Gurley contrasts past Microsoft dominance with today's five to seven competing monoliths creating more startup opportunities.
“When I got into venture, every startup presentation ended with what are you going to do when Microsoft does this? Right.”
Gurley identifies five to seven major tech companies today, unlike the aligned Wintel coalition of the past.
“And interestingly, they're not, you know, least with Wintel, you had Microsoft, Intel and Dell and Compaq all fairly aligned to the same initiative.”
Gurley argues IPO process has devolved from wide marketing to hand allocation among 10 to 15 firms.
“I think there that it used to be that the IPO process was about disseminating and marketing and selling far and wide, and it's become a game of just hand allocating shares to the same 10 or 15 firms.”
Gurley notes the number of public companies has fallen by half from prior levels.
“We have a situation where the number of public companies today is half of what it was a while ago. And you ask, well, why is that?”
Gurley cites IPO underpricing totaling $6B in 2018, $7B in 2019, and over $34B this year.
“In in in 2018, it was 6,000,000,000. In 2019, it was 7,000,000,000. This year, it's gonna be over $34,000,000,000 in one day giveaways.”
Gurley argues IPO pricing relies on human guessing rather than modern market mechanisms.
“And the price and allocation are determined by humans just guessing, which makes no sense whatsoever in the modern age.”
Gurley argues SPAC market emerged because traditional IPO underpricing was worsening.
“I think one of the big reasons the SPAC market opened up was because the underpricing was getting worse and worse and worse.”
“So you have low barriers to entry, but you have very high barriers to exit.”
“So you have low barriers to entry, but you have very high barriers to exit. And so felt that it was just systematically set up to rise and crash, rise and crash.”
Gurley says vast majority of IPOs concentrated in four or five firms, suggests need for banks dedicated to smaller IPOs.
“I found some data which we can put up, like the vast majority of IPOs are being underwritten by like four or five firms.”
Gurley discusses slide comparing AI trajectory to reach 75% of total US market cap against historical industrial and transport precedents.
“when will AI reach 75% of total US market cap, which I think is incredibly provocative how you compare that to industrials and transport because everybody's saying it's so big already it can't get any bigger.”
Gurley argues trillion dollar companies staying private with limited investor access is unhealthy for capital markets.
“The idea that we're going to have trillion dollar companies and the only people who get to participate are the people sitting around this table, right? I just think is unhealthy for our capital markets.”
Gurley notes technology grew from 5% to 15% of global GDP, implying further growth ahead over next decade.
“Said another way, technology, when we got started, Thomas, was 5% of global GDP. Today is 15% of global GDP. And when we're sitting here in ten years, I think you're saying confidently,”
Gurley notes bonds and crypto ICOs already use supply-demand matching that IPOs avoid.
“And by the way, that's how every bond is priced. And that's by the way, how all the initial coin offerings work in the crypto world. It's just what you would do.”
Gurley argues IPOs should match supply and demand through bidding, calling current handpicked pricing process ignorant.
“So if you ask any first year comp sci student and first year finance student to write a model of how an IPO should work, you would allow everyone to bid and you would award the shares to the highest bidder. It's just not like, it's not, it should just be tautological.”