Public companies have changed but founder expectations have not moved fast: Benchmark’s Bill Gurley

economictimes.indiatimes.com:

Bill Gurley, a general partner with Silicon Valley-based venture capital (VC) firm Benchmark, is of the view that though there is a larger assumption that VCs are sitting on heaps of dry powder and that they are “burning a hole” in someone’s pocket, the reality is very different. Gurley was referring to an article in tech publication The Information, titled ‘Venture firms still writing small checks despite $271 billion in dry powder’.

Dry powder is a commonly used term in the VC business and refers to the money that has been raised from limited partners — individuals, pension funds, or institutional investors — but has not yet been invested. According to Gurley, undrawn VC dollars do not run on an IRR clock as the money is actually not at a VC firm but still with the limited partners (LPs).

“No VC firm I have ever been exposed to feels “pressure” to “get dollars to work”, Gurley posted on X (formerly Twitter). To clarify, general partners (GPs) manage the business and are jointly liable for the debts and obligations of the business, whereas LPs have limited liability for business debts and obligations and don’t actively manage the business.

IRR or internal rate of return — annualised return a VC fund generates or is expected to generate over a period of time — is a yardstick to measure the success of a fund. Gurley’s remarks hold significance because they come at a time when venture funding in startups has hit record lows amid global macroeconomic headwinds, a prolonged funding winter, increasing tax rates, corporate governance issues, and an overall approach of caution.