Skip to Content

Silicon Valley investor: Unicorn startups are like career college students

Bill GurleyBill Gurley
Bill GurleyPhotograph by Brian Ach — Getty Images

Over the past several year years, private tech company valuations have ballooned amid a flood of easy money. But Silicon Valley investor Bill Gurley is losing patience.

It’s like seeing a seventh or eighth year undergrad at the college bar, Gurley said Tuesday at a tech conference in Laguna Beach, Calif. “Everyone is like, ‘What is he doing?”

More specifically, Gurley is critical of a growing number of tech companies that have decided to remain private instead of going public or being acquired. In his view, entrepreneurs should almost always work towards an initial public offering.

“Until you get liquid, you really haven’t accomplished anything,” Gurley said.

Part of the reason that “unicorns”—startups with a value of at least $1 billion—are staying private is economics. Their private valuations exceed what they could get in an IPO, Gurley said, thereby making a switch unattractive.

The press and investors should therefore look more skeptically at private companies and their sky-high valuations, he argued. In fact, they’re worth a lot less as publicly traded businesses, a phenomenon he called a liquidity discount.

“If you’ve got a CEO saying they won’t go public, you should be using a 70% or 80% liquidity discount,” Gurley said.

Ironically, Gurley’s venture capital firm, Benchmark Capital, is an early and actively supportive investor of ride-hailing company Uber, which has raised more than $8.2 billion and is valued at over $51 billion. It’s unclear when or if the company plans to go public, but Gurley’s comments suggest that he thinks it should.

Gurley’s comments at the Wall Street Journal’s conference weren’t his first criticism of the frothy startup world. In the past few months, he’s warned that some big startups will start to die off and that the free-spending by some companies is unsustainable.

Subscribe to Data Sheet, Fortune’s daily newsletter on the business of technology.

For more about the public market climate for unicorn startups, watch this Fortune video: