Bill Gurley, a well-known Silicon Valley venture capitalist best known for his investments in tech unicorns such as OpenTable and Uber, stated on a podcast that this could be the best time in the past 10 years to start a business from scratch.
Gurley spoke with Rick Tetzeli on "The Quarterly Interview: Provocations to Ponder" about the conditions for startups in the volatile market of today.
Gurley characterized the business environment over the previous five years as "really crazy."
"And the truth is that if you're going to build something from scratch, this might be as good a time as you've had in a decade," he said.
Laying out the reasons why now is a good time, according to Gurley, founders can currently obtain any real estate they desire without having to worry about the lease's associated costs.
"That whole mentality of, oh, your competitor raised $100 million, now you have to raise $100 million. All those things have evaporated — for the better, I'd say," Gurley said about getting rid of the distraction of all that cheap money may be a good thing.
He added that the cost of hiring people has decreased, which is another reason why this is a good time to start a business. Access to talent is also much better than it was previously.
With hybrid work, more people can join a company even if they don't live in the same area as the company, he said, adding that layoffs at other companies also means more talent is available.
"If you need an iOS programmer within 20 miles of your Silicon Valley location, that's way harder than if you can shop globally for that," Gurley said.
Regarding valuations, which have dropped as a result of companies having to raise money at a significant discount from their market value, Gurley claimed that founders must adjust and that going into denial can lead to a lot of mistakes.
“A founder who, say, owns 15% of a company that raised a round at $1 billion has done the math,” he said. They’ve mentally banked that they’re worth $150 million, “pretax, of course, but they forget that. But now, they’re not!"
The venture capitalist continued by stating that failure to recognize a founder's predicament may result in insufficient cost savings or staff reductions. “They continue to think they can just go raise money, but they don’t realize their cost of capital has changed by 5x,” Gurley said.
“You have to play the game on the field,” he explained, “if everything has reset, it has reset. The sooner you get in touch with that, the better you’ll do.”
Photo: Stephen Brashear, The Demo Conference, via Flickr Creative Commons
