In an interview with Tim Ferriss, legendary venture capitalist Bill Gurley shared his thoughts on entrepreneurship and investing. Bill Gurley is a partner at Benchmark Capital, and he has invested in some of the most successful technology companies in the world, including Uber, Twitter, and GrubHub. Gurley says entrepreneurs should focus on developing a great product and team and not get too caught up in the hype. He also emphasizes the need to have a strong network and be willing to learn from others. His advice to entrepreneurs is to be patient, and disciplined, focus on having the outliers, and have a solid framework for evaluating investments. A common mistake that entrepreneurs make is they develop a technological breakthrough, and they do not spend any time analyzing the industry structure or if go-to-market is even possible. "Strong opinions, loosely held" is a scope that all investors must work within. The job in venture capital is not to find what will not work but to find the outliers.
Network effects play an important decision in the company that wins in a winner-take-most industry. The venture can be a pattern recognition job, but having rules that are too rigid could result in catastrophic errors. There is a need to have a large tent, value your network, and not cut off avenues or sources of information. Entrepreneurs and tech investors may have to "unlearn" several things about valuation following the amazing bull market run that began in 2010. The bull market in the last 13 years is no longer the norm; that was a fantasy. Suppose there was a scale of financial sophistication between 1 and 10, and a brilliant person in New York is an 8.5. In that case, the average Silicon Valley person is a 2 in financial literacy. The undervalued competitive advantages in business include network effects, customer lock-in, high switching costs, and performance. Elite entrepreneurs like Jeff Bezos and Tobi Lutke are hyper-curious, have their mental models are more than willing to learn new ones, and are constantly thinking. On restoring a culture of mission-focused companies: How well would the Duke Basketball team perform if Coach K had to prioritize the happiness of his players above the program's goal of winning a championship? Tribal affiliation turns off more brain cells than any other activity. In a dynamic world, companies must continuously incorporate this to remain afloat in their business.