Vinod grew up dreaming of being an entrepreneur, despite growing up in an Indian Army household with no business or technology connections. Since the age of 16, when he first heard about Intel starting up, he dreamt of starting his own technology company.
Upon graduating with a bachelor’s in electrical engineering from the Indian Institute of Technology, Delhi, Vinod failed, at age 20, to start a soy milk company to service the many people in India who did not have refrigerators. He came instead to the U.S. and got his master’s in biomedical engineering at Carnegie-Mellon University. His start-up dreams attracted him to Silicon Valley, where he got an MBA at Stanford University in 1980.
Upon graduation he was one of the three founders of Daisy Systems, which was the first significant computer-aided design system for electrical engineers. The company went on to achieve significant revenue, profits, and an IPO, but Khosla, driven by the frustration of having to design the computer hardware on which the Daisy software needed to be built, started the standards-based Sun Microsystems in 1982 to build workstations for software developers. At Sun he pioneered “open systems” and RISC processors. Sun was funded by longtime friend and board member John Doerr of Kleiner Perkins Caufield & Byers.
In 1986 Vinod switched sides and 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 microprocessor to have significant success against Intel, sold to AMD for 28 percent of AMD), incubated the idea and business plan for Juniper to take on Cisco’s dominance of the router market, formulated the very early advertising-based search strategy for Excite, and transformed the moribund telecommunications business and its archaic SONET implementations with Cerent (sold to Cisco for $7B).
He helped in creating value, having fun, succeeding, failing (remember Dynabook?), and driving impact in partnership with entrepreneurs and the partners at KPCB. In 2004, Vinod, driven by the need for flexibility to accommodate four teenaged children and a desire to be more experimental, to fund sometimes imprudent “science experiments,” and to take on both for-profit and for “social impact” ventures, formed Khosla Ventures, funded entirely with family funds. His goals remain the same: work and learn from fun and knowledgeable entrepreneurs, build impactful companies through the leverage of innovation, and spend time in a partnership that makes a difference.
Vinod joined the 2016 Global Conference in front of 3000 fellow founders and investors. Watch his whole session with Startup Grind founder & CEO Derek Andersen.
Vinod Khosla is a friend and frequent Startup Grind guest, joining us at Startup Grind Silicon Valley and headlining the Startup Grind Global Conference in 2015.
Watch his full, personal Silicon Valley talk below, and catch his Global Conference interview at the end.
Let’s start with Google: what was the first time you met Larry & Sergey like?
It was long time ago. It's actually a very funny story. I met Larry Sergey when they were in the Computer Science Department at Stanford, and at that time their work wasn't considered that important, but I thought what they were doing was really, really important. I was on the board of a research company called Excite. And I talked to Larry Sergey about joining Excite and doing their work there and they had the Google engine going and they said “Well, we’ll sell this to Excite,” and I went back to Excite and I said “Hey, got this great opportunity to buy Google.”
Had they heard of them?
They'd not heard of them but they've heard about it from me enough times. There is some disagreement on the price so I went back to Larry Sergey to try to agree on a price. I think they agreed to $100,000. Sergey now claims it was a million dollars but I know it wasn't, but I'd be happy to buy Google for a million dollars. But Excite didn't want to buy and I went back and forth about five times. Because Excite said “We're done we definitely don't want to buy it.” And that was my first real exposure to Larry Sergey. The good news is if we had in fact had Excite buy Google, we wouldn’t be where we are now: we wouldn't have invested in Google, and it turned out good for us and for Google. Not too good for Excite - in fact Joe Krause, the founder of Excite, then started a company that Google bought so he now works at Google.
On Learning from Failure
You talk openly about failure. Your phrase over the last 10-15 years has been, “my willingness to fail gives me the ability to succeed.” Can you explain this to us?
How many people in here are entrepreneurs or want to be entrepreneurs soon? Great, no wonder you are at Startup Grind. I think everybody else should just go get a life. I'm one of those people who religiously believe the only useful life to live is to be an entrepreneur among professional jobs, because obviously you can do other things like Madonna does or Lady Gaga does, there’s other things to do. But I'm a religious believer - I never wanted to do anything but be an entrepreneur since I was growing up, probably since I was sixteen. I never considered any other job, I never did any other job and after doing it a couple of times I switched from doing start ups to mentoring entrepreneurs, so I consider my job is mostly playing coach.
I want to answer your question on failure and give an example. How many people here know a company called Sun Microsystems? How many people here know a company called the Data Dump? Not a single hand.
My point is the following, McNeiley and I started Sun - everybody knows the company. We also three months before we started a company called the Data Dump. That failed. Nobody remembers failures. In fact my point is success matters. Failure is inconsequential - yet what I hear most people do is not do things because they are afraid of failure.
People's fear of failure restricts them from doing most of what they can do. I like to say most people are limited by what they think they can do not by what they can do.
I long ago adapted and I was very lucky I graduated from Stanford Business School and frankly I had nothing - so when I met my first VC who was willing to give me money I said this is a great deal. If we win, we win. If we lose, you lose because the only thing I could possibly lose was my student loans. I didn't have anything else. Now that was very liberating and as soon as you accept the willingness to fail you can start to actually do things that matter. If you don't accept that if you're afraid of how it might hurt or what might fail, you're not going to try the things that are material.
The second part of that statement is probably even more important to me personally. Maybe half the time somebody should ask me about what are all the reasons to do a startup, because not obvious. There are many, many different reasons but I'd like to say I don't mind failing - but if I succeed it better be consequential. What I hear in general about the venture capital business is they reduce risk to the point where the consequences of success are almost inconsequential. Think about that. You will always reduce your risk in your life whatever the next step is, is inconsequential if you succeed.
I'd rather do it the other way around. Hey, if I'm failing with somebody else's money some VC's money I don't mind failing but if it succeeds, I’m going to make a real impact. No, anybody argue with this logic? So, it's important to put things in perspective. People always talk about the risk of a startup. How many good people you know who've gone without a job for more than six weeks and still can value?
That's the consequences of failure and the consequences of success or you have made a real impact, make a real difference, make a lot of money, I know what's wrong with that straight up. So, I always encourage people to do this.
There's also another reason I think entrepreneurial life is important. Don't get me wrong entrepreneurial life isn't all royalty, it's really hard, failure feels pretty bad, you’re hanging on by your knuckles, it's tough. It's a life in which I like to say it's really a roller coaster where the highs are really high and the lows are really low. It can be lonely; it can be difficult; been through all of that, been through don't know how I'll meet next month's payroll, to “Whoa, I'm the smartest person in the world because everything is going right.” I've seen both emotions all the time in the same start up.
So, despite it being a hard life, an entrepreneurial life isn’t easy, but it is a lot of fun. You're always stretching yourself, you're always learning something new, you're always pushing the boundaries of what other people think as reasonable. And I think most entrepreneurs are pretty unreasonable because if they're only doing reasonable things somebody else could have done them.
And I'll cite two of my favorite quotes on this; George Bernard Shaw said, "Human progress depends on unreasonable man." He should have said man or woman but I'm being reproducing it with fidelity.
Martin Luther King said something similar, he said, "Human progress depends on the socially maladjusted." That's what entrepreneurs are, that's why they do unreasonable things and unreasonable things.
You know if you’re doing unreasonable things you're stretching the bounds. If you're doing reasonable things you're not stretching the bounds, you're not really taking risk, you're not going to do something different. I like to say not all hard things are valuable but most valuable things are hard.
Is it easier to talk about failure once you've had so much success? Did you have this when you were like me or somebody else in this room?
I don't know if I'd say I had the same perspective on failure. But I sure as hell had the perspective that I only do entrepreneurial things and if one fails I'll do the next and then if that fails I do another. I was totally committed from when I was sixteen to doing entrepreneurial things and only entrepreneurial things, that's why I made my way to Silicon Valley.
So, now I'll give you a tiny bit of neuroscience; the genetic disposition towards risk, where the risk doesn't feel as risky. I sometimes call it naive optimism; sort of self-confidence that you're more likely to succeed than fail and I suspect I have that gene. By the way, it's the same gene as what's sometimes called the God gene, the sort of tendency of people to just believe in religion or God it turns out it's the same gene, you can Google the God gene, it's entrepreneurs believing in their plan, having this naive overconfidence.
It turns out there’s a good book I recommend that talks about this called, On Being Certain When You're Wrong. It's written by a neuroscientist, good science, but the idea you are so certain of things, even though it is actually wrong. Why do you believe you're right? So I suspect I had that gene, I suspect a lot of entrepreneurs do, but it's not as scary because you're a little more naive than you should be.
To your question earlier, what are the reasons to do a startup? Why should I be an entrepreneur?
Tell me a reason why not to be an entrepreneur! So you want to work at a big company, at a boring job, where the most risk they'll take is the next incremental thing? You know there was a time when people thought it was silly for Google to do Android. It wasn't very long ago. People thought it was silly to spend a hundred, two hundred million dollars a year and lose that kind of money in a public company because, think of what it could do. People still think it's silly to do driverless cars.
So Google is an unusual company and I'm really glad for Larry and Sergey being able to take real risks which frankly from their perspective aren’t huge risks. There are all risks that are that are risks with a few hundred million dollars where the consequences of failure are inconsequential but the consequences of success are very large and so I really admire Larry and Sergey for that.
Excitement comes from taking risks and having the courage to take that risk. Let me tell you one critical thing about courage. Courage is easy to talk about, there is no courage if you're not scared; you have to be paranoid, you have to be scared. The notion of courage and being scared shitless goes together. And that's where excitement comes from - it's those dips in the roller coasters, the highs the lows, that's what makes life more fun. I mean, look in some sense I think people self-select to do boring jobs because that's the only thing they can do if they could be an entrepreneur they would be, like all of you. I know I'm pretty big headed and biased.
When do you plan to retire?
Look, it’s such a fun job. Why would you do anything else, like sitting on a beach? Doing what? I mean I love the beach, I go there all the time but you know I'll go there and read a book on machine learning on optical networking, I'm happy doing that. Learning is a very fun part of life and if you're in the entrepreneurial company you learn faster than any other situation.
I was talking and answering your question on age. I think the older people get, the more experience they get, the less likely they are to think outside the box. So, I think too much experience is a bad thing in thinking out of the box. But, and this is the important part, we have a company here full of young people designing a new kind of entity and I keep saying to them you got to get some people with a lot of experience in building engines.
Now, experience is really a set of biases. Whenever you are doing something the more experience you bring, the more you know what works and what doesn't. And you should think of them as biases. Some of those biases are actually very good and avoid major mistakes. So, it's important to have experience on your team which means older people generally. You won't find any 16 year old with 20 years of experience in any industry. So, really important to have that experience, but you have to have people who don't yet know what can’t be done, mix that, and the creative tension between people with a lot of experience and people with a lot of naiveté of what's not possible is what results in the best start ups.
So, whenever you're engineering the gene pool of a company, make some really young people with some really experienced people or older people that's a really good recipe. It's really important to engineer that kind of environment and that will increase the probability of success as long as you don't treat the young people as too junior to listen to. If experienced people, older people and really young people with naiveté are equal and it's a battle of ideas and logic then you will have high probability of success. I engineer every gene pool I could with that mix of old and young, to increase my probability of success. Because, really what startups are, are about increasing the probability of success in whatever you are trying to do.
It doesn’t matter how young you are or how old you are, your ideas matter, your contributions matter, not seniority by view of age, and that’s really what am talking about, age. And it’s important to realize, that the more experience you have, the more biases you have, but more traditional you become, in what works and what doesn’t work. Some of that is right but not all of it is right.
It’s got nothing to do with being old or young. The older you get, the more responsibilities you have, you have kids, you have a mortgage, it becomes harder to take larger risks, and to try the attempts. So, you know, look it’s easy for Mark Zuckerberg to chuck higher at college and start something, like he can always go back. If you’re 42 and you have 3 kids and they’re in college, then it’s much harder to take some risk, so that’s just the reality.
On Building Great Startup Teams
I want to ask you building teams. It’s something you’re famous for, and you have your quote, “Building great teams is what great founders do.” Tell us about that.
So I fundamentally have a belief system that a company becomes the people it hires. Business plans are largely irrelevant. A company almost always becomes the people it hires early. By the time you have hired ten or fifteen people, it’s too late to change the gene pool.
Two things happen:
First, the team you have interviews the new candidates, and they want to hire in their own image. It’s very hard for them to break away from that.
The second thing is, the people who want to come work for you judge your company by who is interviewing them. And so it becomes very hard to change the trajectory of a company after you get to a certain critical mass, and really great people outside say “Is this the team I want to join? Are they as good as me?” And so it’s very hard to change the gene pool significantly. And because of this, as well a sort of cultural norms get established, it’s very hard to change the trajectory of a company.
And that’s why I always say a company becomes the people it hires, and for really great founders, the place I would spend time is hiring people much better than me, who are real stretches to go after. People would say “Oh I would never get that guy. That’s a 5% chance.” And I say “That’s a 5% chance of changing the trajectory of your company. Now isn’t that worth a few hours of your time?”
So nothing is too far a stretch for me, it never was. I mean look, if you look at when we started Sun, I was in my 20s. I recruited Andy Bechtolsheim. Here’s a funny story, he actually tried to convince me to get a license to the Sun Technology for $10,000, and I said no, I want the goose that laid the golden egg; I don’t want the golden egg. And I convinced him to drop his PhD. He was probably six to nine months away from finishing it. I sold my heart out until I convinced him to join me. Then we went after Bill Joy, and we did the same thing, we got him to drop his PhD. He was at Berkeley, he could have had any job he wanted, and we sold out, and then we hired Eric Schmidt at Sun early.
I think after the first 15 people we hired, there were probably 10 companies who started with more than a billion dollars in market cap. I used to say I love collecting great talents, people smarter than me. And once we have them, there doesn’t have to be a reason to have them, just that they are really smart, and we collect them. And I saw that approach in the early days of Google. Larry and Sergey definitely had that approach, of hiring really smart people. Yeah, I don’t know how many of you remember the billboards, one of them said, “If you could solve this puzzle, apply to Google.” I think that’s key, and I am never satisfied by the quality of my team, ever. And it’s probably the one thing people get bugged at me for, for pushing them too hard to even keep stretching the quality of the teams, to the point where I am truly irritating.
When a company is small - one or two guys in a garage, or in a little office somewhere - with no funding, is it better to say that I will absolutely set the bar at the very top of that 5% talent or I will not hire anyone and put the product on hold, or admit I can’t convince anyone that’s great, so I am just going to push forward my vision and I will get to those great people later?
Startups are always about pragmatic trade-offs, but by and large I would wait to hire great people than to hire mediocre people, because it’s going to be hard to change their trajectory later. I go further with fewer people, than hire mediocre people who will then have to interview the really good people, who will not want to come work for those mediocre people.
Now that’s one of the really important ways having a great venture capital investor who can help you recruit makes a difference. So most companies we invest in, if they have two people, I will probably personally interview the engineers among their first 5 hires and I mainly talking about turning them down, because they are not good enough. I can give you plenty of examples. And that then completely changes the vision of the company and it goes off in a different much better, much more attractive trajectory. I probably spend 40-50% of my time today interviewing candidates, even down to critical engineers in each of these companies.
Whenever I see a good person, first thing I ask them is if they are willing to consider a job. Mostly they are not looking but I try and convince them working in a startup.
People are always surprised about how much of my time I spend recruiting, and people would say, ok maybe you're looking for VP's in marketing or CEO's, why the number of, you know, if an area is hard, the number of engineers I have interviewed in the last month probably more than any other single class of.
So when you get great candidates in a room, what do you say to them to convince them to join this company?
First, I never give up. I keep calling them. Today there was a company that lost a person who is coming to Google instead. I said ok, you tell me 30 days after he starts, and I am going to call him again hoping he doesn’t like this job. Even after he started his new job, I am maniacal about it. I have been turned down by some guys four, five times before I get ‘em.
Yeah, but I bet they always take your call.
They always take the call, that privilege I do have.
So what else do you say?
Every time it’s different, and if you're worried about risk, the fact is, there’s no risk, if you’re really good in that portfolio. If one company doesn’t work, we got 20 others you can go join. So what’s the risk? In any job you take with us you have equity upside. It’s a no brainer.
So where, which company you want me to go work for?
Anyone have a great resume you want to send me, vk@khoslaventures.com, I’m always recruiting, and I do look at every resume myself. I may send it to somebody else to connect with you, but I always look at it myself first, so I am always recruiting.
What do you do to qualify these engineers? What do you ask them?
Well, it depends on the position. Most entrepreneurs who are not sophisticated don’t think of the person you are hiring is the person who will hire and influence the next 50 engineers you hire. So I would much rather hire great recruiters than somebody who is just a good engineer, especially if it’s early. If it’s later in a company, you might just want a good engineer. Most people ignore who is a great architect as opposed to who is a good engineer.
Architecture is often underrated in starting companies, because you want to put something together and get a website up. Important, but not the most important thing. Other times, if you just looking, your team is strong in area ‘a’ but weak in ‘b’, so you looking for ‘b’. So every time it’s different. If your team is really young, you want to add somebody with a lot of experience. If it’s really experienced, you want to add somebody with a lot of great new ideas.
So, we have two engine companies... My first question to one of the CEO's is who have you hired who has a PhD under the age of 30? Every single time that’s the first question. There is another engine company I always ask, who have you hired who has more than fifteen, twenty years of experience?
Because one team is biased one way or the other one is hired, most people like to hire in their image. So where ever you start tends to be self-perpetuating, and are almost always pushed opposing point of view. So it’s not the same answer for each company.
When I was very young, my first choice was to be an architect, and after I started Sun, I actually hoped to be a furniture designer and I actually spent some time trying to be a furniture designer. So if you come to our office, every single piece of furniture I personally designed including the drawing details and all that kind of stuff.
So I am an extreme supporter of design’s role in technology. Anybody in design knows Dave Kelly, he started the design school at Stanford, he started IDEO. In my very first startup before Sun, startup called Daisy Systems, I may have been the first technology startup to hire a designer. I hired Dave Kelly in 1980, after a huge fight with my co-founders who didn’t want to waste money on design.
My point is the following; design is really not pretty paints, it’s a way of painting. It’s a way of making technology useful. It’s a way of fitting into the problem in a seamless way. And I think all that is really important, and it’s really, really heartening for me to see design play a much bigger role in the Valley. You don’t have to be an engineer to do a really great job. But if you’re going to play a big role, then design aesthetic which I really equate to empathy, if you’re a psychologist, and to motoneurons if you are a neuroscientist, is absolutely essential to making products much, much better. And Instagram’s a great example.
There are very few technology startups I do where I wouldn’t add a design person. And design doesn’t apply just to how things look, but you know the CEO of IDEO gives a talk about design thinking. How do you design an organization changes the product you produce. That’s design thinking applied to organizational design, so it changes the product you design. It changes the biases in the product, so I’m a huge fan.
Once you’ve got a little bit of revenue, how do you scale your startup up? How would you break through sort of this glass ceiling and actually start making the consequential success that you talk about?
Ok, so let me give you an analogy on startups. Some people think too big, some people think too small. The right strategy for entrepreneurs is what I call think big, act small. If you imagine building a Google on day one, and only want to build the company with $100 million, you’re likely going to fail.
On the other hand, if you’re thinking really small, you’re going to do things that perpetuate a very small company. One of my other favorite sayings, I have all these favorite sayings about entrepreneurship, is “There is a massive difference, massive difference between a zero million dollar company and a zero billion dollar company.”
It's a difference in attitude, it's a difference in who are the first five or ten people you hire, it's a difference in how you set your goals. It’s whether you're trying to ascend Mount Everest or not in your thinking. But anybody who’s tried to ascend Mount Everest and I haven't, but I can tell you that this is true at least in the startups of the Mount Everest of the startup world; you can't get there without base camp.
You have to have a place where you can build a stable business. Most of the interesting things you can think about either getting a certain level of traction, if it’s an internet company first, before they get to the really huge impacts. It's 30 million in revenue or 40 million in revenue where you can sort of say, okay if I need to, or if bad things happen, I can be stable as a business, that's base camp. But the thing about base camp is the people who haven't thought big while acting small to get to 10, 20, 30 million in revenue, is they set up base camp too far away from the peak.
I like to say it's important to think of base camp that you're going to set up that's a smaller business, but that's a stable business where you get some level of stability and comfort. But if it's not close enough to your larger vision, your big thinking and you don't have the team at base camp that's going to help you climb Mount Everest, then base camp doesn't help you scope out the path to be really successful.
So, if you think about that analogy it's a good way to look at this straight up, think big, act small to get to base camp, set up base camp where you actually have visibility and learning about how to get to the peak to how to scope out your paths.
On Chasing Big Ideas
From the Audience: I'm a master student at CMU, and I'm interested in starting up, but I feel negatively about most ideas that I think of or my friends discuss with me. Should I wait for a perfect idea before starting up or should I just go for it and change as I go?
That's a great question, since I'm a Masters from CMU too. Too many people decide they want to do a startup and in fact force an idea. When you force an idea, you’ll get into rationalizing why an idea is good and that's very dangerous. If you say I'm going to do a startup, and force an idea, you’ll dramatically reduce the probability of success, so my clear answer is wait until you get good ideas.
Now, there are a lot of things that you can do in the meantime so don't start up something just because you want to start something - wait until there is something that you're passionate about. Why? Because if you're not passionate about it the first time you run into problems you’ll give it up and most startups need this religious believe in what you're doing so when you run into a wall, you keep banging your head against it. And any entrepreneur here will recognize this, you keep banging your head, keep trying new ways, trying to stay afloat, trying to buy time so you get lucky somehow.
I sometimes say one of the goals of a startup is to survive long enough to get lucky, because luck always impacts how successful you can be. But you can improve your skills, so when you have that great idea your probability of being successful goes up, your probability of your execution being better goes up. So you might work at other stuff so you can learn and that's what I would recommend. Anyway, let's keep going with the questions, I was going to wander off in a new direction.
From the Audience: I have an opposite problem: eight to ten ideas which I believe are very good ideas. How do you pick out the one that you want to do?
My advice is very contrary to what most people would give you. I love analogies so I have an analogy for that.
So think you’re at one of these British roundabouts with six roads going up in six different directions. Once you take a road and if you take VC money, they'll force you to take a road, because they have to have a plan that you execute on - and I always get into arguments with VCs on this; they want to gel things too quickly and have an execution plan too early and I'm always tolerant of exploration. I like to say keep going in circles around this imaginary roundabout trying to scope out what is there in each of these paths, even do a small forex, trying things in that area, seeing what works.
When you have lots of good ideas you should pick the best one and the best way to pick the best one is take your time exploring, trying some experiments, talking to people even prototyping six different ideas and once you decide which one feels better. At some point you will not have perfect information, but you will have a good sense of “I'm not going to get any more information so I should just decide.”
When you reach a point where you have enough scoping of the road from where you are from this roundabout you're going around in circles, then take a path and then commit to it and to stay with it, so that's what I would recommend as a way to approach. I mean these are real practical things that startups and startup founders face and something anybody in a big company who is academic will never know, will never feel and never be able to intuitively explain to you.
This is why I also don't like VCs who've never done a startup themselves, it just really bothers me, because I always ask them what you have done to earn the right to advise an entrepreneur? And most of them have done nothing but get a business degree, get an MBA. Sorry it doesn't qualify you for anything, in fact, it probably disqualifies you from advising entrepreneurs.
This is really serious business. An entrepreneur’s life is at stake, they actually don't know who to ask for advice; no matter who you ask everybody has your advice, your dad will give you advice, your friends will give you advice and one of the hardest things an entrepreneur does is deciding whose judgment to trust on what topic and the same person isn't good for everything. And the common mistake I've seen is somebody said, “Oh, he's the VP of marketing at some company, so I'll take his advice in marketing." Well, he may be a VP of marketing, how good a VP of marketing is he? How much has he dealt with startups environments? Don't be fooled by somebody's title, try and ask the question to judge how deeply thinking, how insightful they are before you trust their judgments. So, I know good advice to say how you trust somebody's judgment, but be very discriminating about whose advice you take on what topic and for each topic there is probably a different person whose advice you should be taking. That may be the single most important piece of advice I give you today other than this idea of putting together awesome teams and engineering the gene pool of the company.
Along those lines there is a related topic of who do you hire? If you're an engineer you have no idea what a marketing function involves, who is a good VP of marketing? Who is a good CFO? Who is a good VP of operations? For those of you, I have two papers I highly recommend I wrote them just for.. it's on our website. One is called, “Engineering the gene pool of a company” because I'm really big on this idea of engineering a gene pool. If we have time I'll talk more about it. The other is, “How do you judge a person in a position you're not qualified to interview for?”
Now, if you're an engineer at Google and you're starting a company you have no idea what a VP of marketing in some esoteric area like recruiting looks like. This paper on how to interview is really important for entrepreneurs; it sort of give you a way to avoid huge mistakes in hiring.
For those 20-somethings or 30-somethings who have not yet been successful and are trying to figure out what to build or how to grow it, what do I need to do to have these kinds of innovative ideas? How do I look ahead into the future?
That's a great question, here is how I would recommend; first, don't look at any research reports, completely worthless, don't talk to anybody from McKinsey, no experts. If you have a tendency to believe experts read a book called, Future Battle - this is a professor at UC Berkeley who just studied expert opinions. He took 250 of the most recognized experts in many different fields; he tracked all their expert opinions, predictions for 20 years across 28,000 individual forecasts; the average accuracy of these looking back retrospectively after 20 years was about the same as God coined monkeys.
This is serious statistically valid research, so the idea that you can predict the future is a silly one especially in technology where things change rapidly. No matter how good a job you do you won't always get it right, so be prepared to fail. You can fail because you pick the wrong market, you can fail because you had the wrong execution in the right market. There's plenty of people like Facebook who also built social networks and didn't succeed; you can fail because you're just plain unlucky.
I like to say for a typical founder, there's probably ten major reasons your company can succeed or fail you probably control four of them. Three of them are controlled by your competitors and three of them are controlled by pure chance, if the right thing happened in the world of the right time. So don't bash yourself too much if you fail keep your chin up and keep going or try something new. Having said that, the right approach and Alan Hay said a long time ago, “The best way to predict the future is to invent it.” I'm a complete believer in that.
Almost all experts extrapolate the past to predict the future and they are dead wrong. Karl Marx an unlikely person to quote said, “When the train of history hits a curve then electrodes fall off” and I think that's exactly right. But think about the following, the only time predicting the future matters is when the future is going to be different than the past.
I can with probably 75% accuracy say tomorrow’s weather is going to be just like today’s; that's probably the safest weather prediction algorithm, but it's largely irrelevant, the only time it matters is if you think it's going to rain tomorrow. So change is the only time forecasting matters and it's the only time experts don't work. So what do you do? Look at spaces where you think change is possible and jump in and try things and take an evolutionary approach, jump into the right space - that takes good instinct, see where ships are large and where the ships have large economic consequences.
What happens if the PC doesn't matter? You know we are in the post-PC era, taking large risks in those areas makes a lot of sense and then being first to jump in, so you make the mistakes that have to be made first and learn from them and adjust rapidly is what matters. I like to say I probably made more mistakes than anybody I've met in the Valley, because I've been trying new things for thirty years and so I have probably failed more often than anybody here and more often than almost anybody I've met. But I'm never afraid of that but I will also say because of that I've learnt more than anybody else. I still make all sorts of stupid mistake and I make them every day and sometimes I look back and say, “Oh, what was I thinking?” And that happens to everybody, but the key is to be smart about admitting when things aren't working, seeing what isn't working, why isn't it working and iterate and it will all be in the past. So I believe most good business plans are evolved and not planned, I call it flexi planning, I call it if-then planning I have lots of name for it, I try and help all our companies do that.
This is one of the reasons I say I've never called myself a venture capitalist and never will. I am a mentor and coach, but I am really a venturing assistant so if you look on our websites when we started coastal venture the tagline says “Venture assistants.” It's not about being on boards I almost never like to go on boards, it's not about governance it's about assisting entrepreneurs making these hard talks.
Just before coming here I spent two hours with an entrepreneur and he said, "You know, really tough decision, should I take my burn rate from 200 K to 500 K? Really hard decision.” I said here's the risk, if you don't, here's the risk if you do. Here’s how to think about it, let's talk again next week after you've thought about the risks of doing this, the opportunities of doing it, the risks of not doing it and the opportunities if you don't do it and let's make a decision. That just happened.
So this idea of venture assistants is what matters, it's what I do, that's why I never call myself a venture capitalist I say I'm a venture assistant and I think the fundamental notion of screwing up enough times so you earned the right to advise entrepreneurs is absolutely key to being good advisors to entrepreneurs.
Get more of Vinod at last year's Startup Grind Global Conference, and catch his third appearance at SG Global Conference 2016.