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Bill Gurley Passed on Google's Series A and Has Thought About It 1,500 Times

By Bill Gurley · Investing · 2 min read

Gurley met Larry and Sergey when Google had 25 employees. He brought them to his partnership. They didn't follow through.

Key Points

In venture, you lose 1x your money on failures but miss 10,000x on missed winners
Great investments often require breaking your own rules
The best VCs of all time (Doerr and Moritz) broke multiple rules to invest in Google

I've been over this in my head about 1,500 times. I have remarkable clarity.

The Biggest Miss

Gurley: The biggest mistake I ever made is I met Larry and Sergey when there were 25 employees at Google and had them present to my partnership, and we didn't follow through and try to invest.

I've been over this in my head about 1,500 times. I have remarkable clarity.

The biggest mistake I ever made is I met Larry and Sergey at 25 employees and we didn't follow through.

The Asymmetry

Gurley: In venture you have asymmetric returns. You lose one times your money. But when you miss out, you miss out on 10,000 times your money.

We had a saying — 'what could go right.' Internally we never sweated a zero. We didn't do case analysis on why we made a bad investment. But when we miss big winners, we talk about it frequently.

You lose one times your money. But when you miss out, you miss out on 10,000 times your money.

Why the Rules Failed

Gurley: There were a lot of negative signs. Yahoo had fallen from 82 to 10 as a public company. Excite was in bankruptcy. These were other search companies at the time.

Larry and Sergey both wanted to be CEO and they were PhD students at Stanford. Co-CEO PhD students is not on the checklist positive. And they wanted a really high price.

Co-CEO PhD students is not on the checklist positive.

The VCs Who Broke the Rules

Gurley: The part that probably bugs me the most is two of the very best venture capitalists of all time — John Doerr and Mike Moritz — did the deal. They had a superior mental framework in that situation. They broke a lot of rules.

They split the deal at a really high price. Their ownership was much lower than they traditionally get in an investment. But they knew to break that rule.

They had a superior mental framework. They broke a lot of rules.

No Fixed Rules

Gurley: Venture is a nonlinear, multivariable problem. It's a complex system. There are no rules. If there were, everyone would do it and everyone would make money.

You develop a set of pattern recognition. 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 chaotic framework to live on.

A lot of the times when you make a great investment, it's because you decided to relax one or two of your rules.