Bill Gurley passed on Google's Series A and regrets it. He explains how venture capital works on asymmetric returns, where missing one giant winner can define a career. Top VCs like John Doerr and Mike Moritz sometimes break their own rules to win, but Gurley saw red flags: the founders were PhD students, they wanted co-CEOs, and the price was high.
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The biggest mistake I ever made is I met Larry and Sergey when there were 25 employees at Google and had him present to my partnership and we didn't follow through and trying it best. What did I learn from it? Well, in venture and a lot of people talk about this in venture but you have asymmetric returns, you lose one times your money but when you miss out on that, you miss out on 10,000 times your money. And so we had a saying what could go right internally. We never sweated a zero. We didn't do like case analysis on why we made that mistake. But when we miss big winners, we talk about it frequently. You know, because of that, that reality.
Can I just push a little bit more on that?
I've been over this in my head about 1500 times. So yes, I, I have remarkable cl. Yeah, there's one of the interesting things about venture is and, and this is true of a lot of what I find to be really interesting problem sets. It's, it's, it's a non linear, you know, multivariable problem. Like it's a complex system. There's, there's no if, there's no rules. If there were if, if, if, if it were just simply apply these rules then everyone would do it and everyone make money. And so I've often thought about it as you develop a set of pattern recognition which is enhanced if you're working with a partnership because everybody has their own and you have like 10 loose rules that you apply when you see a company. But a lot of the times when you make a great investment, it's because you decided to relax one or two of those, which is a really like chaotic framework.
Right.
To live under. There were a lot of negative signs in the Google case. Yahoo had fallen from 82 to 10 as a public company site was in bankruptcy. These were other search companies right at the time. Right. Larry and Sergey both wanted to be CEO and they were PhD students at Stanford. It's not a great light. You know, co CEO PhD students is not on the checklist positive. And they wanted a really high price and I don't know if we could have closed it. We didn't lay chase. The interesting thing and the part that probably bugs me the most is two of the very best venture capitalists of all time, John Doerr, Mike Moritz did the deal. So they had a superior mental framework in that situation and broke a lot of rules. You know, they took another thing was because they split the deal at a really high price, their ownership was much lower than they traditionally get right investment. But they knew to break that rule. Right. You know, at the time, it wasn't because a lot of people say it was because you didn't know how I was going to monetize. We had already met Overture, which was this paid listing ad search thing that Bill Gross had built in la. And we were like, oh, yeah, we'll just do that. That's what you'll do. That wasn't the issue.
Right, but is this correct? And correct my ignorance, please. But you have unwritten rules. You have to know those rules without them being written. And then you have to be willing to figure out strategically which ones break in each situation. It ain't easy, right? Exactly.
I mean, like, imagine the. These, the people that invested in Tesla, like Steve Jurvetson and like, like, you know that that is a heroic set of decision making that that likely violated most people's entire rule set. Right.
Nine out of ten or whatever.
And I guess makes it contrarian, which is why the return is so high. Yeah.
