The venture capitalist told Bloomberg Television that the pain for the tech industry isn’t over yet.
(Bloomberg) — Bill Gurley, the longtime venture capitalist, has this advice for startups in the wake of a bank run that’s deeply shaken Silicon Valley: The past was a fantasy — assume the chaotic present is our new normal.
For years, capital was easy to raise, ideas were quickly turned into startups and valuations kept soaring. That came crashing down last week with the collapse of Silicon Valley Bank, and two more banks to follow.
Observers were quick to blame venture capitalists who threw cash at money-losing startups and then advised those same portfolios companies to pull their deposits out of Silicon Valley Bank. In an interview for the forthcoming show “The Circuit with Emily Chang,” Gurley said his firm, Benchmark, did not “run for the doors” or advise its companies to pull their deposits from SVB. Still, he doesn’t think VCs who did should take the blame.
“There are people that want to put this on risk seeking, risk taking in Silicon Valley,” Gurley said. “But Wall Street got it wrong too, right? All of Wall Street. If everyone’s so smart, everyone should have been short the stock.” Instead, SVB was trading at $260 a share, “so the world believed that this bank was OK,” he said.
The bank was not OK, and now the pain has spread through the financial and technology industries. Still, Gurley believes that the tech world has yet to fully come back down to earth, and there will be a “slower realization of the consequences” because of all the money that’s still out there.
The investor warned that tech companies should get used to a new reality. “Sometimes I hear an entrepreneur go, ‘Well, as soon as things go back to the way they were,’” he said. “That’s a catastrophically disastrous mindset.”
Gurley spent the better part of two decades investing in technology, living through multiple economic cycles and backing companies like Uber Technologies Inc., Zillow Group Inc. and Stitch Fix Inc. He does still see opportunity in these more “normal” times. He recounted the early aughts and the dregs of the dot-com bust, when Wall Street firms and media companies stopped focusing so much on Silicon Valley.
“I actually love that environment. That’s a great environment to work in,” he said. “I hate the manic stuff. But we’re not there yet.” Translation: It could get worse, for a while, before it gets better.
–With assistance from Lauren Ellis.
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