20VC Vinod Khosla on What Venture Assistance Really Means, Why Many VCs Are Not Qualified To Advise Founders & Why Startups Can Innovate So Much Faster Than Incumbents



In this episode of "20 Minutes VC," host Harry Stebbings interviews venture capital legend Vinod Khosla, founder of Khosla Ventures, discussing his journey from founding pioneering companies like Sun Microsystems to becoming a general partner at Kleiner Perkins and eventually starting his own firm. Khosla emphasizes the importance of building significant companies over prioritizing returns, taking bold technical risks, and providing venture assistance by surrounding entrepreneurs with the support they need to succeed. He also touches on the necessity of aligning founder and VC interests, the role of values in startups, and the challenges of innovating within large companies. The episode also features discussions on products like HelloSign and Hims, and services from Silicon Valley Bank, illustrating the diverse landscape of technological solutions and support for startups.

Summary Notes

Introduction to the Episode

  • Harry Stebbings expresses excitement about finally hosting Vinod Khosla on the show.
  • Vinod Khosla is introduced as a legendary figure in the venture capital industry and the founder of Khosla Ventures.
  • Vinod's background includes founding Daisy Systems and Sun Microsystems, as well as being a general partner at Kleiner Perkins.
  • Acknowledgement of Samir's contribution to the episode with question suggestions.

"But to the episode today and my word, I've wanted to do this episode ever since I started the show over five years ago. He's a legend of the industry and a true pioneer, and I couldn't be more honored to welcome Vinod Coastler to the show today."

The quote highlights Harry Stebbings' long-standing desire to have Vinod Khosla on the podcast and his respect for Khosla's achievements in the venture capital industry.

Sponsorships and Advertisements

  • Hellosign is praised for its user experience in digital signature solutions.
  • Hims is introduced as a wellness brand for men, focusing on hair loss and other wellness supplements.
  • Silicon Valley Bank is presented as a bank for visionaries and startups, offering banking services to support growth.

"Hello Sign is an effortless esignature solution used by millions to securely send and request legally valid digital signatures and agreements."

This quote describes Hellosign's product and its significance in the market as a widely used solution for digital signatures.

Vinod Khosla's Background and Entry into Venture Capital

  • Vinod Khosla was inspired at a young age by Andy Grove, a Hungarian immigrant who founded a company in the U.S.
  • Despite not having exposure to business or technology in his youth, Khosla was drawn to entrepreneurship after reading about Grove.

"Well, I was 15 or 16. I'm 65 now, but I was 15 when I first read about Andy Grove, a Hungarian immigrant moving to the US and starting a company. And I fell in love with that idea."

The quote reveals the early inspiration behind Vinod Khosla's career in venture capital and entrepreneurship, highlighting the impact of Andy Grove's story on him.

Venture Assistance and Working with Founders

  • Khosla Ventures focuses on building companies, not just on returns.
  • The firm's motto is "bold, early, and impactful," emphasizing high technical risk and large impact.
  • Entrepreneurs often need help in areas where they lack experience, such as management, marketing, and finance.

"Our firm and I am much more focused on how do you build company, not on returns. And if we build the big successful company, then the returns take care of itself."

This quote underscores the philosophy of Khosla Ventures, which prioritizes the creation of significant companies over immediate financial returns.

Vinod Khosla's Role in Supporting Entrepreneurs

  • Vinod Khosla believes small nudges can significantly alter a company's trajectory.
  • He spends considerable time helping portfolio companies recruit top talent.
  • Challenging conventional wisdom and identifying hidden risks are key aspects of venture assistance.
  • Personalized sessions are used to help entrepreneurs navigate difficult decisions and potential business pitfalls.

"The single most important thing I spend time on, probably more than any other single thing in my calendar, is helping our companies recruit. Great team."

This quote explains that Vinod Khosla dedicates a significant portion of his time to assisting portfolio companies in building strong teams, which he views as crucial to their success.## Advising Entrepreneurs on Which Advice to Take

  • Vinod Khosla emphasizes the difficulty for entrepreneurs in determining whose advice to take.
  • He suggests that most board members, even with business school backgrounds and venture firm experience, aren't qualified to advise entrepreneurs.
  • Entrepreneurs face a challenge in filtering advice and deciding which guidance is beneficial for their business.

"The number of people qualified to advise an entrepreneur is really, really limited."

This quote highlights the scarcity of truly qualified advisors for entrepreneurs, suggesting that credentials alone do not make someone a suitable advisor.

Acceptable vs. Unacceptable Risk

  • Vinod Khosla discusses the concept of risk in startups, particularly when they begin to gain initial traction.
  • He criticizes board members who advise startups to reduce risk to the point where success becomes inconsequential.
  • Khosla advocates for aiming for a "bigger vision" rather than settling for safe, conservative plays.
  • He explains that there are trade-offs with different types of risks, such as financial, product, or market risks, and that managing these risks is a critical task for an entrepreneur.

"Risk management is the other hard thing an entrepreneur does."

This quote indicates that managing risk is one of the most challenging aspects of entrepreneurship, requiring careful consideration and strategic decision-making.

The Role of Time in Startup Success

  • Vinod Khosla believes that time can be a significant factor in the failure of startups.
  • He advises entrepreneurs to manage their burn rate and to plan for flexibility and evolution in their business plans.
  • Khosla highlights the importance of surviving long enough to potentially get lucky and to adapt plans based on learning and evolving market conditions.

"So time is a bigger killer, but you can increase the time you have."

This quote suggests that while time can be a threat to startups, it's also a variable that entrepreneurs can influence through careful planning and risk management.

Startup Innovation vs. Large Company Incrementalism

  • Vinod Khosla reflects on the source of major innovations over the last 40 years, noting that most came from startups, not large companies.
  • He observes that large companies tend to focus on incremental improvements and rely on experts who are resistant to radical change.
  • Startups, on the other hand, are driven by necessity to survive, which fosters invention and the willingness to take significant risks.

"Experts are experts in a previous version of the world, not the world you're trying to create."

This quote underscores the idea that experts often base their advice on past experiences, which may not be applicable to the innovative visions that startups are pursuing.

Tolerance to Failure in Silicon Valley

  • Vinod Khosla shares his personal belief that being willing to fail has allowed him to succeed.
  • He criticizes the shift in Silicon Valley from building companies to treating startups as financial tools, leading to a decrease in the willingness to take technical risks.
  • Khosla's firm does not allow IRR calculations when making investments, as they aim to focus on large risks that cannot be quantified in spreadsheets.

"My willingness to fail is what has allowed me to succeed."

This quote reflects Khosla's personal philosophy that embracing the possibility of failure is essential for achieving significant success.

The Importance of Values and Mission in Startups

  • Vinod Khosla discusses the importance of values and mission in startups and investment firms.
  • He differentiates between being obstinate about vision and being flexible about tactics.
  • Khosla points out that while many startups have a mission, fewer focus on the impact of their values on society.
  • His firm prioritizes investments that are not negative for society and has passed on profitable opportunities that conflicted with their values.

"Values is focusing on you care about its impact, whether it's positive or negative."

This quote highlights the significance of considering the societal impact of a company's actions and aligning them with its values.## Investment Values and Decision Making

  • Vinod Khosla emphasizes the importance of adhering to firm values even when it might mean sacrificing profit.
  • Specific examples of investments that Khosla Ventures avoids include gambling, encouraging drinking, debt collection, and advertising tools that are perceived as negative.
  • The true test of a firm's values occurs when there is something significant to give up in order to maintain those values.

"When we did impossible, we were very clear we would pass up on profit and not sell impossible to a food company that might divert its mission."

This quote illustrates the firm's commitment to its mission over profit, using the example of Impossible Foods to highlight the importance of aligning investment decisions with core values.

Advice for Aspiring Venture Capitalists

  • Vinod Khosla advises new venture capitalists to be clear about their values and to stick with them, especially during challenging times.
  • He suggests that it is easier for young VCs to choose firms that align with their values and that success affords more luxury to uphold those values.
  • Khosla appreciates firms like Blackrock for being clear and vocal about their values.

"Be clear what your values are, be explicit about them and stick with them."

This quote underscores the advice to be resolute in one's values and to make them explicit within the venture capital industry.

Effective Board Meetings

  • Vinod Khosla advises founders to consider the purpose of a board meeting and to focus on seeking advice on key questions where they need feedback.
  • He believes that boards should serve an advisory role rather than a fiduciary one in private companies.
  • Founders should ensure they have a good board that can provide diverse perspectives and honest feedback.

"Focus on the two or three questions that you most need feedback on."

Khosla emphasizes the importance of using board meetings to gain insights on the most pressing issues facing a founder rather than just going through reports.

Board Effectiveness and Entrepreneurial Experience

  • Vinod Khosla points out that many board members lack the firsthand experience of the entrepreneurial roller coaster, making their advice less practical.
  • He highlights a misalignment of goals between founders and board members, which can lead to poor advice.
  • Founders should seek board members who understand the challenges of entrepreneurship and share their vision.

"If you haven't gone through this roller coaster, it's very easy as a board member to give advice that's perfunctory, sounds like good business school advice, but isn't based on the reality of how hard it is to be a founder."

The quote conveys the disconnect between theoretical advice and the practical realities of entrepreneurship, emphasizing the value of experience in providing effective guidance.

Alignment of Risk Between Founders and VCs

  • Vinod Khosla discusses the different motivations for being a founder and the importance of aligning with a VC that shares the founder's goals.
  • He notes the potential misalignment of risk between founders and VCs, as VCs may encourage higher risk for larger returns, while founders may have different measures of success.
  • Founders should be selective in partnering with VCs that understand and support their long-term vision and mission.

"As a founder, you have to find a VC that matches your goals."

This quote highlights the necessity for founders to seek out venture capitalists whose investment strategies and risk appetites align with their own objectives and values.

Founder vs. CEO

  • Vinod Khosla believes that founders who grow into effective CEOs can build larger and better companies due to their vision and passion.
  • The ability to hire the right team and delegate management tasks is crucial for a founder to successfully lead a company.
  • Khosla advises founders on how to avoid needing a CEO and what to do if they need one, with the understanding that different companies and founders have different paths.

"The team you build is the company you build, not the business plan you make."

This quote encapsulates the idea that the success of a company is largely determined by the quality of its team rather than just its business strategy.## Great Founders

  • Great founders are characterized by vision, passion, unreasonableness, and ambition.
  • These traits often exceed what practical people consider possible or doable.
  • Working with such founders is exciting and rewarding, albeit sometimes challenging.
  • The right combination for success includes a supportive board and advisors who provide challenges along the mission.

"But almost certainly, great founders have great vision, passion, unreasonableness, more ambition than most practical people would accept as possible or doable."

The quote emphasizes the exceptional qualities that distinguish great founders from others, highlighting their visionary and passionate nature, which often defies conventional wisdom.

Book Recommendations

  • Vinod Khosla's favorite technical book is "Life on the Edge," about quantum biology.
  • His preferred economics book is "Third Pillar," which discusses the role of community in capitalism.
  • "Uninhabited Earth" is recommended for insights into the climate crisis.
  • "Loonshots" reflects the culture of Silicon Valley.
  • "Lying" by Sam Harris is his all-time favorite book, challenging readers on honesty.

"My all time favorite is lying by Sam Harris this is where you really test yourself on whether you're honest. And I always say we prefer to be brutally honest than hypocritically polite."

This quote reveals Vinod's admiration for Sam Harris's book "Lying," which he values for its exploration of honesty, a trait he prioritizes over polite hypocrisy.

Motivation and Plans

  • Vinod Khosla is motivated by having fun and making an impact through technology.
  • At 65, he has a 20-year plan outlined in "Reinventing Societal Infrastructure with technology."
  • He is excited by his portfolio companies that are involved in highly impactful technological advancements.
  • Vinod is driven by the potential to have a significant impact and his enduring curiosity about new technologies.

"Personally, if I can have an impact, it's the most valuable thing, most rewarding thing I can do. And I'm always curious to learn about new technologies."

This quote captures Vinod's personal motivation to create impact and his passion for learning about new technologies, which he finds rewarding.

Life Philosophy

  • Vinod Khosla believes skeptics do not achieve the impossible, while real doers, like entrepreneurs, take on challenges.
  • He encourages embracing opportunities with a high chance of failure if they also have the potential to change the world.
  • The willingness to take risks and pursue challenging goals is seen as rewarding and fun.

"To me, if there's a 90% chance of failure and there's a 10% chance of changing the world, that's a pretty good deal."

Vinod's philosophy is to focus on the potential to make significant changes in the world rather than being deterred by the high possibility of failure.

Overcoming Challenges

  • Startups face difficult times, but belief in the mission helps founders power through obstacles.
  • Mission-oriented founders are more likely to create better and more successful companies.
  • Vinod believes in sticking with companies through ups and downs, as mission alignment is crucial.

"I think if you believe in a mission, you stick with it. You power through walls, bang your head against the wall till you break through."

This quote emphasizes the importance of mission alignment and perseverance in overcoming challenges faced by startups.

Lessons Learned

  • Vinod Khosla has learned that embracing more risk leads to greater opportunities.
  • He believes in the concept of nonlinear returns and the importance of not being afraid of risk.
  • Sticking with companies to achieve larger goals has been a successful strategy for Kosla Ventures.

"More risk is a good thing, not a bad thing. More risk is something most people are afraid of, and it's where the larger opportunity lies."

Vinod reflects on his realization that taking more risks can lead to larger opportunities and that fear of risk often prevents people from seizing these chances.

Investment Philosophy

  • Vinod Khosla enjoys investing in large, breakthrough ideas.
  • He is proud of investing in individuals who have won Nobel prizes after his investment.
  • OpenAI is a recent investment because of its ambitious goal and potential societal impact.
  • He is willing to invest even if there is a high chance of failure, as long as there's a possibility of significant success.

"For a specific investment. OpenAI is going after a big, hairy, audacious goal of building an AGR. That to me is worth pursuing as an investment, but also for society."

Vinod shares his excitement about investing in OpenAI, which he sees as a pursuit with both investment potential and societal benefits despite the risks involved.

Entrepreneurial Inspiration

  • Vinod Khosla aims to inspire more people to become mission-driven entrepreneurs.
  • He believes that even one person inspired to create impactful technology makes his efforts worthwhile.

"And if I can excite one more person into being an entrepreneur on a mission that helps society, that has impact, or does some very cool thing like microbots, this hour is worth it."

The quote reflects Vinod's desire to motivate others to become entrepreneurs who are dedicated to missions that benefit society and push technological boundaries.

Supporting Startups and Wellness

  • HelloSign is highlighted as a successful company with a focus on user experience, having been acquired by Dropbox.
  • Hims is mentioned as a wellness brand that offers solutions for hair loss and other men's wellness needs.
  • Silicon Valley Bank is recognized for its support of visionaries and startups with adaptable banking services.

"Hello sign is an effortless esignature solution used by millions to securely send and request legally valid digital signatures and agreements."

This quote points out HelloSign's success in creating a user-friendly digital signature solution, which led to its acquisition by Dropbox.

"Hence hymns, the one stop shop for hair loss, skincare and other wellness supplements for men."

The quote introduces Hims as a comprehensive wellness brand for men, offering various treatments for hair loss and skincare.

"Silicon Valley bank has been the bank for visionaries of all kinds, people and businesses who've revolutionized everything from software to social media, from workspaces to wine."

Silicon Valley Bank is praised for its role in supporting innovative individuals and businesses across various industries with its banking services.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy