The Ezra Klein Show: VC Bill Gurley on Transforming Health Care

In November of 2015, I posted a tweet that declared Benchmark was interested in discovering Internet healthcare investments. Our firm has had the good fortune to invest in many two-sided networks that used information aggregation, supplier aggregation, and user generated content to attract and inform consumers and resultantly disrupt and change different industries. Examples of such companies include Yelp, OpenTable, GrubHub, 1stDibs, DogVacay/Rover, Zillow, and Uber. It only seemed logical to us that the same opportunity should exist in healthcare. Most people are aware that healthcare spending in the U.S. has risen to 17-18% of GDP and is grossly out of line with other comparable nations. Additionally, all of us that have been consumers of the U.S. system are blindingly aware that numerous inefficiencies exist in the system. Simply put, there is amble room for improvement. So if Internet and mobile technologies can be used to change real estate or transportation, why not healthcare?

Over the next two years, I looked at many healthcare IT investment opportunities – I went “all in.” It’s worth noting that our primary focus was on technologies that aided and improved primary care, which is about half of the U.S. market in terms of revenue dollars (there is no question that digital tools will successfully impact specific acute diseases/disorders, but it’s our intuition these are best left to 100% focused HC investors). At first, this deep dive proved frustrating. The more we learned, the more we realized how much we did not really understand. The U.S. healthcare system is confusing and complex. Eventually, however, we gained our footing and developed a mental model for the industry and a framework for where opportunities do exist. We also discovered what we believe is a large and investible trend/theme. In May of this year, Ezra Klien, who is remarkably informed and intelligent on the topic of healthcare, was kind enough to include me on his podcast to discuss and debate my learnings. That podcast is included here along with a transcript.

 

 

Ezra Klein:  Hello and welcome to the Ezra Klein Show, a podcast on Vox Media Podcast Network. I am Ezra Klein and my guest this week is Bill Gurley. Bill is a general partner at Benchmark, one of Silicon Valley’s really legendary venture capital firms. He is one of Silicon Valley’s legendary venture capitalists. He was named the venture capitalist of the year in 2016 at the TechCrunch’s annual Crunchy awards. He’s been an early investor in Grubhub, OpenTable,Uber, and Zillow and all kinds of things. A very, very smart guy, a very thoughtful guy. We’ve been talking recently because he’s been thinking a lot about healthcare.

They’ve recently made Continue reading "The Ezra Klein Show: VC Bill Gurley on Transforming Health Care"

Thinking of Home: Dickinson, Texas

For those of you who have moved away from the town where you grew up, the few times that you see your hometown in the national news creates an enormous sense of pride. Over the past few weeks, the town I grew up in, Dickinson, Texas, has been front and center in the national news, but for all the wrong reasons. Dickinson, a small town southeast of Houston on Galveston Bay, has been one of the hardest hit communities by Hurricane Harvey.

I became a resident of Dickinson for the same reason many of my childhood friends did. My father, John, was an early NASA employee, and when Johnson Space Center opened in Clear Lake, he and many of his colleagues made Dickinson their home. It seems like half of the fathers on our street worked at NASA. Gene Kranz, the famous NASA Flight Director is a Dickinsonian. I, along with a handful of others in my class, spent my entire K-12 education in the Dickinson public school system and graduated from Dickinson High School in 1984. When people ask me “where did you grow up?” or “where are you from?” there is one easy answer — Dickinson.

That said, our family’s strongest tie to Dickinson is the countless hours my mother, Lucia Gurley, spent in service of the town and community over her 38 years as a resident. She currently lives in Marble Falls, but during her time in Dickinson, my mother’s impact on the local community was quite significant. She was a substitute teacher for over 20 years, she volunteered at the local library, she helped raise grants for the public school system, and was a key contributor to Keep Dickinson Beautiful. In 1992, she was recognized nationally for her leadership in the H.O.S.T.S. program, receiving the Betty Scharff Memorial Award, and in 1994 was recognized by the local Chamber of Commerce as Citizen of the Year. Most significantly, she served as a councilwoman on the city council for 11 years, and upon retiring was recognized for her efforts in the local newspaper.

Although it does not appear that either were as devastating as Harvey, our family lived through two difficult storms while we lived in Dickinson. In the summer of 1979 Tropical Storm Claudette dumped 43 inches of rain on the area in a single day. Our house ended up with 2-3 feet of water inside, and as a result I have a small sense of how painful life will be for many of the residents over the next many months. In 1983, the eye of Hurricane Alicia went directly over Dickinson. My mother spent the entire evening at city hall, Continue reading "Thinking of Home: Dickinson, Texas"

Benchmark’s New General Partner Sarah Tavel

The partners at Benchmark are excited to announce that Sarah Tavel has joined the firm as our newest General Partner. We define ourselves by a love for the craft of early stage investing, and Sarah’s career-long desire and commitment to be one of the world’s great venture capitalists make her an ideal addition to a Benchmark team. About a year ago, we asked our venture partner Scott Belsky who he thought had the greatest potential to become one of the best investors of the next decade. He answered quickly and definitively: Sarah Tavel. We’ve gotten to know Sarah over the last year. While we only very recently revealed our interest in having her join us, our interactions with her over the year amplified our instincts. She especially impressed us with the speed and quality of her thinking around disruptive markets, her ability to influence others with her ideas, and the depth of the relationships she has forged. Throughout her career, Sarah has shown a remarkable ability to spot new companies and markets, and to develop deep bonds with extraordinary entrepreneurs. Early on, at Bessemer Venture Partners, she helped source and pursue companies as varied as Pinterest and GitHub well before they were broadly understood. Not only did she identify these phenomena before others, she left long-lasting impressions on the founders of both companies. In fact, Ben Silbermann thought so highly of Sarah that he recruited her to Pinterest to lead core parts of the product and business after the Bessemer investment. The experience of helping scale Pinterest through a period of explosive growth is an incredible resource for the founders on whose boards she will serve in the future. Most recently, Sarah worked as an investing partner at one of the great venture capital firms, Greylock Partners, working with some of the sharpest product minds in the business. Beyond her impeccable resume, from our earliest interactions Sarah demonstrated an investor mindset that just felt consistent with our own. Our small, focused team approach relies on open debate, advocacy, and working together to support the entrepreneurs we serve. Each partner at Benchmark needs to bring a unique perspective while simultaneously enhancing the overall functioning of the team. It is clear that Sarah will get in front of breakout companies early, challenge our thinking on new markets, help us make sharper decisions, and be an incredible partner for the entrepreneurs we back. Adding a new partner is an infrequent event for Benchmark. Our structure – now six equal partners – means Sarah joins with the same authority, responsibility and ownership as the current partners. We have the highest conviction Sarah will excel at the complex craft of early stage venture investing and Continue reading "Benchmark’s New General Partner Sarah Tavel"

Benchmark’s New General Partner Sarah Tavel

The partners at Benchmark are excited to announce that Sarah Tavel has joined the firm as our newest General Partner. We define ourselves by a love for the craft of early stage investing, and Sarah’s career-long desire and commitment to be one of the world’s great venture capitalists make her an ideal addition to a Benchmark team. About a year ago, we asked our venture partner Scott Belsky who he thought had the greatest potential to become one of the best investors of the next decade. He answered quickly and definitively: Sarah Tavel. We’ve gotten to know Sarah over the last year. While we only very recently revealed our interest in having her join us, our interactions with her over the year amplified our instincts. She especially impressed us with the speed and quality of her thinking around disruptive markets, her ability to influence others with her ideas, and the depth of the relationships she has forged. Throughout her career, Sarah has shown a remarkable ability to spot new companies and markets, and to develop deep bonds with extraordinary entrepreneurs. Early on, at Bessemer Venture Partners, she helped source and pursue companies as varied as Pinterest and GitHub well before they were broadly understood. Not only did she identify these phenomena before others, she left long-lasting impressions on the founders of both companies. In fact, Ben Silbermann thought so highly of Sarah that he recruited her to Pinterest to lead core parts of the product and business after the Bessemer investment. The experience of helping scale Pinterest through a period of explosive growth is an incredible resource for the founders on whose boards she will serve in the future. Most recently, Sarah worked as an investing partner at one of the great venture capital firms, Greylock Partners, working with some of the sharpest product minds in the business. Beyond her impeccable resume, from our earliest interactions Sarah demonstrated an investor mindset that just felt consistent with our own. Our small, focused team approach relies on open debate, advocacy, and working together to support the entrepreneurs we serve. Each partner at Benchmark needs to bring a unique perspective while simultaneously enhancing the overall functioning of the team. It is clear that Sarah will get in front of breakout companies early, challenge our thinking on new markets, help us make sharper decisions, and be an incredible partner for the entrepreneurs we back. Adding a new partner is an infrequent event for Benchmark. Our structure – now six equal partners – means Sarah joins with the same authority, responsibility and ownership as the current partners. We have the highest conviction Sarah will excel at the complex craft of early stage venture investing and Continue reading "Benchmark’s New General Partner Sarah Tavel"

Is the new normal really new?

hello-normal I’ve been hearing a lot lately about “The New Normal” for VC-backed technology companies. It’s not just in the popular press headlines. Nearly every conversation I have with co-investors, founders and LPs these days involves some discussion of current “new normal” market conditions and what they mean. There’s clearly change in the air. Read More

On the Road to Recap:

Why the Unicorn Financing Market Just Became Dangerous…For All Involved

In February of last year, Fortune magazine writers Erin Griffith and Dan Primack declared 2015 “The Age of the Unicorns” noting — “Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.” By January of 2016, that number had ballooned to 229. One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. Twelve to eighteen months later, you hit the road and do it again — super simple.

While not obvious on the surface, there has been a fundamental sea-change in the investment community that has made the incremental Unicorn investment a substantially more dangerous and complicated practice. All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate.

Many have noted that the aggregate shareholder value created by all of the Unicorns will vastly overshadow the losses from the inevitable failed unicorns. This likely truism is driven by the clear success of this generation’s transformational companies (AirBNB, Slack, Snapchat, Uber, etc). While this could provide some sense of comfort, most are not exposed to a Unicorn basket, and there is no index you can buy. Rather, most participants in the ecosystem have exposure to and responsibility for specific company performance, which is exactly why the changing landscape is important to understand.

Perhaps the seminal bubble-popping event was John Carreyrou’s October 16th investigative analysis of Theranos in the Wall Street Journal. John was the first to uncover that just because a company can raise money from a handful of investors at a very high price, it does not guarantee (i) everything is going well at the company, or (ii) those shares are permanently worth the last round valuation. Ironically, Carreyou is not a Silicon Valley-focused reporter, and the success of the piece served as a wake-up call for other journalists who may have been struck by Unicorn fever. Next came Rolfe Winkler’s deep dive “Highly Valued Startup Zenefits Runs Into Turbulence.” We should expect more of these in the future.

In late 2015, many public technology companies saw a significant retrenchment Continue reading "On the Road to Recap:"

Benchmark’s New General Partner: Scott Belsky

The partners at Benchmark are delighted to announce that Scott Belsky has joined the firm as our newest general partner. It is rare for us to encounter a partner candidate who has so much experience as an operator, investor, and advisor at such a young age. We have confidence that Scott can be one of the best investors of his generation, and we are excited by the opportunity to have him as a member of our team. Scott came to our attention through his work as an early-stage investor and active advisor to important companies like Uber, Warby Parker, Pinterest and most recently Periscope. Being in front of such big, transformative ideas at an early stage shows tremendous investment judgment. His work with the Periscope team exemplifies his character as an investor. We learned from Periscope’s founder, Kayvon Beykpour, about Scott’s role as a trusted advisor and confidant in the company’s earliest stages, culminating in Periscope’s acquisition by Twitter and subsequent integration. Scott’s relationships with founders like Kayvon embody Benchmark’s approach of working shoulder-to-shoulder in support of the entrepreneurs we back. Scott never sought credit, fame, or anything that would put him in front of his clear purpose to help the entrepreneur. Scott is also known as the founder and CEO of Behance, an online design community that became the essential showcase for design work around the world. He bootstrapped the company in New York for five years before raising venture capital from high-quality investors like Jeff Bezos and Union Square Ventures, then managed the business to a successful sale to Adobe in 2012. Scott remained at Adobe, managing the deep integration of Behance into the Adobe Creative Cloud and leading Adobe’s innovative mobile product efforts. Scott is incredibly passionate about the craft and theory of design, and has helped drive the central role of design in modern digital products. In 2007 he founded 99U, an annual conference attended by thousands of design leaders and creative professionals. He is also a prolific writer on the subject of product design and managing creativity, both online and in his book, Making Ideas Happen. At Benchmark we have witnessed the increasing influence of design in startups, and we see Scott’s pivotal role in the design community as a key competitive advantage for our current and future portfolio companies. Adding a new partner is a significant event for Benchmark. Our equal partnership structure, which is the foundation of our firm, means Scott enters with the same platform to work with entrepreneurs as the current partners. We are convinced that Scott’s character, dynamic curiosity, and passion for entrepreneurship will take Benchmark to a higher level of success. – Bill Gurley, Eric Vishria, Matt Cohler, Mitch Continue reading "Benchmark’s New General Partner: Scott Belsky"

The Daily Startup: Videoconferencing Provider Lifesize Spins Out of Logitech

dailystartup_D_20090806101628.jpgArt by Mike Lucas
Logitech International SA has spun off its videoconferencing division as Lifesize Inc.The new private company has raised $17.5 million in funding from Meritech Capital Partners, Redpoint Ventures and Sutter Hill Ventures. Lifesize was founded in 2003 under the name KMV Technologies. Its early board members included Jeff Brody of Redpoint Ventures, Vab Goel of Norwest Venture Partners and Venu Shamapant, then of Austin Ventures, according to regulatory filings. ALSO IN TODAY’S VENTUREWIRE (subscription required): Buddy Platform, an Internet-of-Things analytics company that was backed by Microsoft Ventures, has listed on the Australian Securities Exchange through a reverse takeover of struggling public Australian mining company Potash Minerals Ltd. Bill Gurley is stepping down from the board of Zillow Group Inc., according to a regulatory filing. The resignation from the publicly traded company is effective Thursday, according to the filing. Mr. Continue reading "The Daily Startup: Videoconferencing Provider Lifesize Spins Out of Logitech"

Bill Gurley Surprises With A Positive Note On Seed Stage Startups

Bill Gurley Benchmark Capital’s Bill Gurley may be Silicon Valley’s best-known tech bubble doomsayer, but he took a positive view of the early stage investments in an onstage interview at the Wall Street Journal Live conference Tuesday. “Earliest stage is probably the most insulated from this,” he told the audience of his belief we are in an impending bubble pop. Read More

What If The Angels Go Back To Heaven?

William Blake - Jacob's Dream “The louder he talked of his honor, the faster we counted our spoons.” That’s how Ralph Waldo Emerson described his distrust of a certain type of “private adventurer.” I think of that whenever I hear that angel investors will do more and bigger deals next year than they did last year — not because I don’t believe it, but precisely because I do. It… Read More

Bill Gurley: “I Hope To God We Have A Soft Landing”

10536905104_cd7e7b473c_o Venture capitalist Bill Gurley, Julie Wainright from TheRealReal and co-founder of unicorn startup Slack Stewart Butterfield discussed the frothiness of the market and the possibility that Silicon Valley is indeed facing a second bubble at the Vanity Fair New Establishment Summit in downtown San Francisco today. Talk of a possible bubble pop has been going on for a good decade now and… Read More

Two Lies And A Truth About “The Bubble”

bubbles There has been a lot of discussion about startup valuation over the past few months. Luminaries across the industry have chimed in, suggesting we’re returning to a time of irrational investment valuations hearkening back to the bubble of the late 90s. My colleagues and I at Sapphire Ventures are seeing the rise in private market valuations firsthand. The stage at which we invest, the… Read More

Multiple Compression In The “Winter” & Why It Matters

To say that today was a rollercoaster would be an understatement. While I recognize I’m a relative novice to the financial markets, watching fast selloffs and panic selling is always mesmerizing – no matter how many times one has seen it. I don’t know how Bill Gurley always seems to have impeccable timing, but last [...]

What The Tech Bubble Means Outside Silicon Valley

bubble It’s a place, a mindset, a nickname, a metonym, an innovation hub, a TV show and a standard against which all cradles of technology are measured. Silicon Valley prides itself on having a meta-status that defies easy categorization, but this cannot save it from the impending bubble. According to investors like Mark Cuban, Chris Sacca, Bill Gurley, Manish Goyal and Bharat Ramnani… Read More

In Defense of the Deck

My partners and I have noticed an interesting trend over the past few years: an increase in the number of entrepreneurs who prefer to pitch us without the use of a presentation deck. On one hand, this is totally understandable. Many believe that PowerPoint decks are emblematic of the type of bureaucracy disparaged in Dilbert cartoons. Others want to appear “casual” and “conversational” and view the presentation as overly formal. But, going deck-less can be a risky move, and here is why. Investors are not solely evaluating your company’s story. They are also evaluating your ability to convey that story. Efficiently communicating your strategy, business model, and competitive differentiation is required for many critical things you will do as a company.bezos 2 Can you raise money without a standard slide presentation? Sure. Can you have a great investor meeting that is purely conversation? Absolutely. But it is important to separate the possible from the optimal. If you are the next Google and everyone knows that you are in the driver’s seat, you should certainly do as you please. But if you are one of the thousands and thousands of startups that merely want to have an optimal fund raising process, I highly recommend that you develop a killer presentation. benioffHere are six reasons why good presentation decks are impactful:
  1. Importance of Narrative – Last year I was turned on to an amazing book by  Jonathan Gottschall titled The Storytelling Animal. Gottschall explains how storytelling plays a critical role in each and every human’s life. The purpose of a presentation deck is to enable entrepreneurs to effectively tell the story of their business. In many ways it’s like a structured scientific proof. You want to walk the listener through an argument as to why this is going to be an amazing business. The goal is to bring the investor to the VC equivalent of Q.E.D. A well-organized deck will gradually transport the listener to the desired conclusion – “this will be a great investment.” A rambling free-speech conversation is much less likely to achieve this goal.
  2. Controlling the Cadence – When you have a single hour with investors, you want to use your time wisely and ensure that you deliver all your key points. The organized deck helps you control the tempo and guarantee that you make all your arguments, sequentially, in the time allotted. Once again, this is like a structured proof. You want your arguments to build towards a conclusion in a systematic way. For this same reason, you should also avoid jumping around in the deck (another common occurrence, especially from entrepreneurs with decks that are too large). It might seem to make sense to jump to another slide to
    musk
    iPad-2-Keynote-by-Steve-Jobs
    Continue reading "In Defense of the Deck"

…Be Like Dave

goldie

Like many of those that had the distinct pleasure of knowing Dave “Goldie” Goldberg, I was shocked and in disbelief when I received the tragic news this past Saturday. I first spent time with Dave when he joined us as an EIR at Benchmark back in 2007, and over the years, we had become good friends. I clearly had become quite accustomed to seeing Dave, because when I realized I would not have a chance to hang with him again it hit me like a ton of bricks. Like so many others, I really, really miss him.

For those of you that do not know him as well, you have likely read the numerous articles highlighting what an amazing guy he was. I was particularly moved by Kara Swisher’s “Does Silicon Valley Have a Soul? It Did — as Well as a Heart — in Dave Goldberg” and Adam Lashinsky’s “Remembering Dave Goldberg.” And there were countless others, that all portray Dave as a special human being that uniquely stood out among so many other remarkable people. An outsider might find these comments overly grandiose, or consider them to be a bit of retroactive embellishment. That would be an error. The stories are completely accurate — Dave was really this special.

For me, it all starts with his intelligence. Dave was wicked smart, and what is really cool is that he could care less whether you knew that or not. Over the years, I have had detailed conversations with David about business, politics, sports, music, poker, and many other subjects. He could go deep in so many areas. He was super-even keeled in most of these discussions, not allowing emotion to distract from his perspective. He was also a fiercely independent thinker, and frequently held opinions that cut against the norm. In each case he would back his argument  with data and in most cases would convince others to change their mind. Because of this, I loved chatting with him, particularly about business and Silicon Valley. If we were ever on different pages, I wanted to sort it out right then and there. I never wanted to be executing a plan that cut against his better judgment.

The other thing that stands out for me is that Dave was insanely funny. At first, I just thought he was kind-of funny, but the more time I was able to spend with him, the more I realized this guy was really f***ing funny. One of the funniest guys I have ever known. This was not jocular humor, but quite the opposite; witty creative humor. His intelligence soaked into his jokes the way syrup penetrates a pancake. And his humor was augmented by one Continue reading "…Be Like Dave"

Etsy’s IPO is a Milestone for New York’s Startup Scene

Kristina Salen, center left, Etsy’s chief financial officer, stands with Chad Dickerson, center right, chairman and chief executive officer of Etsy, to celebrate the company’s IPO with employees and guests at the Nasdaq on Thursday.
Associated Press

For the burgeoning New York City startup and venture capital scene, Etsy Inc.’s blockbuster initial public offering Thursday is a beacon of what is possible.

The online marketplace for handmade and unique items, founded in Brooklyn in 2005, priced its IPO at a valuation of $1.8 billion and saw shares and market capitalization almost double on the first day of trading on Nasdaq.

It is a milestone for New York City, which has seen few startups, backed by venture capital, in recent years go public or sell for large amounts. Tumblr Inc., sold for $1.1 billion to Yahoo in 2013, was a rare example. Both Etsy and Tumblr count Continue reading "Etsy’s IPO is a Milestone for New York’s Startup Scene"

First-Quarter Drop in IPO Exits Could Spell Trouble for Venture Capitalists

BRENDAN MCDERMID/REUTERS

Last year was a great one for venture capital. Mega amounts raised by startups and venture firms were supported by the large returns clocked by the industry via initial public offerings and mergers and acquisitions.

But the first quarter of this year changed the dynamic, according to data from Renaissance Capital, an IPO research and investment-management firm. While venture investments appear to be barreling ahead, venture exits via IPOs dropped.

The first quarter of 2015 was the worst in two years in terms of the number of venture exits via IPOs, as well as the amount of IPO proceeds that venture-capital backed companies raised, Renaissance said.

Just 17 venture-backed companies went public in the U.S. in Q1, down from 40 a year ago. IPO proceeds dropped 59% to $1.3 billion in the first quarter from $3.2 billion a year ago. The first quarter IPO Continue reading "First-Quarter Drop in IPO Exits Could Spell Trouble for Venture Capitalists"

New York’s Sailthru Finds New CEO Neil Lustig Close to Home

New York startup Sailthru Inc. named Neil Lustig, an International Business Machines Corp. veteran, as chief executive, adding to a string of big hires by enterprise software startups in the city.

“We were super excited to find a veteran, proven, tried-and-true enterprise software CEO right in Manhattan,” said Bill Gurley, a general partner at Benchmark, one of the investors in Sailthru.

Mr. Gurley has in the past been critical of New York-based startups, saying that too few build out into big companies and go public.

“I think it’s more difficult in the outer markets to build long-term independent public companies,” Mr. Gurley said, referring to smaller venture markets than the one in Silicon Valley. He said there hasn’t been much of a record of big IPOs in New York, especially with enterprise software companies, an underrepresented sector in the startup community in the city.

“One of the things Continue reading "New York’s Sailthru Finds New CEO Neil Lustig Close to Home"