Investor Series: Dr. Hesam Motlagh (Khosla Ventures) on Investing in Breakthrough Technologies
A-Level Capital Podcast, Episode 3
About Dr. Hesam Motlagh
Hesam is an investment partner at Khosla Ventures, a VC firm backing bold, innovative companies that leverage technology to solve today’s most pressing problems. Founded in 2004, their portfolio includes OpenAI, InstaCart, Affirm, and Impossible Foods. At Khosla, Hesam focuses on companies that translate basic science into products that impact and improve society. He is also Chief of Staff to the legendary Vinod Khosla, co-founder of Sun Microsystems and founding partner of KV.
Outside of Kholsa Ventures, Hesam is an Adjunct Professor of Structural Biology at Stanford Medicine and a Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise. Prior to joining KV, he worked at Seer Biosciences, a biotechnology company focused on developing proteom tools. He was a molecular and computational biophysicist for nearly a decade, and also spent time as a quant at an investment firm. He earned his PhD in Molecular Biophysics from Johns Hopkins University and his MBA from the Stanford Graduate School of Business.
Episode Show Notes
In this episode, we speak with Hesam about his journey into investing from academia, the mission behind KV, and how they live up to their thesis of being bold, early, and impactful.
1:35 Hesam’s journey into investing, from biophysics to Khosla Ventures. A key theme: focus on finding mentors and maximizing learning opportunities along the way. Luck is where preparation meets opportunity, and everyone should make their own luck if they can.
5:57 Origin of Khosla Ventures and the story of Vinod Khosla. Referred to as the “Elon Musk of India”, Vinod was one of the first Indian Americans to make it big in entrepreneurship. He had a small exit with Daisy Systems, then went on to build Sun Microsystems (acquired by Oracle). Vinod made his debut in venture capital as an investor at Kleiner Perkins, before eventually deciding he wanted to take more risk and invest in more “science experiments” — hence the genesis of Khosla Ventures.
8:02 Core thesis of Khosla Ventures. Broadly speaking, KV invests in “tech enabled economic disruption” across three sectors: 1/3 healthcare / LS, 1/3 deep tech and climate tech, and 1/3 ‘classic venture’ (SaaS, fintech, consumer-facing products). Their investment approach begins with two central questions: what does it take to help fix the planet, and where do these inventions come from? Underlying these questions is a simple observation: 700 million people live a relatively rich lifestyle (rich in healthcare, energy, education, access to transportation, etc.), and 7 billion people want and deserve this lifestyle. Current solutions are not scalable enough — to solve this 10x gap requires using technology to amplify resource utilization. Entrepreneurs and non-institutional innovators have historically been at the heart of these 10x or 100x reinventions. Think Amazon reinventing retail, Uber reinventing taxis, Musk reinventing space travel, and Airbnb reinventing hotels.
11:33. KV portfolio companies. Portfolio companies include Affirm, Rocket Labs, Instacart, Garden Health, and DoorDash. To illustrate the KV philosophy, Hesam gives the example of Impossible Foods. Ten years ago, Stanford professor Pat Brown pitched Vinod a crazy (at the time) idea: animal husbandry is a significant contributor to greenhouse gas emissions, and he could make a dent in the climate problem by creating a plant-based burger that tastes like actual beef. At other firms, something so far out of left field would probably get shown the door. But KV made the bet. They have a saying internally: it is the consequence of success that matters, not the probability of success; if you try to increase the probability of success for certain endeavors, you decrease the consequences of success. After making the investment over ten years ago, Impossible Foods is now largely recognized as having initiated the plant-based meat revolution. It’s also a great example of how much reinvention can come from non-institutional folks. Suggested listening: How I Built This with Pat Brown.
13:42 How KV supports its portfolio companies. Like most Tier 1 firms, Khosla Ventures supports its portfolio companies with a robust team of operating partners — people who have been in the trenches, who can advise founders on tactical issues like legal or finance. Beyond this “table stakes” value-add, KV differentiates itself with 1) patient capital, and 2) an unwavering commitment to recruiting. Especially as deep tech investors, they recognize that executing on ambitious visions usually takes longer than anyone expects. As Hesam notes, “Impossible Foods was an overnight success ten years in the making”. KV also recognizes that the best technology doesn’t always win — the only certainty in the business plan is that the business plan is wrong, and the company a founder builds is ultimately the people they hire. Great teams have a compounding effect. Suggested reading: Vinod believes that most VCs add zero or negative value.
18:47 What KV looks for in entrepreneurs. The ‘good’ entrepreneur is a nebulous concept. There is some research suggesting that successful founders score high on effectual reasoning (a ‘few too many’ projection): given the tools that I have, what alternative versions of reality could I create? It is easier, however, to paint a picture of what KV does not want to invest in: small ideas or problems, derivative business models, or anything incremental. In short, KV backs big audacious goals.
19:58 The Mount Everest metaphor. KV looks for founders with an internal belief system, who have a grand vision but are flexible on how to get there. Building a startup is like climbing Mount Everest: reaching the top is incredibly challenging, and to succeed first requires arriving at basecamps along the way. For entrepreneurs, this means using capital to de-risk broader visions, reach fundamental milestones, and pivot if needed. An internal saying at KV: there’s a difference between a zero-million and zero-billion dollar company. Every company’s income statement looks the same at zero sales, but the types of conversations and visions in whiteboard sessions are fundamentally different between a zero-million versus a zero-billion company. Suggested reading: The Entrepreneurial Roller Coaster by Khosla Ventures.
22:08 How KV builds conviction in markets that other investors aren’t yet familiar with or comfortable with. Ultimately, KV focuses on finding the right entrepreneurs in what they believe will surely be large markets (emphasis on large — they prefer technical risk to market risk). They also don’t systemically listen to industry experts, recognizing that expertise becomes a bias as it encourages extrapolating the past instead of thinking about ways to reinvent the future.
25:32 Value of the outsider perspective in disrupting established markets. Industry experts come with an existing set of assumptions, while outsiders are free to build without preconceived limitations. The story of AlphaFold is particularly relevant here: researchers in biophysics had been working on the protein folding problem for half a century, but ultimately Google’s AlphaFold relied on AI algorithms instead of underlying physics.
26:51 How AlphaFold has influenced Hesam’s perspective as an investor. Broadly speaking, the protein folding problem can be summarized as follows: given a linear sequence of information, how can we predict the three-dimensional structures and possible functions? Researchers and academics have been working on addressing this question for half a century, with most proposed solutions based on first principles. Ultimately, however, people from Google (not industry experts) solved the protein problem by taking a deep-learning approach. The implication for investing: technology is getting increasingly commoditized. This levels the playing field for startups, reducing technical risk while increasing the risk on other components (including customer experience and the imagination of entrepreneurs). A second AlphaFold implication on Hesam’s investing style: question every assumption.
31:36 Risks particular to deep tech companies, including funding risk. Hesam refers once again to the Mount Everest metaphor: summiting the top first requires reaching basecamps along the way. Take Commonwealth Fusion Systems, a KV portfolio company trying to solve the nuclear fusion problem by developing higher-temperature superconductors to eventually build nuclear reactors. This is no small feat — the running joke is that nuclear fusion is always 30 years away. Because of the capital-intensive nature of the project, CFS first needed to de-risk the Everest goal by building viable businesses along the way — i.e., leverage their magnet technology to develop other monetizable applications with more near-term use cases. The general takeaway for deep tech entrepreneurs: find investors who see the larger vision, and think creatively about how to reach “fundable milestones” as stepping stones along the way. Another note from Hesam: consider other funding mechanisms (for example, SPACs or government funding) when thinking about how to satisfy large capital requirements.
33:56 KV’s relationship with risk and failure: “we fail all the time.” The underlying probability distribution in early-stage investing is one where losers don’t matter. You can only ever lose one time your money, but the upside is unlimited. In Vinod’s words, “My willingness to fail is what gives me the ability to succeed. Too many people don’t try anything new because they are afraid of failing.” If KV has too many winners, they see this as a sign that they aren’t being risky enough. Suggested reading: The Power Law by Sebastian Mallaby.
36:24 KV’s thesis on climate change. KV has always been relatively active in climate, and continues to focus heavily on the sector today. Their contrarian perspective: a few climate breakthroughs are all we need, and it will only take a handful of people with grand visions to drive meaningful change. Take the example of Musk and EVs. Before Tesla, no major car manufacturer had a meaningful EV strategy; today, a manufacturer without an EV program is behind the times. Tesla has demonstrated how one entrepreneur is able to drive demonstrable reinvention and change in an entire industry, leading to a revolution that far exceeded most expectations. Suggested reading: Vinod Khosla, A few Critical Climate Technology Breakthroughs Multiplied by “Instigators” is desperately needed.
39:06 Biggest lesson learned from Vinod: most people take “no” for an answer too easily in professional settings, limited by what they think they can do and not what they can do. As Vinod has proven time and time again, a “no” is easily turned into a “maybe”, and a “maybe” is easily turned into a “yes.” It ultimately comes down to drive, internal motivation, and confidence. Be stubborn on the vision but flexible on the tactics. Don’t be surprised when people push back; when they do, be ready to prove them wrong.
42:17 Best piece of advice Hesam has ever received. Prioritize mentorship and the people you work with. True learning and growth come from being challenged, and Hesam (almost) enjoys being the dumbest person in the room. The best piece of personal advice: without family and friends, all this means nothing.
We hope that you enjoy this conversation with Hesam! Stay tuned for another Founder Series episode next week with Robin Shah, founder of Thyme Care, a digital health startup backed by a16z and Bessemer Ventures focused on reimagining the cancer patient care journey.
If you have questions about the episode or want to suggest topics for future episodes, please email Jemina Opman-Auge (jemina@alevelcapital.com) and Anusha Rao (anusha@alevelcapital.com). If you enjoyed the show, please subscribe to A-Level Capital Podcast on Spotify or Apple Podcasts (and leave us a rating!). We’re also on LinkedIn @A-Level Capital
