Gurley cites Uber burning $2B yearly, now generating over $10B in annual free cash flow.
“Uber's a case where we were burning 2,000,000,000 a year and Dara, you know, has it now generating over 10,000,000,000 a year in free cash flow.”
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“Because then we'll just throw out two examples, the coding space and the legal AI space. There's seven companies that have raised over $200,000,000 and they're all gonna mount customer acquisition strategies with those dollars.”
Gurley recalls Uber's mega-burn era had no precedent, leaving board with no mentors or case studies.
“You could take the board members from Walmart and Costco and GM and and General Electric or whatever you consider the top 10 best company, and they would have never been in this situation before.”
Gurley says AI companies now burn more than Uber's $2 billion annual losses that he found anxiety-inducing.
“I thought losing 2,000,000,000 a year was nuts and very anxiety inducing, And these companies are doing more than that.”
Gurley says OpenAI's burn rate is five times Amazon's or Uber's, unprecedented in venture capital.
“And when we did at Uber, we had the same kind of burn rate, but Open the Eyes got a burn rate that's five times that size.”
Gurley says competing in top AI categories now requires willingness to lose a billion dollars per year.
“So every one of the most interesting AI categories, you may have to be willing to lose 1,000,000,000 a year just to compete”
Gurley questions whether overfeeding startups with cash leads to poor execution, citing companies burning $20M monthly.
“does overfeeding these companies with cash lead to non optimal execution? And you and I were deeply involved in the Uber situation, but you know, when you start losing a billion dollars a year, or even I would say $20,000,000 a month, you're very far away from profitability. And we talk a lot about focus and constraints”
Gurley warns that unlimited capital leads to poor execution and burn rates are now higher than ever before.
“Being able to just do everything leads to poor business execution. And so now we have numbers of companies, I think, making poor decisions. Burn rates are higher than they've ever been.”
Gurley argues ten percent layoffs are too small to meaningfully reduce burn rate.
“I read about someone doing a 10% layoff and you should never do 10 because it's not consequential enough to really affect your burn rate.”