Lessons from Sand Hill Road, Silicon Valley
In our latest Silicon Valley trip, we spoke to Sven Strohband, Managing Partner from Khosla Ventures who invest in deep tech/hardware companies (Rocket Lab, Impossible Foods, GitLab, Stripe, Deep Genomics…). Khosla Ventures has raised 14 funds, has $5bn AUM and 8 unicorns in their portfolio. Sven has a PhD from Stanford, co-founder of MetaMind (now part of Salesforce Brain). He gave us a much memorable conversation packed with wisdom from his experience as an entrepreneur and VC.
Q: How should companies set their targets/KPIs?
A: Start writing the next round’s pitch deck when the last one just finished. Clearly see how you want the company to look like for that next round.
Q: What do you look for in a startup?
A: Founders who operate on first principles and know how to hire well. It takes a certain humility to admit that they’ve never done marketing or sales before and make a sound judgment on who are able to complement them well. Look at the people they had hired in the past or who do they have in their LinkedIn network. A players hire A players, B players hire B players and so on. At Khosla we have a hiring partner whose sole job is to help their portfolio hire the right talents at the right time.
Q: How do you do due diligence on early stage founders?
A: By talking to their previous startup’s customers or see what they had given up to build this thing. e.g. Impossible burgers, a Stanford professor who gave up his 10-year research career to found a company without a commercial product for 4 years. We’re tolerant on no viable products, we’re not tolerant on no progress though.
Q: When should one hire a seasonal executive into the team?
A: Almost all CEOs replace their executives too late.
Q: If one of your portfolio startups struggle to raise funds, will you save them?
A: If that’s the case, either you’re smart and the rest is dumb, or the other way round. Take a hard look in the mirror and decide.
Q: Why don’t you invest in China or other places?
A: If your fund is based in the US and your fund performance in China is phenomenal, soon enough (as early as after the first fund) your LPs will realise that and invest in China themselves without you. (LPs invest in a local VC to maximise the local returns, based on the VC’s local knowledge and experience.)
Q: How do you set a valuation in a founders (sellers) market?
Often the valuation is determined by how much one is raising and what’s the maximum dilution one is willing to give up. If a market is big enough (doesn’t have to be too specific numbers) and the potential upside is massive then don’t haggle that 20% off valuation with the founder. It’s not worth it to lose out on a deal that could have a great outcome. Being in is enough.
Thanks Sven for a pleasant afternoon!
