Insight
Gurley: Endowment VC Managers Are Bonused on Paper Marks
“But the thing people may not realize is the managers of the VC group at the large endowments have no incentive to try and right size this number. In fact, many of them are bonused on paper marks. And so, if anything, they have the reverse incentives to get the…”
Insight
Gurley: Copying David Swensen's 50% illiquid Yale model broke LP liquidity
“I would suggest that what we might be seeing is the exact result of everyone copying the Yale model. You know, Howard Marks famously said, you make a lot of money when you do something non-consensus and accurate. But what if everyone copies David Swenson? What…”
Prediction Not checkable as stated
Gurley: Putting retail IRAs into 2-and-20 venture funds will increase fraud
“If we move to a world where, you know, the answer to getting the everyday consumer into high growth tech is to put their, you know, endowments, for one case, IRAs into, you know, these venture funds that are charging two and 20. I just think there's more obfus…”
Opinion
Gurley: Investors are repeating ZIRP-era mistakes with AI startups
“All of the problems we talked about that created the zombie unicorns. We're just rerunning that. Like there was this maybe part of not living through a correction, but like we're funding these AI companies, the exact way we funded those companies.”
Opinion
Mega-check VCs act as uncritical friends instead of providing oversight
“One, another negative element of all the systems issues that we're talking about is the firms that, that, that beg their way onto the cap chart by writing a. Three hundred million dollar check or whatever. They differentiate themselves by being the best friend…”
Insight
Gurley: 'Late stage' is just a euphemism for big checks
“I've always thought late stage was a euphemism for big check, you know, because you, if there are people willing to put three hundred million in an AI company that's 12 months old. Right. So that's not late stage. It's just big check.”
Insight
Gurley: Believing You Cannot Overpay Is Rational If Assuming Meta-Like Scale
“People that have watched Google or Meta, you know, go from Looking expensive at twelve billion to three trillion. Like, if they assume something might be that, they can't overpay in their mind. Which I think is rational for the independent player.”
Assertion Not checkable as stated
Gurley: The AI boom prevented venture capital from having a full correction
“You never had a full correction here because AI came along and everyone got so excited.”
Assertion Not checkable as stated
Gurley: Thrive Capital pioneered massive tender offers keeping top startups private
“I think Josh and the team at thrive have been leading.
They're not the only one, but they've been leading the way here where you go at companies that were already on the list to go public that the journal was talking about.
They're going to go public next year…”
Assertion Supported
Gurley: IPO underpricing and fees create a 33% cost of capital
“I had my friend Jay Ritter rerun the data. Is there, you know, up like 25, 26% underpricing. You add in the seven percent fee, and you're like a 33% cost of capital.”
Prediction Not checkable as stated
Gurley: Uber-style capital battles will happen across every category
“And I lived it in the Uber lift situation, but we're going to have that type of capital battle in every category under the sun.”
Insight
Gurley: AI revenue growth includes compute wrappers resold at negative gross margins
“There is some chance in my brain, and I haven't Fully thought through all the implications of this, that some of the revenue growth is, is resale of compute. And so many of the players in the market are reselling a wrapper on top of a foundation model on top o…”
Insight
Gurley: Warren Buffett's Principles Do Not Apply in Capital-War Competition
“All the stuff you read in every Buffett letter will not apply in that world of capital competition.”
Prediction Not checkable as stated
Gurley: China's open AI models will enable experimentation unmatched in the US
“And so that level of competition, if it leads to four deep pocketed, all open products is going to be ultra powerful. And we've already learned that these models can train each other and help each other get better. So if you have four open ones that can all tr…”
Opinion
Bill Gurley: Vocal VC China hawks are often military technology investors
“Some of the people that are the biggest China hawks are the ones that have bet on the new VC-backed military companies, and, you know, I just hate that, that, like, you might become a warmonger”
Assertion Supported
Gurley: Capital-intensive hard tech historically yields poor venture returns
“You could study it like mathematically and it hasn't been a great place for returns. And you could look at, you know, there was a massive amount of venture capital put into solar. 1520 years ago, and it didn't work.”
Opinion
Gurley: SpaceX and Tesla are Elon Musk outliers, not repeatable models
“SpaceX and Tesla are data points, but they're outliers really, and they're both attached to Elon. So I think it'll, we'll have to see four or five of those from non Elon to know if it's possible. I, what I've learned and heard and studied about his execution p…”
Opinion
Gurley: VC lacks a corrective mechanism unless LPs step in
“The system as it exists today promotes less liquidity, less traditional high quality company building and way higher burn rates. And that's just not a great combination from my perspective and it's all self-reinforcing. So all of the components that I listed, …”
Prediction Not checkable as stated
Gurley: Any AI market pullback will rebound very quickly
“I suspect that the conviction in AI is high enough that even if we were to have a six month period where people thought AI was overstated, it would start rebounding very quickly.”
Insight
Gurley: Staying private indefinitely deprives companies of feedback that makes CEOs sharper
“The very best CEOs, and I put people like Barton and Vinny off in there. Even Mark at Meta has said this. They believe being public makes them run sharper. And one other negative of these companies staying private forever is they're not getting that feedback.”
Insight
Gurley: VCs Avoid Replacing Founder CEOs Due to 50% Failure Rate
“It's actually true of every venture capitalist in the world because you got a 50 50 shot when you change the CEO. And why would you put that risk on on your portfolio?”
Prediction Held up
Gurley predicts 4-5 consumer AI companion startups will emerge within a year
“It's not That difficult for me to imagine exactly what played out in her, which was an unbelievable movie for its time, by the way. But like, I think that will happen. Like, I would be shocked if you don't see four or five companies pop up in the next year.”
Assertion Not checkable as stated
Gurley: Top VC firms increased fund commitments 10x to $5B
“Today, many of the branded firms, I think, have moved from maybe Five hundred million commitment every three or four years to five billion, you know, so, so 10 X and they're participating in very actively in what we would call late stage.”
Insight
Gurley: Overfunding Stalls Market Attrition and Leaves Too Many Competitors
“I think you end up with too many participants in a single field where you would have had whittling earlier. And so you end up, so that, that makes market expansion more difficult because there's three to five survivors instead of one or two.”
Bill Gurley