Special Report -- Silicon Valley -- The Next Generation
BILL GURLEY--Venture Capitalist, Hummer Winblad Venture Partners
It's a recent Monday morning at San Francisco's Hummer Winblad Venture Partners, a high-tech venture capital firm located in South Park, a hip, artsy, pocket of the city noted for its multimedia companies, groovy cafes, and startups of every kind. Sitting in a sleek office in an old industrial building, dressed casually in a black button-down shirt, yellowish wool pants, and lace-up black leather boots, Bill Gurley, age 31 and 6 ft. 9 in. tall, isn't your typical venture capitalist. He probably doesn't feel much like a venture capitalist, either, since he has only been on the job three weeks.
"I feel like a greenhorn in this business," says Gurley, hunched over his brand-new desk. "The first four days here, I totally zoned out. And somebody said, 'You know, we do need you to look at the market a little bit,'" he laughs. But if Gurley is as good a VC as he was when he was a sell-side financial analyst, first for Credit Suisse First Boston and later for Deutsche Morgan Grenfell Technology Group (DMG), Hummer Winblad should end up pleased.
Gurley is probably best known for his biweekly, offbeat newsletter, "Above the Crowd," which he started writing in 1994 while working as an equity analyst at C.S. First Boston in New York, where he covered the PC hardware and software industries. Gurley's colorful commentaries are known for bringing new understanding and a skeptical technical eye to sell-side analysis. "He had a deep insight, more than any other analyst, as to what were the real economics of the industry and where the industry was going, " says Charlie Wolfe, director of equity research at C.S. First Boston. "He showed an appreciation of the strategic positioning that completely eluded any other PC analysts on the Street."
By giving away his reports, Gurley won an enormous following. "Most of the executives at a lot of the big high-tech firms know what it is and read it," he boasts. That includes such big names as Bill Gates, Michael Dell, CEO of Dell Computer, and Mitchell Kertzman, CEO of Sybase. "Gurley's analysis of strategy is the most original and insightful of any of his peers. I am an avid reader of his reports," Gates has said.
On top of writing the newsletter, Gurley is also known for his acumen as a financial analyst. In 1995, for instance, he encouraged institutions to buy Dell stock. Dell rose five points the day his report hit the Street and has continued to climb. "The stock today is at 85, but it has split twice, which means it has gone to 340 in a year and a half," Gurley says. "We talked institutions into buying, and they got a tenfold return in a year."
Gurley has been a numbers man ever since he was a boy growing up outside Houston, Tex. The son of John Gurley, an aeronautical engineer for NASA's space program, and Lucia, a substitute teacher, Bill started writing his own computer programs in eighth grade. After graduating from Dickinson High School, he attended Millsap College in Jackson, Miss., for two years, then transferred to the University of Florida at Gainesville, where he received a scholarship to play Division One basketball. The university offered a computer engineering degree with courses in hardware and software, so in between basketball dunks Gurley earned a B.S. in engineering in 1989.
His career in high tech began that year, when he went to work as an engineer debugging software at Houston-based Compaq Computer Corp. When he wasn't working, he spent time investing in high-tech businesses and reading up on hot new technologies. "I started getting infatuated," he says. After two years at Compaq, Gurley decided to go to business school, earning an MBA from the University of Texas in 1993.
His first year of business school, Gurley tried to get a summer job on Wall Street but had no luck, ending up instead at Advanced Micro Devices doing strategic marketing. He eventually realized there were two jobs he wanted to do after business school: sell-side analyst or venture capitalist. Reasoning that without a Harvard or Stanford degree, his chances of getting a job in venture capital would be slim, Gurley focused on his other choice. In 1993, he scored a position with C. S. First Boston as PC hardware analyst. "I think there were two of us that had a degree that was West of the Mississippi or south of the Mason Dixon line," he says with a laugh. By the time DMG hired him away in 1996 to be its Internet analyst, Gurley had a reputation as a hot shot.
At DMG, Gurley has participated in big deals, like Seattle-based Amazon.com's IPO in May, which placed DMG, a relative newcomer to high-tech investment banking, squarely on the map. Perhaps Gurley's best prediction at DMG came this past January, when he downgraded Netscape's stock -- sending the price down sharply. "It became clear to me that while the company was going to meet the sell-side numbers, the buy-side expectations were far greater than that and that the market wouldn't be real happy," he says. The stock dropped nearly 11 points, some 19%, the first day.
Gurley's dream of getting into venture capital came true two months ago, when he was approached by Hummer Winblad to become a partner. "I consider myself very lucky to do this at a very young age," he says. "I've always been fascinated with high-tech business strategy. A lot of the stuff you learn in business school related to
microeconomics just doesn't hold true in the high tech industry. There's a new set of rules to be written. When Microsoft was the only one that knew about network effects and increasing returns, they used it to a huge advantage. When everyone knows about it, it changes the game. So it's a very interesting time to come in and help companies build strategies in a world where it's not just applying what's available in the latest MBA text."
Oh, and there's one more perk in his new job: He no longer has to wake up at 4:30 a.m., as he did while covering Wall Street. By Gabrielle Saveri in San FranciscoReturn to top