📶 Bill Gurley's 2025 state of the union

Zombie unicorns are more prevalent than we all think. Gurley estimates it’s ~1,000 and ~$3 trillion in assets on the books of LPs.

Nobody knows how much these companies are actually worth.

LPs have gradually scaled up their private equity allocation towards venture from 5% to as high as 50%.

Nobody has an incentive to get the mark-to-markets right. This is most obvious by GPs giving different prices on the same assets. Managers of LPs are also incentivized to keep marks high because their bonuses depend on it.

The amount of money you raise in aggregate becomes your liquidation preference.

Constraints lead to creativity, and periods of capital abundance destroy this. Too much money leads to too many different initiatives.

Many LPs have a liquidity problem, and this is a new and unique problem. Using debt to provide capital commitments is becoming the new standard.

Yale announced they are selling $6b of private equity positions. This would not be newsworthy if it was anybody else other than Yale, who was the original endowment to see value in putting more capital to work in illiquid assets vs. liquid assets.

What we are seeing now with private markets is possibly a result of every allocator copying the Yale model. You can only make money if you are non-consensus and right.

When traditional capital markets have been tapped out, there is seemingly always money out in the Middle East.

Encouraging the company to stay private is becoming the standard. Databricks is the latest example of this, and trading in and out of these companies is becoming a new investment strategy.

By delaying the company from going public, you rob the public from a lot of the compounding that happens within these companies. Google went public for ~$1 billion and now is a multi-trillion-dollar company.

All of this benefits venture and private equity funds: if these companies are not going public (at least not at the rate they used to), the only way to get access is to be an LP through these funds.

87% of the companies with over $100m in revenue are now private.

The removal of small, medium, and even relatively large outcomes is bad for the asset class. The incentives that drive this behavior are responsible for the current downcycle we are all experiencing.

Last year, 5% of venture funds returned LP capital within the 5-10 year window.

People used to say that DPI was more important than IRR, but now the argument (at least from Bill) is that IRR is a more valuable assessment of performance given the new timelines.

Even the Middle East is growing concerned about private equity valuation practices. If this fear becomes the standard, a huge slug of capital that powers the venture game goes missing.

As an acting GP, Gurley was more calm and productive during the resets than the manias. Sales-y VCs thrive more during the runup periods.

Opportunists are bad for every asset class. Downturns remove these people, but only after the damage is done.

Most investors have become terrified of the idea of telling a founder “no”. The SBF debacle should have been obvious in hindsight, but nobody intervened because of the idea that the founder is always right.

Founders currently have the best set up of all time. Better tools, more capital, more status than ever before.

Unit economics will matter one day even if they do not today.

The ability to lead thousands of people is not a trait you are born with.

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