I can invest in more seed
and speculative ventures
May 31, 2005
Catching Up with Vinod Khosla
Justin Hibbard
Businessweek
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.
