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Benchmark’s Bill Gurley says he’s still worried about a bubble

There’s too much money in the startup ecosystem, and “there will be consequences of that,” Gurley says.

TechCrunch 9th Annual Crunchies Awards Photo by Steve Jennings/Getty Images for TechCrunch

"Too much money" sounds like a good problem to have.

It’s not, Benchmark general partner Bill Gurley said on the latest episode of Recode Decode, hosted by Kara Swisher. He warned that "there will be consequences" of excessive risk-taking in tech that could range from governmental interference to — if things get really extreme — a repeat of 2001’s "complete wipeout" crash.

Gurley recalled attending an investor conference in Las Vegas where he heard eight "unicorn" startups (so named for having valuations of more than $1 billion) present. Five of the eight companies used the word "trillion" in their talks.

"We had done something in the ecosystem to encourage this type of outlandish promotion, where you feel like you need to use words like ‘trillion,’" Gurley said. "And I think it’s dangerous. When we act like we have the right to disrupt everything or eat every industry, but we’re not willing to play by the rules of profitability or GAAP accounting or being public, we look like entitled brats. And the really bad end state of that type of behavior is [that] we invite regulation from Washington that I’d prefer we not have."

He argued that the best entrepreneurs are hurt by a bubble because they could raise money in any economic climate. When funding is easy to come by, it’s harder for a competent operator with a big idea to stand out in a field of "hyper-promotional" hucksters who "only come to Silicon Valley when the time is right."

That said, Gurley acknowledged that investors like him are complicit in things like startups’ rising valuations and irrational competition.

"I think everybody, to a certain extent, has to play the game on the field," he said. "With interest rates so low, you just have people looking for yield, and so money sloshes around."

On the new podcast, he also discussed how he came to Benchmark right before the first bubble burst; why the firm failed to pursue Google when co-founders Sergey Brin and Larry Page were looking for funding; and serving on Uber’s board, which means playing an intensely competitive game.

"I don’t think that we’re going to be going public any time in the near future," Gurley said. "We have a large number of competitors who are very deep-pocketed, who have decided that their primary form of competition is just price. There are intense subsidy battles going on all over world. Those companies, when they approach investors, tell them, ‘Uber’s going to go public, and then they’re going to have to be profitable, and then we’re really going to sneak up on them with these discounts.’"

You can listen to Recode Decode in the audio player above, or subscribe on iTunes, Google Play Music, TuneIn and Stitcher.

If you like this show, you should also sample our other podcasts:

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If you like what we’re doing, please write a review on iTunes — and if you don’t, just tweet-strafe Kara. Tune in next Monday for another episode of Recode Decode!

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