Gurley argues that VCs using cheap capital to enter new industries are actually funding low-return businesses.
“I overheard a VC on a panel say that now that capital's become so cheap, we as venture capitalists get to go after all these new industries.”
“Yeah, the flow of cash and the competition and how that money is being used.”
Gurley criticizes VCs who think cheap capital enables them to pursue low-return businesses in new industries.
“But I overheard a VC on a panel say that now that capital's become so cheap, we as venture capitalists get to go after all these new industries.”
Gurley mocked a VC who said cheap capital enables going after new industries, calling it flawed logic.
“I overheard a VC on a panel say that now that capital's become so cheap, we as venture capitalists get to go after all these new industries. And it really made me chuckle.”
Gurley argues that funding businesses because capital is cheap is equivalent to funding low-return businesses.
“The exact flip way of saying that is, I'm excited about funding low return businesses and I'm gonna go do it.”
Gurley says foundational model companies burning $100-200M yearly cannot possibly represent high quality capital allocation.
“100,000,000 a year? 200,000,000 a year? There's no way that's high quality capital allocation from my point of view.”
Gurley argues foundational AI model companies burning $100-200M annually represents poor capital allocation but may be unavoidable.
“100,000,000 a year? 200,000,000 a year? There's no way that's high quality capital allocation from my point of view. There's no chance. But maybe they don't have the alternative.”
Gurley calls foundational model companies' hundred-million-dollar annual burn rates poor capital allocation but possibly unavoidable competitive traps.
“200,000,000 a year? There's no way that's high quality capital allocation from my point of view. There's no chance. But maybe they don't have the alternative.”
Gurley notes four non-Microsoft coding copilot companies raised over $200M each despite being only 18 months old.
“There are four companies in the coding co pilot space that are not named Microsoft that have raised over $200,000,000 each. And we're just these companies are all of a year and a half old.”
Gurley says Meta may cut Reality Labs spending by 20 percent to reallocate billions toward AI development.
“Remember, Meta had allocated $20,000,000,000 a year to Reality Labs. And there was a report last week that they may, you know, tighten their belt on Reality Labs”
Gurley says late-stage investors force-feed capital to companies based on power law beliefs in unprecedented ways.
“It's it's it's just worse as it's ever been, where because you have these monolithic late stage players who believe in power laws, believe in network effects,”