Type of Investing: Venture Capital
Firm:
Who is Vinod Khosla?
Vinod Khosla is the founder of Khosla Ventures, a top-tier venture capital firm that focuses both on for-profit and social impact investments. Vinod is a strong believer in startup innovation's ability to combat the world's most pressing social problems.
Khosla is a seasoned and successful entrepreneur. He came from an Indian army household with no connections to business or technology. But after finishing his MBA at Stanford, he founded two extremely successful technology startups: Daisy Systems and Sun Microsystems.
Afterwards, he joined KPCB as a general partner where he played a crucial role in taking on Intel’s monopoly by building and growing semiconductor company, Nexgen, which eventually was acquired by Advanced Micro Devices (AMD). It was in 2004, 18 years after joining KPCB, that he decided to start his own venture firm, Khosla Ventures.
What does Vinod Khosla think about...?
Growing a Business
- Don't make a business plan; plan on planning - Most large businesses went through several iterations and reinventions before becoming what they are today. You must evolve as you learn.
- "Knowing whose advice to take and on what topic is the single most important decision an entrepreneur can make." - Founders get tons of advice but there is a very limited number of people actually qualified to give useful advice. Going to business school doesn't give you the right to challenge an entrepreneur and it doesn't even give you the right to decide who needs to be on the team.
- Reducing risk can make the consequences of success inconsequential - Once startups get traction, boards will often advise them to reduce risk in a way that also reduces the magnitude of success. You first need to decide on your orientation to risk (high risk high reward or more conservative) and then you need to think about what kind of risk to take. This is why incumbents don't make significant innovations: unwillingness to take risk.
Investing
- 90% of investors add no value and 70% actually reduce a startup's potential - Founders need to take advice from investors who have been in their shoes. "And most VCs haven’t done that, so they give stupid advice. You know, if you got out of business school and joined a VC firm and grew up and eventually became a partner, you haven’t learned what it’s like to be in a startup." Most investors haven't earned the right to advise founders.
- Founders need to think of investors as employees that they can never fire - When you raise money, the money is actually only a small part of what you get. The approach and philosophy of the investor is more important. For example, if you have an investor that only cares about getting a 3x return, they will push for liquidity ASAP. “Seeking an acquisition from the start is more than just bad advice for an entrepreneur. For the entrepreneur, it leads to short term tactical decisions rather than company-building decisions and in my view often reduces the probability of success.”
Quotes
- “The combination of brilliant ideas and entrepreneurial spirit should lead us to a safer and more secure future.”
- "The only way you multiply resources is with technology. To really affect poverty, energy, health, education, or anything else - there is no other way."
- "You have to invent the future you want."
- "Our focus is not on exit. In fact, if you talk to any of my entrepreneurs, I'm generally saying, 'Don't sell the company,' when other investors want to sell. I'd much rather focus on building long-term value in building companies rather than worrying about exits."
- "Your willingness to fail is what will let you succeed."
- "Startups allow technologists and scientists to take risks and change plans in a way that would be frowned upon in a big company. Having said that, big companies will play a key role in certain areas and in partnerships with little companies. Each has its strengths."
- "Any problem is an opportunity. The bigger the problem, the bigger the opportunity."
