Why Bill Gurley Thinks LA Tech Executives Have Been ‘Too Transactional’
Ben Bergman is the newsroom's senior reporter, covering venture capital. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks. Follow him on Twitter.
The legendary Silicon Valley investor Bill Gurley thinks Los Angeles tech founders should be more focused on growing their business over the long term instead of selling to larger competitors too quickly.
"I think [they've] historically been a little too transactional, which I blame on Hollywood," Gurley said, speaking in a keynote session on the second day of the dot.LA Summit. "You tended to have more M&A outcomes than IPOs."
dot.LA Summit -- Bill Gurley & Spencer Rascoff www.youtube.com
But Gurley said the rush to sell is becoming less of a problem as L.A.'s tech scene matures after the successful IPOs of Snap, and more recently, GoodRx. He predicts those will have a trickle-down effect as investors and employees who have cashed out start the next generation of startups who want to take their companies the distance.
"Those things have real long-term impact about how they shed people with wealth that can go be founders or go be angel investors," Gurley said.
Gurley is a general partner at Benchmark, which he joined in 1999. He plans to step away when the firm invests its 10th fund. Gurley is most famous for making an early $10 million Series A bet in 2011 on Uber, which reaped a multibillion-dollar payday for his investors. Gurley is also known for getting in early on Stitch Fix, OpenTable, Grubhub, and Zillow.
Gurley said Benchmark has made 20 investments in L.A., including Riot Games, which he admitted "we sold that too early." More recently, Benchmark invested last month in Imagine Impact, the content accelerator and online marketplace startup founded by Academy Award-winning duo Brian Grazer and Ron Howard in 2018.
Gurley also talked about how startup founders are overly skeptical about Wall Street. He compared a private company going public to a football player moving from college football to the NFL.
"There's this myth in ventureland that Wall Street is not very smart, and it's just wrong," Gurley said. "It's an up-or-out game. I'm sorry it may sound harsh. You have to decide whether you have what it takes to go the distance."
For all his enthusiasm about going public, however, Gurley thinks the traditional IPO process is broken because it reaps huge gains for investment banks and their favored clients, which come out of the pockets of those who built the company.
"The system by which they allocate capital has gotten worse and worse," Gurley said. "It's a shock that the SEC allows it because it's such a game."
Instead, Gurley favors direct listings and SPACs, which have been growing in popularity.
Referring to calls in Washington to break up large tech companies, Gurley said he has long thought Apple's 30% cut of app store purchases was "aggressive." And he does not think it bodes well for Google that it also takes the exact same cut for Google Play.
"The fact that Google has the exact same number is a bad fact, not a good fact," Gurley said.
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