The bubble is going to pop, and it’s likely the market has already tipped, according to legendary venture capitalist Bill Gurley.
“There’s proof that we typically go through cycles. There’s no soft landings. There’s boom bust periods. ’01 and ’09 were tragic and really hard to execute through,” Gurley said on Tuesday during a conference.
“We’ve moved from everything’s rosy and we’re starting to see cracks. Historically that’s led to a change. I’m of the belief there’s an 80 per cent chance we’ve tipped and headed towards that stuff, but I can’t prove that,” Gurley said.
The partner at Benchmark has been sounding the alarm for a while that startups are being bankrolled with too much easy money by investors and the reckoning is coming. This week, he finally named some names of companies that could be in trouble, including Shyp, Postmates, and Instacart.
At the conference for Sailthru, a Benchmark company, Gurley finally explained why he’s been the one to speak out against it rather than cheer it on. It’s not that he wants to see companies fail. But he says that when lower quality companies enter the market riding on a wave of easy money, it forces good startup founders to raise more capital and to spend aggressively.
“The reason I speak out is because I don’t like these environments.
I think that really great entrepreneurs can raise money in any environment so on a relative basis, they’re disadvantaged in these environments because lower quality people can raise money, and enter their field, and bring this kind of unsustainable competition.
It’s a long answer to what you’re saying, but you’re forced to respond.
I always say let’s have two financial plans. Let’s have the one that we’re executing on as long as capital is free because the market’s demanding that we be able to be aggressive and defend our turf. But let’s also know the path we’re going to move to quickly if the environment does shift and be cognisant, cause even knowing that path and knowing the hard choices behind it can be effective at getting you in the right frame of mind.”
Here’s a full video of Gurley’s remarks. His talk about the bubble begins around the 42 minute mark: