Jun 29, 2022 · 26m · 20vc
20VC: The Memo: Bill Gurley, Doug Leone, Keith Rabois; Investing Lessons from Prior Busts, How Their Investor Psychology Changed, What Can Be Applied To Today's Market
compilation · excluded from per-person scoring
Harry Stebbings · 7m spoken Michael Eisenberg · 3m spoken Fabrice Grinda · 2m spoken Roger Ehrenberg · 2m spoken Mark Carney · 2m spoken Jim Swartz · 1m spoken Keith Rabois · 1m spoken Bill Gurley · 1m spoken Sonali De Rycker · 52s spoken Oren Zeev · 49s spoken Doug Leone · 47s spoken Arthur Patterson · 16s spoken
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this special compilation episode of 20VC, host Harry Stebbings brings together legendary venture capitalists and economic experts to share critical lessons on navigating market downturns, managing portfolio risk, and maintaining investment conviction across macroeconomic cycles.
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 29.7% of the talking time here. How this is scored →
Harry as informed peer 1.8 Guest teaching 3.5 Guest disagreement 1.7 Harry pushing back 0.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:10 Sonali De Rycker calling VC directives almost psychotic
Sonali forcefully calls out the venture industry's hypocritical flip-flop from demanding growth at all costs to requiring immediate profitability within two years, labeling it almost psychotic and unfair to founders.
Hardest push from Harry ▶ 11:15 Harry challenging Roger Ehrenberg on macro comparisonsHarry refuses to accept generic market cycle summary and explicitly prompts Roger to contrast current tightening with specific historical dislocations like the March 2020 COVID shock.
Biggest teaching moment ▶ 14:02 Mark Carney explaining discount rate multiplier effectsFormer central bank governor Mark Carney clearly educates the audience on financial mechanics, demonstrating how a 1% base rate increase expands discount rates on speculative assets by 1.5% to 2.5%.
Harry holds his own ▶ 11:15 Harry demonstrating historical macro awarenessHarry shows strong market context by citing specific historical crisis points including 1987, 1994, 1997, and March 2020 to frame an insightful question for Roger Ehrenberg.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Bill Gurley on Macro Trends and Venture Fund Flows | 0 | 2 | 1 | 0 | The segment consists of monologues from Bill Gurley and Doug Leone explaining macro cycles and downside protection. Harry Stebbings provides only brief introduction transitions, resulting in zero host expertise or pushback. | |
| Jim Swartz & Arthur Patterson on Price Multiples and Tactical Adjustments | 0 | 3 | 1 | 0 | Jim Swartz and Arthur Patterson share historical insights on market cycles and extreme revenue multiples. Harry introduces the guests with praise but does not engage in interactive questioning or pushback. | |
| Keith Rabois on Valuation Discipline and Stage-Specific Strategy | 4 | 4 | 2 | 2 | Harry actively prompts Roger Ehrenberg by comparing past market shocks like March 2020 to historical crashes. Roger educates on Fed interest rate hikes and structural liquidity deflations, while Keith Rabois dismisses paper valuations as fake returns. | |
| Mark Carney on Macro Interest Rates and Failure Planning | 3 | 5 | 1 | 1 | Harry asks Mark Carney a direct futuristic question regarding interest rate hikes and market response. Former central banker Carney provides a masterclass on how discount rates expand disproportionately on risk assets during rate hikes. | |
| Michael Eisenberg on Reserve Allocations and Early-Stage Strategy | 3 | 4 | 2 | 1 | Harry asks a targeted question about reserve management during downturns. Michael Eisenberg reframes reserves as an art rather than a science, while criticizing inexperienced investors who naively project growth multiples in a bust. | |
| Sonali De Rycker on Maintaining Confidence and Supporting Founders | 1 | 3 | 3 | 0 | Sonali De Rycker forcefully criticizes erratic VC advice to founders as almost psychotic, while Fabrice Grinda presents a probabilistic framework rejecting current market doom-and-gloom narratives. Harry provides introductory and closing remarks. |
Statements from this episode (21)
Gurley sought macro advice from Howard Marks and Stan Druckenmiller
“Funny story, about two or three years ago, when interest rates were heading into unprecedented territory, I told my partners I needed to talk to some macro experts, and I did everything I could to find my way to Howard and Stan Druckenmiller, and I was thrille…”
Gurley: VC LP Gains Peak Right Before Major Market Resets
“If you were a LP that had been exposed to venture capital for the past 30 years, it'd be interesting, you would notice that some of your biggest gains were the years right prior to the resets, in like, oh, one and oh, nine.”
Gurley: There Is No Such Thing as Conservative Venture Capital
“There's no such This thing is conservative venture. You don't take your cards off the table and maximize return. It never works.”
Doug Leone: Sequoia stress-tests portfolios against hypothetical 30% market crashes
“One of the exercises I've asked, we run more than once at Sequoia. Let's take a fund two cycles ago where the companies are just coming up. How would we feel about those investments if the market just crashed by 30%? Let's figure out how many of those were mom…”
Swartz: Revenue Multiples Are 3x to 5x Above Historical Peaks
“If you do a careful analysis of the multiples here in the marketplace, we're at three to five X where we've ever been in our lifetime, price to revenue of companies, three to five X where we were at the peak ever before.”
Jim Swartz Is Exiting Overvalued Assets Ahead of Expected Market Crash
“I'm behaving like there's a major crash coming and whatever opportunity I have to get out of very high priced assets I do, but I'm continuing to invest and continuing to plow back.”
Rabois: Thiel and I saw market crash coming in summer 2021
“Both Peter and I figured out this market was crashing last summer, and we really tried to stop people from investing at ridiculous prices, but even a founder's fund, we weren't totally successful.”
Rabois: VC paper gains are fake returns unless distributed
“The problem for younger VCs over the last three or four, maybe even five years, is with everything inflated, most of that inflation is paper, not real. So unless you were also savvy enough to sell, those are fake returns. Depends on whether you distribute it.”
Ehrenberg: The 2022 market downturn resembles 2001's valuation bubble, not a shock
“I think the difference between this and say, 87 and 97 with LTCM is that this is not a shock. This is not an episodic jolt. This is much more akin to O-one, when you had valuations getting stretched to the point of just lacking reason, and partly it was a func…”
Carney: 1% central bank rate hike increases risk discount rates 1.5–2.5%
“What tends to happen when interest rates increase is that there is a amplified impact on the interest rates of risk assets or the discount rates on risk assets. So if the bank rate goes up by one percentage point, the discount rate tends to go up by one and a …”
Carney: Crypto and DeFi face pullback, but resilient apps will establish bottom
“The extent to which you're at the furthest end of the spectrum in terms of risk tends to have a larger effect on the value, at least in temporary terms for those risk assets. You could crypto various DeFi applications in that camp. They've had a very large run…”
Eisenberg: The best time to invest in early-stage VC is during busts
“The best time to invest is when it busts. You need to maintain a constant investment pace, no matter what the external circumstances are around the bust in early stage venture capital.”
Eisenberg: Aleph intentionally operates strictly as a single-stage fund
“It informs our investment strategy in general at Olive, which is a lot along the lines of benchmark, which is we like to work with partners. And that means we are a single stage, basically seed and a fund. We're not doing the big, big fund with the multi-stage…”
Eisenberg: Market downturns hit startup founders psychologically more than financially
“Busts are psychologically impactful far more than they're financially impactful. It takes people a long time to realize you're in a bust, and then even longer time to come out the other side, and that's true of founders.”
Sonali De Rycker: Venture funds fail when they stop investing in downturns
“One is never stop investing. The minute you lose your confidence, you lose your right to exist. Because if you look at the funds that were around in 2000, so many of them disappeared exactly for that reason.”
Sonali De Rycker: Conflicting venture capital guidance to founders is almost psychotic
“And right now it's such a confusing time for these founders, right? We told them cut costs during COVID. It's a recession. Who knows? The demand is gone. Then there was money flowing through the system. Money had never been cheaper. It was all about growth. We…”
Oran Zeev says every venture investment he made in 1999 failed
“Every single deal that I did in 1999 tanked was a bad deal. Every single deal is zero percent success.”
Oran Zeev's first investment after the dot-com crash was Audible
“The first deal that I did off the bet was Audible, which was a big success”
Oran Zeev advises VCs not to obsess over failing portfolio companies
“If something's not working, no need to overly obsess about it, and make the life of the founder miserable more than it has to be, and just be positive, help if you can, but not obsessing, yeah, and just focus on the future.”
Grinda: 60% probability of economic stagnation, 20% chance of severe downturn
“Today, in my probabilistic terms, I'd say there's a 20% scenario that we probability that we end up with a optimistic outcome from where we are, and I can explain why. Maybe a 60% scenario of what I call the great stagnation, and another 20% scenario of, like,…”