Vinod Khosla, entrepreneur, investor, technologist and founder
of Khosla Ventures, talks about how he is breaking the mold for venture capital
investing, what makes an entrepreneur successful, harnessing the network effect
and the power behind storytelling.
GUEST: Vinod Khosla, Khosla Ventures
HOST: Steven Krein, StartUp Health
LOCATION: StartUp Health
Festival, San Francisco, CA
IN THIS
EPISODE:
Breaking the Mold for
Venture Capital Investing
What Makes a Successful
Entrepreneur
The Power of Storytelling
Key Takeaways in This StartUp Health NOW! Episode
Breaking the Mold for
Venture Capital Investing
[0:43] Steven Krein: You are not a typical venture capitalist.
In fact, as an entrepreneur for probably more years than you were a venture
capitalist, you've transformed industries. I think you, even as an investor,
are not investing in the typical things that investors invest in. Without a
doubt, there is no underlying mold that you're following.
[1:44] Vinod Khosla: I feel like I'm more of a troll than an
investor, because I like changing things, whatever occurs, you try and disrupt
it, be a little painful, and it's fun.
[1:57] Vinod: To me, there are two kinds of healthcare
investors. There are investors who the first question they ask is, "What
is billing codes," or, "How does this fit into today's systems?"
That may be interesting to a lot of people, and there's a lot of money floating
around, a lot of inefficiency, and a lot of money can be made. Frankly, it's
completely uninteresting to me. I'm very interested in inventing new stuff,
finding new ways to treat things, approaching things where it changes practice
very radically. I think the time is exactly right.
[2:43] Vinod: First, one thing people forget is the US is a very
small part of the global healthcare system. I love taking a global perspective.
Also, it's very hard to change any system from the inside. If you look at who
changed automobiles, it wasn't General Motors, it was Tesla and maybe Google
with driverless cars.
[3:31] Vinod: If you look at who changed media, it wasn't NBC or
CBS, it was YouTube and things like that. If you look at who changed space, it
wasn't Lockheed or Boeing, it was SpaceX. If you look at retailing, it wasn't
WalMart, it was Amazon. I can't think of a single area where innovation came
from the inside.
[3:55] Vinod: That's good news for people who are trying to work
outside the system and find excuses to be compatible. You have to be. You have
to find, hack your way into the system and existing practice. That's very
important, but that's a tactic, not the mission.
[4:15] Vinod: People who are trying to change things are the
ones that are really, really interesting to me, do things in a radical way.
Collaborating With Entrepreneurs to Think Bolder
[9:11] Steven: If an entrepreneur walks in the door and happens
to get a meeting with you, or you meet someone, and they're thinking about the
traditional challenges and questions they get from traditional thinking venture
capitals and investors. Is it a "No thank you," or do you try to tap
into your entrepreneurial origins and collaborate with them to help figure out
how to be 10 or 20 times more bold with how they're thinking about solving the
problem?
[9:49] Vinod: I love doing that. My funnest meetings are where
somebody comes in prepped on how to speak to healthcare investors and they do
all this traditional stuff. Then they will meekly say something on the side and
I will say, "Tell me more."
[10:06] Vinod: Then they will admit they were told not to talk
about what they believed and how to package their idea around what's expected
in which billing code it fits. I love those meetings to think outside the box.
People are frankly discouraged from doing what they really should be doing.
[10:46] Vinod: To me, that's much more interesting, it's much
riskier, but it's where all the large impact happens. Two of my favorite
quotes. One was from Martin Luther King, which said, "Human progress
depends on the socially maladjusted."
[11:07] Vinod: The other one was from George Bernard Shaw, who
said, "Reasonable people fit themselves into the world; unreasonable
people try and fit the world to themselves. Hence human progress depends on the
unreasonable man."
Vinod on Important Entrepreneur Characteristics
[12:17] Steven: What are some of the characteristics, their
mindset and other things, that would help you say, if you could multiply or
rubber stamp to some of those characteristics into other entrepreneurs, you
would be making more investments?
[12:29] Vinod: First, generally not always, they're deeply
knowledgeable in some area. Often, again not always, they're naive about
healthcare, and so they're able to think outside the box and they're not too
constrained.
[12:49] Vinod: I find if an entrepreneur is like that, and you
team him up with somebody who knows something about the healthcare system, so
they can lay the caution flags out of why entrepreneurs fail and they fail
often, that's a very good combination.
[13:05] Vinod: But somebody who says, "I have a vision for
how I'm going to transform something,” often, for a personal reason. My father
had a heart attack, my family is diabetic or has a history of Alzheimer's, or,
you pick your favorite. That passion and knowledge-driven entrepreneur, they
are the ones who cause most of the change.
[13:28] Vinod: Those who do startups to make money get too
pragmatic, too quickly, and will not be transformative in my view.
What Makes a Successful Entrepreneur
[13:57] Vinod: Almost all the great entrepreneurs have great
vision. They have a mission and a passion.
[14:23] Vinod: The reason that's important is every startup runs
into lots of scary problems. The ones who have a mission and a passion, almost
a religion about it, they don't give up.
[14:37] Vinod: When you have to bang your head against the wall
and you're running out of cash and nothing seems to be working, you need a religious
fervor to break through those walls and keep banging your head till you punch
through.
[14:51] Vinod: It's really hard being an entrepreneur. I find
the people who are too pragmatic, find something else to do. And the ones who
are mission-driven, drive through that wall. It's one of those old sayings, you
keep trying till you succeed and you don't give up, that's important.
[15:14] Vinod: Depth of knowledge and thoughtfulness are really
important. Now, turns out there's the dreamers with the big vision, that's
necessary, but it's not sufficient. The really good entrepreneurs get very
pragmatic.
[15:33] Vinod: Here's the way I would describe that
characteristic of an entrepreneur. If you're trying to cross a stream, you have
this mission to cross the stream, but if anybody is trying to do that across
flowing waters, you almost never go direct.
[15:49] Vinod: You zigzag to the left, you find stepping stones,
you might find a log. This zigzagging departs from the vision and the mission
to be tactical. This schizophrenic personality between being mission-driven and
visionary, and being very tactical and pragmatic.
[16:11] Vinod: The way I like to think about it, good
entrepreneurs use each stepping stone to gather the resources to get to the
next stepping stone. The zigzagging is OK, but eventually, their goal is to get
across. That to me is a really important description of what good entrepreneurs
do, this pragmatism with mission.
The Power of Storytelling
[18:35] Unless you're good at communicating what you do -- and
that's really storytelling -- you're not going to convince those people when
the going gets tough. I'd like to say entrepreneurship is a roller coaster
where the highs are high and the lows are really, really low.
[18:54] Vinod: When you are at the bottom of the roller coaster,
storytelling can motivate your team to redouble the efforts to bang your head
against the wall.
[19:08] Vinod: Those are really important skills. You're selling
everybody all the time. Storytelling is a well-established way to get people
rallied, emotional, committed to you unreasonably.
Harnessing the Power of the Network Effect
[19:42] Steven: You're incredibly passionate about peer support,
trusted peer networks. What are your thoughts about the view that that kind of
community can do some great work together, acting both together and separately
but harnessing the power of the network effect?
[21:33] Vinod: To your question, if you have an ecosystem around
you of mistakes other people are making, you can learn a lot from them. If
you're making mistakes, they can ask you questions, that make you think harder.
[21:50] Vinod: Most of the time, I like to say, startups get the
two or three macro things right pretty easily. There's a hundred small things
you get wrong. The only way you get past them is get lots of hard questions.
[22:41] Vinod: Sometimes, I tell entrepreneurs — and don't do
this to me — but even if you don't need funds, go talk to VCs about funding
because every criticism, when they tell you the things they're concerned about,
if you can pull that out of them, those are really valuable questions to put in
your repertoire of questions to think about, ask, question yourself.
Vinod’s Unique Ability
[25:39] Vinod: I've done this long enough, but I feel like I've
screwed up more often than anybody else. I feel like some days, I feel so
stupid. Why didn't I think of this earlier?
[25:55] Vinod: Accumulating a series of mistakes. I have a large
library of things I've screwed up on. I think that's really valuable. I never
assume anything is true. I ask a lot of questions, and I'm always looking for
what could be different.
[26:15] Vinod: In fact, I'm reading a book that I've started
called "Mindset" by Carol Dweck on fixed mindsets and explanatory
mindsets. It's worth reading. Though, I'll finish it and then see if I agree.
The beginning of it is very good. With respect to, do you have a fixed mindset
or open mindset?
Less Equals More
[27:00] Vinod: I find people who have less money do better in
building their startup.
[27:12] Vinod: Because they question many more things. If you
got $50 million in the bank, you make a series of assumptions, you start
executing on them. If you have $500,000, every $10,000 is valuable and you
question a lot more to this learning process I talked about. Becomes much more
important, and you're likely to build a much better plan with less money.
Resources,
Web Sites and Tools Mentioned:
[00:43] StartUp Health
[00:43] Khosla Ventures
[02:43] CPT codes
[03:02] General Motors
[03:02] Tesla Motors
[03:02] Google
[03:31] NBC
[03:31] CBS
[03:31] YouTube
[03:31] Lockheed Martin
[03:31] Boeing
[03:31] SpaceX
[03:31] WalMart
[03:31] Amazon
[05:29] Twitter
[05:29] Facebook
[06:57] Jerry Levin
[10:46] Martin Luther King
[11:07] George Bernard Shaw
[11:27] General Electric (GE)
Source: StartUp Health – Mar 16,2016