In the most downloaded episode of 2019 on "20 Minutes VC," host Harry Stebbings celebrates having venture capital titan Bill Gurley of Benchmark on the show, a dream guest since the podcast's inception. Gurley, renowned for his investment acumen and roles in companies like Uber, Twitter, and Amazon, shares his journey from Wall Street to becoming a general partner at one of the most successful funds. He discusses the role of luck in venture capital, the importance of embracing market size expansion potential over fixed TAM analyses, and the significance of maintaining a strong reputation by supporting both successful and struggling portfolio companies. Gurley also emphasizes the necessity of passion for venture capitalism, the challenges posed by abundant capital in the market, and the equal partnership model at Benchmark that fosters generational talent and enduring success.
"Our most downloaded episode of the year is with Bill Gurley, general partner at Benchmark, one of the most successful funds of the last decade, with a portfolio including the likes of Uber, Twitter, Dropbox, Weworks, Snapchat, Stitch Fix, eBay and many more incredible companies."
The quote highlights the success of Bill Gurley and the recognition of his episode as the most downloaded, indicating the high interest in his insights within the venture capital community.
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The quote explains the utility of Room's product in improving workplace environments, particularly in open office settings where noise can be an issue.
"And that's how I ended up here."
The quote succinctly captures the culmination of Gurley's journey into becoming a general partner at Benchmark, highlighting the serendipitous nature of his career path.
"So as markets start to boom, the amount of capital that comes into the category is immense. But when the market breaks, the capital doesn't have a mechanism to go away quickly because it's already been committed to these ten year windows."
The quote explains the structural reasons behind the cyclical nature of venture capital, where capital inflows during booms are not easily reversible during busts due to long-term commitments, affecting how venture capitalists approach investing.
"The vast majority of the average returns over a multidecade window are right at the end of the cycle."
This quote emphasizes the importance of remaining invested through the entire market cycle to realize the majority of returns.
"The best way to protect it against the downside is to enjoy every last bit of the upside."
This quote suggests that to mitigate losses, one should stay invested to benefit from the full potential of the market's growth.
"Everybody gets hyper conservative at the same time."
Bill Gurley indicates that during market downturns, there's a collective shift towards conservatism in investment behavior.
"The burn rates now are probably two or magnitude higher than they were in the 99, 2000 time frame for some of these companies."
This quote highlights the increased financial risk companies face today due to higher operational expenses without corresponding revenue.
"If I invest in a company that doesn't work, I lose one times my money."
Bill Gurley explains the asymmetric nature of venture investing, where the cost of a failed investment is limited to the initial investment.
"If I decide not to invest in Google, that error in decision making cost you 10,000 x or whatever, 1000 x, whatever the number was."
This quote illustrates the opportunity cost of passing up a successful investment, which can far outweigh the cost of a failed one.
"People get into more trouble by over focusing on TAM analysis, especially in these super early stage companies."
Bill Gurley discusses the pitfalls of placing too much emphasis on traditional market size analysis for early-stage ventures.
"What could possibly be true that would know those types of Tam analysis to be wrong?"
This quote suggests that investors should challenge traditional market size estimates by considering how a company could disrupt and expand its market.
"The companies we invest in definitely benefit from a brand halo."
Bill Gurley acknowledges that Benchmark's brand reputation aids its portfolio companies in fundraising and market positioning.
"We take the responsibility of being a principled owner and being a contributor on the board very seriously."
This quote underlines Benchmark's commitment to active board participation and its positive impact on the perception of investors.
"I'm the best board member in Silicon Valley... I'm more prepared than anyone else at the table."
This anecdote from Pierre Le Mon showcases the importance of preparation and knowledge in being an effective board member.
"Does this need to be discussed right now? Is there a benefit of this being discussed with the other board members right now?"
Bill Gurley shares his method for evaluating the necessity and timing of his contributions during board meetings.
"Know your circle of competence."
Bill Gurley advises new board members to be aware of their strengths and when it is most beneficial for them to contribute to discussions.
"There are companies in any venture portfolio that are going to be delivering 100x more return than another one that you might be working on."
This quote highlights the disparity in potential returns between successful and less successful companies within a venture capitalist's portfolio, which influences time allocation decisions.
"Your reputation is going to be a part of what allows you to win or not win investment opportunities in the future."
Bill Gurley emphasizes that a venture capitalist's reputation, shaped by their conduct across all investments, influences future investment opportunities.
"80% of the weight might just be a group decision about the competency or capability of the founder."
Bill Gurley describes how the founder's competence is a significant factor in Benchmark's investment decisions, often more so than detailed financial analysis.
"If a majority of the partnership wants to move forward, we move forward."
This quote explains the democratic nature of Benchmark's decision-making process, where a majority vote can drive an investment decision.
"I'd rather be known for being a good partner picker than investment picker."
This quote underscores the importance of choosing the right partners for the firm's longevity and success, as opposed to just focusing on individual investment decisions.
"You need to be passionate about being a venture capitalist."
Bill Gurley stresses that passion for the venture capital industry is a vital trait for potential partners at Benchmark.
"There's just so much peculiarity that's happening right now because of these massive amounts of capital."
Bill Gurley expresses his concern about the unusual market conditions created by an abundance of capital and their implications for venture capital strategy.
"There's no way it's unavoidable."
Bill Gurley expresses skepticism regarding the idea that the technology sector could be immune to macroeconomic cycles, suggesting that all sectors are likely to be affected at some point.
"Anytime a venture capitalist opens their mouth, they're probably sending a message to the founder they haven't met yet."
This quote emphasizes the strategic communication of venture capitalists, aiming to attract founders by projecting confidence and optimism in the technology sector.
"I've got no incentive to change my operating principles or the way I go about doing the job just because I think one day the cycle might end."
Bill Gurley explains his commitment to his investment strategies regardless of potential market fluctuations, indicating a long-term approach to venture capital.
"It's called Complexity by Mitchell Waldrop, and it's about the rise of the Santa Fe Institute, which I've very recently joined the board of."
Bill Gurley shares his admiration for a book that has significantly influenced his understanding of complex systems, which is directly relevant to his work in venture capital.
"I have a profound affection for the art of helping founders realize their dream."
This quote captures Bill Gurley's passion for venture capital as a means to assist founders in achieving their vision, highlighting the fulfillment he derives from his work.
"I had a meeting, or my firm benchmark had a meeting with Larry and Sergey where they said, will you invest at 100 pre? And we should have said, yes."
Bill Gurley expresses a lesson learned about the importance of recognizing exceptional opportunities, even if they seem costly at the time.
"A lot of our biggest regrets are when we got too worried about price."
The quote reflects on the tendency to overly focus on valuation, which has led to missed opportunities that could have significantly impacted the fund's success.
"The founding partners put together this crazy idea of this equal partnership."
Bill Gurley explains the unique and successful partnership structure at Benchmark, which fosters a strong sense of unity and shared purpose among partners.
"We put some money in a company called good eggs."
Bill Gurley describes the rationale behind a recent investment, highlighting the importance of leadership and strategic supply chain management in their decision-making process.
"I want to say huge thank you to Bill for giving up his time."
Harry Stebbings expresses gratitude to Bill Gurley for joining the podcast, emphasizing the value of his insights to the audience.
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