The two of us talked over a cup of coffee last week. I hadn’t been planning to interview Gurley while I was in Austin. After all, I hadn’t even realized he had sold his home in San Francisco and moved here about a year and a half ago. But when I found out, he agreed to tell me why he and his wife ended up in Texas. And we talked about a host of other things, too: Which music venues he is frequenting, how he was influenced by Steve Martin’s book Born Standing Up, Uber, A.I., and his new COVID hobby—guitar. (You can read all about that here.)

But I couldn’t help but ask Gurley, who was outspoken in predicting that the tech bubble would burst for nearly a decade, how this private market crash would ultimately shake out. Gurley is not making new investments these days, as he stepped back from Benchmark’s tenth fund a few years ago, but he still sits on 10 boards, attends Benchmark meetings, and has skin in the game. He also has more than two decades of experience, with a front-row seat to how this mess might end, and how too much capital can lead to founders losing some discipline.

“I became convinced that the industry is structurally flawed and is always going to boom and bust,” Gurley tells me. “They have very low barriers to entry and actually high barriers to exit, using the old Michael Porter stuff. And so, during this time, you ended up with just a flood of new entrants…They amass all this stuff, and eventually just supply and demand are going to lead to that being a wreck. It’s always a matter of time.”

Benchmark is well-known for keeping its funds small. Its tenth fund (the first that Gurley isn’t part of since he joined the firm), is $420 million, dwarfed by the likes of Andreessen Horowitz, Kleiner Perkins, Khosla Ventures, or Sequoia Capital. In the last few years, even some brand-new funds, such as Katie Haun’s crypto firm, managed to raise more than $1 billion for their very first fund. As venture capital firms offered huge checks to get into the most promising startups, valuations soared, the IPO market boomed, returns were fabulous, and endowments, sovereign wealth funds, pensions, and foundations were clamoring for exposure.

“I mean, for the past five years, everyone told us we were crazy: Why aren’t you raising a billion-dollar fund? We certainly could have and then our management fees would have been five times as big,” Gurley says. But Gurley was at Benchmark when the firm lost focus during the Dot Com Boom. “We did over-expand in 1999 to 2001,” he says, pointing out that Benchmark had a $1 billion fund at the time that it deployed for six or seven years. “We went global. And it didn’t work for us.” 

“Having been through that, we’ve always said that good judgment comes from experience, and [experience] comes from bad judgment,” he adds.

So what happens now? “It’s always a matter of time,” Gurley says. “I thought it was going to happen five years before it did, but once it does, it’s usually catastrophic…it doesn’t end well.”

Gurley traced his finger along the table to visualize what he was saying, how he used to think venture was cyclical, like a sine wave, but how he’s now convinced it’s like a sawtooth wave. It goes up slowly, slowly like a roller coaster, and then crashes. And then it goes up again. And people take on risks very slowly and incrementally, and then suddenly become risk averse.

“This went so long [since] ‘09. There were tons of people in the ecosystem—founders and investors—they didn’t know any other way. They just thought this is how it will be forever. And then it crashed. And it’s wild to see,” he says, noting that, due to all the capital sloshing around in these companies, it may take several years before all the bankruptcies come to fruition.

Something to watch out for: whether venture firms start returning capital to LPs as several did in 2001.

“People presume that it was the act of being gracious—I think it was an act of greed,” Gurley says. He points out that many venture firms have a term in LP agreements called a “lookback,” where you have to pay limited partners back some of your carry should a deal not reach an agreed return. “If you terminate a fund and raise new funds, they don’t have that lookback liability. So I think a lot of these firms shut these funds down early so they can start with fresh capital and not be exposed to that risk.”

The exception to this market havoc, Gurley can’t help but point out, is A.I.

“Now A.I. is just an interesting randomizer. Everybody wants to fund those [startups] at any price, but you still—that’s not gonna help all this stuff,” he says.

Greg Becker speaks out…In his first appearance since the devastating and sudden collapse of Silicon Valley Bank, former CEO Greg Becker testified during yesterday’s Senate banking hearing, and was quick to blame the bank run, rising interest rates, and media attention—rather than himself. Lucy Brewster has the story here.

Until next time,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Gradiant, a Woburn, Mass.-based water and wastewater treatment solutions provider, raised $225 million in its first close of Series D funding co-led by BoltRock Holdings and Centaurus Capital.

- Ray Therapeutics, a San Francisco-based optogenetics company, raised $100 million in Series A funding. Novo Holdings led the round and was joined by Deerfield Management, Norwest Venture Partners, Platanus, MRL Ventures Fund, and 4BIO Capital. 

- Noveon Magnetics, a San Marcos, Texas-based neodymium sustainable rare earth magnets manufacturer, raised $75 million in Series B funding co-led by NGP and Aventurine Partners.

- Hippocratic AI, a Palo Alto-based large language model for the health care industry, raised $50 million in seed funding co-led by General Catalyst and Andreessen Horowitz.

- Spiff, a Salt Lake City-based sales commission software company, raised $50 million in Series C funding. Salesforce Ventures led the round and was joined by Lightspeed, Norwest, Kickstart Fund, Album, and others. 

- Nivoda, a London-based B2B marketplace for diamonds and jewelry, raised $11 million in Series A funding led by Headline.

- TidalSense, a Cambridge, U.K.-based respiratory intelligence health company, raised £7.5 million ($9.39 million) in funding co-led by BGF and Downing. 

- Quilt, a Redwood City, Calif.-based ductless heat pump system development company, raised $9 million in seed funding. Lowercarbon Capital and Gradient Ventures co-led the round and were joined by Incite Ventures, MCJ Collective, Garage Capital, Climate Capital, and Spacecadet. 

- Nory, a London-based operating system for hospitality businesses, raised €7 million ($7.6 million) in seed funding. Triple Point Ventures and Samaipata VC co-led the round and were joined by Playfair Capital, Cavalry VC, and Circlerock Capital. 

- Somethings, a New York-based teen mentorship platform, raised $3.2 million in seed funding led by General Catalyst.

- Asymmetry Finance, a New York-based liquid staking tokens protocol, raised $3 million in seed funding led by Ecco Capital.

- Pear Suite, a Honolulu-based digital health company, raised $2.5 million in seed funding. Mucker Capital, Impact Engine, American Heart Association, Sweater Ventures, and Atento Capital co-led the round and were joined by Techstars, Open Venture Capital, Incisive Ventures, Lair East Labs, StartUp Health, and Third Act Ventures. 

- Wrangle, a Durham, N.C.-based productivity tools developer for remote workers, raised $2 million in seed funding. Accomplice led the round and was joined by Bloomberg Beta, Eniac Ventures, and the Triangle Tweener Fund.

- Minus Works, a Long Island, N.Y.-based sustainable packaging manufacturer, raised $1.8 million in seed funding from Emil Capital Partners and others.

PRIVATE EQUITY

- Entrepreneurial Equity Partners acquired a majority stake in Furlani Foods, a Mississauga, Canada-based garlic spreads and purees company. Financial terms were not disclosed.

- Foremark Performance Chemicals, an SK Capital Partners portfolio company, acquired NexGen Chemical Technologies, a Houston-based alternative natural gas sweetening solutions provider, from Black Bay Energy Capital. Financial terms were not disclosed. 

- Nexbelt, a TEAM Partners portfolio company, acquired Lejon of California, a Corona, Calif.-based leather belts and accessories manufacturer. Financial terms were not disclosed.

- Papirfly, backed by Verdane, acquired Keepeek, a Paris-based digital asset management company. Financial terms were not disclosed.

- Tendit Group, an Osceola Capital portfolio company, acquired Clean D Windows, a Tempe, Ariz.-based commercial window cleaning company. Financial terms were not disclosed.

OTHER

- Endred acquired Reward Gateway, a London-based employee engagement company, from funds managed by Abry Partners and Castik Capital for £1.15 billion ($1.44 billion). 

- ArisGlobal acquired SPORIFY, a Dublin-based SPOR data integration platform. Financial terms were not disclosed.

IPOS 

- Atmus Filtration Technologies, the Nashville-based filtration company of Cummins, plans to raise up to $296.6 million through the sale of 14.1 million shares priced between $18-21.

FUNDS + FUNDS OF FUNDS

- Illumen Capital, an Oakland-based impact fund of funds, raised $168 million for a fund focused on education, health and wellness, climate and sustainability, and financial inclusion. 

PEOPLE

- Apollo Global Management, a New York-based investment firm, named Jason Scheir as cohead of Apollo’s Hybrid Value business.

- K50 Ventures, a New York-based venture capital firm, hired Nick Talwar as a senior partner. 

- Narrative Strategies, a Washington, D.C.-based communications firm, hired Chris Ullman as a senior advisor. Formerly, he was with the Carlyle Group. 

- Sofinnova Investments, a Menlo Park, Calif.-based investment firm, hired Jakob Dupont as an executive partner. Formerly, he was with Atara Biotherapeutics.