Vinod Khosla: Maintain the Silicon Valley Vision


Vinod Khosla is the founder of Khosla Ventures, a venture capital firm started in 2004. His firm tries to make investments in disruptive technologies in Internet, computing, mobile, silicon technology, alternative energy and medical technology. He worries, though, that greed, not vision, may be motivating some entrepreneurs in Silicon Valley. Mr. Khosla submitted this guest post to Bits

Some people seem to think that getting acquired should be the highest aspiration for an entrepreneur in Silicon Valley. I disagree vehemently.

In fact, I think that mindset does a disservice to the entrepreneurs in Silicon Valley and around the world. This is exactly the wrong way to think about building a start-up not only because it develops the wrong company culture, but on a large scale it can poison the unique and innovative ecosystem that has developed in Silicon Valley over the past 40 years.

Vinod KhoslaMario Anzuoni/ReutersVinod Khosla

You want missionaries, not mercenaries –passionate, maniacally-focused founders who believe in a vision. Founders like this draw the most gifted and passionate employees, who maximize the chance of success, even if they ultimately fall short of their initial goals and get acquired.

There are of course mercenaries and people setting up for “acqui-hires” in the valley as well, but that is not what Silicon Valley’s special sauce is about.

In my view, it’s irreverence, foolish confidence and naivety combined with persistence, open mindedness and a continual ability to learn that created Facebook, Google, Yahoo, eBay, Microsoft, Apple, Juniper, AOL, Sun Microsystems and others.

Having a vision does not prevent you from being acquired, but starting a company to “do a deal” is not what Silicon Valley culture is about even if most companies that have a successful exit are acquired. An acquisition may be a safety net, a way to free yourself or learn to pursue another bigger or more interesting vision, but those are tools rather than goals of the true Silicon Valley entrepreneurs I have seen. (When I say Silicon Valley, I mean it how my Kleiner partner John Doerr meant it when he used to say “Silicon Valley is not a place but a state of mind.”)

The deal mentality is a Wall Street specialty and doesn’t fit the valley culture. Yammer for instance (recently acquired by Microsoft for $1.2B) was not built to be exited quickly. But when an attractive offer came along the management team chose to take it. That happens quite often and is consistent with how the valley culture should work.

Seeking an acquisition from the start is more than just bad advice for an entrepreneur. For the entrepreneur it leads to short term tactical decisions rather than company-building decisions and in my view often reduces the probability of success. It can lead to sub-par “guns for hire’” rather than a team excited about a larger vision. It leads to a job not a lifestyle.

It makes the world poorer too. Imagine in 1980, if the highest goal of every start-up was to be bought by DEC or IBM for $20M in a couple of years. I’d assert that we’d still be in the Stone Age of high tech – using mainframes and cell phones that bolt to the floor of your car – no Internet, no biotechnology, no e-mail, no computers in the home, much less in your pocket. Imagine a world if Google was sold to Microsoft. Imagine the world of mobile based on Nokia and Motorola if Apple had not been restarted by a missionary entrepreneur named Steve Jobs who cared more for his vision than being tactical and financial. Each of those “no vision” start-ups looking for a quick sale would only try to do something safe and derivative that fit into IBM’s, NBC’s, Cisco’s Pfizer’s or Nokia’s old models.

It’s hard to imagine all the things that wouldn’t have happened, because it’s easy to forget how much the world has changed due to dreamers and entrepreneurs. Many big company advances were also prompted by start-up visions. It was Nexgen, a little start-up, which forced Intel to work much harder on processor architectures. And before Juniper threatened it, Cisco did very little in TCP/IP Internet technologies. In fact, their chief technology officer told me when we were starting Juniper that they would never do an Internet router above OC12, a speed 8 times slower than the one that serves my house today, just because the major telecoms said they would never switch to TCP/IP. Now the world runs on it because we took a “build it and they will come” approach.

In 1980, Ken Olsen, chief executive of DEC, couldn’t imagine people ever needing even one computer in their home, and now even our washing machine, toaster, refrigerator and car have one (or many) processors. The Apple iPad, at a few hundred bucks, is far more powerful than the most powerful computer that DEC built twenty five years ago.

All the best engineers and thinkers would work at big companies accomplishing only a little and maintaining the status quo rather disrupting the status quo or contributing to some part of the world’s needs.

And we need that kind of disruption in food, agriculture, clean energy, healthcare and education among many other areas, which will likely be driven by a Silicon Valley state of mind.

The creativity, productivity and pace of innovation in Silicon Valley relies on brilliant and foolish entrepreneurs being unreasonable enough to believe they can be the exception to the “rule.” As George Bernard Shaw said, “all progress depends on the unreasonable man.” If everyone played it safe, we wouldn’t get anywhere.

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