Venture Capital: Vinod Khosla

Business India, Jan 22-February 4, 2001
Vinod Khosla
Shivanand Kanavi

“You can put my name in any search engine and you will get enough material on me, and I have said whatever I have to say in most of my interviews. So you can dispense with the usual questions and fire away”, said Vinod Khosla, when we met him in his office at Sand Hill Road at Menlo Park. The words were not tinged with arrogance but were a genuine attempt at getting to the core issues quickly.

That is how Vinod has made his famous picks : Juniper Networks, Cerent, Sierra, Redback and more. Which, according to Fortune, have made over $16 billion for KPCB, thereby making him “the most successful VC of all times”. Clearly he has gotten to the core of the next generation of networking.

Vinod is famous for his brevity. Rajvir Singh, who has become a fountain of Optical start-ups, recalls how the first thing Vinod advised him in an e-mail when he invested in Fiberlane (later split into Cerent and Sierra) was: "Keep the B.S. out of all communication".

We say amen to that, and give below a few notes from our conversation, albeit pared with Occam's razor:

Money: In 10 years I have never done a rate of return calculation. I have only looked at economic contribution. After all, if you have made economic contribution, then money will come anyway. Many people talk about how much they will be worth. I reject all those who only talk about money. That is Wall Street mentality. It goes against my intellectual curiosity, predicting trends and so on.

Venture Capitalism: It is all about helping entrepreneurs build companies. Juniper is a classic example. When Pradeep Sindhu came to me, he had no business experience. I guided him in building Internet routers and then helped him find the team; I helped him find Scott Kriens. All these things are really hard to do if you are just an engineer, because you have never done anything like this. What we do is help make an idea into a company. It is like being a coach for a soccer team or a football team.

Startups: I do not miss being in a startup myself. It is a lot of work and you get stuck in one area. Technology is moving rapidly in so many areas and I have interest in so many areas. Every two to three years I completely change the area I am investing in. I take a few months off to learn the whole technology and develop a vision of what the world is going to be like - it is literally going back to school – then start investing.

Current interests: Whether it is optical components, which is physics and material science or enterprise software, the only way to do it is to take three months off, learn and come back. My position lets me do it. I have got curiosity. I change my interests regularly when I get bored.
All three of my degrees are in completely different areas. Right now, as hobbies, I keep up with string theory and evolutionary biology.

Big vs small companies: It is not big vs small. People who refused to take risks are losing. Lucent had more talent than Nortel. But Nortel has changed: they have absorbed entrepreneurial culture. Lucent has wrong acquisition strategy and wrong culture. People don’t leave Cisco when it acquires, but they do when Lucent does. It is much harder for big companies but Nortel has done it.

Optical Networking: In both optical and wireless, valuations are hyped and over-hyped. But if you look at the impact they are going to have on society, on the way business is going to be run and so on, then they are underestimated. Investors are like lemmings; suddenly they go from greed to fear.

Indian entrepreneurs: The stockmarket is not a good indicator. Some have built businesses but some have built market caps. It is a bad value system. Issue is what you can create that has lasting value. Desh has real revenue. I like what Desh did. In the end his value will be judged if he makes the economic contribution. That is what Pradeep is doing. Intel, Sun, Dell, Microsft, Oracle all made contributions.

Education in India: A country of the size of India, a billion strong, does not have a major university which is world class and which is leading in research so that it does not have to depend on all the research in US. You have to take a 50-year view of this, not five to ten years. Over the long haul, India has the talent, language (English), enough infrastructure. It will grow in a very, very big way in the knowledge economy. Hopefully, people from all over the world will go to India to do research. That is the genesis of my interest in Global Institutes of Science and Technology.

Role models: I was 15-16 and living in Dehi Cantonment, as my father was in the army. I used to go to Shankar market and rent old issues of trade journals in electronics, which you get free there. I read about Intel being started up by a couple of engineers. That was my dream long before I went to IIT. In 1975, even before I finished IIT, I tried to start a company. Those days in India, it was not possible if your father did not have connections. That is why I resonate with role models. Andy Grove and Intel became role models for me.

Vinod Khosla loves travel and photography. Blown up pictures of his children taken by him are all over his office.