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20VC: Khosla Ventures Founding Partner, Samir Kaul on Why Pro Rata Is A Cop Out, Why He Likes Technical Risk and Does Not Take Market Risk & How To Approach Time Allocation Across The Portfolio In Venture

Jan 13, 2020

Samir Kaul, Founding Partner at Khosla Ventures, shares insights from his extensive investment experience, including backing top startups like Square and Impossible Foods. He challenges the norm by arguing that pro-rata rights are a cop-out and emphasizes the importance of embracing technical risks. Kaul also dives into investment decision-making, stressing the need for a proactive mindset in volatile markets. He discusses balancing time allocation across portfolio companies and the evolving role of board members in fostering effective collaboration.

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ANECDOTE

Accidental VC

Samir Kaul's entry into venture capital was accidental, stemming from his work on genome projects.
He transitioned from biotech research to business school, then to Flagship Ventures, and finally co-founded Khosla Ventures.

INSIGHT

Risk in Venture Capital

Conservatism in venture capital can hinder returns, according to Samir Kaul.
Venture capitalists should embrace risk, especially technical risk, to achieve outsized returns.

ADVICE

Seed Investment Strategy

Treat seed investments as option value investments, focusing on potential billion-dollar opportunities.
Aim to lead subsequent rounds if initial investments show significant promise and align with return goals.

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Samir Kaul is a Founding Partner and Managing Director at Khosla Ventures, one of the valley's most renowned firms of the last decade with a portfolio including Square, Affirm, DoorDash, Impossible Foods and OpenDoor just to name a few. As for Samir, he led the firm's investment in Guardant Health, Impossible Foods, Nutanix [NASDAQ: NTNX], Oscar, among others. Prior to Khosla, Samir spent five years at Flagship Ventures where he started and invested in early-stage biotechnology companies, including Helicos Biosciences which went on to IPO. Samir was also founding CEO of Codon Devices and led the Arabidopsis Genome Initiative at Craig Venter’s Institute for Genomic Research.

In Today’s Episode You Will Learn:

1.) How Samir made his way into the world of venture from the world of biotech and came to found one of the leading firms of the last decade?

2.) How did seeing the booms and busts of the last 2 decades impact Samir's investing mindset? Why does Samir think it is dangerous for a VC to have a "conservative mindset"? How does Samir analyse and think about upside maximisation when investing today? How does Samir think about when to sell your position and how to determine the right time?

3.) What does investment decision-making look like at Khosla? What are the criteria that re-investments are made upon? Why does Samir believe that pro-rata is a kop out? Which should be the core questions that determine whether to double down or not? How does Samir and the partnership think about time allocation across the portfolio?

4.) How does Samir approach the exercise of market sizing? Why does Samir never want to take a risk when it comes to market? Why does Samir want to maximise his risk when it comes to technological risk? How does Samir think through having to carry these deep tech companies for longer? What were his learnings from the clean tech days on this?

5.) How would Samir analyse his own price sensitivity today? What was his most formative inflexion moment as an investor? What did he learn from it? From a people side, who had the biggest impact on Samir as an investor? What were the core elements he learned from them? How does Samir deal with the element of self-doubt? How does he get through those moments?

Items Mentioned In Today’s Show:

Samir’s Fave Book: Start Something That Matters

Samir’s Most Recent Investment: Lightship: Direct to Patient Clinical Trials

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