Gurley cites Data Domain and ArcSight as examples of IPO-then-acquisition premium strategy working.
“Another interesting thing is with Data Domain and ArcSight and three part, you've seen companies go public, establish a valuation and then get an M and A premium on top of that.”
Gurley describes venture capital as an artisan business that fundamentally does not scale.
“In the long run, we like to believe that this is an artisan business that doesn't scale and that if you want someone to help you and trusted you taking this company to the next level that you want what is an artisan,”
Gurley says Benchmark turns down twenty percent IRR opportunities because LPs invest for beta and home runs, not steady returns.
“Like if there's an opportunity where we can make a 20% IRR someone might go, oh you should do every one of those, but we're limited by the number of board seats we can take and our LPs are investing in us to get beta and so they want the home runs”
Gurley explains Benchmark isn't judged on IRR and would pass on 20% IRR deals due to board seat limits.
“You know, we're luckily in a business where we're not judged on IRR per se.”
Gurley says bug bounties are the only offensive security solution versus defensive dam-building approaches.
“It is the only offensive solution. Most of the security solutions are defensive where you're just building a bigger and bigger dam and trying to hold people out.”
Gurley says marketplace success requires doing unscalable things early, which frustrates most business school-trained entrepreneurs.
“And if you took 90% of the entrepreneurs that have been to business school and understand scaling, it drives them nuts.”
Gurley criticizes SoftBank's strategy of deploying hundreds of millions, which forces companies into massive losses.
“I've I've been quoted publicly, like, they've, you know, played a strategy where you hand hundreds of millions of dollars to a company and say, here, go win in the market with this.”
Gurley would bet on a 500 million user communication platform adding avatars over a perfect avatar system without users.
“if I had to place a bet on whether someone that had 500,000,000 users on a digital place platform where people are communicating and that they might add avatars or some digital thing that makes it more immersive versus someone that built the perfect digital three d avatar immersive system but doesn't have the users yet?”
Gurley recommends reading Porter's Competitive Strategy because selling into consolidated industries is tough versus fragmented ones.
“I always tell people to read the first two chapters of Competitive Strategy by Michael Portner, because like if you're building a product and trying to sell into a consolidated industry, it's really tough.”