Startups are all the rage these days. But a big venture capitalist just said there is “too much money” in the startup ecosystem.
Bill Gurley, a general partner at venture capital firm Benchmark, warned about the consequences of excessive risk-taking in Silicon Valley during a Recode podcast. (Source: “Benchmark’s Bill Gurley says he’s still worried about a bubble,” Recode, September 12, 2016.)
Gurley said that when he was at an investor conference in Las Vegas, there were eight “unicorns”. A unicorn is a startup company valued at over $1.0 billion. Moreover, Gurley recalled hearing five of those eight unicorns using the word “trillion” in their presentations. “We had done something in the ecosystem to encourage this type of outlandish promotion, where you feel like you need to use words like ‘trillion’,” said Gurley. “And I think it’s dangerous.”
Gurley continued, “When we act like we have the right to disrupt everything or eat every industry, but we’re not willing to play by the rules of profitability or GAAP accounting or being public, we look like entitled brats. And the really bad end state of that type of behavior is [that] we invite regulation from Washington that I’d prefer we not have.”
Note that Gurley’s fund is behind one of the biggest unicorns today, Uber Technologies Inc., and he also serves on Uber’s board. During the podcast, Gurley talked about the much-discussed topic of Uber’s potential initial public offering (IPO). He said, “I don’t think that we’re going to be going public any time in the near future.”
“We have a large number of competitors who are very deep-pocketed, who have decided that their primary form of competition is just price. There are intense subsidy battles going on all over world,” said Gurley. “Those companies, when they approach investors, tell them, ‘Uber’s going to go public, and then they’re going to have to be profitable, and then we’re really going to sneak up on them with these discounts’.” (Source: Ibid.)