“Venture Assistance”: A philosophical view of what entrepreneurs need beyond just funding…
Many years ago, when Keith Rabois joined our firm, I wrote this blog in Techcrunch. As we announce that Dan Levin is joining Khosla Ventures as our newest operating partner, I am reminded of why we called our firm a “venture assistance” firm and not a “venture capital” firm when we founded it in 2004. Younger (and experienced) entrepreneurs need this assistance far more than capital (funding) even if sometimes they don’t quite realize it yet.
The concept of venture assistance is simple. Most VCs pitch their firms as being able to add value — to really help a company’s entrepreneurial founders. Personally, I think leading VC firms do a pretty good job of being supportive of their companies, and most entrepreneurs funded by good firms like their investors. But, on the question of “value added,” most venture capitalists (each VC with a typical 10–16 boards) even among the leading partnerships, are pretty passive and ineffective when it comes to assisting companies, except possibly in helping with networking, or they don’t give the right advice.
And in my view, many investors haven’t done enough in their careers to earn the right to advise entrepreneurs, a role that I consider laden with responsibility and fraught with the potential to do more harm than good by giving bad advice. We constantly ask our less experienced team members “What have you done to earn the right to advise entrepreneurs?” I don’t want entrepreneurs to get inexperienced advice on important matters. Their startup is their life, their baby — it is not just another company in an investor’s portfolio. The companies need help from board members with hiring key executives and with introductions to unreachable candidates. The need help with critical decisions, and with handling internal conflicts. And they need board members who will push them to be as great as they can be without voting against them on their board or crossing the line of making board “decisions”. Boards in my view should rarely make decisions. They deserve brutal honesty rather than hypocritical politeness, even when it is inconvenient to give or get. They need to be pushed to think hard and critically about complex problems that board members can see with the benefit of experience, but they need to be left alone and empowered to make their own final decisions. Entrepreneurs in private companies need trusted advisors, not governance. They need venture assistants.
We are excited to have Dan join us. Dan was the President and COO of Box, and more importantly mentor to star CEO Aaron Levie, for the last seven years. He joined Box when when Aaron was 24, and together they led the company from $10MM to $500MM in revenue. In the previous twenty years, Dan founded a couple of startups and held senior executive roles in several others — in addition to taking seven years out of his entrepreneurial efforts to run a large part of Intuit (the makers of TurboTax and Quickbooks), at the time an 8,000 person organization. A seasoned leader who has founded venture backed companies himself, and helped a 24 year old entrepreneur grow a business to billions of dollars in value — who went through the ups and downs associated with that rapid growth — is exactly the kind of experienced coach and mentor that we believe should be available to young entrepreneurs; not some junior VC who happens to join a venture firm but has not earned the right to advise entrepreneur because they have never built a startup themselves.
During Box’s phase of very rapid growth, when it was doubling in size year after year, Dan invested heavily in people and culture. He felt strongly that a great leadership team — not just at the eStaff level but several layers down in the organization, was critical to its success. For example, Dan held a class in the cafeteria and personally taught every people manager in the company how to craft a great review, give hard feedback, and reward outstanding performance. Even years later, when Box was over a thousand employees, Dan led a book club to help every leader in the company, and every Boxer who wanted to attend, to become a better manager.
Dan knew that if Box wanted decisions to be made quickly, leaders had to be empowered to make calls locally — and that required them to both understand the company’s strategy and objectives, and to be operating with enough information to make good decisions.
He also knew that as the company grew, they would have to hire from the outside in order to add needed skills to the mix. But that if they could not grow talent quickly enough to enable them to promote from within as well — they would put their company culture at risk. Box established a goal of filling 50% of their management hires with existing Boxers — and reported out to the entire company every six months on their progress against that target — one that they never failed to hit.
But the only way that could happen — the only way that enough leadership talent could grow inside the company — was if leadership development was a key priority. Box made a huge statement when they hired Even Wittenberg, previously Chief Talent Officer at HP and Head of Global Leadership Development at Google!, to lead Box’s people team. Evan and Dan went on to build one of the strongest leadership development programs ever seen in a young technology company — and as a result, were able to promote from within to a much greater extent than can most young companies.
Dan brings that passion for teaching and mentoring leaders to Khosla, where he will work to help every one of our portfolio CEO’s become that best leader that they can be — and to solve critical challenges and entrepreneurial conflicts along the way with hands on advice and mentorship.
That leads me to one of my favorite questions around younger entrepreneurial companies: What is the role of a entrepreneurial advisor or board member?
The right advisor asks the questions you never knew were important.
Most of us don’t know what we don’t know when operating in a new area, or in a new (to us) job. We are, as the academics would say, unconsciously incompetent. The right advisor leverages their own experience (and their many mistakes!) to ask the questions you never knew were important, and by doing so, opens your eyes to the previously unseen. They also look beyond more immediate imperatives to longer term issues and to help create new “S” growth curves. They serve as guides, seeing around corners, and helping you navigate the difficult road of building a company from the ground up, using their experience to spot things that an entrepreneur might otherwise miss (risks and opportunities alike), or to look into the future by reflecting on their experiences with other, similar companies. They carry with them an extensive network that they can bring to bear on all the different problems and challenges that might crop up along the way, whether it’s finding a critical hire with the perfect match of skills and experience, or getting a company a make-or-break meeting with a decision-maker at a potential marquee customer.
At Khosla Ventures, we also believe that a good investor should be able to bring expertise to the table that can solve real problems that you and your team face. Our investing team is chock full of experienced operators who can provide the kind of advice mentioned above — including 4 ex-CEO’s. We are extremely hands-on — whether it is helping with fundraising decks, a product strategy session, discussing brand strategy, or even writing patents. Among those who have not run a company, four have PhD’s in science or engineering fields, and two more had senior executive roles at companies like Google, TellMe and Square and many other startups.
And in addition, we have a group of operating partners who do nothing but teach and coach and mentor our portfolio companies — offering real targeted help, be it in leadership and management training, recruiting executives or engineers, AI technology or recruiting, strategy, design, manufacturing and more.
One critical area for all young technology companies is hiring great talent. You have to source amazing candidates, drive a thorough and thoughtful interview and selection process, and then close the best candidates in your pipeline. And you have to do it for some incredibly difficult roles, especially if you are based in Silicon Valley, where the talent war is raging out of control. Our recruiting team can provide expertise and assistance with technical talent as well as executive leaders — and perhaps more importantly can help you to hire and train a great internal recruiting team so that you can grow quickly.
As we see other areas where we feel that our companies could leverage talent and expertise provided by an operating partner, we add that capability. We can help with AI and ML strategy, with Design Thinking and building design into the DNA of your company, with supply chain and manufacturing if you have a hardware component to your offering, and with blocking and tackling issues like finance and legal as well.
At Khosla Ventures, we believe that our role is to add value to our portfolio companies, not just to provide them with capital. That is why we call ourselves a Venture Assistance firm, and why we work so hard to live up to the expectations that that title sets. From mentorship about management to operational help in AI, design, brand, manufacturing, enterprise software, we strive to help entrepreneurs reach greater heights than they might on their own to the very lonely job of an entrepreneurial CEO by helping them expand their opportunity and fullest capability.