29:15):
people kind of wrote We're going to run it our
way and not for you. And so he was special,
like you endear yourself to a community when you talk
to him in a respectful way.
Speaker 3 (29:25):
So how much is it about the individual versus the
team versus the moment, about luck versus skill in all matters.
Speaker 2 (29:32):
There are certain business models that are more prone to
network effects a dating app or a social network, and
if they take fire, it can be just hold on.
And in those cases I would say it's about timing
and getting the product exactly right. To get it to
(29:57):
a really big outcome requires so one to be a
great CEO. And there's this blog post Ben Horowitz wrote
that I always sticks in my brain where he's talking about,
and once again I think this is venture capital is
talking to the founder they haven't met yet, but he's saying,
we only want to back people that go all the way.
And the truth matter is every VC wants that because
(30:19):
hiring a CEO is a fifty to fifty bet. So
your expected value is now cut in half.
Speaker 1 (30:25):
But you have to somewhere deep.
Speaker 2 (30:28):
In his post there's a paragraph that says that the
founder has to want to learn to be a great CEO,
and that part's hard. We all had a remarkably unfair
kind of wild card with Bill Campbell, who who was
remarkably generous to a handful of venture firms, not just
Benchmark Kleiner, many others, and he spent time helping these
(30:53):
founders be CEOs. As I understand it, he was still
in the management team meeting at Google ten years after
they went public, and you know, people talk about Eric
Smith coming on, but they had Bill Campbell in there,
you know, And so it's hard. It's hard. That part's hard,
Like why in the world would a twenty two year
old founder be good at managing ten thousand people?
Speaker 4 (31:15):
So let's talk about that.
Speaker 3 (31:16):
Your investment in Uber is legend in part because you
made a lot of money and also all the drama.
Speaker 1 (31:21):
Yeah, when you look.
Speaker 4 (31:22):
Back on that, how do you reflect? Is there anything
that you would have done differently?
Speaker 2 (31:26):
Yeah, I've said this publicly, like I think in a
perfectly executed world from a venture capitalist perspective, that doesn't happen.
Like we help the founder and the team, you know,
navigate their way to a successful company. And I think
I won't name any names, but I think there are
(31:46):
plenty of entrepreneurs from previous generations that are not perfect
humans and matured along the way right and became different
people and different leaders, And you'd like to make that happen.
Speaker 1 (32:01):
It's quite sad.
Speaker 2 (32:02):
Emeil Michael and I were actually working quite hard to
try and get Campbell, who we had both had experience with,
to come in and try and help us, and he
unfortunately had started to decline and health at that moment
at times. So it's not from a lack of effort.
There were lots and lots of tries, but it didn't
work out. Whether it was adding board members or the
(32:22):
type of governance or all that. Like, we didn't quite
get it there, and things started to spiral before and
at that point like it was, I think all the stakeholders, employees, customers, drivers,
it was all at risk, which created the need for
something a little more unusual. But yes, definitely, when I reflect,
(32:44):
I would love to think we could have done something
different that would have landed it all in a different place.
Speaker 3 (32:51):
I mean, some people think it should have happened sooner.
There's a school of people who think if Travis was
still there, who was controversial, larger than life founder, maybe
Uber would be worth more.
Speaker 2 (33:00):
What do you think, Well, one, it's an impossible question
to answer. I do think that the number of things
that were going on at that I think it was
the January through June of twenty seventeen, the number of
things that had happened to the company were at that moment,
I think insurmountable. So we had five different state attorney
(33:24):
generals running investigations. There were so many independent committees of
the board that I couldn't keep track of the meetings.
The market share was in free fall, lift was taking
sure left and right. I just think today we're getting
over or we I still talk about it in Royal
but Badara is helping execute past that stigma. But I
(33:46):
know people I know, you know people that would just
not say the word ober, wouldn't get in, one wouldn't
like and that was a community of potential customers. The
phrase we had used internally and with other investors as
there was a group of five investors actually that that
all kind of came together was this is going to
happen eventually, and what's going to be the value of
(34:09):
the ASKT if we let it go down? So I
don't I don't think the theoretical, you know, would it
be worth more now if someone else were running it
is possible. Have there not been a change made, I
think the asset value would be lower, not higher, because
everything was coming in on itself. So I don't think
we could have gotten to the imaginary question that they
(34:32):
want to pose.
Speaker 4 (34:33):
Well, I just like to ask impossible questions.
Speaker 2 (34:35):
And I you know, that's funny. I sent darn note
the other day at the time. You know, we taught
about the CEO search in a two step way, which
is we've got all these fires, like tons of fires.
There was there were specific fires in South America and
the UK in addition to everything else that I had mentioned.
Speaker 1 (34:56):
And by the way, we were losing billions of dollars
a year. Did I mention that?
Speaker 2 (35:02):
So it was a hot mess and Dark took that job.
And that's pretty bold thing to do. And if you
look at where the company is today, the fires are
all out. And so I realized I had in cinema
note and I just said, you know, thank you because
(35:22):
it I think everyone that has anything to do with
the company of employee, shareholder, investor driver or whatever are
in a better place because of what he did. And
it was really hard, and some people are are now
kind of getting after him, like, well, what you know,
should the stock be higher? That kind of thing, and
I'm like, well, you know, let's give him credit for
the first part. Now he's in a place where I
(35:44):
think the network effects are getting stronger. I think he's
done a great job. I think they're right on the
cost of profitability depends on how you define profitability. And
he feels pretty good. So let's see. Let's see what's
in the next chapter. But I gotta give him an
a plus for the first half.
Speaker 4 (35:59):
All right, we got a grade from Bill Gurley. Okay,
fair enough.
Speaker 3 (36:03):
It caught Hollywood's attention, and my mom is so excited.
We're talking because she loves the Bill Gurley that's played
by a Kyle Chandler in the Showtime Uber show.
Speaker 4 (36:13):
Did you watch it? Like, what did you think of
his portrayal?
Speaker 2 (36:16):
I did watch it. I mean, I hope this doesn't
sound bad. But every single female that I know came
up to me and said exactly what your mom said.
So they said, Wow, you're so lucky to be playing
by Kyle. But none of them said and he looks
a lot like you. They didn't say that second work.
I just got the first part. But I was a
huge fan of Friday Night Lights. I had watched the
(36:37):
whole thing. I read the original Dissinger book that came
out because I grew up in Texas and that show
was amazing, and he was amazing. The person he portrayed
is certainly a much better version of myself, So I
should be fortunate because of that. I think, you know,
it's funny because I watched I was initially nervous about
(36:58):
watching it, but there was so much There were a
lot of things that weren't true, like that were just
kind of embellished. That made it easier to watch because
it wasn't It wasn't like reliving the whole thing, you know.
There was also this other show that Benchmark was portrayed in,
We Crashed, and I thought that they did a really
(37:20):
amazing job in that one of showing how the crazy
soft bank money made it easier, I mean harder, much
much harder to manage the company to the right place.
You were asking me earlier about regrets and looking back,
and having someone come in and just hand three billion
(37:41):
dollars to your founder and tell them to be crazier
is really hard to manage well, because.
Speaker 3 (37:47):
Benchmark kind of got an anti founder narrative out of that.
Speaker 4 (37:51):
First it was Uber, then it was Adam Newman that
we were.
Speaker 1 (37:53):
Right, and and is that fair?
Speaker 2 (37:56):
The point I was making it in that one was
they just did a great job of highlighting. You know,
Jared's running around saying, Marsa wants me to be crazier.
That's actually how it was right And I think people
have a hard time believing that was true. But that
was true, and it makes that shepherding job a lot
(38:17):
more difficult.
Speaker 3 (38:17):
But I assume you think the whole sort of anti
founder thing that came out of kind of both of
those situations combines is not fair.
Speaker 2 (38:26):
When we were working with these four other venture firms
and made a decision to try and arrest the situation
at Uber, everyone knew what the consequences of that was.
We weren't like blind. We set around and said, you know,
if we do this, some class of humans are going
(38:46):
to use this against us and point it out and
put us in that bucket. This will sound overly dramatic,
but you know, the thing we told ourselves as we
had it out the door was you know, history will
be on our side.
Speaker 1 (39:00):
And you know, no.
Speaker 2 (39:03):
Matter what the cost was, if I had to go,
if I went back to that moment in time, I
do the exact same thing, and yes, maybe there's a
cost to it, but I didn't the cost wasn't worse
than not doing it, Like it was a known decision
(39:23):
that had consequences.
Speaker 3 (39:25):
The soft bank money, there's Tiger Global, there's big money
coming from Saudi Arabia. All this money not necessarily smart.
How do you think this is going to play out?
How does this impact a longer term problem?
Speaker 2 (39:39):
Well, I mean there's a lot of great sayings I
could use it this moment in time.
Speaker 1 (39:43):
I'll just pick one.
Speaker 2 (39:44):
It's like they say, if there's a fool in every market,
if you don't know who it is, it's probably you.
The markets have a way of separating very risk seeking
individuals from their capital. It may not happen overnight, but
it always happens eventually. Like there's no easy money, Like
it feels like there is a moment in time, but
(40:06):
arbitrage causes that to go away. And I love the
FTX story, not because I want to pick on anybody,
but to make the decision to give money to somebody
whose auditor is someone out of Washington, doesn't audit anybody else,
that has no board, and it has a side business
(40:30):
that's co mingled. Who tells you it's not co mingle?
Then it turns out it was co mingle, like what
are you doing?
Speaker 3 (40:36):
Why did so many people fall for FTX and Sam
bankman free We're talking about legitimate, legendary venture capital firm.
Speaker 2 (40:44):
The numbers were really really big, So those are seductive.
The individual is unique and capable narrative and fomo if
you're missing out, drives a lot of behavior. Silicon Valley
a lot. It's classic. I mean, that's why I like
(41:05):
talking about it, because until you get to that moment,
you don't get to correction, Like you need excessive risk.
Speaker 1 (41:12):
Taking and then you get excessive.
Speaker 2 (41:15):
Arbitrage, which a lot of crypto writ large may have
been just excessive arbitrage taking money from people that wanted
to separate themselves from it, and then you get a correction.
But this isn't new. This goes you know, all the
legendary investment books that go back to the Tulips you
know in Amsterdam, Like, this is classic, it's not new.
Speaker 3 (41:38):
The cult of the founder has long been this Silicon
Valley ideal.
Speaker 4 (41:43):
Does that need to change?
Speaker 2 (41:45):
I don't think so. And the reason I would say
it is that the really really long outcomes tend to
have a founder that stays around for a very long
period of time, whether it's Zuckerberg or I mean the
famous you know, Jeff Bezos, you know, or Steve Jobs
coming back to Apple. Can you believe Steve Jobs came
(42:07):
back to Apple? That company's going bankrupt? Like there's a
true north that they know innately, and there's a drive
that they have to win at all costs that you
can't get in a hired ceo.
Speaker 1 (42:24):
You just can't.
Speaker 3 (42:26):
What about Elon Musk obviously revolutionized space electric cars?
Speaker 4 (42:31):
Can he win at Twitter?
Speaker 1 (42:32):
Well, before you go to can't he win at Twitter?
Look what he's done.
Speaker 2 (42:38):
I saw this documentary where they interviewed the astronauts when
the SpaceX vehicle opened up for the first time they
were on the space station. They said they'd never seen
a rocket more clean and amazing. The car company in
their own battery factory. These are hard businesses. I would
never have put our venture dollars behind those types of
(43:00):
businesses because they're too hard and he's made it work.
So at this point, like I think, I think you
have to take the other side, like why we would
he fail them?
Speaker 1 (43:11):
Well?
Speaker 4 (43:11):
Benchmark back Twitter? Would you back el on Twitter?
Speaker 2 (43:14):
I personally have a remarkable affection for Twitter and think
that it has radical amounts of optionality beyond where it
is today. Now, whether he'll steer it there or not,
I don't know. And he's created some obstacles that he
may have not needed to create for him.
Speaker 3 (43:33):
Okay, well, so then talking about where you're placing bets, like,
there's been so much.
Speaker 4 (43:36):
Hype around crypto and self driving cars and the metaverse.
Speaker 3 (43:41):
What is going to be the next wave of real innovation?
Speaker 2 (43:45):
I think my answer to this is remarkably uninteresting, which
is similar to everyone else. I think the stuff that's
happening in AI feels so much more real than any
of those other things that you mentioned.
Speaker 4 (43:58):
So it's not the next bubble.
Speaker 1 (44:00):
I don't think so.
Speaker 2 (44:02):
And the things we're seeing in very particular verticals like
are super big impact very fast. I think the press
rit large gets caught up in can chat, GBTB a
competitor to Google. Not that, but taking a model and
(44:22):
applying it deeply to a medical use case or a
legal use case, or that's where we're seeing stuff that's
pretty magical.
Speaker 4 (44:30):
How many more billion dollar deals are out there?
Speaker 3 (44:32):
I mean, given sort of the environment, is it going
to be a lot harder to start a billion dollar
company now than it.
Speaker 2 (44:38):
I mean, so a couple of different things there. So one,
it is still a little bit bubbly when it comes
to AI. So the average if it deals hot, you know,
it's pretty expensive to get at first investment, So that's
a negative. On the positive side, it does feel like
there are enough.
Speaker 1 (44:57):
Competitive models that you can go would do a startup
that's that's attacking a very vertical or specific or functional.
Speaker 2 (45:05):
Problem and not be you know, kind of stuck like
maybe startups where it feels like they.
Speaker 1 (45:12):
Are enough alternatives that.
Speaker 2 (45:14):
You can use the tools without without being caught.
Speaker 1 (45:19):
And so that's actually a really big positive.
Speaker 4 (45:21):
So it is an AI or bust. I mean, is
there anything else to invest in?
Speaker 2 (45:26):
Well, you know, one of the reasons that people made
the argument that you needed to pay attention to crypto
was that the developers were all going there. And I
would say one of crypto's most unbelievable challenges is right
now is that the developers are completely enamored with these tools.
They're quite usable, and they're quite easy to apply to
(45:49):
a very specific use case, especially if you can get
access to data. I don't hear of a lot of
other things. I mean, there are there are some vcs
that are very heavy on climates aims, that are doing
things there that's hard to do part time. I think
you're either all in on that or you're not because
there's so much lobbying involved in so much regulatory work.
(46:10):
But for the now, it's it's all Ai.
Speaker 3 (46:13):
The circuit continues after this quick break, after all that
talk about the fate of venture capital, it's time to
dig into another classic Texas barbecue.
Speaker 4 (46:29):
This place is amazing. I'm so excited.
Speaker 3 (46:33):
No, all right, I'm ready for my big Austin barbecue.
Speaker 1 (46:38):
Yes, he look at this.
Speaker 4 (46:40):
Oh my god, Oh my god, this looks amazing.
Speaker 1 (46:45):
You're gonna all this so much.
Speaker 4 (46:48):
Let's taste this brisket.
Speaker 3 (46:52):
Hey, guys, child, if you were going to start a
company today, where would you move?
Speaker 2 (46:59):
Place can be very impactful, and so if I were
like a twenty two year old founder starting something, I'd
go to Silicon Valley just because it's going to increase
your odds of success.
Speaker 4 (47:10):
What about like Miami, La Boston.
Speaker 2 (47:14):
I think many cities, whether it's Austin or Miami, they
have a problem that sounds ironic, but they're a lot
of fun and so I think there's a question as
to whether you attract the very most determined founders.
Speaker 3 (47:33):
Oh, that's a little controversial.
Speaker 2 (47:35):
Which may explain why Seattle's done so. Not that it's
not a wonderful place, but for two thirds.
Speaker 1 (47:42):
Of the year it's dark house exactly.
Speaker 2 (47:44):
I do think there are a lot of contagious qualities
to successful startups. Constantly around other people that are all
in the same game is super helpful.
Speaker 3 (47:55):
So you step back from an active role at Benchmark
a few years ago, how much are you still investing?
Speaker 2 (48:01):
What I really did was stop making new investments, so
I'm still on ten boards.
Speaker 1 (48:05):
The shift in the.
Speaker 2 (48:06):
Markets and the bubble bursting kind of increased the workload
and the time frames. And I think other not naming names,
but I think other vcs have hung around past their
point of relevance.
Speaker 4 (48:20):
I didn't want to be that person you mentioned earlier.
Benchmark has always stayed super small and lean.
Speaker 3 (48:25):
Other venture firms like Andreson Borrowitz kept gotten big, And
you're often pitched against Mark Andresen as sort of an opposite.
Who's model do you think is going to stand the
test of time?
Speaker 4 (48:38):
How do you think about that?
Speaker 1 (48:40):
Well?
Speaker 2 (48:41):
I do think that there are numerous successful models in venture.
I mean, it's not an industry where you can run
the table. I think the one reason that Andresen created
some animosity in the valley was when they came in
they made these bolts statements like we're going to change everything,
(49:02):
We're going to rewrite, We're going to take over.
Speaker 1 (49:04):
It doesn't been too taking over. It's just not structured
any way.
Speaker 3 (49:08):
There are a number of vcs that seem to be
sort of indulging in the politics of anti wokeism and
getting into these various debates. And yeah, it happens on
the other side of the aisle too.
Speaker 4 (49:20):
You know, what do you think of that trend?
Speaker 2 (49:23):
I think I understand some of the issues that caused
them to adopt that mindset. In the past five years,
there have been objective functions injected into startups that aren't
solely how well it's the company doing or how well
is the company's stocked doing. But it becomes hard to
(49:45):
succeed if the employees aren't showing up and saying let's
all march in the same direction. As I understand things
at Google, there's just quite a bit of tension between
the employee base executives there, and it's hard. It makes
the job harder to execute the company.
Speaker 3 (50:06):
Well, and I wonder what happens to the cultural tension
in Silicon Valley when the money's gone right, the party's over,
the money, printer no longer goes or whatever it is.
Speaker 4 (50:19):
How do you think that's going to change things?
Speaker 1 (50:21):
I mean, if it is, it's a good.
Speaker 3 (50:23):
Thing, given obviously the environment that we're moving into. Like
you saw Amazon up close, where's the next Google or
Facebook or Amazon or Apple.
Speaker 4 (50:32):
Going to come from?
Speaker 1 (50:33):
There's always someone that's going to come You think.
Speaker 4 (50:36):
Jeff Bezos will ever come back? Would pull Steve jobs?
Speaker 1 (50:39):
I don't think so.
Speaker 2 (50:40):
I don't think it's very much fun being a public CEO,
especially one of those top five. They invite you to
Washington and yell at you in front of people. Yeah,
where's Larry Page's been in the past ten years? You've
seen him? I haven't seen him.
Speaker 4 (51:00):
I did see him once.
Speaker 1 (51:03):
I haven't seen him.
Speaker 4 (51:04):
I saw him once.
Speaker 1 (51:04):
But yes, he must be perfectly happy to do it
for something.
Speaker 3 (51:09):
All right, Well, maybe we should invite Jeff Bezos and
Larry Page to have some barbecue in Austin. Thanks so
much for listening to this episode of the Circuit. I'm
Emily Chang. You can follow me on Twitter and Instagram
at Emily Chang TV. You can watch new episodes of
the Circuit on Bloomberg Television or on demand by downloading
(51:30):
the Bloomberg app to your Smart TV, and let us
know what you think by leaving us a review. I'm
your host and executive producer. Our senior producer is Lauren Ellis.
Our associate producer is Lizzie Phillip. Our editor is Sarah Livesey.
Speaker 4 (51:44):
Thanks so much for listening.
You live here, now do I do? Move here about
a year Austin living. It's good. It's good.
Speaker 2 (00:07):
It's a lot different from northern Californy about it.
Speaker 3 (00:12):
I'm Emily Chang, and this is the Circuit. It's the
live music capital of the world, home to pulsing festivals,
dangerously delicious barbecue, and an emerging tech hub. Build as
an escape from the high taxes and lofty ideals of
Silicon Valley. It's now also home to one venture capitalist
(00:34):
who always stood above the crowd.
Speaker 4 (00:36):
What are the keys to your winning strategy?
Speaker 2 (00:39):
To be great at it requires a level of hustle
that's really hard to explain.
Speaker 3 (00:45):
Bill Gurley is famous for his tech investing, betting his
reputation on one of the industry's most controversial unicorns, Uber.
Gurley recently relocated to Austin not to escape anything, per se,
but to come home. I'm here to find out if
this consummate insider has a fresh perspective from the outside
looking in. Here's my conversation with Bill Gurley. You are
(01:11):
one of the most prolific investors in Silicon Valley history.
Speaker 4 (01:14):
You worked at Benchmark for a couple of decades.
Speaker 3 (01:16):
You invested in everything from Zillo to stitch fix to Uber.
And now you've made this big life change. You're living
in Texas, came back to your home state. Why the
big change?
Speaker 2 (01:28):
I think, truth be told, My wife had kind of
made it a part of the marriage acceptance. When we
empty nested. One day we'd come home. Her family's here,
my family's here. So it's actually been planned for a
long time. We bought a property about five years ago.
Speaker 3 (01:44):
You grew up a child of NASA. I think your
dad was one of the earliest employees at NASA. I've
heard you say half the dad's.
Speaker 4 (01:50):
On the street.
Speaker 1 (01:51):
Yeah, absolutely worked at NASA.
Speaker 4 (01:53):
What was that like?
Speaker 1 (01:54):
It was great.
Speaker 2 (01:54):
I mean, my father fell in love with model planes
in rural North Carolina, so he's playing with powered airplanes,
and he went to NC State, got a airn article
engineering degree, went to Langley Air Force Base, and shortly
after being there, they commissioned NASA and invited a bunch
of them to come to Houston. And I would say
that it's been more impactful later in life, because early
(02:17):
in life I didn't know any different. Like NASA was
our life, and like when the launches would go off,
we'd all just like in the movie, like Apollo thirteen.
You know, we'd go over to Summertown a lot like them.
I don't know about the corvettes and all that, but
it was a lot like the movie in terms of
how the families took it all in afterward, especially when
I was fortunate enough to be a part of Silicon Valley.
(02:38):
To imagine, you know, my father going from playing with
model airplanes in his backyard and then you know, and
that's when it's lesi. So he's born in thirty six,
so he'd be eighteen at fifty fifty four or something
like that, and then sixty nine they put a man
on the moon. That's a pretty short window of time,
(03:00):
and to be a part of that is pretty spectacular.
Speaker 4 (03:04):
Your mom was a teacher. My mom was a teacher.
Speaker 1 (03:06):
Yeah.
Speaker 2 (03:07):
The thing that she did which was amazing, and she
unfortunately passed away this past fall. She was just remarkably
dedicated to civic life and volunteering. So in addition she
was a substitute teacher, she was a city alderman for
the first eleven years. She helped incorporate the city. She
won all kind of awards for helping the school district
(03:28):
and helping clean up the town, and having just celebrated
her passing is a time to reflect on that as well.
And it was really really eye opening. I got a
lot of work to do to catch up with the legacy.
Speaker 3 (03:40):
Sheila, you had kind of an unconventional journey to Wall
Street and go to a fancy school, and then you
moved on to Silicon Valley.
Speaker 4 (03:47):
How would you describe it.
Speaker 2 (03:49):
I'll just tell you how it played out. My sister
was probably a big part of it. She was employee
sixty three at Compact, the computer company in Houston. She
was a double out of Rice, so that's really her.
It's a brand most people don't remember today, but pretty
big company. And I worked there in the summer, and
I went to work there for a couple of years.
And it was funny when I was interviewing there, I
(04:11):
was also interviewing at IBM. This kind of like classic
Silicon Valley stuff. And at IBM they put you in
an inside office and no one got a window because
they didn't want anyone out of fairness, and each engineer
had a chalkboard, and then if you worked there five years,
you'd get a whiteboard. And I thought, well, that's so
peculiar that you would mention that. And then at Compact
(04:32):
in Houston, every engineer had a window office with a whiteboard,
and I'm like, well, this is a little better here.
So I went there and I got a little board
as an engineer. After a couple of years, went to
business school and then just got enamored with thinking about
the business side of things and kind of begged my way.
It was a classic story, like just knocking on doors
one summer saying, please interview me, Please interview me.
Speaker 3 (04:55):
So do we need more good old fashioned grit and
less classic pedigree?
Speaker 1 (05:01):
I don't know.
Speaker 2 (05:02):
I think that a lot of successful people get there
via grit and kind of persistence and studying the history.
And I'm actually working on a book that's somewhat related
to a subject. There are certainly those that are kind
of born to it on first or second base. Not
that I had like an excessively difficult childhood or anything
like that.
Speaker 1 (05:22):
I was a middle class family.
Speaker 2 (05:24):
But I do think that those that climb or work
hard and have failure or struggle or you know, push,
end up having a lot of success. I think that's
a prototype.
Speaker 3 (05:38):
You started investing the dot com boom saw the carnage
of the dot com bust. How is twenty twenty three
going to go down in Silicon Valley history?
Speaker 2 (05:47):
It feels very similar. I mean, we could go through
what's similar and what's different, because there's some of both.
But I had a very, very kind of like almost
an awakening understanding of just how cyclical this venture business
is through I was having a conversation with Howard Marcus
that unlocked all this. But he asked me to explain
(06:08):
the tenants of the business, and when we got to
the end, he says, that's a horrible business. And I
said why, and he goes, it will always be cyclical.
But the way the funds flow work, the way that
limited partners commit to funds that used to be ten
years and now or fifteen means that and a very
low barriers to entry. So when things boom, everyone starts
(06:30):
a venture firm. Right in this past boom, in addition
to everyone's starting a venture firm, every venture firm started
multiple venture firms and growth firm and all that money.
Speaker 1 (06:41):
Gets piled up.
Speaker 2 (06:43):
You're slowly taking on risk and you don't realize it,
and it happens every single day along that path up
It's like the roller coaster goes nick nick Nick, and
you're taking more and more risk and you don't know
it because everyone around you is taking the same amount
of risk. Maybe FTX is the perfect pinnacle of this
past one where a bunch of legendary investors have made
(07:05):
five catastrophic risk assumptions where they've just ignored risk, you know,
and they wouldn't have done that in two thousand and nine.
And unfortunately, because the money flows come in so easily,
they're hard to go out. They're committed for fifteen years.
When that bubble finally burst, it's usually ugly, and it
(07:25):
happens fast. Like risk off is right away, risk on
is slow.
Speaker 4 (07:30):
Silicon Valley Bank collapsed in twenty four hours. Yeah right,
this is the bank.
Speaker 3 (07:35):
Two thousands of startups, thousands of firms, thousands of funds.
Speaker 4 (07:41):
How did we get here?
Speaker 2 (07:42):
Yeah, it's a great question. First of all, there's a
couple points I would make. So on March eighth, the
stock was trading at two hundred and sixty dollars a share.
So there are people that want to put this on
risk seeking, it risk taking in Silicon Valley or the community,
or Silicon Valley as a community. But Wall Street got
(08:04):
it wrong too, right, all of Wall Street. If everyone's
so smart, everyone should have been short to stock. It
shouldn't have been a two hundred and sixty dollars a share,
so the world believed that this bank was okay. I
think that it's unquestionably a black Swan event that relates
to interest rate movements. That and you know, just a
combination of variables that haven't been in this place before.
Speaker 1 (08:25):
And then you.
Speaker 2 (08:26):
Had a prototypical classic run on the bank. And there's
a question. There's a lot of questions about whether vcs
should have been calm and supportive versus you know, And
I can see both sides of the story, Like if
I'm the VC that told everyone get out and they
got their money out and they weren't at risk, I
look smart. But I can also see the argument like, oh,
(08:47):
you helped cause this by running out the door. And
I don't think there's a right answer, Like it's very hard,
but maybe because of social media and ability to communicate instantly,
the run on the bank can happen a lot more severe,
a lot more quickly than it ever could have.
Speaker 4 (09:05):
Before Twitter speed.
Speaker 2 (09:07):
Someone will have to write a book after the fact
about whether there were issues around the venture debt.
Speaker 1 (09:14):
Portfolio that was part of this.
Speaker 2 (09:16):
The early statements are not that what they had was
a duration mismatch on their loan portfolio, which any bank
could have made that mistake. I'm not saying that it's
okay that they made it, but any bank could. That
wasn't a Silicon Valley specific. That part wasn't so anyway.
So that's kind of how I look at the backdrop.
Then you get into these questions of, well, what's the
(09:39):
right thing to do. If you're going to allow every depositor,
every bank to be liable for their bank's solvency, that
puts an enormous burden on every consumer and every business owner.
Speaker 1 (09:56):
To need to be worried about that.
Speaker 2 (09:59):
And if all of Wall Street missed it, why is
it that every startup CFO is going to have this
mythical ability to judge the quality of a bank.
Speaker 1 (10:09):
I don't know how you can let that fall on them.
Speaker 2 (10:11):
And the second thing I would say is if you're
going to let these fail, and there's certain people out
there making that argument, then you got to be comfortable
with the consequences. Banks aren't set up to liquidate everybody
all at once. One other thing I would just highlight,
which I think is critically important, is in two thousand
and nine they're in a great financial crisis. You know,
(10:33):
there was a moment in time where Goldman was in
a difficult position. Warren Buffett did a preferred injection of
capital in that and after he put that money in,
the government bailed out Goldman shareholders. That was never even
considered here like Silicon Valley Bank shareholders and debtholders are
(10:56):
all white to zero. So there's a fairness question in
my mind of the people that are saying, oh, you know,
all the depositors should fail when it was back home
in Wall Street where they even saved the equity holders.
Right Like, if I were a Silicon buy Bank cherolder,
I'd say, why did Goldman get special treat what?
Speaker 3 (11:13):
Benmark, did you take your money out? Did you tell
founders to take money?
Speaker 1 (11:17):
We did not.
Speaker 2 (11:17):
We did not, and we did not kind of run
for the doors either. So we did not do that,
and we put our name on a lot of these
support letters of it. I think those were an effort
to try and get an acquire to come in and say,
you know, we'll support that which didn't happen, So I
don't know that that played a role.
Speaker 4 (11:35):
What about the folks blaming vcs, is that fair?
Speaker 2 (11:38):
I think it's an unanswerable question because it's that classic
prisoner's dilemma problem more hazard that they study in college.
You know, the only way you're you're going to be
safe is if everyone behaves like you do.
Speaker 1 (11:50):
And that's not what happened. Right Clearly we had it
run on the bank.
Speaker 2 (11:54):
And I can't blame an entrepreneur who has to make
payroll for his employeloyees or her employees, because I've seen
these people like for trying to get out first.
Speaker 1 (12:04):
I just that's their job.
Speaker 3 (12:07):
You know, you had some vic's giving out personal cash
to help companies make it payroll. Do you think, if anything,
this crisis will show founders.
Speaker 4 (12:16):
Who to trust.
Speaker 2 (12:18):
I'm able to talk more freely at the end of
my career than if I were at the beginning. That
every venture capitalist, when they open their mouth in front
of a microphone, which I guess I'm doing right now,
is talking to the entrepreneurs they haven't met yet. There
is so much important criticality in getting in front of
the right pitches that everyone wants to look like the
(12:40):
best actor, and so I'm not at all surprised that
you have these types of behavior. The problem is that's
the exact same type of behavior that leads to the
FTX situation because you take yourself out of a governance
role completely, because you just become the founder cheerleader, because
that does endear yourself to.
Speaker 1 (13:02):
A certain type of entrepreneur. So it's it's tricky.
Speaker 3 (13:06):
Well, there's this proposal that would hold vcs personally liable
for their startups mistakes that actually has some support.
Speaker 4 (13:13):
Is that something that are kind of reforming.
Speaker 1 (13:16):
Here's where I would come out on the whole thing.
Speaker 2 (13:18):
You know, if you take a look at the you know,
Fortune fifty over the past forty years, and I think
what you'll see is that that companies that are kind
of legacy companies in the US, like car companies or
insurance companies, slowly get replaced by these few venture backed
companies that become the Apples and Googles and facebooks of
(13:41):
the world. And you know, there is a bit of
a bet on the come notion that if we allow
the exercise of broad experimentation against company formation, that that
primordial soup will lead to these companies coming out and
having growth. If you take those out, you end up
where a lot of your your European economies are where
(14:04):
the companies that are big today are the ones that
were big, you know, forty years ago, and that has
an impact on growth, It has an impact on job creation.
If you make it harder or more difficult, or or
more liability to handing out dollars, it'll just raise the
cost of venture capital for the incremental entrepreneur.
Speaker 3 (14:25):
So when now that you can say whatever you want,
when that doest settles, how bad does this get?
Speaker 4 (14:31):
Like what is the wreckage left?
Speaker 1 (14:33):
I don't know.
Speaker 2 (14:33):
I mean, if if let's say that the FED hadn't
stepped up in Silicon Valley Bank failed and like a
whole bunch of startups lost their venture dollars, that would
have been an event that I think would have been
way worse than O one like that would have been catastrophic.
If it's funny, if you go back to the one
O two oh three time frame, in ninety nine, every
(14:57):
single major Wall Street firm opened an office on Sandhill Road.
All the publications Fortune Forbes, they all had people on
the ground. They were paying attention to everything. Everyone was
in on it. One two oh three, they left, like
the media left, the Wall Street firms left, like they
(15:20):
just kind of moved on and they focused on other
things and it got super quiet, and I actually loved
that environment.
Speaker 1 (15:27):
That's a great environment to work on. I hate the
manic stuff.
Speaker 2 (15:30):
But we're not there yet, and this one's going to
be slower because of the amount of money that's out there.
So you talked to a lot of inter capitalists. Most
of them will say something like eighty percent of our
companies have two years of cash. That wasn't true. In
one you didn't have these stockpiles. So I think you're
going to have a slower realization of the consequences of
(15:58):
the bubble that we lived.
Speaker 4 (15:59):
So could we be in for a slow spiral or
a slow.
Speaker 2 (16:03):
I think you could be on a slow, slow bursting right,
like where things like company bankruptcy or shutdowns or sales
for nothing happened slowly over the next three years rather
than all at once. This event with Silicon Valley Bank
could have been all at once moment.
Speaker 1 (16:22):
And you still may see.
Speaker 2 (16:25):
People just decide that Silicon Valley is a place that's
too risky, and it gets back to this like crazy
manic cyclicality that we go through, like because that's the
exact opposite of where everyone was three years ago, like
where I was.
Speaker 1 (16:41):
Being called a chicken little.
Speaker 3 (16:44):
Right people thought you were like the boy who cried
wolf right right right.
Speaker 2 (16:49):
Right, right right right, and you know, and I was
six years too early. But I didn't pull my chips
off the table, but I was worried. But this is
what happens. It's it's really unfortunate. I'd love to think
of out of way to preventing it from happening, because
I think the industry would be better off if it
were more stable, because in these moments, people start asking
(17:10):
questions like should you be more regulated, should you behave
in a different way? And I don't think that's helpful
to the fundamental premise, which is, let's invest money behind
great entrepreneurs and create lots of amazing things.
Speaker 3 (17:25):
Do you think when you think back, do you think
you were too conservative or do you feel vindicated right now?
Speaker 2 (17:30):
I don't think there's any value unfortunately, and this ties
into the cyclicality thing. There's a saying that came up
when I was talking to Howard Marx, which is the
best way to protect yourself against the downside is to
enjoy every last bit of the upside. Venture capital as
an asset category. So talking about it from the LPCE
perspective is something you can't measure in a small window.
(17:55):
You've got to look at it over twenty to forty years,
which is really bizarre because most firms don't have an
employees that long. But the vast majority of the returns
are in these periods at the top of these bubbles.
And so I can remember back in ninety nine, ninety
ninety five, ninety six, a couple of firms saying this
is too manic, we're getting off the field, and then
(18:17):
you missed the best performance possible. So no matter what
I'm saying about, what I'm worried about, or my psychosis
is dripping out of my mouth, you got to keep
executing because the returns at that window are too valuable
for the for the category, which isn't great either, right,
because it looks like you're you're being opportunistic.
Speaker 4 (18:37):
Do you think this is going to impact innovation? More uncertainty,
tighter funding.
Speaker 2 (18:42):
I don't see any reason that that it will impact innovation.
If the FED hadn't come through, and then then you
could see some type of regulatory reform that that might
actually impact you know, It's funny. I was telling you
this when we were talking about getting together. I'm at
the end of my career. One thing that I'm remarkably
(19:04):
aware of is just how rare success is.
Speaker 1 (19:08):
And we tend to.
Speaker 2 (19:10):
Fantasize that every startup can be the next Facebook, but
we know down deep that's not true, and actually the
odds are much more likely you're going to fail, and
the success is so rare. When we're not staring down
the barrel of a Silicon Valley bank problem, we often
talk about how do you get access to capital the
(19:31):
more entrepreneurs, how do you expand the diversity of people
that can get access to capital? And all of those
efforts are about making it easier to hand out money,
which is is what we see when we're not in
this moment of panic, which seems to be the attitude
people want to have to bring entrepreneurism to a much
broader array of possible outcomes. So I would hate that
(19:55):
if we just you know, went this other way, we
would kind of run contrary to that. But that's what
happens in these cycles. People get caught up in the
in the problem that feels right at the moment.
Speaker 4 (20:06):
What's your advice to startups?
Speaker 2 (20:07):
My advice is pretty simple, which is that thing we
lived through the last three or four years that was
the fantasy. Like some people sometimes I hear I'm gonna
go well as soon as things go back to the
way they were, that's a catastrophically disastrous like mindset, like
assume this is normal. And so unfortunately, there are a
(20:29):
lot of people that that mark themselves to market in
their brain, you know, at the top of the bubble.
Speaker 1 (20:35):
But it's gone.
Speaker 2 (20:36):
Even if something like that happens again, it's fifteen years
in the future. So you're not gonna You're not gonna
wait around for So you've got to recognize what the
reality is today, what your company really might be worth today,
what you know studied the public comparables in your in
your category, right, what are they trading at today?
Speaker 1 (20:54):
Those are the marks you're gonna have to.
Speaker 3 (20:56):
What about your advice to investors, It's gonna be an
string three or four years back in one the investors
that paid the biggest price for the late stage investors.
Speaker 2 (21:06):
So people that wrote really big checks at really high evaluations,
and it was fairly catastrophic for a lot of those.
Like I said, I think this is going to take
three or four years to play out, and so it's
going to be hard to know historically. And when you
say investors, it's hard to know whether you're talking about
a venture investor, a growth investor, or an LP that
(21:27):
might invest in venture Historically, the cohorts that are kind
of scarred are kind of scarred universally, even across the
better venture capital firms. The best venture firm might have
funds that are ten x or more in a good time,
but in bad time there'll be one x, right, and
(21:50):
so good times help almost everybody, but bad times hurt
almost everybody. It's probably a really good time to commit
money to a new venture fund, especially someone someone that
has experience and is leaving another one because they're not
shoveling any you know stuff.
Speaker 1 (22:09):
You know, they don't.
Speaker 2 (22:10):
Have the workload, because there's a lot of work right
now that's very feels counterproductive, that is just cleaning up.
And if you were new and writing new checks in
this environment, you didn't have the baggage, that'd be pretty interesting, interesting,
and I suspect the cohort from here forward will be
pretty good.
Speaker 3 (22:30):
Actually, well, you did have a lot of success navigating
the ups and downs. You generated more returns than any VC.
Speaker 4 (22:41):
It's a lot. You made a lot of money. How
much was it more than a billion? Or Moth said
it was more than a billion.
Speaker 2 (22:50):
I've never I've never had that conversation before, but it's
less than that.
Speaker 3 (22:54):
Okay, it's a lot. The way you did it is
you know, people revere you. What are the key to
your winning strategy?
Speaker 2 (23:03):
The first thing I would say before I answer this
question is there are a lot of amazing venture capitalists
and they tend to come.
Speaker 1 (23:11):
From very different backgrounds.
Speaker 2 (23:13):
So, you know, I think about the way John dor
executed the business. It's very different than the way Mike
Maritt executed the business. And they're both legendary, right and
both wildly successful. John comes from more of a sales
background and is an unbelievable champion for his companies. And
I always thought of Mike's approach as more kind of
(23:35):
analytical cerebic, Like they're just all these different backgrounds. So
I don't know that there's a right answer to the question,
But for me, the thing that I tried to do
is just study and learn and read. I think anyone
in any industry or any field can benefit greatly by
studying the history of the people that have come before
(23:59):
them and thee I did a speech at University of
Texas here a few years ago, and I looked.
Speaker 1 (24:04):
At Bob Dylan and Danny Meyer.
Speaker 2 (24:06):
I read it, and they both went very deep on
the historic artisans in their business, and they.
Speaker 1 (24:15):
Tried to meet them, and they tried to hang out.
And I think that a lot can come from that.
Speaker 2 (24:20):
The other thing I would say about venture is and
one of the reasons why I eventually decided to step
away from new investments is to be great at it
requires a level of hustle that's really hard to explain.
And the reason is you're trying to maximize the optionality
that you get in front of a home run pitch,
(24:41):
and to do that, you have to look under every
rock you possibly can. And so if you're not at
the incremental conference, if you're not calling on the incremental
product manager, if you're not studying some new business model
or new platform, you know AI, if you're not just
in every meeting, then you're lowering the chance that you're
(25:04):
going to be successful. It's an exhausting game, and there's
amazing people at other firms doing the exact same thing.
Speaker 3 (25:11):
I mean, there's this whole debit do you have to
be technical or not? Do you have to be a
founder or not? Are you saying there's just no?
Speaker 1 (25:16):
I don't think that's true.
Speaker 2 (25:18):
I think that's all back to what I said earlier,
which is someone talking their book hoping to spell that
narrative out. There are a few great vcs that used
to be operators. I'd say there's.
Speaker 1 (25:32):
More that aren't.
Speaker 2 (25:33):
Actually, you know, Writs wasn't really I mean, Door wasn't.
Spending two years at a company doesn't really count as
like running something.
Speaker 3 (25:41):
So what about this is the stuff that it took
to be a good investor the last decade going to
be different than the stuff it's going to take in
the next I doubt it.
Speaker 2 (25:49):
They're part of it's being great at investing, And that's
where I think studying the history not just a venture
capital but of investing generally is super helpful. Like understanding
how great investors think is important. The people that end
up buying the product that we helped create and Shepherd
(26:10):
is actually Wall Street right, and so understanding what matters
to them matters. The problem that many operators have, and
I've worked with some great was like Mitch Laski, who
became a great venture capit as a benchmark. I was
on his board. But the operator struggle at first with
two mistakes. One they actually think they can put their
hand on the wheel a lot more because they had
(26:32):
it on the wheel, but I never had that feeling,
so I'm not actually trying to take it over. And
then two, sometimes they imagine themselves in the seat and
don't do enough analysis of whether the individual is capable
of becoming a CEO.
Speaker 4 (26:47):
Interesting.
Speaker 2 (26:48):
Interesting, And I think the flip side to make that
argument as well, which I'm sure many would is some
operator founders feel like the investor only VC doesn't have
the right level of empathy for the day to day job.
So I'm sure that's a fair argument as well. But
there's no analytical data point that suggests only one kind
(27:10):
can do it. There's winners of all backgrounds.
Speaker 3 (27:13):
You covered Amazon as an analyst in the nineties before
Amazon was, you know, barely more than a bookstore.
Speaker 4 (27:18):
What really sticks with you? You saw Jeff Bezos up close.
What sticks with you from those days.
Speaker 2 (27:25):
I had been at CSF First Boston and I was
I was covering PC hardware and software and I was
literally about to leave.
Speaker 1 (27:33):
I was going to go to the to.
Speaker 2 (27:34):
The Byside and for a Capitol Group work for Capital Group,
and Frank qua Trone called me, and I don't remember
who gave me my name, but he was leaving Morgan
Stanley and starting this new bank.
Speaker 1 (27:45):
You know.
Speaker 2 (27:45):
I told him I think I'm kind of done with
equity research, and he said, well, you know what, if
you come to work for me, I'll and I'll bring
you to Silka Vallee, I introduce you to everyone I know,
and you can cover whatever category you want. So the
Internet was starting to emerge, and I said, okay, Well
I eventually he said okay, And at first I was
terrified because I really.
Speaker 1 (28:06):
Didn't know what I got myself into.
Speaker 2 (28:08):
But I've been very fortunate in a very short career
as salesia analysts to meet Michael Dell, to meet Bill
Gates and just hanging out with them and having a
chance to have dinner or whatever. Then you're looking in
this new category and you meet someone like Jeff, and
it's clear that, oh this is like that. I'd say
it's easier than it sounds like. Getting the meeting might
(28:31):
be hard, but like understanding that he's way different than
the other entrepreneurs wasn't that hard. One other thing I'd
say about Jeff that I still believe is true today.
Because he came from D E. Shaw and because he
came from Wall Street, he understood how to talk to
shareholders in a way that no one else did. So
if you reread his s one where he writes a letter,
(28:53):
it's titled to our shareowners, and he talks a lot
about them. All the entrepreneurs followed Jeff that wrote that letter,
we're kind of like, screw you, Wall Street. I'm going
to run it my own way. And it's not actually
what Jeff says. And he says I'm going to run
it for the long term, but he says I'm doing
that for you, which is very different, whereas the other
(29:15):
people kind of wrote We're going to run it our
way and not for you. And so he was special,
like you endear yourself to a community when you talk
to him in a respectful way.
Speaker 3 (29:25):
So how much is it about the individual versus the
team versus the moment, about luck versus skill in all matters.
Speaker 2 (29:32):
There are certain business models that are more prone to
network effects a dating app or a social network, and
if they take fire, it can be just hold on.
And in those cases I would say it's about timing
and getting the product exactly right. To get it to
(29:57):
a really big outcome requires so one to be a
great CEO. And there's this blog post Ben Horowitz wrote
that I always sticks in my brain where he's talking about,
and once again I think this is venture capital is
talking to the founder they haven't met yet, but he's saying,
we only want to back people that go all the way.
And the truth matter is every VC wants that because
(30:19):
hiring a CEO is a fifty to fifty bet. So
your expected value is now cut in half.
Speaker 1 (30:25):
But you have to somewhere deep.
Speaker 2 (30:28):
In his post there's a paragraph that says that the
founder has to want to learn to be a great CEO,
and that part's hard. We all had a remarkably unfair
kind of wild card with Bill Campbell, who who was
remarkably generous to a handful of venture firms, not just
Benchmark Kleiner, many others, and he spent time helping these
(30:53):
founders be CEOs. As I understand it, he was still
in the management team meeting at Google ten years after
they went public, and you know, people talk about Eric
Smith coming on, but they had Bill Campbell in there,
you know, And so it's hard. It's hard. That part's hard,
Like why in the world would a twenty two year
old founder be good at managing ten thousand people?
Speaker 4 (31:15):
So let's talk about that.
Speaker 3 (31:16):
Your investment in Uber is legend in part because you
made a lot of money and also all the drama.
Speaker 1 (31:21):
Yeah, when you look.
Speaker 4 (31:22):
Back on that, how do you reflect? Is there anything
that you would have done differently?
Speaker 2 (31:26):
Yeah, I've said this publicly, like I think in a
perfectly executed world from a venture capitalist perspective, that doesn't happen.
Like we help the founder and the team, you know,
navigate their way to a successful company. And I think
I won't name any names, but I think there are
(31:46):
plenty of entrepreneurs from previous generations that are not perfect
humans and matured along the way right and became different
people and different leaders, And you'd like to make that happen.
Speaker 1 (32:01):
It's quite sad.
Speaker 2 (32:02):
Emeil Michael and I were actually working quite hard to
try and get Campbell, who we had both had experience with,
to come in and try and help us, and he
unfortunately had started to decline and health at that moment
at times. So it's not from a lack of effort.
There were lots and lots of tries, but it didn't
work out. Whether it was adding board members or the
(32:22):
type of governance or all that. Like, we didn't quite
get it there, and things started to spiral before and
at that point like it was, I think all the stakeholders, employees, customers, drivers,
it was all at risk, which created the need for
something a little more unusual. But yes, definitely, when I reflect,
(32:44):
I would love to think we could have done something
different that would have landed it all in a different place.
Speaker 3 (32:51):
I mean, some people think it should have happened sooner.
There's a school of people who think if Travis was
still there, who was controversial, larger than life founder, maybe
Uber would be worth more.
Speaker 2 (33:00):
What do you think, Well, one, it's an impossible question
to answer. I do think that the number of things
that were going on at that I think it was
the January through June of twenty seventeen, the number of
things that had happened to the company were at that moment,
I think insurmountable. So we had five different state attorney
(33:24):
generals running investigations. There were so many independent committees of
the board that I couldn't keep track of the meetings.
The market share was in free fall, lift was taking
sure left and right. I just think today we're getting
over or we I still talk about it in Royal
but Badara is helping execute past that stigma. But I
(33:46):
know people I know, you know people that would just
not say the word ober, wouldn't get in, one wouldn't
like and that was a community of potential customers. The
phrase we had used internally and with other investors as
there was a group of five investors actually that that
all kind of came together was this is going to
happen eventually, and what's going to be the value of
(34:09):
the ASKT if we let it go down? So I
don't I don't think the theoretical, you know, would it
be worth more now if someone else were running it
is possible. Have there not been a change made, I
think the asset value would be lower, not higher, because
everything was coming in on itself. So I don't think
we could have gotten to the imaginary question that they
(34:32):
want to pose.
Speaker 4 (34:33):
Well, I just like to ask impossible questions.
Speaker 2 (34:35):
And I you know, that's funny. I sent darn note
the other day at the time. You know, we taught
about the CEO search in a two step way, which
is we've got all these fires, like tons of fires.
There was there were specific fires in South America and
the UK in addition to everything else that I had mentioned.
Speaker 1 (34:56):
And by the way, we were losing billions of dollars
a year. Did I mention that?
Speaker 2 (35:02):
So it was a hot mess and Dark took that job.
And that's pretty bold thing to do. And if you
look at where the company is today, the fires are
all out. And so I realized I had in cinema
note and I just said, you know, thank you because
(35:22):
it I think everyone that has anything to do with
the company of employee, shareholder, investor driver or whatever are
in a better place because of what he did. And
it was really hard, and some people are are now
kind of getting after him, like, well, what you know,
should the stock be higher? That kind of thing, and
I'm like, well, you know, let's give him credit for
the first part. Now he's in a place where I
(35:44):
think the network effects are getting stronger. I think he's
done a great job. I think they're right on the
cost of profitability depends on how you define profitability. And
he feels pretty good. So let's see. Let's see what's
in the next chapter. But I gotta give him an
a plus for the first half.
Speaker 4 (35:59):
All right, we got a grade from Bill Gurley. Okay,
fair enough.
Speaker 3 (36:03):
It caught Hollywood's attention, and my mom is so excited.
We're talking because she loves the Bill Gurley that's played
by a Kyle Chandler in the Showtime Uber show.
Speaker 4 (36:13):
Did you watch it? Like, what did you think of
his portrayal?
Speaker 2 (36:16):
I did watch it. I mean, I hope this doesn't
sound bad. But every single female that I know came
up to me and said exactly what your mom said.
So they said, Wow, you're so lucky to be playing
by Kyle. But none of them said and he looks
a lot like you. They didn't say that second work.
I just got the first part. But I was a
huge fan of Friday Night Lights. I had watched the
(36:37):
whole thing. I read the original Dissinger book that came
out because I grew up in Texas and that show
was amazing, and he was amazing. The person he portrayed
is certainly a much better version of myself, So I
should be fortunate because of that. I think, you know,
it's funny because I watched I was initially nervous about
(36:58):
watching it, but there was so much There were a
lot of things that weren't true, like that were just
kind of embellished. That made it easier to watch because
it wasn't It wasn't like reliving the whole thing, you know.
There was also this other show that Benchmark was portrayed in,
We Crashed, and I thought that they did a really
(37:20):
amazing job in that one of showing how the crazy
soft bank money made it easier, I mean harder, much
much harder to manage the company to the right place.
You were asking me earlier about regrets and looking back,
and having someone come in and just hand three billion
(37:41):
dollars to your founder and tell them to be crazier
is really hard to manage well, because.
Speaker 3 (37:47):
Benchmark kind of got an anti founder narrative out of that.
Speaker 4 (37:51):
First it was Uber, then it was Adam Newman that
we were.
Speaker 1 (37:53):
Right, and and is that fair?
Speaker 2 (37:56):
The point I was making it in that one was
they just did a great job of highlighting. You know,
Jared's running around saying, Marsa wants me to be crazier.
That's actually how it was right And I think people
have a hard time believing that was true. But that
was true, and it makes that shepherding job a lot
(38:17):
more difficult.
Speaker 3 (38:17):
But I assume you think the whole sort of anti
founder thing that came out of kind of both of
those situations combines is not fair.
Speaker 2 (38:26):
When we were working with these four other venture firms
and made a decision to try and arrest the situation
at Uber, everyone knew what the consequences of that was.
We weren't like blind. We set around and said, you know,
if we do this, some class of humans are going
(38:46):
to use this against us and point it out and
put us in that bucket. This will sound overly dramatic,
but you know, the thing we told ourselves as we
had it out the door was you know, history will
be on our side.
Speaker 1 (39:00):
And you know, no.
Speaker 2 (39:03):
Matter what the cost was, if I had to go,
if I went back to that moment in time, I
do the exact same thing, and yes, maybe there's a
cost to it, but I didn't the cost wasn't worse
than not doing it, Like it was a known decision
(39:23):
that had consequences.
Speaker 3 (39:25):
The soft bank money, there's Tiger Global, there's big money
coming from Saudi Arabia. All this money not necessarily smart.
How do you think this is going to play out?
How does this impact a longer term problem?
Speaker 2 (39:39):
Well, I mean there's a lot of great sayings I
could use it this moment in time.
Speaker 1 (39:43):
I'll just pick one.
Speaker 2 (39:44):
It's like they say, if there's a fool in every market,
if you don't know who it is, it's probably you.
The markets have a way of separating very risk seeking
individuals from their capital. It may not happen overnight, but
it always happens eventually. Like there's no easy money, Like
it feels like there is a moment in time, but
(40:06):
arbitrage causes that to go away. And I love the
FTX story, not because I want to pick on anybody,
but to make the decision to give money to somebody
whose auditor is someone out of Washington, doesn't audit anybody else,
that has no board, and it has a side business
(40:30):
that's co mingled. Who tells you it's not co mingle?
Then it turns out it was co mingle, like what
are you doing?
Speaker 3 (40:36):
Why did so many people fall for FTX and Sam
bankman free We're talking about legitimate, legendary venture capital firm.
Speaker 2 (40:44):
The numbers were really really big, So those are seductive.
The individual is unique and capable narrative and fomo if
you're missing out, drives a lot of behavior. Silicon Valley
a lot. It's classic. I mean, that's why I like
(41:05):
talking about it, because until you get to that moment,
you don't get to correction, Like you need excessive risk.
Speaker 1 (41:12):
Taking and then you get excessive.
Speaker 2 (41:15):
Arbitrage, which a lot of crypto writ large may have
been just excessive arbitrage taking money from people that wanted
to separate themselves from it, and then you get a correction.
But this isn't new. This goes you know, all the
legendary investment books that go back to the Tulips you
know in Amsterdam, Like, this is classic, it's not new.
Speaker 3 (41:38):
The cult of the founder has long been this Silicon
Valley ideal.
Speaker 4 (41:43):
Does that need to change?
Speaker 2 (41:45):
I don't think so. And the reason I would say
it is that the really really long outcomes tend to
have a founder that stays around for a very long
period of time, whether it's Zuckerberg or I mean the
famous you know, Jeff Bezos, you know, or Steve Jobs
coming back to Apple. Can you believe Steve Jobs came
(42:07):
back to Apple? That company's going bankrupt? Like there's a
true north that they know innately, and there's a drive
that they have to win at all costs that you
can't get in a hired ceo.
Speaker 1 (42:24):
You just can't.
Speaker 3 (42:26):
What about Elon Musk obviously revolutionized space electric cars?
Speaker 4 (42:31):
Can he win at Twitter?
Speaker 1 (42:32):
Well, before you go to can't he win at Twitter?
Look what he's done.
Speaker 2 (42:38):
I saw this documentary where they interviewed the astronauts when
the SpaceX vehicle opened up for the first time they
were on the space station. They said they'd never seen
a rocket more clean and amazing. The car company in
their own battery factory. These are hard businesses. I would
never have put our venture dollars behind those types of
(43:00):
businesses because they're too hard and he's made it work.
So at this point, like I think, I think you
have to take the other side, like why we would
he fail them?
Speaker 1 (43:11):
Well?
Speaker 4 (43:11):
Benchmark back Twitter? Would you back el on Twitter?
Speaker 2 (43:14):
I personally have a remarkable affection for Twitter and think
that it has radical amounts of optionality beyond where it
is today. Now, whether he'll steer it there or not,
I don't know. And he's created some obstacles that he
may have not needed to create for him.
Speaker 3 (43:33):
Okay, well, so then talking about where you're placing bets, like,
there's been so much.
Speaker 4 (43:36):
Hype around crypto and self driving cars and the metaverse.
Speaker 3 (43:41):
What is going to be the next wave of real innovation?
Speaker 2 (43:45):
I think my answer to this is remarkably uninteresting, which
is similar to everyone else. I think the stuff that's
happening in AI feels so much more real than any
of those other things that you mentioned.
Speaker 4 (43:58):
So it's not the next bubble.
Speaker 1 (44:00):
I don't think so.
Speaker 2 (44:02):
And the things we're seeing in very particular verticals like
are super big impact very fast. I think the press
rit large gets caught up in can chat, GBTB a
competitor to Google. Not that, but taking a model and
(44:22):
applying it deeply to a medical use case or a
legal use case, or that's where we're seeing stuff that's
pretty magical.
Speaker 4 (44:30):
How many more billion dollar deals are out there?
Speaker 3 (44:32):
I mean, given sort of the environment, is it going
to be a lot harder to start a billion dollar
company now than it.
Speaker 2 (44:38):
I mean, so a couple of different things there. So one,
it is still a little bit bubbly when it comes
to AI. So the average if it deals hot, you know,
it's pretty expensive to get at first investment, So that's
a negative. On the positive side, it does feel like
there are enough.
Speaker 1 (44:57):
Competitive models that you can go would do a startup
that's that's attacking a very vertical or specific or functional.
Speaker 2 (45:05):
Problem and not be you know, kind of stuck like
maybe startups where it feels like they.
Speaker 1 (45:12):
Are enough alternatives that.
Speaker 2 (45:14):
You can use the tools without without being caught.
Speaker 1 (45:19):
And so that's actually a really big positive.
Speaker 4 (45:21):
So it is an AI or bust. I mean, is
there anything else to invest in?
Speaker 2 (45:26):
Well, you know, one of the reasons that people made
the argument that you needed to pay attention to crypto
was that the developers were all going there. And I
would say one of crypto's most unbelievable challenges is right
now is that the developers are completely enamored with these tools.
They're quite usable, and they're quite easy to apply to
(45:49):
a very specific use case, especially if you can get
access to data. I don't hear of a lot of
other things. I mean, there are there are some vcs
that are very heavy on climates aims, that are doing
things there that's hard to do part time. I think
you're either all in on that or you're not because
there's so much lobbying involved in so much regulatory work.
(46:10):
But for the now, it's it's all Ai.
Speaker 3 (46:13):
The circuit continues after this quick break, after all that
talk about the fate of venture capital, it's time to
dig into another classic Texas barbecue.
Speaker 4 (46:29):
This place is amazing. I'm so excited.
Speaker 3 (46:33):
No, all right, I'm ready for my big Austin barbecue.
Speaker 1 (46:38):
Yes, he look at this.
Speaker 4 (46:40):
Oh my god, Oh my god, this looks amazing.
Speaker 1 (46:45):
You're gonna all this so much.
Speaker 4 (46:48):
Let's taste this brisket.
Speaker 3 (46:52):
Hey, guys, child, if you were going to start a
company today, where would you move?
Speaker 2 (46:59):
Place can be very impactful, and so if I were
like a twenty two year old founder starting something, I'd
go to Silicon Valley just because it's going to increase
your odds of success.
Speaker 4 (47:10):
What about like Miami, La Boston.
Speaker 2 (47:14):
I think many cities, whether it's Austin or Miami, they
have a problem that sounds ironic, but they're a lot
of fun and so I think there's a question as
to whether you attract the very most determined founders.
Speaker 3 (47:33):
Oh, that's a little controversial.
Speaker 2 (47:35):
Which may explain why Seattle's done so. Not that it's
not a wonderful place, but for two thirds.
Speaker 1 (47:42):
Of the year it's dark house exactly.
Speaker 2 (47:44):
I do think there are a lot of contagious qualities
to successful startups. Constantly around other people that are all
in the same game is super helpful.
Speaker 3 (47:55):
So you step back from an active role at Benchmark
a few years ago, how much are you still investing?
Speaker 2 (48:01):
What I really did was stop making new investments, so
I'm still on ten boards.
Speaker 1 (48:05):
The shift in the.
Speaker 2 (48:06):
Markets and the bubble bursting kind of increased the workload
and the time frames. And I think other not naming names,
but I think other vcs have hung around past their
point of relevance.
Speaker 4 (48:20):
I didn't want to be that person you mentioned earlier.
Benchmark has always stayed super small and lean.
Speaker 3 (48:25):
Other venture firms like Andreson Borrowitz kept gotten big, And
you're often pitched against Mark Andresen as sort of an opposite.
Who's model do you think is going to stand the
test of time?
Speaker 4 (48:38):
How do you think about that?
Speaker 1 (48:40):
Well?
Speaker 2 (48:41):
I do think that there are numerous successful models in venture.
I mean, it's not an industry where you can run
the table. I think the one reason that Andresen created
some animosity in the valley was when they came in
they made these bolts statements like we're going to change everything,
(49:02):
We're going to rewrite, We're going to take over.
Speaker 1 (49:04):
It doesn't been too taking over. It's just not structured
any way.
Speaker 3 (49:08):
There are a number of vcs that seem to be
sort of indulging in the politics of anti wokeism and
getting into these various debates. And yeah, it happens on
the other side of the aisle too.
Speaker 4 (49:20):
You know, what do you think of that trend?
Speaker 2 (49:23):
I think I understand some of the issues that caused
them to adopt that mindset. In the past five years,
there have been objective functions injected into startups that aren't
solely how well it's the company doing or how well
is the company's stocked doing. But it becomes hard to
(49:45):
succeed if the employees aren't showing up and saying let's
all march in the same direction. As I understand things
at Google, there's just quite a bit of tension between
the employee base executives there, and it's hard. It makes
the job harder to execute the company.
Speaker 3 (50:06):
Well, and I wonder what happens to the cultural tension
in Silicon Valley when the money's gone right, the party's over,
the money, printer no longer goes or whatever it is.
Speaker 4 (50:19):
How do you think that's going to change things?
Speaker 1 (50:21):
I mean, if it is, it's a good.
Speaker 3 (50:23):
Thing, given obviously the environment that we're moving into. Like
you saw Amazon up close, where's the next Google or
Facebook or Amazon or Apple.
Speaker 4 (50:32):
Going to come from?
Speaker 1 (50:33):
There's always someone that's going to come You think.
Speaker 4 (50:36):
Jeff Bezos will ever come back? Would pull Steve jobs?
Speaker 1 (50:39):
I don't think so.
Speaker 2 (50:40):
I don't think it's very much fun being a public CEO,
especially one of those top five. They invite you to
Washington and yell at you in front of people. Yeah,
where's Larry Page's been in the past ten years? You've
seen him? I haven't seen him.
Speaker 4 (51:00):
I did see him once.
Speaker 1 (51:03):
I haven't seen him.
Speaker 4 (51:04):
I saw him once.
Speaker 1 (51:04):
But yes, he must be perfectly happy to do it
for something.
Speaker 3 (51:09):
All right, Well, maybe we should invite Jeff Bezos and
Larry Page to have some barbecue in Austin. Thanks so
much for listening to this episode of the Circuit. I'm
Emily Chang. You can follow me on Twitter and Instagram
at Emily Chang TV. You can watch new episodes of
the Circuit on Bloomberg Television or on demand by downloading
(51:30):
the Bloomberg app to your Smart TV, and let us
know what you think by leaving us a review. I'm
your host and executive producer. Our senior producer is Lauren Ellis.
Our associate producer is Lizzie Phillip. Our editor is Sarah Livesey.
Speaker 4 (51:44):
Thanks so much for listening.
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