Apr 18, 2024 · 1h 18m · bg2-pod
Ep7. The Great IPO Debate, Tesla Robotaxi v Uber, Tech Check | BG2 with Bill Gurley & Brad Gerstner · Bg2 Pod
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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 BG2, hosts Brad Gerstner and Bill Gurley analyze macroeconomic pressure on tech valuations, the debate surrounding high revenue thresholds for tech IPOs, the unit economics of Tesla's Robotaxi vision versus Waymo, and expectations for Q1 tech earnings during the 'Age of Efficiency.'
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Brad and Bill hold 100% of the talking time here. How this is scored →
Brad and Bill as informed peer 7.6 Guest teaching 2.0 Guest disagreement 2.1 Brad and Bill pushing back 2.4
speaking balance: gold is Brad and Bill, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:18 Challenging the Permanence of Quasi-Public Markets
Bill directly challenges Brad's quasi-public framing, warning that avoiding public market discipline conceals severe valuation risks that eventually correct painfully.
Hardest push from Brad and Bill ▶ 52:25 Dissecting the Flaws of Owned Autonomous FleetsBill challenges the economic viability of standalone robotaxi operators like Waymo, pointing out the mathematical dilemma of sizing fleets to peak versus average demand.
Biggest teaching moment ▶ 1:00:10 Explaining the Post-COVID Auto Insurance Inflation SpikeBrad explains the regulatory pricing lag behind auto insurance inflation, detailing how post-COVID accident severities led to severe under-earning followed by regulatory rate hikes.
Brad and Bill hold their own ▶ 15:18 Dismantling Private Valuation IllusionsBill sharply dismantles private founders' comfort with unadjusted valuations, asserting that private low-growth companies are actually worse off than public peers due to illiquidity and rigid cap tables.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Brad and Bill as informed peer | Guest teaching | Guest disagreement | Brad and Bill pushing back | Why |
|---|---|---|---|---|---|---|
| Total Eclipse Experience and Host Catch-Up | 4 | 1 | 1 | 1 | Brad and Bill open with casual catch-up on the solar eclipse before touching on macro indicators, M&A deal rumors, and rising market volatility. | |
| The Great IPO Debate: Revenue Scale and Market Realities | 7 | 2 | 2 | 2 | Brad introduces data comparing historical public company counts against recent claims about revenue requirements for IPOs, while Bill provides historical perspective from his board experience. | |
| Wall Street Expectations and The Cost of Being Public | 8 | 2 | 2 | 3 | Brad shares insights from discussions with heads of capital markets regarding float and scale expectations, while Bill highlights Wall Street structural incentives and the administrative burdens of going public. | |
| Private Valuation Resets and Instacart Case Study | 8 | 2 | 2 | 2 | Brad examines the Instacart case study to illustrate valuation resets, while Bill critiques the ostrich mentality of private founders hiding behind stale valuations. | |
| Multiples Contraction, Public Burdens, and Private Capital Depth | 8 | 2 | 2 | 3 | Brad analyzes valuation multiple compressions across vintages and quotes Jamie Dimon's letter on public market regulatory friction, with Bill emphasizing the risks of big tech M&A being blocked. | |
| LP Liquidity Crisis and VC Structural Challenges | 8 | 3 | 3 | 3 | Brad argues that deep private markets are permanently changing IPO timing, while Bill points out that holding illiquid positions indefinitely locks up LP capital and risks severe downstream corrections. | |
| Rethinking Private Portfolios: Venture vs. Quasi-Public | 8 | 3 | 3 | 4 | Brad introduces the concept of a quasi-public asset tier, but Bill firmly pushes back, arguing that staying private indefinitely creates massive hidden risk that eventually gets written down all at once. | |
| Tesla Robotaxi vs. Waymo: FSD Momentum and Feasibility | 7 | 2 | 2 | 2 | Brad details Tesla's FSD progress and Waymo's presence in San Francisco, while Bill sets the stage to evaluate business model feasibility beyond pure autonomous driving software performance. | |
| Rideshare Fleet Economics and The Peak Demand Problem | 9 | 2 | 3 | 3 | Bill breaks down the devastating economics of owned fleets facing peak versus average demand swings, leading Brad to outline why an open hybrid partnership with Uber is necessary. | |
| Robotaxi Unit Economics, Insurance, and Global Rollout | 9 | 2 | 2 | 2 | Bill highlights how US litigation and insurance structures could hinder robotaxis, while Brad presents detailed unit economic models comparing human-driven rideshare to autonomous fleets. | |
| Q1 Tech Earnings Preview and The Age of Efficiency | 8 | 1 | 1 | 1 | Brad previews Q1 earnings, analyzing cloud acceleration trends and corporate margin expansions driven by AI productivity gains and headcount discipline. |
Statements from this episode (28)
Gerstner: At least six billion-dollar M&A deals are actively being courted
“I think I know at least six other deals over a billion dollars that, you know, are actively being courted in the M&A pipeline.”
Gerstner: US public company listings dropped from 6,500 to 4,000 over 20 years
“The number of public companies has gone in the U.S. Has gone from 6500 or so down to about 4000 over the last 20 years.”
Gerstner: Median software IPO over past decade had $185M revenue, 50%+ growth
“If you look at the, you know, the last 10 years,
The average software IPO has been about a 185 in, in median in median revenue over the last 12 months, and it has over 50% growth.”
Gurley: Going public improves company performance and raises operational standards
“I have always believed, and I'm not the only one there, there's a assortment of other people in our industry, that being public is great for companies. It raises the bar in terms of their performance. It causes them to, I think, achieve more than they would ot…”
Gerstner: Tech IPO window is wide open, determined solely by price
“And I've been making this case that the IPO window is wide open. It's just a matter of price.”
Gurley: Baseline annual cost of being public is $2M to $5M
“The insurance you have to buy for your board, all those things, like is the cost of being public, it's probably two to five million a year just to be public.”
Gerstner: Instacart hit $40B privately before IPOing around $6B
“Instacart was one of these companies that got
you know, really high valuations during the pull forward that we saw in the Zerp COVID period.
You know, it hit a valuation of almost forty billion dollars.
they went on to raise subsequent rounds of private fina…”
Gerstner: Behavioral resistance to valuation markdowns blocks tech IPOs
“And I think this is one of the big psychic or behavioral hurdles to these companies getting out and getting into the public markets.”
Gurley: Hims & Hers and SoFi prove smaller public tech companies can thrive
“Like even in the SPAC space, look at him and hers, or look at SoFi, Anthony Noto, like they, they've actually done well over the past six months, like numbers up and to the right, stock up and to the right, and much smaller than Instacart, so it is doable.”
Gurley: Slow-growth private companies are worse off than equivalent public peers
“In fact, like because of a lack of liquidity premium, you're probably worth less than that public company and structurally,
Your cap chart's more rigid, and so you have less flexibility. You can't do any acquisition. I mean, there's all kind of reasons why tha…”
Gerstner: Over 1,000 unicorns must still exit through the market system
“And, you know, I think we have over a thousand of these companies that are marked over a billion dollars that still have to get work through the system.”
Gurley: Regulatory Scrutiny Has Curtailed Big Tech M&A Exit Options
“We do have a situation where at least the big guys have been pushed away from M&A by regulatory, which is another reason why you need to be more serious about the public option, because there are fewer Relative to history, I guess, fewer options on the M&A sid…”
Gerstner: Elite Tech Companies Like SpaceX and Stripe May Stay Private
“You know, think of, you know, the SpaceX's, the ByteDance, the Databricks, the Stripes of the world, all the companies people are waiting to see when they're going to come public. They all fit that profile. They don't need the public markets to provide the liq…”
Gerstner: Decline in Public Companies Is Permanent and Structural
“I'm evolving my own thinking to say this is permanent and this is structural, right? Because the government regulatory burdens are at least semi-permanent and the markets have responded by the private capital markets stepping in and providing the liquidity whe…”
Gerstner: Institutional LPs Cannot Easily Sell Multi-Billion ByteDance Stakes
“You can't sell easily a billion or a two billion dollar position in ByteDance or sell a multi-billion dollar position. So all of the endowments, foundations, you know, pension funds, they're in a different position than they've been in the past.”
Gerstner: Capital Markets Heads Report IPO Pipelines Are Filling
“All those heads of capital markets that I talked to, they all told me their pipelines are filling. I know this because my team is spending more time on road shows.”
Gurley: Anti-IPO Memes Echo Louder in Silicon Valley Than Outside
“I think there's also some Off the beaten path companies with pretty good numbers that are going to come as well. Ironically, not in Silicon Valley, because I think this, the, these memes and rules and this kind of negativity about how big you have to be, I thi…”
Gurley: Staying private indefinitely will trigger sudden, severe valuation write-downs
“That staying private forever has consequences. And unfortunately, the way it'll show up is some people will have kept some private marks in their very large positions and very large portfolios for a very long time, and then they'll be corrected all at once.”
Gerstner: Tesla FSD surpassed 1B miles, adding 1B per month
“I think they've hit over a billion miles driven now with FSD. And by our estimates, they're adding over a billion miles a month.”
Gurley: Aurora lost $2B two years ago and $1B last year
“Aurora's public lost 2,000,000,002 years ago, a billion last year, and virtually no revenue.”
Gurley: Owned AV fleets face an unwinnable peak versus average demand dilemma
“Are you going to build the fleet to average or peak? And by the way, you lose whatever your answer is. If you build it to average, you're not going to be able to serve your customers during the peak at all. Like they're only going to be disappointed. And if yo…”
Gurley: Standalone owned AV fleets like Waymo require hundreds of billions
“Someone trying to build a completely separate fleet, I just don't think it works. Like, and I would encourage anyone that believes in it, or anyone that's a, let's call them a Waymo advocate, let's build a public Google sheet of the 20 year financial statement…”
Gerstner: Tesla will eventually need to open its robotaxi network to Uber
“So I think they probably launch it you know you know, on a standalone basis. They get a lot of excitement and a lot of customer love for it. But my sense is by the time you scale this, it probably does have to be an open system.”
Gurley: Around 5% of Uber's US Gross Revenue Goes to Insurance
“I think in the Uber case in the U S about five percent of gross revenue goes to insurance.”
Gerstner: Robotaxis Will Increase Rideshare Net Margins to 12-14%
“We still think that the margin goes up from, let's call it seven percent of gross bookings to something like 12 or 14% of gross bookings, even taking into account all of that bill.”
Gerstner: Robotaxis Will Scale Internationally Before the US
“There are a ton of jurisdictions where I expect this, unfortunately, before I expect it in the US you know, at scale.”