Dec 6, 2021 · 50m · 20vc
20VC: Bill Gurley and Michael Eisenberg on The First Signs of an Impending Bust, What Happens with a Market Crash, How Do Public Markets Impact Private Valuations & The Biggest Lessons from 20 Years Investing in Venture
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20VC, host Harry Stebbings interviews venture capital veterans Bill Gurley and Michael Eisenberg to analyze modern market cycles against the 1999 dot-com bubble. The discussion provides strategic insights on capital deployment, valuation discipline, boardroom governance during downturns, and core principles for venture success.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 22.3% of the talking time here. How this is scored →
Harry as informed peer 4.4 Guest teaching 6.0 Guest disagreement 2.1 Harry pushing back 2.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 43:43 Bill Gurley Rejects Venture Disruption Narrative
Bill forcefully rejects Harry's assertion that venture capital is broken or being disrupted, pointing out that top traditional firms just had their best decade in history and labeling claims of industry disruption a silly notion.
Hardest push from Harry ▶ 21:14 Harry Challenges Bill on Price vs. Stage DisciplineHarry interrupts Bill's explanation of market cycles to directly challenge his premise, arguing that Bill is confusing price discipline with stage discipline.
Biggest teaching moment ▶ 11:46 Michael Eisenberg's Historical Cisco M&A MasterclassMichael educates Harry on the reality of market resets by citing exact 1999-2000 deal figures from Cisco's acquisition spree, illustrating how billion-dollar acquisitions completely ceased for five years post-crash.
Harry holds his own ▶ 43:32 Harry Cites Modern Unbundled Venture ModelsHarry demonstrates strong market awareness by citing AngelList rolling funds, Naval Ravikant, and operator funds to push back against Bill's stance that venture capital does not need changing.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Comparing Current Market Dynamics to the 1999 Dot-Com Bubble | 4 | 6 | 1 | 2 | Harry introduces historical context and quotes Howard Marks regarding five game-changing shifts occurring simultaneously. Michael educates Harry on the forgotten second phase of the 2000 crash in fiber optic communications, reframing the dot-com bubble conversation. | |
| Early Indicators of Market Crashes and Liquidity Realities | 2 | 7 | 1 | 1 | Harry admits he has never experienced a market crash in his career and asks how unraveling begins. Bill and Michael provide a deep masterclass on mid-cap tech drops, Fed interventions, and liquidity scarcity. | |
| Mega-Rounds, Tiger Global, and Private Valuations | 3 | 8 | 1 | 1 | Michael schools Harry by reading out exact historical acquisition data from Cisco in 1999-2000 to demonstrate how billion-dollar M&A dried up for five years after the crash. Bill details Tiger Global's strategy and the shift from 2-and-20 hedge funds to venture structures. | |
| Capital as a Weapon, Indigestion, and Price Discipline | 6 | 5 | 3 | 5 | Harry pushes back on Bill's macro cycles argument by asserting that Bill is confusing price discipline with stage discipline. Bill jokingly calls Harry a boomer for worrying about capital abundance while explaining capital weaponization. | |
| Deployment Pace, Time Diversity, and the Evolution of SPACs | 4 | 6 | 2 | 2 | Harry brings up LP pressure regarding compressed 12-month deployment cycles and asks about SPAC performance. Bill clarifies his stance, emphasizing he is a proponent of direct listings and critical of traditional IPOs rather than simply pro-SPAC. | |
| Board Room Dynamics, Co-Investors, and Partnership Structures | 5 | 5 | 2 | 2 | Harry offers insight into partnership dynamics as places of safety rather than fear. Michael explains equal partnership models at Benchmark and Aleph while teasing Harry about operating as a solo capitalist. | |
| Value Mindsets in Extended Booms, Asymmetric Risk, and Notable Misses | 5 | 6 | 1 | 3 | Harry directly asks Benchmark about deals they lost, prompting Bill to discuss asymmetric risk and share how Benchmark missed Google and Square by failing to imagine how high upside could be. | |
| Silver Linings of Market Corrections and LP Asset Allocation | 4 | 5 | 2 | 3 | Harry asks if wide diversification across 500 angel deals is superior, which Bill quickly dismisses as 'd-worse-ification'. Michael details talent reallocation during busts and top-heavy index fund mechanics. | |
| Quickfire Segment: Lessons from WeWork, Mistakes, and Core VC Principles | 7 | 6 | 6 | 7 | Harry pushes back on Bill's claim that venture isn't broken by citing AngelList, rolling funds, and Naval Ravikant. Bill forcefully rejects the idea that venture is disrupted, noting Sequoia and Benchmark had their best decade ever and calling disruption claims a silly notion. |
Statements from this episode (28)
Gurley: 2021 tech market resembles 1999 dot-com bubble more than 2016
“Compared where we were to the dot-com bubble five years ago, and I have a little bit of a chicken little reputation issue here, but things are clearly more like 99 today than they were five years ago”
Gurley: 2021 Startup Burn Rates and Capital Raised Are 10-20x 1999 Levels
“The scale is way larger, both in terms of the amount of money being raised by each company and the burn rate. And I would say that's by 10 to 20 X.”
Eisenberg: Nineties VC Was Concentrated Solely in Silicon Valley and Israel
“Venture capital was decidedly a Silicon Valley and Israel, candidly, investment theme in the late nineties. You almost didn't see it anywhere else at the time. You know, New York wasn't a thing. London certainly wasn't a thing, and it wasn't China yet to the b…”
Eisenberg: Post-1999 Tech Crash Occurred in Two Phases Including Fiber Optics
“People forget that there were two phases to the bubble coming undone. There was the.com, which has become famous because of the pets.com commercial, right? So that's what we all think.com.com. But there was a second one in fiber optic communications, which was…”
Gurley: Non-SaaS mid-cap public tech stocks dropped 50% in six months
“You know, people were forwarding around some charts on Twitter that showed a lot of the non-SaaS, non-FANG, mid-cap public companies. They're already average cut in half right now. In the past six months, no one's really paying attention to it”
Eisenberg: Massive venture capital inflows will result in scarce investor returns
“There's no capital scarcity, by the way, but there could be, and this will take longer to play out, a scarcity of returns because of all that capital that's come in.”
Gurley: Tiger Global's venture strategy is meticulous and research-driven
“Having talked to Scott and understand what they're doing, it's very meticulous and Top down. Tons of research.”
Gurley: Late-stage hedge funds transitioned to closed-end venture structures
“A lot of these hedge funds used to run, you know, a two-in-twenty book that marked every year, and they've all switched to this venture model where they raise capital, invest it, and then return it.”
Eisenberg: Modern founders sell far more secondary equity than in past cycles
“One of the things that's different between now and 20 plus years ago in particular is there's a lot more secondary going on, which means that founders are taking capital off the table in a lot of these rounds.”
Eisenberg: More startups die of indigestion than starvation
“You know, when I was at Benchmark, they used to say that more companies die of indigestion than die of starvation. I actually think that's still true.”
Eisenberg: Disrupting major industries requires a massive balance sheet
“These big industries, if you're trying to disrupt them in order to get the customers on board, they want to see a large balance sheet.”
Gurley: Trying to call market tops is a venture investor's biggest mistake
“And so, I think you have to invest as a venture capitalist over the cycle, like, over a 20 or thirty-year period, and the biggest mistake you could possibly make is trying to call the top.”
Gurley: Benchmark Maintained Early-Stage Focus as Peers Expanded to Multi-Stage
“So we have notably stayed focused on early stage investing, whereas most people have moved to multi-stage.”
Eisenberg: Aleph Will Prioritize Ownership Stakes Over Price Discipline
“So what we're doing is even if we have to pay more, we're optimizing for ownership and we'll continue to do that.”
Gurley: Major Shareholders Cannot Realistically Sell Large Secondary Stakes Privately
“If you own 20% of a company and they're raising a private round and you try and take half of that off the table, you're going to affect the price pretty dramatically. So I don't think those type situations are realistic liquidity events for large shareholders.”
Eisenberg: Selling VC Secondary Shares Without the Founder Harms Reputation
“Founders talk to each other, and unless it's really obvious you're taking money off with the founder, and it's probably a small amount if you're a large stakeholder, I think that's reputation negative over the long term and not consistent with playing the long…”
Gurley: Nine-Month Venture Deployment Cycles Eliminate Portfolio Time Diversity
“I also think there's massive benefit to time diversity in a portfolio. Having lived through cycles before you spend a fund in nine months, you've got no time diversity on that.”
Gurley: IPOs popping 50% to 70% are far more expensive than SPACs
“You know, everyone says SPACs are expensive, but when your stock pops 50 to 70% in the IPO, that's way more expensive than a SPAC, and so it created this window.”
Eisenberg: Equal partnership structures foster safer, more collaborative VC firms
“One of these about the equal partnership is you're not worried about your economics or even negotiating them subconsciously. And that makes the partnership more of a safe space and more of a collaborative space. And I think it's one of the really powerful thin…”
Eisenberg: Inexperienced junior VC board members impair decision-making in downturns
“When you have junior people also deploying capital, it becomes even less of a safe space. And it really can affect board dynamics and good decision-making and Calm decision-making when things get rattled.”
Gurley: Failing to pursue Google at 25 employees was my biggest mistake
“My biggest mistake was clear because I brought Larry and Sergey in to present when there were 25 employees, and we didn't lay chase.”
Gurley: Real VC risk is missing a winner, not losing $10M
“When I think back on that or any of the other misses, there's just this failure to imagine how high is up and to recognize that the risk is really missing it rather than losing ten million dollars.”
Gurley: Benchmark passed on Jack Dorsey's Series A pitch for Square
“Another one that's very similar, and it wasn't me, it was a different partner, but I don't think I was helpful, was Jack That brought Square to us on the A.”
Gurley: Speculative busts leave behind valuable infrastructure that benefits society long-term
“Yeah, I mean, other people have talked about this, but, you know, if you look back at a 2000 time frame, a lot of the money that was, that busted went into telecom infrastructure, and people argue that we are better off having that stuff built out, even if the…”
Eisenberg: Market bust will reallocate tech talent but won't reduce salaries
“A bust in the past and maybe now would reallocate some of that talent around. I actually don't think it would reduce the cost of it for what it's worth, given how scarce the talent is, but I think it could reallocate it to better places.”
Gurley: Institutional LPs and endowments are full on venture capital allocations
“I'll call it tiger chase, and so I've seen some signs that Would suggest they're full, actually, partially because of the returns and partially because of, you know, how far do you want to take the risk on morphing your asset allocation model?”
Gurley: Claims of Disrupting Traditional Venture Capital Have Been Proven False
“I think this whole notion that you're going to disrupt and fundamentally take over the business has just been proven false over and over again. AngelList is awesome, but it's not 20% of the industry, you know. Andreessen said, we're going to completely, you kn…”
Gurley: Benchmark Studies Missed Breakout Deals More Than Portfolio Failures
“I personally, in our firm, we study the great breakouts that we miss the most. So that's not failure in our portfolio. That's failure of us to chase the deal that ends up outside of our portfolio. That's the thing we sweat the most.”