E81: All-In Summit: Bill Gurley & Brad Gerstner on markets, downturns & investment cycles

Gurley describes venture as a “sawtooth,” where risk appetite builds slowly over many years then collapses in months, forcing rapid mental and portfolio adjustment; firms cannot reliably time the top, so they must enjoy the upside but be ready to pivot quickly when the turn comes.

Gerster notes the “iron law of investing” that a 1% rate move can cut valuation multiples by 15–20%, so with the cost of capital normalizing, the extreme multiples of the past 18 months are unlikely to return; investors and founders should re-underwrite to 5–10 year averages, not peak-pandemic comps.

By deconstructing CPI components (used cars, housing, airfares) and combining that with collapsing consumer confidence and bond market breakevens, Gerstner argues that demand destruction is already underway and inflation is rolling over, even though backward-looking headline data still looks scary.

Both believe capital raised but not yet called will be deployed much more selectively, with many GPs slowing or skipping calls rather than forcing money into bad vintages, while PE buyers feast on bargains; early-stage founders may benefit from cheaper talent and less distorted competition.

Gurley stresses that price-to-revenue is a crude tool; public investors are now laser-focused on net dollar retention, long-term margins, free cash flow, and stock-based comp, and the history of software shows only a tiny handful ever exceed $1–2B in revenue—making 100x ARR valuations for niche apps indefensible.