Monday, September 15, 2014

WSJ: "Venture Capitalist Sounds Alarm on Startup Investing"

This WSJ interview is with Bill Gurley, venture capitalist and author of Above the Crowd:

"For the first time since '99, in the past 12 months, I've been in board meetings where the company says, 'Our only option is a 10-year lease,' at record pricing on a per square foot basis here in San Francisco, which is two or three times what the rent was three years ago. And so this is why it's all cyclical—because the landlords get greedy. They wouldn't do a 10-year lease if they thought that the rates were low. So they're implicitly telling you they want to lock this in for 10 years, which is its own form of greed because what happened in '99 is half the companies went bankrupt and they couldn't pay the lease over the 10-year period."
That is an excellent observation. Also notable is that Gurley himself (essentially) says that even he is unable to stop investing and his portfolio companies are unable to spend more conservatively.

3 comments:

James said...

Also notable is that Gurley himself (essentially) says that even he is unable to stop investing and his portfolio companies are unable to spend more conservatively.

It's a good argument against specialization. He does one thing, so he feels compelled to keep doing it even though he knows the market is unfavorable.

CP said...

Good point.

These venture capitalists' illiquid interests in unprofitable companies are going to be completely impossible to sell when we ever leave the mania phase.

The thing to do is sell your entire portfolio to one of the true believers and then go sail around the world or hike the AT.

CP said...

http://www.creditbubblestocks.com/2014/11/the-techcrunch-bubble-index-parsing.html