Bill Gurley

Quotes are word for word from the source.

• Profitability as goal

  “As the first to fall, consumer Internet companies were the first that were forced to recognize that money is not in fact cheap, but expensive, and that profitability is the real goal to the game.”

  Our noteGurley explains why dot-com companies recovered faster than other tech sectors after the 2000 crash.

• Systematic growth

  “Consumer spending may be down 5%, but online spending is still such a small percentage of overall consumer spending that growth results from the continued increase in online usage.”

  Our noteExplaining why online businesses grow even during a lethargic economy.

• The IPO Allure

  “Back then, taking a company public, either as a CEO, CFO, or founder, held an allure similar to that of a young athlete dreaming of making it in the major leagues.”

  Our noteGurley describes the historical ambition of Silicon Valley entrepreneurs to take their companies public.

• Short-termism Argument

  “Wall Street is too short-term focused, and that if you want to run your company for the long-term you should remain private.”

  Our noteAddressing the common argument that public markets prevent long-term strategic thinking.

• IPO pricing reality

  “If IPOs were priced "fairly" there would simply be no price "pop" to exploit or giveaway.”

  Our noteClarifying that IPO pops are a result of intentional underpricing, not market magic.

• Focus on product

  “In a day and age of social media, where many companies project a persona much larger than reality, Demandforce chose instead to focus on its customers and its products.”

  Our noteBill Gurley discusses why Demandforce succeeded by avoiding the hype cycle common in tech.

• Customer centricity

  “The Demandforce team always felt that the attention should be focused on the customer rather than the company.”

  Our noteExplaining the company's philosophy of keeping a low profile while serving small businesses.

• Superior value proposition

  “Better performance than EVDO at a much lower cost. You won't stop this with an AP article.”

  Our noteGurley argues that superior technology and pricing will win despite negative press.

• Customer Value Focus

  “This goal - to deliver the highest possible value to the customer - is a key catalyst for UberPool.”

  Our noteThe motivation behind launching UberPool was to maximize value for the end user.

• Offense versus defense

  “It's hard to play offense when you are always on defense.”

  Our noteGurley discusses the cellular industry's struggle against the disruptive impact of Wi-Fi.

• Mobile platform potential

  “the cell phone can be a leading platform for interactive entertainment services. What's more, it could be much bigger than you realize, perhaps even bigger than the PC industry.”

  Our noteHe predicts the massive growth of the mobile internet compared to the PC market.

• Market entry strategy

  “Because Free is a disruptive way to compete, it is a great choice for an entrepreneur to use to break into a new industry.”

  Our noteBill discusses using free pricing as a tool for new entrants.

• Internet Economic Impact

  “The growth of the Internet and the numerous resulting businesses and services are the unquestioned drivers of our current economy.”

  Our noteBill emphasizes the importance of the internet as the primary facilitator of technological and economic growth.

• Complexity of healthcare

  “The more we learned, the more we realized how much we did not really understand. The U.S. healthcare system is confusing and complex.”

  Our noteBill describes the initial frustration of trying to understand the healthcare industry for investment purposes.

• High Switching Costs

  “As users invest more and more time into a persistent character, into an avatar, into accomplishments, into online relationships, and into the resulting reputation, the higher the costs to switch to an alternate platform.”

  Our noteHe describes how user investment in a product creates a competitive moat.

• Valuation and Scrutiny

  “The last round is not the permanent price, and being private does not mean you get a free pass on scrutiny.”

  Our noteBill warns that private company valuations are subject to market corrections.

• Collaborative Team Structure

  “Our small, focused team approach relies on open debate, advocacy, and working together to support the entrepreneurs we serve.”

  Our noteDescribing the internal working dynamics and philosophy of the Benchmark partnership.

• Community resilience

  “Tragedies like these bring out the very best in a community and neighborhood. During the storms our family encountered, we were awestruck by the sheer volume of neighbors helping neighbors.”

  Our noteHe describes how natural disasters reveal the strength of local communities.

• Conflict of interest

  “It is therefore natural to assume that underpriced IPOs are allocated to the best brokerage customers”

  Our noteExplaining the bias in how investment banks allocate underpriced shares.

• Importance of audits

  “Learning how to meet and perform an audit is part of "growing up" as a company. Some founders unfortunately have an explicit aversion to audits.”

  Our noteGurley argues that audits are necessary 'referees' for any business generating meaningful revenue.

• Secondary transaction warning

  “You never want to be a buyer in a pre-public round where the person you are negotiating with is a very large seller. You should assume they know something you do not.”

  Our noteHe warns against investing when founders are cashing out massive amounts of equity early.

• Physical vs Digital Rights

  “For DVDs, Netflix's rights are unlimited and its costs are constrained. For digital, its rights are constrained and its costs are unlimited.”

  Our noteHe contrasts the legal and financial structures of DVD rentals versus digital streaming.

• Ad engagement limits

  “Many speculate that this is because the user is so heavily engaged in using the product (i.e. communicating) that they are unlikely to be distracted by or engaged in an advertising message.”

  Our noteExplaining why communication-heavy sites like IM and email have low ad revenue.

• Digital goods margins

  “Think about it; this is a beautifully high gross margin business with very low marginal costs.”

  Our noteDescribing the financial attractiveness of selling virtual items for avatars.

• Fundraising reality

  “If you have a great team, a compelling idea, and a demonstrable probability of success, then you simply will not go unfunded.”

  Our noteGurley argues that high-quality startups always find investors even in tough times.

• The Differentiation Paradox

  “How do you differentiate your product if your core mission is to ensure that your product operates exactly as your competition?”

  Our noteHe questions the logic of trying to stand out while adhering strictly to standards.

• Openness as Commodity

  “In a very real sense, open is a euphemism for commodity.”

  Our noteBill warns that total openness leads to a lack of unique value.

• Implicit Risk Discounting

  “An employee's decision to work for a company that is losing money is an implicit decision to discount risk.”

  Our noteHe explains how employees ignore the dangers of working for unprofitable startups during booms.

• Handling Exceptions

  “Organizations have few problems when it comes to normal orders or customer requests. However, it's the five percent that are exceptions which dominate the majority of the company's time and resources.”

  Our noteGurley explains why managing edge cases is the most resource-intensive part of business operations.

• Scale economics cycle

  “The second reason that open standards have a powerful economic advantage is that high volumes lead to lower prices. Lower prices then increase the market for said technology, which in turn drives even higher volumes.”

  Our noteDescribing the virtuous cycle of volume and pricing in open technology architectures.