Bill Gurley 2

Supported by Greenhaven Road Capital, finding value off the beaten path.

Bill Gurley was on This Week in Startups (LAUNCH Festival 2017 edition) and it was a fast half hour or so. Let’s not waste time here either, here are the notes.

1/ How many investments does Gurley make in a year? “As a partnership, we average about two (investments) a year.”

That’s not a lot. Gurley, it appears, is on the same path as Brent Beshore, look at many companies but be choosy with the ones you invest in. Looking at the list there are names you know (Tinder, Snap, WeWork) but also unfamiliar ones. Those other, mostly B2B focused enterprises, are intentional. Gurley said, “there’s a ‘hits’ dynamic to consumer startups. Even if you are a very successful repeat entrepreneur, you may head out to do the next one and fall flat on your face.”Consumer startups and enterprise startups have different arrangements of the two-jar model.

Consumer and enterprise startups have different arrangements of the two-jar model. B2B entrepreneurs, says Gurley, have more stable and predictable results. This is because the skill jar scores factor more into the results than the luck scores. For consumer startups, the situation is reversed.

2/ Obvious opportunities. HackerOne is a bug bounty program and “it’s an enormously obvious idea yet it’s not easy for every company in the world to prop this up because you have to know whether it’s okay to pay a hacker in Estonia or not.” HackerOne creates a marketplace for hackers and companies (another B2B).

At the same festival, Patrick Collison of Stripe said this was something that inspired him to create Atlas. “In the Stripe data, we saw that there were so many people that were going to such lengths to surmount these stupid barriers.”

Sam Shank said he founded Hotel Tonight for this reason too. You want to save people time or money, Shank said, ideally both.

Many entrepreneurs start when they scratch their own itch but others see a rough road they could smooth. Gurley, Benchmark, and HackerOne all thought the one-off, bug bounty system could be improved.

3/ Snapchat, the sexting app. “When we first stumbled upon the opportunity years ago there was a lot of noise that suggested the company was about sexting.”

Teenagers. Ugh.

In their defense, teenagers rarely get the benefit of the doubt. This can be for good reason, but not always. When bicycles were created and popularized, people thought they were bad for teens. So too for cars, phones, AIM, and, now, Snapchat. But not so fast. Adults doubting teens is like a fairway crosswind and wise players will consider that before their approach.

Gurley did just this. He talked to teens. They told him that Facebook was to them like LinkedIn was to adults. Gurley said that weaknesses are strengths and strengths are weaknesses. The things Facebook did well were not the things Snapchat did well.

There’s too much noise and not enough signal when you don’t talk to customers. It’s one-way startups fail. “The normal mind,” said Nick Murray, “takes out of the noise what it wanted to hear all along.”

4/ Books!

Competitive Strategy is “the most efficient short-form MBA you can get.”

Crossing the Chasm, “especially if you’re doing any enterprise work.”

Innovators Dilemma “is fantastic and is really the core essence why startups have an advantage.”

Startup. “It’s remarkably detailed. We spend so much time analyzing success that sometimes it’s just good to read how hard it can be.”

Shoe Dog. “It shows how much grit matters.” (We’ve looked at Grit too).

5/ Grit and moats. Gurley is an investor in Uber and Uber has been in the news for all the wrong reasons. Calacanis asks if too much grit can be a problem.

The taxi industry has a great moat, regulation. Along with network effects (supply & demand) and IP, it provides pricing power. Taxi companies could raise prices and not overly affect demand. Licenses are another regulatory moat.

Screen Shot 2017-04-17 at 8.45.56 AM

In #108 Ben Thompson said:

“What you will so often find is that the folks opposing the repeal of that sort of regulation are the companies that are already in place….they love regulation because it locks them in.”

Gurley said, “The most regulated industries become the least capitalistic…regulation protects the incumbent.”

Entrepreneurs, said Yvon Chouinard are like juvenile delinquents, and delinquents break things.

To attack this moat, the thinking goes, requires a more cavalier attitude. But as you do it you get to tell your story. Uber should have told a better story.

Storytelling, Gurley said, “is essential for any founder.” Storytelling is built on top of relationships. It was part-of-the-reason Sam Hinkie failed in Philadelphia. It was part-of-the-reason Eric Maddox succeeded in Iraq. People who use empathy to build relationships tell their story better and good stories make people more forgiving when you break things.


Thanks for reading.

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