“No board," with only a few hours of exposure to a company every 6 weeks, "is qualified to make any decision” for a business, when it's really the founder who is grinding on the startup every day, insisted Vinod Khosla at the Startup Grind Global Conference. "Money is the least important thing to get at an early stage," said Vinod. Instead, it's advice from those who have done it before and access to their network that has the greatest impact.
The Sun Microsystems and Khosla Ventures founder is known not just as a long-time founder, but also a contrarian. Sitting before 3,000 founders with Startup Grind founder Derek Andersen, he urged founders to "get around people that will disagree with you, push you and let you make the decision" by looking for venture capitalists that will push your team to its limits, and help you examine all the potential risks of your business model.
Watch Vinod Khosla's full fireside chat at Startup Grind, and read our highlights below.
Startup Marriage: Building Founder-Investor Relationships
Most investors will interact with you and your company once a week or once a month potentially for life, said Vinod, himself an investor in dozens of companies through Khosla Ventures' +$1.3 billion in assets under management. Thus, one of the founders' most important decisions is on whom they'd like to bring on as an investing partner.
But the real danger is hidden, suggest Vinod: the more money a startup raises, the more you lock yourself into a trajectory - hiring, scaling, and doubling down on what appears to be working. Instead, with small amounts of money, startups are able to test, discover, and evolve - instead of executing before the model is mature. Vinod tells founders “I'm telling them what not to do, so they can figure what to do."
Once the relationship is set, the founder-investor relationship is an important one - and Vinod knows just how to make the most of it. “I often take positions I don’t believe in just because I think the team is not considering a certain perspective enough," Vinod quips.
On the flip side, having a board at a smaller startup is not always a good thing, he adds. In the beginning most things should be the founders' decision; investors should push them, but founders should always retain the right to disagree.
Considering his own role as an investor, Vinod likes to measure himself with an important question following any meeting with founders: “Did I walk out of the meeting with questions that are really important to their business?” If Vinod eats up a few hours of the founder's time and leaves with just a report, that's time wasted, he admits.
How to Not Need a CEO
Vinod's stated job as an investor is to teach founders to become leaders - "how to not need a CEO," he says. Much like Andreessen Horowitz, Vinod believes startups are always better off with a founder running the company and stewarding the vision - and he has written "If, When, And How To Avoid Hiring A CEO" on just this topic.
The goal of the piece? Helping founders stay in charge of their business, and remain confident against the fear that their investors will fire them. Vinod spends most of his time coaching founders on the fundamentals of growth leadership, training them in the operational skills so that the business doesn't lose the founders' vision and intuition in the shuffle. The rest of his time isn't spent on golfing, but on the founders' hiring and recruiting process.
The belief driving Vinod's attention to people is the same belief that ignores the value of business plans, calling them useless: the founder and investor believes that the true value lies in the hires - especially engineers - who impact your company's decisions and its eventual future.
A Founder's Work is Never Done
Derek and Vinod ended on a personal question: despite the fact that Vinod appears to have "made it," Derek points out that it "seems as though you have a chip on your shoulder, like you still need to keep proving yourself.” Why is that?
Vinod says his drive comes from within, unlike the majority, who are externally driven by doing what is expected of them. Often times, Vinod says, “the more success you have in the past, the less you examine the assumptions about yourself," - and as the always-learning businessman, he isn't one to get intellectually lazy, having dived into investing in both energy and health tech in the last decade, and learning on the fly.
Not driven by awards or history, what keeps Vinod driving hard as a founder is the possibility of startups that can change the world - and especially ones that will do it for the better. Now philanthropically involved, Vinod is spending more time and energy on social impact - and the Khosla Ventures Impact fund follows.