| Bill Gurley switched his career twice before ending up in Silicon Valley. First in computer engineering, which felt too siloed; and later working on Wall Street, but banking didn’t excite him. Venture capital, however, was the perfect match for his “personality, character, and curiosity,” he says. Today, he’s best known as an investor behind deals into tech companies like Uber and GrubHub early in their existence.
But despite being involved in some of the most notable deals in recent history, Gurley warns against raising too much money today. Especially in a world where tech startups are reaching billion dollar valuations left and right (last year we compiled a list of 46 Under 30 alumni who have become billionaires since being named to the list), it might seem easier than ever for startups to raise. But that’s promised only to certain industries, Gurley says.
“Most venture capitalists are so focused on AI that they won’t pay attention,” he says, adding that “you have this situation where the AI companies are raising money at crazy valuations, and the non AI companies can’t raise money at any valuation, so it’s a really stark contrast.”
Meanwhile, many of the VC firms hoping to back these booming AI companies have, too, raised a lot more money. And it’s caused a wave of proactive investing.
“If a company’s working, they proactively go to them and ask them to take money,” he says. “People are just showing up at the door, in many cases with the implication that if you don’t take the money, they’ll give it to the competitor.”
It’s true: We’ve covered startups like Mercor, the makers of AI coding tool Cursor, who, at the time of speaking to us last year never asked for funding yet had raised more than $135 million; or Radar, a retail tech startup that set out to raise $60 million but ended up with a $170 million Series B this year. This proactive funding is worth taking a pause, Gurley advises.
“When taking lots of money you don’t need, you’re naturally going to take your burn rate up, which I think of as a risk,” he says. “It becomes harder and harder to truly understand your unit economics the bigger that burn gets.“
Plus, with high funding comes high expectations: “Founders should always realize, and young ones don’t always understand, that valuations represent discounted future expectations. The higher the valuation you take, the more is expected of you. A slight misstep, and you could be way underneath.“
All this advice and more is in the latest episode of the Forbes Under 30 Podcast. Episodes one (with creator and barber VicBlends) and two (with Cloaked CEO Arjun Bhatnagar) are live on YouTube, Spotify, or wherever you get your podcasts now. Episode three with Bill Gurley will air Monday at 9am EST.
See you there,
Alex & Zoya |
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