>> he made his name as a top tech analyst on wall street, leading coverage of the amazon ipo. then, bill gurley made his way to the promised land of silicon valley, launching a venture capitalist firm, joining venture capital in 1999. almost right away, the bubble burst. bill gurley rode the market up and down, along the way making his early bets on some of the hottest names -- twitter, uber, snapchat, instagram. joining me today on "studio 1.0," seasoned venture capitalist bill gurley.

you recently sounded the alarm about startup and fund raising in silicon valley, saying that silicon valley is taking on an excessive amount of risk, "unprecedented since 1999." why? >> first of all come i think because of this risk-taking is an abundant amount of capital at the late stage of market. lately, it is being pushed into startups. the problem is, it is easier to run a company like this. we have a lot of companies at high valuations that everyone says, hey, these are the breakout winners. i'm not so sure, because we have not passed the test of proving the business model has legs in the long-term. >> which companies aren't you sure about? >> certain companies that are more prone to arbitrage. i think a lot of the ad tech companies. i think e-commerce is dangerous. the problem is nobody really gives up.

nobody says, oh, our numbers are not working, we should take out the deal. they just keep hoping it will get better in press. >> what are you most worried about? >> bad actors in the ecosystem. companies that maybe do not have long-term economic models that are out there perverting the rents that people pay, the cost that you pay for employees, the market that may be in against a competitor where they may just try to spin to win. >> i want to talk more about what 1999 looked like, but first how you got here. born and raised in texas. what kind of kid were you, what did you want to be when you grew up? >> my father grew up on a farm in north carolina playing with model airplanes. he got an aeronautical engineering degree and went to johnson space center and worked for nasa. half the fathers on my street were nasa fathers. so, when the apollo launches were happening, we would go to somebody's house, occasionally

we would drive 14 hours for a 30-second launch. did you want to be an astronaut? >> the guy was too tall to get in the jet. >> you played college basketball. what did you learn in team sports? >> i struggled to hang on the end of the bench. i practiced more basketball then i played. not being a starter, not getting a lot of playing time is a bit of a humbling experience. it creates a drive. when i got to my next place, it probably pushed me to try even harder. >> you studied engineering? what were you hoping for? >> right, my sister was employed. my first job out of college was at compaq. that is where she was. we were working on a motherboard designed for desktop computers. >> you went to the university of florida, mba from the university of texas.

these are not typical schools where silicon valley recruits from. harvard, stanford. >> i went to work on wall street. being from texas, i was the odd duck among the group. >> you covered compaq, dell, microsoft. tell me about the days as a tech analyst on wall street in the 1990's. >> one of my first experiences was the agenda conference. i remember the first dinner, walking into the tent. back in those days, you look around and there is bill gates and larry ellison, michael dell. you could just walk up and talk to them. it was like, oh my god. >> even back then, did you know they were of greatness? >> i got invited, when i was covering microsoft -- they have this annual analyst meeting. my second trip out there, someone handed me a card and said, you will be at bill's table tonight. i was 27, 28. >> it does not matter if amazon

never turns a significant profit? >> it only matters if wall street doubts that they can. ♪

>> how do you become a top tech analyst? what does that involve? i am sure it is a lot of hustling. >> i was fortunate. the research was not generating as much profit on its own. i was experimenting with this premium model. that is when i started above the crowd, which was a fax back then. it's sort of way back then. >> above the crowd, 6'9", playing on your height. >> frank quattrone recruited you. >> i got a call out of the blue from frank quattrone, who i did not know at the time.

he said, what you want to do long-term? i said, to be a venture capitalist. he said moved to silicon valley and i will introduce you to every venture capitalist i know. >> when did you become the lead analyst of amazon? >> shortly thereafter, we got into a competition of who would be the lead banker of amazon. >> what was that like? >> it was exciting. getting exposure to somebody like jeff bezos at that moment in time and seeing what he accomplished today is amazingly rewarding. i have been able to keep up with him. he is one of the smartest, quickest thinkers i've been exposed to. >> what has surprised you most about amazon and jeff bezos, now almost 20 years later? >> he has convinced wall street that he is playing this super long-term game, and they let him forgo profits for what is now 20 years. it kind of goes back to what we were talking about with the overfunded startups. he gets to play a different game because he has convinced them it is ok.

>> is it ok? >> every investor gets to decide that on a daily basis. i think there were multiple periods in amazon's life where people doubted whether the model had long-term legs and they forced him to show more profitability, which he did, and then backed off of. >> does it matter if amazon never turns a significant profit? >> it only matters if wall street comes to doubt they can. >> will amazon have the confidence of wall street indefinitely? >> boy, i bet they will for a long time. imagine when we did the ipo they were only selling books, right. i have been fortunate to work with a number of companies that have made a pass just being successful to where they have an ipo, and it is remarkably hard from that point to create a second and third act. i think there are very, very few executives, and of course, larry has proven he can do it. >> larry page. >> yes. and even larry ellison has proven that, as well. where they don't let the game be

defined by where they started. but most people cannot do it. >> what about google? eric schmidt, chairman of google, recently said that amazon is their biggest rival in search. >> to qualify, he made the comments during an antitrust meeting. there was an incentive to highlight the competition, obviously. but i think there is some truth to it in this case. the nature of search is changing. if you were to search for an item to buy from an e-commerce search on amazon, you know where the reviews are, you know the category it is in, you know how to select prime or not. you don't need those features. google is doing something interesting. they are taking on this endeavor called google shopping express, which i cannot make the math work. i am waiting for someone in the press to follow around one of these vehicles and add up how many stops. i don't see how it can work. >> and they are also trying to

do delivery drones as well. >> don't get me started on drones. i think the drones and the self-driving cars are a distraction to keep the media from talking about the topics we just talked about. >> you are not a fan of it? >> i find the whole drone thing distracting. amazon did it, then they did it, ups did it. >> what about self-driving cars? >> i'm more skeptical than most. using artificial intelligence across a broad away. it is really hard. a self-driving car is right 99% of the time. is that good enough? how about 99.99%? is that good enough? they will be held to a much higher bar than a human. human error, people expect. >> you are skeptical about some of these things, self driving cars, drone deliveries. what about google's long-term future?

>> google has done one thing that is remarkable, which is they developed android. they probably spent $2 billion, $3 billion making it come true. and they have taken over whatever, -- 80%, 85% of the most critical operating system in the next 20 years. i think it might be one of the most ambitious and successful business efforts of all time. >> between google, amazon, apple, facebook, these are companies referred to as the four horsemen of today. who has the most to worry about? >> i would say amazon's position with prime is pretty remarkable. i would probably put them in the safe camp. i think google, with the profitability of the search business and this insane foot print of android, i would put them in the safe camp, too. on facebook, i think they're working through an interesting challenge. they have lost the trust of their user.

if you ask someone, do you have certainty who is seeing your facebook onset, my guess is 90% of the people would say no. that creates anxiety. i think it made room for snapchat, which we are an investor in. even, a company like nextdoor, which we are also invested in. because that lack of trust limits what you can do next. >> and apple? >> i think apple's only problem is android. and google. and google's willingness to be aggressive. apple should have paid anything. flat out. if you're going to pay $3 billion for a headphone company, $2 billion for a maps company is a no-brainer. i also think they should have found a way to broadcast. i have a deep respect for tony fidel. >> should apple buy twitter? >> i don't know if they would know what to do with it, and that is why i would probably say no. >> twitter is one of your

companies? >> yes, and i think they have one of the most amazing moats. they have the most important people in almost any field in the world, remarkably committed to their own persona within the system. >> peter kale, a venture capitalist criticized twitter, calling it horribly mismanaged, probably "a lot of pot smoking going on over there." how do you respond to that? >> i think he is on a book tour, correct? >> i believe so. >> i would leave it at that. once you make a statement like that about a management team that has created a $30 billion company, taken in public, grown revenues to $1 billion, i think you lose all credibility yourself. >> what else can uber do? we have seen them delivering christmas trees. but really, what is next? ♪

>> what is the myth of bill gurley and what is the reality? >> i don't know if i can

separate the two. i love being an investor. i think, over the past five years, people have made a big deal out of, do you have operating experience as a vc. i think over the next next five years, if the markets play out like i think, they will be asking, do they have investor experience, because that is what the job is after all. >> some will only hire partners who were former ceos. >> 90% of the time when a venture capitalist opens their mouth, they are speaking to the entrepreneur they have not funded yet. there is a lot of marketing messages out there. >> it is said you have a generational shift between old and new. would you describe it that way? >> when i came into the business, john doerr and mike moritz were the legends of the game. i competed with them on the google deal and messed it up. >> why? >> they presented it and we were

like, oh, let it go. biggest mistake of my career. >> what did 1999 look like compared to now? why is now not a bubble? >> all i said is i think risks are too high. i never said valuations are too high. i do not see a lot of valuations -- maybe gopro. i don't see -- i look at facebook or google and they are trading at very low p/e's actually. my bigger concern has to do with the large fundraisers. >> if it does not pop, what happens, is there a downswing? >> there are two things that could cause a correction. one is a macroeconomic. very hard to predict. the second would be the firms that are doing the late stage investments might change their criteria a little bit. i think that is probably the more likely near-term catalyst for something like this, where they start to ask questions about, do these companies really

have a business model that can go the distance? we are more cautious. we are still making new investments, but we are more picky for sure. >> what does being more picky mean? >> you will see the uber for this or that. ideas that are a fraction away from something else on the dial, that is a bad sign. i think anything that is too close to the big thing might be something the big thing does one day. so it's another way of saying look for things that are universally different. >> you are on uber's board, an early investor. how did you get into the deal? >> i met with brian and travis before they raised their seed round and cannot convince my partner. then we watched it 6, 9 months. then we ran in and did what we could. >> and then they were convinced. >> yes. the thing that separates the return of the best firms is the

single company that goes forever -- the googles, the facebooks of the world. >> you have not sold any shares of uber? >> no, and neither has travis, which i think is interesting. >> how big could they could become? >> when we made the investment, it appears that uber, with its convenience and price points, will be competitive at some level against the first thing is rental cars. we are now anecdotally meeting lots of riders who say they have gotten rid of their car. that is something that was never in our original investment thesis, but opens up an opportunity about as large as a business opportunity could be. >> what is it like working with travis, and how does he compare with all the ceos you have worked with in your day? >> if you're going to compare him to people that built companies that are $100 billion or more, that is pretty

audacious. i would say, if i look along the nectar, he is most like bezos and the business is most like amazon. it is not a facebook. it is an operational intensive business. i find him to be most like jeff. the thing that is least well understood about travis is he is an insanely good recruiter. jeff was always going into walmart and getting their cio, going in and getting the best people he possibly can. that is what travis has done. >> when you think about competitors like halo, just got out of the u.s. market, lyft and sidecar, do they stand a chance? >> i don't know. i have often thought about it like this. first of all, a lot of the money goes to the driver. it is a lower margin business. i think it is tough to compete. i think travis is very competitive. >> what else can uber do?

we have seen them delivering christmas trees. what is next? >> when they raised money, the deck had zero slides on these types of things. whatever might be next. that is not to say the companies are not interested. they are testing food delivery, they have done flower delivery on valentines. i think it is something they are watching. i think, for the time being, everyone knows that focus is critical to great execution, and the opportunity in front of us is immense. >> what about taking on fedex or ups? >> i would say we are not as well situated for that type of thing as we might be for a quick -- i know people that have put objects in uber. a lot of people have done that. >> snapchat is another company you have gotten into early. how do you know it is not just a fad? >> when we were looking at the investment, we talked to a number of kids and they said facebook to us is like linkedin

to you. i think there is an element that the younger generation wants to be able to communicate, have fun, and not worry about the permanence having some kind of weight. the numbers are staggering. i think evan is doing a great job. >> can evan mature into a rockstar ceo? >> i think so. it is interesting because he has had some issues, and other people we have worked with have. one of the things that benchmark truly tries to differentiate is we want to be a partner with the entrepreneur over a long time. i think there is a growing trend in silicon valley that i'm not a fan of, which is trial by social media. our job is to help these people through situations like that, not to abandon them even though the press is pounding them. evan in particular is a special person. he has a keen sense of product features that matter to his constituency that i think has been a common trait among some of the most successful

entrepreneurs. >> is there more or less in silicon valley than there was before? >> there is probably more than 1999. and i think people have learned from 1999. even though a lot of the young entrepreneurs today were not around, there are still lessons learned. >> how do you make sure that you are getting into the next snapchat, the next uber? >> we have to hold ourselves accountable for that. one of the things that differentiates us, we don't have this huge, large staff. i would say of our pierce at we are probably the leanest of anyone out there. we have often had our competitors ask us, how do you get so much coverage with so few people? i think the answer is we are doing it all day long. if you have a staff of 100 people, you have to look after them. we are just out on the field, playing. >> bill gurley, thank you so much for joining us. it is so great to have you. >> thank you. >> thanks. ♪

>> he is known as tech's turnaround guy. blackberry ceo john chen has spent more than 30 years working in enterprise technology. famously taking the enterprise software maker sybase from the verge of death to $5.8 billion powerhouse. now he is taking on what some say is an impossible job, leading blackberry's comeback. can he prove them wrong? and just how did he become the tech industry's fixer? my guest is today on "studio 1.0" is blackberry ceo john chen. thank you for joining us.