Vinod Khosla: 70-80% Of VCs Add Negative Value To Startups

[rvivek]

We (interviewstreet, YC s2011) raised money from Khosla ventures and Vinod is my main point of contact in the firm. I don't know about other experiences but to us he has been of tremendous help in advice, connections (he knows the entire world and isn't shy to connect to people he knows for a valid reason) and in hiring people. He has taken at least 8 interviews for me in the last 5 months for VP/PM roles - sometimes to evaluate and sometimes to convince.

I think it depends on the entrepreneur on how much involved and close you want to be with your VC. Some of their operating partners - Keith Rabois, Ben Ling, Mark Jung, Flo (recruiting), Mojgan (PR), etc. are big resources to leverage on. I'm not trying to evangelize the firm in any way here but just putting it across that there are pros & cons in every VC firm and it boils down to what the entrepreneur actually wants. I have personally met entrepreneurs who just want a high valuation, that's it. The need varies.

Every entrepreneur's goal is to make his/her company successful and if the odds are high in getting a particular investor on board, then do it.

Btw, I think there are a lot of YC companies after our batch which raised money from Khosla ventures - instantcab, instacart are the ones on top of my mind.

[coleslawfail]

Glad you have had a positive experience. I wish you the best in building your company.

Can you comment on why so few YC companies have raised from them?

My comments have received a total of 53 points. KV has tried suing thefunded. And big, successful startups haven't taken his money.

[edouglas]

As CEO of another KV-backed company (CellScope), I'd like to chime in and echo rvivek's comments. Vinod demoed my otoscope device during his talk, which was great, but for CellScope the real value has been in helping us to expand the vision of the company. KV was the lead investor in our seed round when we finished Rock Health, just as digital health was coming on the scene. He and his team have constantly pushed us to think bigger and faster, and provided resources and connections to add meat to those bones. I am very glad to be working with KV on building a company to make a real difference in healthcare.

[lmartel]

Clearly the shortcut to quality VC funding is to pitch a startup named /in.*/ to YCombinator!

[mathattack]

Thank you for sharing your experience. His type of advice and connections appear to be the pinnacle of what people can hope for in a VC.

[coleslawfail]

Wish I could say this openly but the secret truth in the Valley is connected startups know to avoid seed/A round money from Khosla, if you can. They are very aggressive on terms and it's all about Vinod. They do plain shady stuff, like share your details and plans with their portfolio companies. At a seed stage they regular push for 50% of the equity and call it an "experiment". Then rather stick behind you, they pull the plug.

Don't believe me? Take a look at their portfolio and ask why with all of their resources so few YC companies are there. Xobni and ...? The other bigger companies all took growth equity not early money. In all my time in the Valley the gap between Vinod's public persona and the underlying truth is the biggest con I've run into. And of course he just keeps up the PR cause that's his best source of naive founders. Few others send him deals to lead. The good ones they keep to themselves and shut him out, until he gets in a growth terms (e.g. Square).

[onedev]

Look that's great and all, but if you make like 7 comments in a row spouting the same thing over and over and over again about Khosla, I'm inclined to think there are some personal issues between you two and you're looking to spread FUD.

[rdl]

The good thing I've heard about Khosla Ventures is that they're fast to make decisions (a trait shared by a16z, Sequoia, and most of the other "best" firms, especially newer ones). Stringing people along for a long time is one of the worst things to do when raising funding -- this says nothing about the experience after taking funding, though.

[unono]

The flip side is does he help you succeed? You just made a case for why you should be in his portfolio - he'll go to the lengths of shady stuff to help you out.

He openly admits he's tough, but that's out of wanting all of his investments to succeed.

[CurtMonash]

The VC who, by far, most subtracted value from my startup Evernet was Vinod Khosla. He was still at Kleiner Perkins then.

He also in those days still prided himself on how successfully he negotiated against entrepreneurs.

[coleslawfail]

Thank you for saying this publicly. If more did the bubble around his persona would quickly pop.

I'd have no problem if all he did was negotiate good terms. He certainly owes his LPs that. The problem I have is presents the persona as being founder friendly. Sadly, he's at the far other side of that spectrum.

[marcamillion]

Vinod is so refreshing to listen to. Obviously there would be a lot of pushback from the HN crowd - because there are many VCs here.....go figure.

He reminds me of the Elon Musk of the VC industry.

[coleslawfail]

That's his con. Then you go to them, pitch, and they want half your company.

New/naive founders get Bad Vinod.

Experienced founders who don't need him get Good Vinod.

Sadly it's an open secret.

[davidjgraph]

So a VC presenting at a startup media event says that the vast majority of other VCs don't add value, but his does.

In other news...

[clicks]

Well... he's a pretty smart guy (being the co-founder of Sun), and he's got a nice record.

But what I like most about Khosla (and Khosla ventures) is that he focuses on cleantech ventures: http://www.khoslaventures.com/sustainability.html -- something that is really assuredly /good/. I wouldn't mind having more VC's around like him.

[bdcravens]

He never said "his does". Additionally, read the last paragraph. He alluded to his failure, and the implicit uncertainty of giving qualified advice.

[rhizome]

I wonder if we can turn it around and use an aphorism that 70-80% of the advice from any particular VC should be ignored.

[gilgoomesh]

Surely, Sturgeon's Law applies here?

http://en.wikipedia.org/wiki/Sturgeon%27s_Law

90% of everything is crap. Why should VC's be any different?

[dragonwriter]

Most startups add negative value to VCs, too. Its high-risk, high-potential-reward on both sides of the street.

[quique]

First off as a rule of thumb, I generally avoid talking about people. In the rare case I do, it's only if I've had significant experience with them.

As an operating partner with Khosla Ventures for the past two years, below are a couple things that I respect about Vinod that entrepreneurs may misinterpret in all the tech gossip.

1) Bold leadership Rather than be in the business of doing "deals," putting money in, getting money out - Vinod is truly in the business of building companies with meaningful impact on the world.

Research KV's portfolio and you'll see how Vinod is contributing to fundamental human needs in food, agriculture, clean energy, healthcare and education among many other areas. He even setup an impact fund where others aren't investing. His leadership pushes me to focus on making a bigger and positive difference in people's lives.

Also read his perspective on Silicon Valley: http://bits.blogs.nytimes.com/2012/07/13/khosla-the-silicon-... To me, it was a healthy reminder not to be so small minded and uphold our larger purpose for innovation.

2) Honest feedback I highly recommend you read Vinod's point of view on venture assistance and the role of board members before commenting on this thread: http://www.khoslaventures.com/wp-content/uploads/2013/02/Ven...

I admit, I've been in meetings where's he's given me candid, no BS feedback. Although sometimes it was uncomfortable to hear, ultimately I'm thankful because it made be a better entrepreneur and designer. I prefer honesty from someone who challenges me to be great rather than hypocritical politeness.

Think about all the great founders of our time, from Steve Jobs to Mark Zuckerberg - they all have strong points of view that not everyone can get along with but don't confuse this with being a jerk: http://techcrunch.com/2012/09/09/do-you-need-to-be-a-jerk-to...

[unono]

Vinod Khosla is one of the few good guy VCs out there. He's invested in high tech foods, robots, energy, healthcare, farming. He runs a Google X type fund.

[jedc]

Also, his first two funds were self-financed. He did well enough on those that when he started Khosla Ventures III he was able to raise $1Billion in LP money.

[coleslawfail]

Not true. Yes he takes what appears to be big risks but he hedges by insisting on insane terms. Then it's his and only his company. A good guy he is not. Smart, yes. He does deals no one else will. There's value there but mostly to him and his LPs. The founders are mere employees.

One easy test is the lack of YC companies in his portfolio. Another is the lack of big name founders he created. It's all about Vinod.

[jmtame]

The VC connects wealthy investors to nerds. There are few alternatives. You can self-fund by consulting and by setting aside money for your venture. That doesn't work.

Can you elaborate on this part? Is this a pattern you noticed in many entrepreneurs?

I can recall at least one successful startup that had to contract early on in order to get by. They were in my YC batch and they're now doing pretty well.

[casca]

If you have a pile of money at your disposal, it's not hard to invest in all the good things that Vinod Khosla invests in. Maybe his previous success was down to luck or maybe he's not one of those VCs that "add negative value", but it'll be a good few years before there's any feedback on the quality of his more recent choices.

[npguy]

Given the effort that VCs put in to understand the business, this ratio of value addition is not surprising.

http://fakevalley.com/conmen-arrested-for-cheating-vcs-by-se...

[durandal1]

And 90% of all statistics are made up on the spot.

[paulhauggis]

..except the positive value of the cash you need from a VC to survive.