Catching Up with Vinod Khosla
I recently visited Vinod Khosla, who since the 1980s has been a general partner in seven funds at VC firm Kleiner Perkins Caufield & Byers, which has funded such companies as Google, Genentech, and Sun Microsystems, where Khosla was a co-founder. Last year, when KPCB raised its eleventh fund, Khosla opted not to participate as a GP. Though he still keeps an office at the firm, he now invests his own money, sometimes alongside KPCB, sometimes with other VC firms, and sometimes solo. He is still a GP in past KPCB funds, some of which are fully invested but not yet fully distributed to limited partners. He manages his investments from those funds and serves on some boards on behalf of KPCB. But when making new investments, he bets only his own money. I asked him why he chose to go it alone and what he's up to.
When you walk into Khosla's office, the first thing you notice are the enlarged photos of his four kids that line the walls. There must be 20 or more pictures. Khosla says his kids are the main reason why he chose his current work arrangement. "For the next four or five years, they're all going to go through high school, and it's pretty important to me that I have the flexibility of my time and schedule," he says.
The new schedule also lets him devote time to ventures that aim for maximum social impact rather than maximum profit. Khosla is especially interested in social ventures that use Silicon Valley-style entrepreneurship to create self-sustaining organizations. Two weeks ago at the TiECon 2005 conference, he moderated a panel with some of the organizations he has been working with: Share Microfin Ltd., Aravind Eye Hospital, and Institute for OneWorldHealth.
Investing solo lets Khosla fund pet projects that many VCs wouldn't touch. "I can invest in more seed and speculative ventures," he says. Khosla has always had an interest in pure research that promises to produce breakthrough technologies--the kind of initiatives that don't yet fit neatly into a business plan. He calls them "science projects."
For example, he recently teamed with MIT professor Srini Devdas on a project they're calling Puffco. Devdas is developing a tiny chip that can uniquely identify an object and, according to Khosla, can't be counterfeited. Applications for the invention aren't yet certain. It could be placed inside a Rolex watch to ensure authenticity. It could be incorporated into radio frequency identification (RFID) tags to uniquely identify each tagged item. It could ship inside every laptop to make sure only a rightful owner gains access to stored contents.
Investing at the science-project stage is highly risky since the entrepreneur hasn't yet proven his or her technology can work, much less attract customers. But Khosla has experience with investing at that stage. Over half his investments at KPCB from 1996 to 2001 were infusions of $1 million or less into barely formed startups. That period was a golden era for him, giving rise to such hits as optical networking company Juniper Networks, which returned KPCB's invested capital over 1,000 times.
Investing alone also lets Khosla explore industries VCs have rarely funded in the past. Recently, he has looked at investing in bio refineries, which use sustainable crops or agricultural waste to produce fuel. He has also considered synthetic biology, the creation of new life forms (or alteration of existing life forms) through genetic engineering. He's also interested in fuel cells and solar cells.
He's still doing traditional VC deals, too. He recently invested alongside Sequoia Capital in a second round of funding for Beceem, a WiMax chip startup. In February, he invested with KPCB in Spatial Photonics, a display company. That deal has given him the opportunity to serve on the same board as KPCB general partner John Doerr--something he never got to do at KPCB since the firm assigns only one partner per board. He has also invested with KPCB in chipmaker eAsic and data center equipment maker Xsigo, where he serves on the board with KPCB general partner Ray Lane. After leaving the partnership, Khosla is finally getting to see his former partners in action.
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Tracked on May 31, 2005 02:12 PM
Thanks for giving us a peek behind the curtain of the venture capital industry. There is such a mystique and so much widespread mistunderstanding about venture capital, that even a fleeting glimpse can be quite illuminating.
Your post briefly touched on a related topic that I hope you'll follow up on in the future: the future of basic computing research. Traditionally, VC's didn't fund research and simply benefited from the vast amounts of existing research that were already sitting on the shelf. Now, with research funding rather skimpy, and a number of traditional researchers moved out of the lab and into entrepreneurial roles, it seems like the VCs and angel investors like VK are one of the few bright spots for encouraging research that is both fundamental and has some market potential.
-- Jack Krupansky
Posted by: Jack Krupansky at May 31, 2005 01:14 PM
Thanks for the insight into a really interesting man. How does one get an audience with the man?
Posted by: Anonymous Coward at May 31, 2005 07:57 PM
My company, Centrata, is one example when Vinod and KPCB decided to bet on a “barely formed startup.” We the founders came to Vinod in 2000 with some fairly raw ideas and technology (with roots at MIT and Bell Labs) on how to tie a large number of distributed computing resources into a manageable IT environment. Vinod helped us to evolve our thinking about the technology, the product, and the business model into a viable company. That was in 2000-2001… today, Centrata is a recognized leader on the IT service management space, and Vinod is still on our board!
Posted by: Boris Pevzner at June 12, 2005 04:18 PM
Was searching the web for info on the man with the Midas touch thats when I read up your article,thanks a ton for the inside scoop on one of my favourite Idols,Im a business school student in India and look up to inspiring personalities like Mr Khosla.
Posted by: vineet at September 7, 2005 07:37 AM
Hello,I viewed datelines story with Vinod Khosla I myself have been into alternate fuels for decades and lost interest due to the strength and power of big oil.the story gave me promise that it is possible with financial clout and the government backing to do the right thing and produce these fuels.I would like to contact MR Khosla to team up or help in any way I can.
Posted by: Steve Randall at May 8, 2006 05:33 PM
I too, saw the Dateline story with Vinod Khosla on May 7. I am an elementary school teacher and a spare time gearhead and environmentalist. I am very interested in alternative fuels, particularly alcohol fuels, and am wondering what I can do to promote this renewable resource with the limited time and financial resources of a teacher.
Posted by: Gregg Lucas at May 9, 2006 05:20 PM
Watching the special on Mr Khosla the other night inspired me greatly. My interest and efforts flow toward assisting small business start-ups. I attempt to marry them and their entrepreneurial endeavors with 'angels' or venture capitalists but only, in a small business basis and in a small town environment (in Indiana where corn grows wild). The inspiration and enthusiasm was born again from this insight of Mr. Khoslas' recent venture especially fighting the giant obstacle of the oil industry. I am an individual to be multiplied 'enmass'of the enthusiasm that shall soon flow like the mouth of the Mississippi.
I would like to partake in this 'upstart' and hope that this message reaches Mr. Khosla (my e-mail:email@example.com)
Posted by: Marcoantonio Arellano at May 12, 2006 11:25 AM
Its always really a pleasure and inspiration to get hands on articles about Mr. Khosla . He is indeed a gem of a man and a true role model for an entrepreneur and an Indian .I feel very proud about the fact that he graduated from the same school that I am in now(IIT Delhi). I together with two stanford university students have started a company to make and sell bio-diesel in rural india where huge amounts of diesel is used in running fishing boats , water pumps, generators and tractors. Anyone interested to know more about our project visit familiarfuels.com or write to firstname.lastname@example.org
Posted by: Ankit Gupta at May 28, 2006 09:33 PM