All right, welcome to a new episode of Opening Bid Unfiltered. I'm Yahoo Finance executive editor, Brian Sozzi, here at the NASDAQ in Times Square, and we have a real treat for you on this episode. You're going to get a lot smarter about tech stocks, investing, and I would even say a lot smarter about where you may go in your career and why you should consider doing it. With me is noted venture capitalist, Benchmark's Bill Gurley, and I should say author of Running Down a Dream: How to Thrive in a Career You Actually Love. I don't know, when did you find time to write a book, Bill?
It's something that came up in the background. You know, I've written my blog my whole career and so I constantly have little files with ideas where I'm keeping track of things. And there was this moment when I was reading biographies and it came to me that I noticed these certain patterns amongst these people that had done really well in their careers and people that were very intentional about their career, which I think is a big part of it. And it just gelled in my brain and I felt like it was a story I had to tell. I gave it as a presentation and then a few people noticed, like James Clear noticed, and people like that started pushing me to do the book. It was a side project. It obviously isn't related to venture capital or investing. It's about, you know, how to maximize your life, I think. But it's something that became kind of a passion project for me as we decided to make it a book. I invested even more time and did more reading, both of more biographies and more stories, but also the academic work in the category around career regret, around career satisfaction, that kind of thing. And so we put it all in there together and I hope what it does is it gives more people the permission to chase what they truly love.
Bill, I love the book. I can't wait to get into it, but you and I have never talked. I don't know how that has happened. But nonetheless, we're here now. I followed your entire career, really past 15 years of my own career. And I have to ask, how do you find opportunities, Bill? How do you find like an Uber? How do you find a Twitter? Like, how did these things happen? And how could the average person find opportunities like this in this giant stock market?
Yeah, I think the key, my old partner Andy Kohler used to say, it's not about seeing the future, it's about seeing the present very clearly. And you watch these scenes that open up and you watch and pay attention to how things are changing and then you can start asking yourself questions like, what's a realistic thing that's going to emerge in this moment. And so, you know, the Uber thing really came up because I had worked on OpenTable and I had seen what putting a network on top of a highly distributed supply base can allow and unlock and was intentionally looking for something in that category when the company emerged. So, you know, there are plenty of people, there's great stories like the General Magic story, if people haven't seen that documentary, where right idea, but 5, 10, 15 years too early and the pieces aren't there. And so, it's really about seeing the disruptions but knowing what's possible within a five-year window. Otherwise, you're going to run out of venture capital.
Are you in those, when you're assessing these early stage companies, what is more important for you in the hierarchy? Is it that amazing founder who has worked to put together the amazing slide deck or pitch deck and they clearly have that it factor, or is it the raw opportunity of the business? How do you know what to weigh?
I think you look at like three different things. I think one is what you said about the founder. I would suggest that salesmanship is a big, big requirement. Once you start running a company, you're recruiting, you're closing business development deals. If you're an enterprise company, you're closing seven-figure contracts. Like if you can't sell, you're not going to do well. So that salesmanship quality of the founder, and then I'd say the product instincts of the founder is remarkably important as well. And I think if you get both of those to line up and you believe in the first thing I mentioned, which is this window is right for what they're doing, then that's nirvana. If you get all three. But if they spike super heavy on a single vector, I think you have to take that chance. There's a notion in venture capital about asymmetric risk. So if you, you know, the biggest mistake of my career is I had Larry and Sergey present to the partnership when there were 25 employees at Google and we failed to chase the deal. And that's the mistake in venture, not funding something that doesn't work. If you fund something that doesn't work, you lose one times your money. If you miss this big thing, you lose, you know, 10,000 extra money. And so you have to tilt towards, my partner Bruce used to say, what could go right? You have to tilt in that way. And so if there's any vector that's just super spiffy, you know, or like a social media product that has started to take off and elevate those kind of things, you usually have to take a flyer.
There's no surefire way to spot the next Sergey Brin and Larry Page, right? I mean, there's not like a playbook someone can follow.
No. In fact, I think one of the reasons we failed to chase it was at the time, you know, there were two PhD students who wanted to be co-CEOs and that, you know, back in that moment 20 years ago, that was, today it wouldn't seem that way because there's so many AI researchers that come out of doctorate programs, but back then that was considered a red flag. And so, you know, something you're watching out for, but would have been a negative signal.
Is Bill Gurley as excited about this moment or this period in technology as the stock market and stock market investor that has put so much money into the Mag 7? Are you jazzed up by what we're seeing?
Yeah, look, I think that the venture capital industry lives off of these moments. You know, you have a book like The Innovator's Dilemma or Crossing the Chasm, like these technology waves come along and they create real opportunity for companies that just got started yesterday to take massive share from incumbents. And venture capital, without these types of disruptions, I think venture capital would be a lot harder. And so everyone gets excited. I think you've also seen in this case revenue ramp rates for some of the AI players faster than we've ever seen before in any previous wave, which is really powerful and compelling. It says that the customers are adopting the products super quickly. At this point, however, I think like running out looking for incremental investments has gotten very complicated because the venture capital community could not be more convinced that this is the biggest wave of all time. And so, you know, supply and demand start to even out. And so, you know, I heard just this week about a company that did a seed at 100 pre and is doing their A for 10 million at 300 pre. So that venture investor that's doing 10 at 300 pre is getting a tiny percent of this company relative to what people used to get. And so I just think that things have adjusted to the reality so fast that the odds of making incremental wins from here gets a lot harder.
Is that some form of indication to you that we're near some form of top for this?
You know, it's hard. And you know, there are a lot of people that have talked about is it a bubble or not? And I've started echoing this work from Carlota Perez, this academic who says when you have big waves it attracts speculators. So real waves always have bubbles attached to them. And she goes back, you know, 4 or 500 years. And so it's not an either-or thing. It's the fact that it's real that you get speculators. And these are opportunists that run in and we've already seen some types of corrections. I think the Oracle boom-bust thing happened very fast. You know, CoreWeave stock is way off of what it used to be. We had the Rick Perry SPAC data center thing that went up and way down. So there's already been speculators that have been kind of called off a little bit. And so, you know, I do think that there will eventually be a correction. And one of the reasons that I feel strongly about that is that so many of the players, so many of the competitors, especially the deep-pocketed venture, the ones that have raised tons of venture capital, they're losing massive amounts of money, more than Uber ever lost, which was a lot, I would say. More than Amazon ever lost. And so the burn rates are bigger than they've ever been in the history of venture capital. And eventually they're going to want to bring those in. And when they do, like when people right now in almost every one of these categories, the leading player is not pricing the cost. They're pricing to take share. And so at some point, and I don't know what causes that, it's just some type of exhaustion from the capital markets, these companies then have to do what Uber did, which is transition from losing money to being cash flow positive. And once as they do that, the pricing for these products is going to shift. And I just feel like that's going to be a moment of a correction. There's another thing which is if you go back to the dot-com period, you know, when all these companies first started they were all on Oracle and they were all on Sun and they were spending a third of the venture capital they raised on these servers that they were propping up. Five years later they shifted all to Linux and MySQL on open source. So there were, you went from a period of innovation to a period of optimization where people are much more worried about cost and I think that could happen here. I mean I think there's some really interesting questions about the open-source models versus the proprietary models, the alternative inference architectures, you know, like Grok which Nvidia just bought but also Cerebras and some of those others. So there's those two things, I think when the startups finally have to prove unit economics and simultaneously we start looking for optimization you could see some things move around. The Google TPU architecture as well is a competitive alternative.
Are you concerned that I guess OpenAI is some form of this generation's Sun Microsystems, where maybe it's not a direct comparison, but OpenAI is at the center of so many of these deals and for them to make these deals work, they have to hit profitability at some point over the next 10 years.
Yeah, I think it's created risk for everybody that they have committed to so many deals in so many different places. It's almost like everyone's dependent on them surviving. And that is another thing that could lead to a correction if they ever have to start defaulting on some of those commitments. And so, you know, we'll see. The other thing that's part of the reason why you've had the CoreWeave type correction, the Oracle correction, and the Rick Perry SPAC, is data centers are really hard to build and like we already know that there's shortages of energy. Everyone's talked about it. So just the pure mental exercise of assuming that they would make it on budget on time is probably incorrect, right? I think almost specifically going to be incorrect.
Bill, is there, you get to see so many companies early in their lifespan. Is there another Mag 7 waiting in the wings? Will there ever be another Microsoft or Google? Are any companies catching your attention?
Well, look, I mean, I think that you have to look at what the capital markets have done and, you know, players like Thrive and Altimeter and Coatue and SoftBank committing to OpenAI, they clearly, like, you're not funding something at 300 billion pre, 400, 500 billion pre if you don't already believe that. So there are a lot of very proven investors who have made big bets across multiple decades that have already decided what you said is true about OpenAI.
