#15 My biggest learnings from Bill Gurley
“There is no fear in Silicon Valley right now.”
A quick thread on my biggest learnings from Bill Gurley(My investing idol):
Venture as a business: Venture capital is a services business as investors are not the ones in the cockpit. Investors are advisors, so your reputation is everything. Benchmark strives to be the most impactful and helpful investor in every company.
Why VCs say what they say: Venture capitalists are always talking to the entrepreneur they haven’t met yet. Their biggest concern is that they’ll miss the next Google or Facebook so they are always marketing regardless of who they are talking to or what the topic is.
Too nice: Hypercompeition has driven venture investors not to ask the hard questions. It’s a tough problem to solve as it was created due to excessive money being raised.
Scale: China and India present incredible opportunities, but when you train local investors, they end up leaving in a couple of years to build their own brand to have better economics.
Cost: The current ecosystem has made it far cheaper to start a new business. But the cost to scale a business has never been higher as the salaries of great engineers are increasing rapidly.
Go public: For a long time, entrepreneurs didn't want to go public due to the high level of transparency & scrutiny. Bill compares this to a football player thinking of not signing up for the NFL as he’s concerned about all metrics being mapped out.
Capital as a weapon: Funds like Softbank have had a massive impact on multiple industries as they deploy capital as a weapon(does not matter which competitor takes the money). For companies being approached by Softbank and choosing not to engage is like seeding the field.
Incentive alignment: The best companies are built when the incentives of the entrepreneur and the industry are aligned.
Angel community: Last decade of consumer social companies were funded by venture capitalists at a stage when products had traction as they liked the economics of coming in later but really getting the winner. This allowed angels to get into the early rounds of top companies.
Snapchat thesis: Kids look at Facebook as LinkedIn as everyone they know is on it, and once they post something, it has longevity, so it takes the fun out of it. Snapchat lets its users interact in a more free and informal way.
Why not be multi-stage: Conflict: Negative signaling by VCs not following up can make it hard for founders to fundraise. Next great company: Leading an early-round means if another player is raising, you don't even get a call. The risk of missing out on the next winner is huge.
Customer satisfaction: Find entrepreneurs who are obsessed with customer satisfaction and go great lengths to figure out a way to make it work(Best example: Uber gave riders high fives and riders hugs).