The legendary mentor Vinod Khosla criticized accelerators like Y Combinator who produce startups with overly slick pitches that he says garner “so much hype that they get valuations that no one who will help the team are going to pay.”
During his TechCrunch Disrupt talk, Khosla explained that the key role of early investors is not funding, but personal attention and guidance. But generating buzz too early can inflate a startup’s market cap and make them a less lucrative investment of time and money for the top-tier advisors they need. That leads to critical missteps like poor hiring decisions that can doom a startup.
Khosla wasn’t trying to defame Y Combinator, noting “There’s plenty of smart teams out of YC that we fund.” But he stressed that heavily prepared presentations can backfire. “Too much of the polish of the five slide deck” distracts a team and can repel mentors like him.
For a startup that believes it has a great idea, the next thing they need is great execution, and that requires an all-star team and savvy strategy — elements that the right angel or VC firm can offer. A pumped-up valuation might help the founders retain more equity, but that doesn’t matter without success.
If your idea is risky, but with a huge upside that isn’t valued too high, you can gain the support of people like Vinod and his Khosla Ventures. ”I spend most of my time recruiting for my companies. Once you hire the wrong people… it’s really hard to get a company back on track.”
So startups are welcome to maximize their valuations and buddy up with whoever accepts their terms, but Khosla doesn’t think that’s the right plan. “My job is not to be an entrepreneur’s friend. It’s to drive them to do more and achieve greater heights. That’s why I never call myself a VC. I call myself a venture assistant.”
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...