How to Hustle Like VC Legend Bill Gurley | The Circuit with Emily Chang

Emily Chang 0:00 [upbeat music]

Emily Chang 0:02 It's the live music capital of the world, home to pulsing festivals, dangerously delicious barbecue, and an emerging tech hub billed as an escape from the high taxes and lofty ideals of Silicon Valley. It's now also home to one venture capitalist who always stood above the crowd. Bill Gurley is famous for his tech investing, betting his reputation on one of the industry's most controversial unicorns yet, Uber.

Bill Gurley 0:27 I'm the guy they call. That's how this works.

Emily Chang 0:31 The real Bill Gurley recently relocated.

Speaker 0:33 [laughs]

Emily Chang 0:34 Hi.

Speaker 0:34 Hey, Emily. How are you?

Emily Chang 0:35 Not to escape anything per se, but to come home. I'm here to find out if this consummate insider has a fresh perspective from the outside looking in. So you live here now?

Speaker 0:46 I do. I do. Moved here about a year ago.

Emily Chang 0:48 How's Austin city living?

Speaker 0:49 It's good. It's a lot different from, from Northern California.

Emily Chang 0:52 [laughs] A lot different from Silicon Valley.

Speaker 0:54 Yeah.

Emily Chang 0:54 Normally, we're sitting when we do interviews, and you're, like, quite tall.

Speaker 0:57 I am. 6'8".

Emily Chang 0:58 6'8", all right.

Speaker 0:59 Yeah.

Emily Chang 0:59 And I got my cowboy boots on, so no heels.

Speaker 1:02 All right.

Emily Chang 1:02 Um, well, you have a hookup here.

Speaker 1:03 Yes.

Emily Chang 1:03 This is, like, one of the coolest spots in Austin.

Speaker 1:05 Yeah, this is where they film Austin City Limits. It's a famous television show on PBS. Some of the best artists in the world have, have come and played here.

Emily Chang 1:14 Yeah.

Speaker 1:14 And continue to do so.

Emily Chang 1:17 Do you play music, or are you just a fan?

Speaker 1:19 I, um, I took up, uh, guitar during the pandemic, but I wouldn't suggest that I'm very good. I'm just a massive fan of the, of the artistry of others, and, uh, I think trying to play actually gives me more perspective on that. [laughs] It's become one of those venues, there's like a handful of them in the country, where people want to play there. The iconic scene you see is the Austin skyline. This is Johnny Cash, obviously.

Emily Chang 1:53 Is there something that you think super successful musicians and super successful entrepreneurs have in common?

Speaker 2:01 I, I do think there's some of that. So I think they're n- natural students at what they do. They learn to navigate different format shifts. Like, these people hustle-

Emily Chang 2:11 Yeah

Speaker 2:11 ... like, harder than anyone that you can possibly imagine.

Emily Chang 2:13 All right, well, we're gonna talk about hustling.

Speaker 2:15 Okay.

Emily Chang 2:15 What it takes, how much you have to hustle to be a legendary VC. Um, so thank you. Thanks for hustling on down here.

Speaker 2:23 [laughs]

Emily Chang 2:24 You are one of the most prolific investors in Silicon Valley history. You worked at Benchmark for a couple of decades. You invested in everything from Zillow to Stitch Fix to Uber, and now you've made this big life change. You're living in Texas, came back to your home state.

Speaker 2:39 Truth be told, my wife had kinda made it a part of the marriage acceptance. When we empty nested one day, we'd come home. Her family's here, my family's here. Um, so it's actually been planned for a long time.

Emily Chang 2:51 You started investing in the dot-com boom, saw the carnage of the dot-com bust.

Speaker 2:56 Yeah.

Emily Chang 2:56 How is 2023 going to go down in Silicon Valley history?

Speaker 3:00 It feels very similar. I mean, the, the... I, we could go through what's similar and what's different, 'cause there's some of both. But I had a, a very, very, like almost an awakening understanding of just how cyclical this venture business is. The way that, that limited partners commit to funds that used to be 10 years and now are 15, and the very low barriers to entry. So when things boom, everyone starts a venture firm, right? And in this past boom, in addition to everyone starting a venture firm, every venture firm started multiple venture firms and growth firms. And all that money gets piled up, and you're slowly taking on risk, and you don't realize it. It's like the rollercoaster. It goes , and you're taking more and more risk, and you don't know it 'cause everyone around you is taking the same amount of risk. And maybe FTX is the perfect pinnacle of this past one, where, where a bunch of legendary investors just ignored risk. You know, and they wouldn't have done that in 2009. They had to do it after going off that rollercoaster. And unfortunately, because the money flows come in so easily, they're hard to go out, they're committed for 15 years. When the, when that bubble finally bursts, it's usually ugly. Risk on is slow. Risk off is fast.

Emily Chang 4:18 Silicon Valley Bank collapsed in 24 hours.

Speaker 4:21 Yeah.

Emily Chang 4:21 Right? This is the bank to thousands of startups, thousands of firms, thousands of funds. How did we get here?

Speaker 4:30 So on March 8, the stock was trading at $260 a share. So there are people that want to put this on risk-taking in Silicon Valley, but Wall Street got it wrong, too, right? So the world believed that this bank was okay. I think that it's unquestionably a black swan event that relates to interest rate movements that... and, you know, just a, a combination of variables that haven't been in this place before. There's a lot of questions about whether VCs should have been calm and supportive versus... You know, and I can see both sides of the story. But maybe because of, um, social media and ability to communicate instantly, the run on the bank can happen a lot more severe, a lot more quickly than it ever could have before.

Emily Chang 5:18 What did Benchmark do? Did you take your money out? Did you tell founders-

Speaker 5:20 We did not

Emily Chang 5:21 ... to take money out?

Speaker 5:21 We did not. And we did not kind of run for the doors either.

Emily Chang 5:25 You had some VCs giving out personal cash to help companies make-

Speaker 5:29 Yeah

Emily Chang 5:29 ... payroll. Do you think, if anything, this crisis will show founders who to trust?

Speaker 5:34 Every venture capitalist, when they open their mouth in front of a, a, a microphone, which I guess I'm doing right now-

Emily Chang 5:40 [laughs]

Speaker 5:40 ... is talking to the entrepreneur they haven't met yet. There is so much important criticality in getting in front of the right pitches that everyone wants to look like the best actor. The problem is that's the exact same type of behavior that leads to the FTX situation because- You take yourself out of a governance role completely because you just become the founder cheerleader. So it's, it's tricky. It's super tricky.

Emily Chang 6:09 So when the... Now that you can say whatever you want.

Speaker 6:11 [laughs]

Emily Chang 6:12 When the dust settles, how bad does this get?

Speaker 6:15 Let's say that the Fed hadn't stepped up and Silicon Valley Bank failed and like a whole bunch of startups lost their venture dollars. That would've been an event that I think would've been way worse than '01.

Emily Chang 6:26 Mm-hmm.

Speaker 6:27 Like, that would've been catastrophic. In '99, every single major Wall Street firm opened a office on Sand Hill Road. Everyone was in on it. '01, '02, '03, they left. Like, they just kind of moved on and they focused on other things, and it got super quiet. And I actually loved that environment. That's a great environment to work in. I hate the manic stuff. Um, but we're not there yet, and this one's gonna be slower because of the amount of money that's out there.

Emily Chang 6:59 Could we be in for a slow spiral or a slow bubble bursting?

Speaker 7:03 I think you could be in a, on a slow-

Emily Chang 7:05 A bubble deflating?

Speaker 7:05 ... a slow bursting, right, like where things like company bankruptcy or shutdowns or sales for nothing happened slowly over the next three years rather than all at once. And you still may see, um, people just decide that Silicon Valley is a place that's too risky, and this, it gets back to this like crazy manic cyclicality that we go through. That's the exact opposite of where everyone was three years ago, like where I was being called a, a, a Chicken Little or whatever.

Emily Chang 7:39 Right. People thought you were like the boy who cried wolf.

Speaker 7:42 Right, right. And then, you know, and I was six years too early. But I didn't pull my chips off the table, but I was worried. [laughs]

Emily Chang 7:47 [laughs]

Speaker 7:48 Um, but this is what happens. It's, it's really unfortunate. I'd love to think about a way to preventing it from happening 'cause I think the industry would be better off if it were more stable because in these moments, people start asking questions like, "Should you be more regulated? Should you, you know, behave in a different way?" And I don't think that's helpful to the fundamental, um, p- premise, which is let's invest money behind great entrepreneurs and create lots of amazing things.

Emily Chang 8:18 When you think back, do you think you were too conservative, or do you feel vindicated right now?

Speaker 8:23 Uh, unfortunately, and this ties into the cyclicality thing, there's a saying which is, the best way to protect yourself against the downside is to enjoy every last bit of the upside. Venture capital as a asset category is something you can't measure in a small window. You gotta look at it over 20 to 40 years, which is really bizarre because most firms don't have employees that long. But the vast majority of the returns are in these periods at the top of these bubbles. And so I can remember back in '99, '90, '95, '96, a couple of firms saying, "This is too manic. We're getting off the field." And then you missed the best performance possible. So no matter what I'm saying about what I'm worried about or my psychosis is dripping out of my mouth, you gotta keep executing because the returns at that window are too valuable for the, for the category.

Emily Chang 9:16 Do you think this is gonna impact innovation? More uncertainty, tighter funding.

Speaker 9:22 I don't see any reason that it, that it will impact innovation. At the end of my career, one thing that I'm remarkably aware of is just how rare success is, and we tend to fantasize that every startup can be the next Facebook. But, but we know down deep that's not true, and it, actually, the odds are much more likely you're gonna fail.

Emily Chang 9:47 The road to unicorn land is littered with startups that sparkled brightly for a moment, then faded. For more than a decade, I covered countless companies, some of which no longer exist. Maybe they were heralded as the next big social network or ride-sharing competitor, or they were part of hype cycles that are lately looking lavishly oversold. Moving fast and breaking things was possible in the era of easy money, but will it be the strategy now? Venture capitalists are always looking for founders with the right stuff, a great idea, and the drive to make it happen, but this is a whole new world. What's your advice to startups?

Speaker 10:24 My advice is pretty simple, which is that thing we lived through the last three or four years, that was the fantasy. Sometimes I hear an entrepreneur go, "Well, as soon as things go back to the way they were," that's a catastrophically disastrous, like, mindset. Like, assume this is normal. And so unfortunately, there are a lot of people that, that marked themselves to market in their brain, you know, at the top of the bubble, but it's gone. Like, that kind... E- even if something like that happens again, it's 15 years in the future, so you're not gonna, you're not gonna wait around for it. So you gotta recognize what the reality is today, what your company really might be worth today.

Emily Chang 11:03 Well, you did have a lot of success navigating the ups and downs. What are the keys to your winning strategy?

Speaker 11:12 To be great at it requires a level of hustle that's, that's really hard to explain, and the reason is you're trying to maximize the optionality that you get in front of a home run pitch. And to do that, you have to look under every rock you possibly can. And so if you're not studying some new business model or new platform, you know, AI. Like, if you're not just in every meeting, then you're lowering the chance that you're gonna be successful. It's, it's an exhausting game, and there's amazing people at other firms doing the exact same thing.

Emily Chang 11:50 Mm-hmm. You covered Amazon as an analyst in the '90s before Amazon was, you know, barely more than a bookstore.

Speaker 11:56 Yeah.

Emily Chang 11:57 You saw Jeff Bezos up close. What sticks with you from those days?

Speaker 12:01 Because he came from D.E. Shaw and because he came from Wall Street, he understood How to talk to shareholders in a way that no one else did. So if you reread his S1 where he writes a letter, it's titled To Our Share Owners, and he talks a lot about them. All the entrepreneurs that followed Jeff that wrote that letter were kind of like, "Screw you, Wall Street. I'm gonna run it my own way." And it's not actually what Jeff says. And they're... He says, "I'm gonna run it for the long term," but he says, "I'm doing that for you," which is very different. Whereas the, the, the other people kind of wrote, "We're gonna run it our way and not for you." And so he was special. Like you, you, you endear yourself to a community when you talk to them in a respectful way.

Emily Chang 12:46 So how much is it about the individual versus the team versus the moment? Luck versus skill?

Speaker 12:51 Oh, it all, it all matters. It all matters. It's about timing and getting the product exactly right.

Emily Chang 12:57 Yeah.

Speaker 12:58 The, the founder has to want to learn to be a great CEO, and that part's hard. Why in the world would a 22-year-old founder be good at managing 10,000 people?

Emily Chang 13:08 So let's talk about that. Your investment in Uber is legend, in part because you made a lot of money, and also all the drama. Well, Uber, the ride sharing giant and world's most valuable startup, has been in the news a lot this week.

Speaker 13:21 I lost $97,000 co- because of you. I bankrupt because of you.

Bill Gurley 13:26 Well, I'll be the first to admit that I'm not perfect, and neither is this company.

Emily Chang 13:30 There have been so many controversies, one after another, it's hard to remember what actually led to this. But it was a blog post by a former Uber engineer who accused a manager at Uber of sexual harassment.

13:43 Uber's chief executive, Travis Kalanick, has resigned. Five of Uber's major investors, including Benchmark Capital, demanded that he resign yesterday. Gurley, who was on the board until very recently, lets his two partners fly to Chicago, meet Travis at the Ritz, and hand deliver him this letter that says, "We and other investors want you to resign."

14:04 And Gurley was responsible for-

14:06 He was the first-

14:06 ... getting all of these other investors on board.

14:08 Right. Right.

14:08 Correct. When you look back on that, how do you reflect?

Speaker 14:12 In a perfectly executed world, that doesn't happen. Like, we help the, the founder and the team, you know, navigate their way to a successful company. I won't name any names, but I think there are plenty of entrepreneurs from previous generations that are not perfect humans and matured along the way, right? And became different people and different leaders, and you'd like to make that happen. It, it's not from a lack of effort. There were lots and lots of tries, but it didn't work out. Like, like, a- whether it was adding board members or the type of governance or all that, like we didn't quite get it there, and things started to spiral. I think all the stakeholders, employees, customers, drivers, it was all at risk.

Emily Chang 14:59 It caught Hollywood's attention and-

Speaker 15:01 Yeah

Emily Chang 15:01 ... my mom is so excited we're talking because she loves the Bill Gurley that's played by Kyle Chandler.

Bill Gurley 15:07 We need to build companies that change the world. The key to being a great coach is you gotta love your guys, right? He has to take this guy under his wings. He has to love this guy. Those two together knew this was something that's gonna hit, and boy, were they right.

Emily Chang 15:22 Did you watch it? Like, what did you think of his portrayal?

Speaker 15:25 This... I hope this doesn't sound bad, but-

Emily Chang 15:27 [laughs]

Speaker 15:27 ... every single female that I know came up to me and said exactly what your mom said. So they said, "Wow, you're so lucky to be played by Kyle." But none of them said, "And he looks a lot like you." Um, I was initially nervous about watching it, but there was so much that... There were a lot of things that weren't true, like, that were just kind of embellished, and, um, that made it easier to watch because it, it wasn't, it wasn't like reliving the whole thing.

Emily Chang 15:54 Benchmark kind of got an anti-founder narrative out of that.

Speaker 15:57 Well-

Emily Chang 15:58 First it was Uber, then it was Adam Neumann at, at WeWork.

Speaker 16:00 Right. And I th- but the-

Emily Chang 16:01 And is that fair?

Speaker 16:02 When we were working with these four other venture firms and made a decision to try and arrest the situation at Uber, um, everyone knew what the consequences of that was. We weren't, like, blind. If we do this, some class of humans are gonna use this against us and point it out and put us in that bucket. And, um, [laughs] this'll sound overly dramatic but, you know, the k- thing we told ourselves as we, we headed out the door was, you know, history will be on our side. And, you know, it, it, no matter what the cost was, if I went back in time, I'd do the exact same thing.

Emily Chang 16:44 The SoftBank money. There's Tiger Global. There's big money coming from Saudi Arabia. All of this money, not necessarily smart. How do you think this is gonna play out?

Speaker 16:53 I mean, there's a lot of great sayings that I could use at this moment in time. I'll, I'll just pick one. It's like they say there's a fool in every market, and if you don't know who it is, it's probably you. I mean, the, the markets have a way of separating, uh, very risk-seeking individuals from their capital. It may not happen overnight, but it always happens eventually. Like, there's no easy money. I love the FTX story, not because I wanna pick on anybody, but to make the decision to give money to somebody that has no board and that has a side business that's commingled, who tells you it's not commingled, and it turns out it was commingled, like what are you doing? Like what-

Emily Chang 17:37 Well, why did so many people fall for FTX and Sam Bankman-Fried? We're talking about legitimate-

Speaker 17:42 Yeah

Emily Chang 17:42 ... legendary venture capital firms.

Speaker 17:44 Um, the numbers were really, really big. So those are seductive. The individual is unique and capable of narrative, and FOMO, fear of missing out, drives a lot of behavior in Silicon Valley. A lot. And, uh, it's classic. Now, I mean, that's why I like talking about it, because until you get to that moment, you don't get to correction Like, you need excessive risk-taking, and then you get excessive arbitrage, which a lot of crypto writ large may have been just excessive arbitrage, taking money from people that wanted to separate themselves from it, and then you get a correction. This is classic. It's not new.

Emily Chang 18:36 After all that talk about the fate of venture capital, it's time to dig into another classic: Texas barbecue. This place is amazing. I'm so excited.

Speaker 18:46 You ever been here before?

Emily Chang 18:47 No.

Speaker 18:48 All right.

Emily Chang 18:49 I'm ready for my-

Speaker 18:50 Ev-

Emily Chang 18:50 ... big Austin barbecue.

Speaker 18:52 Yes. Oh, look at this.

Emily Chang 18:54 Oh my God.

Speaker 18:56 Wow. Oh my God.

Emily Chang 18:57 Oh, this looks amazing.

Speaker 18:58 Oh, wow. You're gonna eat all this?

Emily Chang 19:00 [laughs] It's for you.

Speaker 19:01 Thank you so much.

Emily Chang 19:03 Let's taste this brisket. Are you guys jealous? [laughs] If you were gonna start a company today, where would you move?

Speaker 19:14 Place can be very impactful.

Emily Chang 19:16 Mm-hmm.

Speaker 19:16 And so if I were, like, a 22-year-old founder starting something, I'd go to Silicon Valley just because it's gonna increase your odds of success.

Emily Chang 19:24 What about, like, Miami, LA, Boston?

Speaker 19:29 I think many cities, whether it's Austin or Miami, they, they have a problem that sounds ironic, but they're a lot of fun. And so I think there's a question as to whether you attract the very most determined founders.

Emily Chang 19:47 Oh. That's a little controversial.

Speaker 19:50 Which, which may explain why Seattle's done so well.

Emily Chang 19:52 [laughs]

Speaker 19:53 Not that it's not a wonderful place, but for two-thirds of the year, it's dark outside.

Emily Chang 19:58 Exactly.

Speaker 19:59 I do think there are a lot of contagious qualities to successful startups. Constantly around other people that are all in the same game-

Emily Chang 20:07 Yeah

Speaker 20:07 ... is super helpful.

Emily Chang 20:09 So you stepped back from an active role at Benchmark a few years ago.

Speaker 20:14 Mm.

Emily Chang 20:14 How much are you still investing?

Speaker 20:16 What I really did was stop making new investments, so I'm still on 10 boards. The shift in the markets and the bubble bursting kinda increased the workload and the, and the time frames. And I think other, not naming names, but I think other VCs have hung around past their point of relevance, and I, I didn't wanna be that person.

Emily Chang 20:36 You mentioned earlier, you know, Benchmark has always stayed super small and lean. Other venture firms, like Andreessen Horowitz, have gotten big, and you're often pitched against Marc Andreessen as sort of an opposite. Whose model do you think is gonna stand the test of time? How do you think about that?

Speaker 20:55 Well, I do think that there are numerous-

Emily Chang 20:59 Mm

Speaker 20:59 ... successful models in venture. I mean-

Emily Chang 21:02 Mm

Speaker 21:02 ... it's not a industry where you can run the table. I think the one reason that Andreessen created some animosity in the Valley was when they came in, they made these bold statements like, "We're gonna change everything. We're gonna rewrite. We're gonna take over."

Emily Chang 21:18 Mm-hmm.

Speaker 21:18 It doesn't bend to taking over.

Emily Chang 21:21 Right.

Speaker 21:21 It's just not structured that way.

Emily Chang 21:23 There are a number of VCs that seem to be sort of indulging in the politics of anti-wokeism and-

Speaker 21:30 Yeah

Emily Chang 21:30 ... getting into these various debates and, yeah, it happens on the other side of the aisle, too. You know, what do you think of that trend?

Speaker 21:37 I think I understand some of the issues that cause them to adopt that mindset. In the past five years, there have been objective functions injected into startups that aren't solely how well is the company doing or how well is the company stock doing, but it becomes hard to succeed if, if, if the employees aren't showing up and saying, "Let's all march in the same direction." As I understand things at Google, there's just quite a bit of tension between the employee base and the, and the executives there, and it's hard. It, it makes the job harder to execute the company.

Emily Chang 22:20 Well, and I wonder what happens to the cultural tension in Silicon Valley when the money's gone, right? The party's over. The money printer no longer goes brr, or whatever it is. How do you think that's gonna change things?

Speaker 22:36 I mean, I, I... If it is, it's a good thing.

Emily Chang 22:38 Given obviously the environment that we're moving into, like, you saw Amazon up close. Where is the next Google or Facebook or Amazon or Apple gonna come from?

Speaker 22:48 There's always someone that's gonna come.

Emily Chang 22:50 You think Jeff Bezos will ever come back, with pull of Steve Jobs?

Speaker 22:53 I don't think so. I don't think it's very much fun being a public CEO, especially if one of those top five.

Emily Chang 23:01 Mm-hmm.

Speaker 23:02 They, they invite you to Washington and yell at you in front of people.

Emily Chang 23:10 Yeah.

Speaker 23:10 Where's Larry Page been the past 10 years? You seen him? I haven't seen him.

Emily Chang 23:15 I did see him once, actually.

Speaker 23:16 Oh, did you? [laughs]

Emily Chang 23:16 Yeah. [laughs]

Speaker 23:17 I haven't seen him.

Emily Chang 23:18 I saw him once, but yes.

Speaker 23:20 He, he must be perfectly happy doing something else.

Emily Chang 23:23 [laughs] All right. Well, maybe we should invite Jeff Bezos and Larry Page to have some barbecue in Austin, 'cause this was fun, right?

Speaker 23:30 Yeah, very fun.

Emily Chang 23:31 [laughs] [upbeat music]