Bill Gurley on Venture Capital at Texas McCombs

A few years ago, McCombs Magazine published a profile on Bill Gurley of Benchmark Capital. In it he shares how the venture firm was formed.

We have this partnership model where all the partners share equally in the profits. Things don’t scale well inside of that because we don’t have a CEO. We experimented with expansion coming out of ’99. We launched Benchmark Europe and Benchmark Israel and tried to replicate what we do, recognizing that entrepreneurism wasn’t a U.S.-centric thing. And it caused all kinds of distraction. We had done a billion dollar fund in ’99. So we told our limited partners in 2007, “We’re going to [do] $400-million funds. We’re only going to do early stage. We’re not going to do international. We’re not going to do growth. We’re not going to do seed.”

I think it was very fortuitous timing because almost three or four years after we did that, all of our competition started scaling out in huge ways into different geographic sectors. They became stage agnostic. They raised huge, billion dollar funds. And, to me, that’s been the seminal event that led to our success — that we chose to focus. And being focused as an investor I think is the most important thing. It means giving up the notion that you’re going to scale up and take over the world. But I don’t believe that there are network effects to venture.

High Stakes: Venture Capitalist Bill Gurley, MBA ’93, On Entrepreneurs, High-Tech Startups, and Launching a Silicon Valley Career, McCombs Magazine

He also shares what is most important as a venture capitalist.

It’s a hard question. Where we really screw up is when we decide “no” for the wrong reason. If we bet $10 million on a company that doesn’t work, we lose $10 million. When we failed to put $12 million in Google, and the deal went to Kleiner and Sequoia, we missed out on a thousand times that. The real question is, “Are you getting enough at-bats?” If you’re getting the at-bats and you bat .400, you’re very successful in venture. But if you’re not at bat at all, then your odds of hitting a home run with one at-bat is low.

Silicon Valley is not what it used to be.

I think Silicon Valley boards are probably the softest they’ve ever been. If you go back to the old days of venture capital, you hear stories about the Don Valentines of the world just iron fisting their way through a board meeting. [Valentine founded Sequoia Capital in 1972 and was one of the early investors in Apple, Atari, Oracle, Cisco, Electronic Arts, Google, and YouTube.] No one does that today, and it makes the job of a VC a lot tougher. In a board meeting you can’t influence through fiat or contracts. You have to do it all through persuasion.

By the way, Bill gave a talk on finding your dream job more than a year ago at the McCombs School of Business.

You can read the transcript here.

“Runnin’ Down a Dream: How to Succeed and Thrive in a Career You Love” by Bill Gurley, James Clear

Texas Longhorn, the mascot of the University of Texas at Austin.
Photo by Megan Markham on Unsplash

Post by Marcelino Pantoja