And I'm Zoya. And we're the hosts of the Under 30 Podcast.
Today, we sat down with Silicon Valley royalty, legendary investor Bill Gurley.
Bill does not hold back on the current wild VC landscape. He breaks down the massive funding divide between AI and non-AI startups and warns of the real dangers of taking too much cash when you don't need it.
Plus, we spoke about his fascinating past, including how trips to Vegas led him to gambling with an edge.
Bill Gurley, thank you so much for being on the podcast today.
So, you have had a very legendary career in Silicon Valley. But, we want to give you a space to just do a very... you've achieved and are achieving now.
When I came out of undergrad, I had a computer engineering degree and I tilted at that for two or three years. And then, I decided that wasn't the end-all, and I went to business school. And then, I thought the next thing was Wall Street, so I went there for three years and got to the same place where I was like, 'This isn't exactly it.' And was fortunate enough to find my way to Silicon Valley, where I would spend 25 years. And I've said and I mean this, like if we were in some weird socialist society where you just picked a job but y'all got paid the same, I think I would have still done venture capital, just because it fit with so many dimensions of my personality, character, curiosity, interest, that kind of thing.
What are you most proud of?
In reflection, I'd probably say that it's I had the opportunity along the way to be successful, but to simultaneously share, mainly through blog posts and whatnot. But, there are other investors that I hold in super high regard that did it that way as well, Buffett, Howard Marks, where they would write as they went. And I think that part of the reputation that I have, a big part of it's tied to the success of the companies that worked out. If that hadn't happened, I probably wouldn't matter, but the fact that I did this other thing and kind of had a legacy of being a bit professorial and a teacher, probably you're asking me this as I'm about to turn 60. So, like thinking back, that's probably the thing that I would cherish the most.
Something that we talk about a lot is as reporters on the under 30 list, we in a lot of ways have a similar role to investors and venture capitalists. It's like trying to look at the landscape and decide who's doing really well now, but who's going to be able to do even better in the future. And you mentioned that like that curiosity was a huge part of it for you. What initially drew you to the VC side of things in the first place?
A number of different things. I got interested in investing. I read Peter Lynch's book One Up On Wall Street. I started trading stocks in my 20s. So, that's one. Two, this will sound a bit out there. My friends and I started doing annual Vegas trips and I kind of had a little gambling itch in there. And gambling with edge. We were counting single deck, all the stuff that used to happen back then. I was always fascinated with computers and technology from a very early age. And then I got super interested in corporate strategy and how disruptive technology played into that. And there've been many books written on that topic. So, it was really this coalescence of all those things that kind of line up really well. I also think that I have people might call it ADHD or whatever, but like my brain wants to think about a whole bunch of stuff simultaneously. And service jobs are better for people I think that have that going on. It could be investment banker, it could be consultant, you know, but where you get to look at a whole bunch of stuff. One of the things that happened to me when I was a computer engineer is I felt somewhat isolated from all this other stuff that was going on that I wanted to know more about.
It could be investment banker, it could be consultant, you know, but where you get to look at a whole bunch of stuff. One of the things that happened to me when I was a computer engineer is I felt somewhat isolated from all this other stuff that was going on that I wanted to know more about.
Mhm. Any crazy Vegas stories you can tell us?
The way, I don't mean that to be I wouldn't want anyone to walk away from that comment and think, 'Oh, you know, being a computer engineer is bad.' I think there are certain people who love going deep that way and being focused. And I think it's just a part of matching your personality with the right opportunity.
Yeah, there's a different job for every skill set, every personality. Are there any crazy Vegas stories you can tell us?
This one won't be that crazy, but way back when this was before what was the MIT group burning down the house? There's a famous book these MIT people were flying out. And they ended up counting into an eight-deck shoe, but before that we were just Binyon's used to do single deck. It was fairly easy math to count, but they would start paying attention to who was changing their bets around, which is what you do when you're counting. And so we came up with this other idea, which is you try and find a pit. A pit is a series of tables and there's usually a pit boss who's the one that's usually looking for the counters. We'd try and find a pit where someone had stepped up as a high roller because it took the pit boss's attention away and we would say we're invisible now.
Checking the system a little bit there.
This is 30 years ago. May it's 35 years ago. Yeah.
Since we're talking about gambling, I'm curious your take on prediction markets where
Gambling with an edge, but I think that's important. I don't I'm not one of those people that wants to flip a coin for money. I find that kind of random, but prediction markets, yeah, it's interesting. We were an investor in this company Betfair in Europe and they there were a couple of different companies that merged there. This was during the internet boom. So this is 20 years ago. And they tried to do prop bets and didn't get it to work. And because of that I was somewhat skeptical. And there's also these issues of what if it doesn't resolve? What if you bet on something and then there's a disagreement? I don't even know how that works. But Shane Copeland, you know, just kept tilting at this. And now they have volumes that are so high that you couldn't dismiss it the way I was because we we didn't see what happened in Europe. I think they're extremely low float. People can move them around if it's a topic where someone might market it the bet is predictive of where this is going. Candidates, whatnot, can put a little bit of money in and move the thing quite a bit. So I think you want to watch the volume before you would make a decision based on whatever it's telling you. And then there's a lot of discussion and I've heard it on both sides about is there a notion of inside trading and is that bad? You know, I look, anytime what was the famous Warren Buffett saying? There's a fool in every game. If you don't know who it is, it might be you. And so, you know, be careful out there.
Yeah, I mean both Polymarket and Kalshi are growing so fast. They're like at a rapid scale. What do you think
And there are I mean there are other people, you know, that are worried about the gambling levels of young people with proximity to the phone and speed. It that's also the sports stuff. But prop bets everywhere. And what a young person may not realize is the more esoteric the bet, the likely the higher rake for the house. If you have a high volume thing, you know, that won't be true. You know, Super Bowl bet on the line, you know, but but the crazier you get, the the likely things that are showing up on there. And the house is likely making way more money on the obscure bets. So you're probably getting less and less you're on the worst slot machine to the ones in the airport or whatever.
Yeah. What do you think of the how young founders are really chasing valuations these days? Like as reporters on the under 30 list, we have seen companies grow really really really fast. And some of them I've talked to personally who say, 'We didn't really need the money, but they offered it to us and it upped our valuation.' And with a big evaluation, we can easily hire and it just makes the AI side of things yeah.
I have a whole bunch of reactions to that. One, especially because your audience is likely a broad set of entrepreneurs. Something has developed and I could argue both sides of it, but let me just state what I think is a fact first and then we could debate it. Right now, most venture capitalists are so focused on AI that they won't pay attention. So you really have this massive black-white have-have-not situation where the AI companies are raising money at crazy valuations and the non-AI companies can't raise money at any valuation. So it's a really stark contrast. The one thing I would say to and then the other thing that's happened is there's been a bit of an industrialization of the venture world and many of the firms have raised more and more and more money. They all now believe in network effects and power laws. And so if a company's working, they proactively go to them and ask them to take money, which is what you just referred to. So back when I was young, the company would decide, 'Okay, in June we're going to set out and raise money.' And today, people are just showing up at the door and saying, 'Take the money.' In many cases, with the implication if you don't take it, they'll give it to the competitor.
Yeah, I've heard stories about founders being flown out in helicopters and being taken to all these sports games and whatnot. Getting, you know, they're like, 'Take my money.'
Yeah, and I think two things come with taking lots of money you don't need. One, you're naturally going to take your burn rate up, which I think of as risk, and it becomes harder and harder to truly understand your unit economics the bigger that burn gets. In the game, the competitive game especially if your competitor raises the same amount of money, I lived through this in the Uber-Lyft situation, it gets really dangerous, like people throwing money around. And but it's a natural reaction to the fact that the investors, you know, there's this thing in science called the observer effect where the microscope or whatever that you're measuring the experiment with changes the experiment. And I think investors have moved into that place here where the investor's being proactive, pushing money in, they're affecting the game in a way that they didn't used to. The other thing that founders should always realize that they unfortunately, especially young ones, don't understand, valuations represent discounted future expectations. So, the higher the valuation you take, the more is expected of you. And a slight misstep, and you could be way underneath. And private, one last thing, and sorry, private cap tables are not structured very well to go down. It would take forever to explain exactly why that is with liquidation preference stacks and whatnot and ratchets, but they're built to kind of only go up. And public companies stocks can go up and down, it's a lot easier, but if a private one, if you start trying to do down rounds in a private company, it gets messy.
Yeah, well, I was going to say, too, like we saw that with WeWork as like one of the most famous examples of the valuations were skyrocketed, and then as soon as the IPO came, it's like, wait, this company is failing, and we're like, no, this just was never level set from the beginning. No one actually knew the reality.
Well, and that's another example of when the burn rate gets so large, it's just really hard to know. And any good talker and analyst could say, well, if you look at it this way or this way, it's all okay, but getting to cash flow break even, true cash flow break even, is hard. And if you and many of these companies are going to be burning over a billion a year. Getting there from there, that's super hard.
Yeah, I told one of the founders that I was like, you know what happens when you raise too much money you don't need?
You end up a Netflix documentary.
I mean, it's certainly a possibility. I mean, Uber's a case where we were burning 2 billion a year and Dara, you know, has it now generating over 10 billion a year in free cash flow. So, it does happen. Amazon burned had a huge burn rate at the time. A relative it doesn't look that big compared to these, but so some make it out.
Yeah. What do you think though about risk? And also like if chasing things like profitability versus valuation because I think this is another conversation that has shifted with some founders lately. How what is your advice for like what to focus on?
Interesting because I think we draw so many of our analysis and metaphors from the top 20 companies and most entrepreneurs that might be listening to your podcast aren't in that world at all. So, I'm careful of the unfortunate thing in these hot categories is I don't think the possibility of being conservative, not raising the money, and trying to get to profitability is a reality. Because and we'll just throw out two examples, the coding space and the legal AI space. There's seven companies that have raised over $200 million. Like and they're all going to mount customer acquisition strategies with those dollars. So, if you were this entrepreneur who says, 'Oh, I'm just going to be conservative and do it the right way,' I doubt you'll be able to make any noise. And it's just a unfortunate reality. I'm always my heart's in the place where two people in a PowerPoint can change the world. Like that's why I got into this game and this more industrialized version, I find less idyllic.
But it is what's happening.
Do you think that every unicorn company in the future is going to be an AI company then?
