Bill Gurley Sees Silicon Valley on a Dangerous Path : Bill Gurley, Venture capitalist
Updated on: 02 Nov 2015
Venture capitalist says companies hurt themselves by trying to delay going public
Venture capitalist Bill Gurley of Benchmark is known as one of Silicon Valley's top technology deal makers. In recent years, Benchmark has backed many of the biggest names in tech, including Dropbox, Instagram, Snapchat and, of course, ride-hailing startup Uber Technologies, the most valuable private company in the world, at $51 billion.
Mr. Gurley sat down with Wall Street Journal reporter Rolfe Winkler to discuss today's sky-high valuations and the importance of going public. Here are edited excerpts.
The worst advice MR. WINKLER: The last time we had you onstage, we spoke in September, a year ago. You made some news by sounding the alarm on excessive risk-taking in private tech investing. Since then, valuations have continued to rise. It seems like the party's still going. Were you wrong?
MR. GURLEY: It's my belief that Silicon Valley and the venture-backed businesses have moved into a world that is both speculative and unsustainable. And if we continue down that path, I think there's going to be even more damage that's caused.
I'm glad we're at The Wall Street Journal event, so we can talk finance, as opposed to just in Silicon Valley, where they like to talk about product all the time. Valuations represent discounted future expectations. They are not a reward for what you have accomplished in the past.
When entrepreneurs raise money at really high valuations, they should be saying, "Oh [no], now I've got a lot to go do," as opposed to, "Hurrah, look what we've accomplished." And Silicon Valley and the press I think have both gotten that wrong for the past two or three years.
MR. WINKLER: What stops it?
MR. GURLEY: Well, I think that's starting to happen. There have been a number of rounds in the past six weeks where an entrepreneur has gone out at a price for X and ended up at 50% of X, or something like that. I think the buy side that has been funding a lot of these rounds has finally recognized that investing in highly illiquid, immature companies is a risky proposition and not one that's easy.
People have been acting as if it is easy, and it isn't.