Vinod Khosla: "I'm a Glorified Recruiter"

TL;DR

The biggest limitation on a startup's success is hiring and retaining talent, which is why top investor Vinod Khosla calls himself a "glorified recruiter" who spends more time recruiting than any other activity. He argues an investor's real value is help and advice, not money, and that 90% of VCs add no value while 70% add negative value.

Transcript

So I I could run down the list of all of the achievements and things that you've done, invested in Juniper Nex, you know, incubated Juniper Networks, made Juniper Networks, you're also Daisy Systems, Sun Micros, that's boring. Let's not waste time. That's boring. Yeah. Yeah. Yeah. There's not so a lot of time, so we'll just get into it. Um I was al... Read More

Key Insights

• Hiring talent is the biggest limitation to startup success. Recruiting outside the Bay Area is hard in many areas, but inside it retaining and fighting for talent is hardest because the best people have so many competing offers.
• An investor's real worth is help and advice, not money. The right investor helps founders avoid costly mistakes and recruit people who wouldn't otherwise talk to them, so choosing an investor should not be driven by valuation.
• Khosla says 90% of VCs add no value and 70% actually add negative value. He frames the current environment's focus on money and valuations, rather than on what a startup actually needs to succeed, as troubling.
• Disruption always hurts someone. Doing anything significant means disrupting an incumbent, so resistance and opposition are an inherent part of being an entrepreneur, whether the company is Uber, Airbnb, or a food startup.
• Rate of learning matters more than experience. Experience carries bias, and much of the understanding gained from knowing a business is not useful, so founders should prize original thinking alongside some industry knowledge.
• Founders should seek critique, not agreement. People who agree with you 100% are not being useful, and Khosla deliberately challenges founders on areas like branding to offset the biases he thinks they hold.
• Prepare 'if-that-then' plans rather than one fixed plan. Founders should keep a sustainable burn rate and be able to hit the brakes hard within 90 to 180 days, since money becomes dangerous if you assume it will keep flowing.
• Khosla calls himself a 'glorified recruiter,' spending more time recruiting than any other single activity, working LinkedIn, making calls, sending emails, and personally interviewing even critical engineers, not just senior managers.

Questions & Answers

Q: Why does Vinod Khosla call himself a glorified recruiter?

Khosla says his real job is a glorified recruiter because hiring talent is the biggest limitation to a company's success, so he spends more of his time recruiting than any other single activity. He works on LinkedIn like a recruiter, makes phone calls, sends emails, and personally interviews candidates, including not just senior management but sometimes a critical engineer a company needs, going in himself to help recruit.

Q: What does Vinod Khosla think about the value VCs add to startups?

Khosla states that he does not think 90% of VCs add any value, and that 70% of them actually add negative value. Despite this, he says entrepreneurs should absolutely go to VCs, because the right investor is not about money but about help and advice. A good investor helps founders avoid costly mistakes and gain leverage in hiring people who otherwise would not even talk to them.

Q: How does Vinod Khosla say entrepreneurs should prepare for a possible bubble?

Khosla advises 'if-that-then' planning: rather than building one plan, build multiple plans based on what you see happening to both your own business and external risks like whether money will keep flowing. He says founders should take money and keep plenty of fuel in the tank, but ensure they can get their burn rate to a sustainable level and hit the brakes hard within 90 days, indefinitely being able to brake within 180 days.

Q: Why does Vinod Khosla give entrepreneurs advice he does not personally believe?

Khosla says if he agrees with a founder 100%, he is not adding much value. So when he thinks a founder is missing a perspective, such as a very technical founder focused on development, he will ask about branding even if he does not think it is as important, because the founder is missing that lens. He compares it to sailing: you aim where the wind blows so you end up where you intend, offsetting the founder's biases.

Q: What does Vinod Khosla say about experience versus rate of learning?

Khosla argues that experience in your business is important but experience is also a bias, and much of the understanding people gain from knowing a business is not useful. He recommends having some team members who understand the industry you are entering or attacking, but being driven by original thinking. What matters more than experience is the rate of learning, and founders should actively seek critique rather than agreement.

Q: What is Vinod Khosla's view on disruption and resistance?

Khosla says if you are doing anything disruptive, you are disrupting somebody, and someone gets hurt, because revolutions are hard on people. He notes that every major company, from Uber to Airbnb, has seen resistance, and it is simply part of being an entrepreneur. His advice is to be cognizant of this early, understand it, and position yourself to take on these challenges when doing anything significant and important.

Q: Are the biggest tech companies overvalued according to Vinod Khosla?

Khosla declines to say whether companies are overvalued, calling it a question only writers like and saying that having an opinion creates an illusion of knowing. He says anyone giving a confident answer does not have a clue. Instead, he reframes the useful question as what an entrepreneur should do if it is a bubble versus if it is not, focusing on preparation and sustainable burn rate rather than predictions.

Q: What technology trends does Vinod Khosla find interesting?

Khosla points to many interesting areas including virtual reality, augmented reality, 3D printing, drones, robotics, machine learning, AI, and CRISPR in genomics. He acknowledges that telling which of these are most impactful is very hard to do. He notes that surprises like Uber, Airbnb, and WhatsApp will keep happening with more frequency, which is precisely why entrepreneurs are essential.

Summary

In this video, the speaker discusses various topics related to entrepreneurship, innovation, and technology. He emphasizes the importance of disruption and the challenges faced by entrepreneurs. He also talks about the role of venture capitalists and the advice he gives to startup founders. Additionally, he touches upon the valuation of companies and the significance of having a clear vision. The speaker mentions a wide range of industries, including food, healthcare, financial services, and robotics, and highlights the potential impact of various technologies such as virtual reality, 3D printing, and artificial intelligence.

Questions & Answers

Q: What important principle should entrepreneurs keep in mind when disrupting an industry?

When disrupting an industry, it is crucial to understand that someone will be affected negatively. Revolutions are hard on people, and there will always be opposition to significant and important changes. Entrepreneurs should be prepared to face these challenges and position themselves to navigate through them effectively.

Q: Should entrepreneurs seek investment from venture capitalists (VCs)?

Yes, entrepreneurs can benefit greatly from the right kind of help and advice that VCs can provide. The value of an investor is not just in the money they bring but also in the guidance, support, and access to resources that they offer. Entrepreneurs should focus on finding investors who can provide the necessary expertise and connections to help their startup succeed.

Q: Are companies like Uber and Airbnb overvalued?

It is difficult to determine whether companies are overvalued or not, and such opinions tend to be speculative. The important question for entrepreneurs is not whether the valuation is accurate but how to navigate through uncertain market conditions. Entrepreneurs should ensure that they have enough financial resources and be prepared to adjust their business plans based on the changing landscape.

Q: What is the biggest challenge for portfolio companies in terms of external risks?

Each company faces different challenges, but a common issue among companies is hiring and retaining the right talent. In competitive areas like the Bay Area, attracting top talent can be challenging, and talented individuals often have multiple offers to choose from. Hiring the right people is critical, and entrepreneurs should invest time and effort in recruiting the best team.

Q: What is the best advice the speaker has given to an entrepreneur recently?

The speaker mentions that he often advises entrepreneurs on topics that challenge their existing perspectives. He believes in challenging their thinking and adding elements that compensate for their biases. The best advice he gives varies depending on the entrepreneur and the specific situation, but it typically involves encouraging them to be open to critique and to iterate based on their learnings.

Q: What are the general trends in technology that entrepreneurs and investors should be aware of?

The speaker mentions several emerging technologies that are currently taking center stage, including virtual reality, augmented reality, 3D printing, drones, robotics, machine learning, AI, and genomics. However, he emphasizes that the most impactful trends are hard to predict and often result in surprising successes. Entrepreneurs and investors should focus on their own unique insights and remain adaptable to changing circumstances.

Q: Which area does the speaker believe is currently most interesting in terms of innovation?

The speaker mentions healthcare as an area where there are significant opportunities for innovation. He highlights the potential for improvement in various aspects of healthcare, such as the development of better diagnostic tools, revolutionizing psychiatry through big data, and reinventing how chronic diseases are managed. However, he also mentions that there are interesting advancements in other areas like 3D printing and robotics.

Q: Is genomics the most important aspect of healthcare innovation?

The speaker argues that genomics is just a small part of healthcare innovation. He suggests that other areas like epigenomics, proteomics, and metabolomics are equally, if not more, important. Understanding what is happening in the human body right now is more valuable than just knowing inherited genetic information. He stresses the need to look beyond individual technologies and take a holistic approach to healthcare innovation.

Q: What does the speaker believe is crucial for entrepreneurs to succeed?

The speaker emphasizes the importance of having a clear vision and being committed to it. He advises entrepreneurs to be obstinate about their vision while being flexible in their tactics. Learning from experimentation and iteration is key to success. Luck and timing play a role, but having a strong vision and adapting quickly to market changes are essential for long-term success.

Q: What is an interesting example of the application of robotics and machine vision?

The speaker mentions a company that can read fields using robotics and machine vision. This technology has the potential to eliminate the need for herbicides in agriculture. By being able to read and analyze fields, it may be possible to remove herbicides, which could lead to significant changes in the agriculture industry. This example demonstrates the power of technology to transform an industry by addressing one specific problem.

Takeaways

The speaker highlights the challenges faced by entrepreneurs in disruptive industries and the importance of having a clear vision. He encourages entrepreneurs to seek the right kind of help and advice from investors. The valuation of companies is less important than navigating through uncertain market conditions. Hiring and retaining talent is often a major challenge for startups. In terms of technology trends, he mentions virtual reality, augmented reality, 3D printing, drones, robotics, machine learning, and AI. However, he also discusses interesting opportunities in healthcare, financial services, and other sectors. He advises entrepreneurs to be flexible in their tactics while remaining committed to their vision.

Summary & Key Takeaways

• Vinod Khosla of Khosla Ventures, interviewed at TechCrunch Disrupt, opens with a tense exchange about food startup Hampton Creek, then pivots to a broader principle: any disruptive, important work harms an incumbent, so opposition and resistance are unavoidable parts of entrepreneurship.

• He advises entrepreneurs to still go to VCs, because the right investor provides help, advice, and hiring leverage rather than just money. He criticizes focus on valuations, repeats that 90% of VCs add no value and 70% add negative value, and stresses gene-pool engineering the starting team.

• On talent, hiring is the biggest limit to success, so Khosla acts as a 'glorified recruiter.' He gives founders contrarian advice to offset their biases, values rate of learning and critique over experience, and urges 'if-that-then' planning to survive a possible bubble.