Not one to shy away from bold and at times controversial statements, heavyweight investor Vinod Khosla took the stage at Disrupt this week and compared green tech innovation in Silicon Valley to Microsoft’s IE9 browser launch.
No offense to Microsoft, but in this analogy Khosla was criticizing the Valley for its deficiency in game-changing technologies and its focus on incremental advances. We got the founder of Khosla Ventures and former CEO of Sun Microsystems, to defend his statements on TechCrunch TV.
Khosla had some interesting thoughts to share on the current state of green tech investment and entrepreneurship. According to Khosla, too many companies who want to think big are doomed to remain small because they pick the wrong investors, as he says, “Any investor who looks at exit strategies, or multiples of investment or even does an IRR calculation, a rate of return calculation, probably is the wrong partner for you.” These days, Khosla is used to dispensing advice to entrepreneurs— his own daughter is in the process of securing angel investors for her own startup (no, dad does not plan to bankroll the operation). His best advice for his daughter?
“I think the single, most important fact about doing a startup is being clear about your vision and not let it get distorted by what pundits and experts tell you. But the second most important thing is finding the right team, and that’s really, really hard, because people tend to look for people around them…You know, I was relentless… really spent well over 50% of my time recruiting, and I encourage all entrepreneurs to try and do that.”
On his specific investments, Khosla was particularly bullish on Eco-Motors and its advancements on an opposing pistons engine. This summer, Khosla and Microsoft founder Bill Gates, invested another $23.5 million into the Troy-based Eco-Motors (his second round of investment). According to reports, Khosla Ventures owns nearly 50% of the company.
Below are some key excerpts:
On Entrepreneurship And Investment
VC should be a co-founder, who thinks big
VK: Your job [(as an investor)] and this is really, really important but misunderstood about startups, startups aren’t big or small, they’re made big or small. So an entrepreneur picking the right partner will more likely end up as a big company, than if they pick the wrong partner who wants a 3X return on money. Any investor who looks at exit strategies, or multiples of investment or even does an IRR calculation, a rate of return calculation, probably is the wrong partner for you.
Incremental Innnovation Vs. Real Disruption
VK: I’ll tell you, ten times more improvement is possible in the engine, than most people think is true or in your standard car… We’re far away from taking enough large shots at it. One of our companies, Eco-Motors is dramatically redesigning the engine, they’re building what’s called an opposing piston engine, most engines today are like V8s… These opposing piston engines were used in the 1920s and discontinued for a reason but those reasons are no longer true but people don’t go back and reexamine the assumptions again. This needs to happen in every area, whether its solar cells, even looking at coal, cleaning up coal or mining or air conditioning, or lighting, almost everything we do…
Question: Going back to those engines, you talked about them with such enthusiasm, you clearly see that as being an important part of your portfolio, what pieces need to align to help this technology take-off?
VK: I don’t think a lot needs to align, we’ll build a great engine, we’ll first find some specialty markets, so we make, so instead of putting it in the car on day one, because those companies are conservative, we’ll make generators out of it, gensets out of it. That’s an easier market to get into, it’s less cost sensitive, but efficiency and weight still count… as soon as we prove it there, we’ll be in autos, already we’re talking to auto and truck makers.”
Best Advice For Entrepreneurs
VK: I think the single, most important fact about doing a startup is being clear about your vision and not let it get distorted by what pundits and experts tell you. But the second most important thing is finding the right team, and that’s really, really hard, because people tend to look for people around them and so it’s the person who they happen to know as opposed to the best possible person they can find…You know, I was relentless, took a lot of time, I used to say when I was starting my first company, I was more of a glorified recruiter than a CEO or a founder. I really spent well over 50% of my time recruiting, and I encourage all entrepreneurs to try and do that.
Vinod Khosla was a co-founder of Daisy Systems and founding Chief Executive Officer of Sun Microsystems, where he pioneered open systems and commercial RISC processors. Sun was funded by longtime friend and board member John Doerr of Kleiner Perkins Caufield & Byers. In 1986 Vinod joined Kleiner Perkins, where he was and continues to be a general partner of KPCB funds through KP X. Through the years there, with other partners, he took on Intel’s monopoly with Nexgen/AMD (the only...
Khosla Ventures is a venture capital firm started in 2004 by Vinod Khosla, Co-Founder of Sun Microsystems. The firm focuses on environmentally friendly technologies in addition to the traditional venture areas such as the Internet, computing, mobile and silicon technology arenas.