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The Twenty Minute VC with Samir Kaul

In this podcast with Harry Stebbings of 20 Minute VC, Founding Partner and Managing Director Samir Kaul shares how the booms and busts of the last two decades has shaped his investment mindset, the firm’s view on technological risk versus market risk, and why he believes pro-rata is a cop out.

Harry Stebbings:

This is The Twenty Minute VC with me, Harry Stebbings. I’ve wanted to feature this firm for a very long time, one of Silicon Valley’s most renowned firms. I’m thrilled to welcome Samir Kaul, founding partner at Khosla Ventures, one of the Valley’s most prominent firms of the last decade, with a portfolio including the likes of 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, Oscar, among others. And prior to Khosla, Samir spent five years at Flagship Ventures, where he not only started, but also 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. I do also want to say a huge thank you to David Utley at Carrot, for providing some fantastic questions ahead of our episode today.

I could not be more excited to have you on the show today. I have many great things from David at Carrot. He told me many a wonderful anecdote, but thank you so much for joining me today Samir.

Samir Kaul:

Well thank you for having me. I’ve followed a little bit of your work and it’s very impressive. So it’s my pleasure.

Harry Stebbings:

Well that is very, very kind of you. Ego is a wonderful thing. So thank you for that. But I would love to start today with a little bit on you. So tell me, how did you make your way into the world of venture and then come to found one of the leading firms of the last decade, Khosla?

Samir Kaul:

It’s a complete accident. I was working on the genome projects with Craig Venter in the late 90s. I was in graduate school, I heard Craig talk and I was still doing DNA sequencing the old fashioned way, with radioactive isotopes and developing my own film. And he was talking about these magical machines that could sequence the whole human genome, and I ended up leaving with a master’s. I went to go work for him and I soon moved up to actually running probably the largest group at the Institute for Genomic Research, without a PhD, which was super fun. And we sequenced the first plant to ever be sequenced, which was Arabidopsis thaliana. And the way to think about why is that even relevant, this little mustard seed plant, is to think about it as the reason we study mice and rats, is because they are somewhat of a proxy for humans. And Arabidopsis is similarly somewhat of a proxy for corn, wheat, soybeans, and other higher level crops.

At some point, Craig and I both thought the right thing to do would be go to business school. And he had moved on to Solera, which was a public company that was a private effort to sequence the human genome. And my goal was to go to business school and I chose Harvard, come back and work for Craig again at Solera, and one day maybe run the company. Instead, soon after I started business school, Craig got fired, so that option didn’t exist anymore and I had to figure out what I wanted to do. I thought that I would then go work at an Amgen or Genentech and work for 20 years, probably make it to a vice-president level and if I was lucky, they would tap me to go a little bit more senior than that. At that time at Harvard, Gordon Binder was CEO of Amgen and Ray Gilmartin was CEO of Merck. And so I had the fortune, because they were HBS alums, to meet with both of them. They were super impressive, big jobs, important company, but not my thing. They were just too big, they were too disconnected from the day-to-day.

I heard Noubar Afeyan, who is the founder of Flagship, give a talk and I approached him after and we met and he gave me an internship, and that was it. I got to work with Noubar at Flagship for four years and while I was at Flagship, I learned a lot. Noubar’s still a very close friend and was a mentor to me. And I helped start four companies, of which Vinod has invested in three of them.  When Vinod left Kleiner Perkins and decided, after some time off, to start Khosla Ventures, he asked me and my other partner, David Weiden, to join him in starting the firm together. This was towards the end of 2005.

Harry Stebbings:

I’ve never seen the boom and bust, something that you have seen. When we discussed it with Josh at First Round, he said the bust made him more conservative. How did seeing the boom and bust impact your investing mindset, do you think Samir?

Samir Kaul:

Josh is an excellent investor and I’m a big fan of his. I tend to disagree. I think in this business, being conservative is a real problem. We’re in the business of returning 20% or greater net IRR to our investors and we don’t get judged by how many companies succeed out of the number of companies that we invest in. We get judged by what is our return. And these are all things I’ve learned, really, from Vinod. The other thing is, you never want to sell your winners too soon, because you just don’t know which one’s going to be a winner. And when you get one, you got to ride it to the highest possible number and you can only lose one times your money. But the upside is completely uncapped. And we’ve seen that across our funds as well. We’ve seen some really super successes.

If you start to become more conservative, you start to not take the type of radical technical risks that you need to get the outsized returns. And I think you also limit the volatility and as such you won’t get the outsized returns and you won’t get the kind of returns that people invest in our asset class to get. The other thing I’d say is that, you get these booms and busts. I’ve lived through two, I lived through the .com boom and the ‘08 boom and bust. And what tends to happen is the companies and the investors that get hurt most are usually the ones that are in these overheated areas where some of these valuations just got out of control. One of the things I really love about our firm is that, though we do invest half or more in traditional venture areas, we also spend about a third or so of our allocation in areas that have yet to be disrupted by technology, don’t have venture there. And so we don’t really have these outsized cost basis and valuations. So they tend to be less affected by these massive booms and busts.

Harry Stebbings:

In terms of that first investment decision making process, and then the reinvestment decision making process, how does it look for you at Khosla, and how does it differ for initial versus reinvestment?

Samir Kaul:

It depends on the size. If it’s a seed fund kind of investment, it’s a million or two million bucks. Then what we look to invest in, and we call it option value investing, is that we make that investment because we have a thesis that this could be a billion dollar opportunity, but we need to see something. Can they recruit the right team? Can they address some binary technical risk, or something along those lines? Will the market develop the way that we think it will? But we want to then be in a position where we have an informed, early opinion on that company, when it comes to a series A or series B. At that point, if it’s not going to be a billion dollar company, it probably doesn’t make sense to put a lot more money and time into it. If we think it’s going to be a big, big kind of win, then we want to lead the next round. So, then we’ll come in and do a lot of diligence, and we should have a front row seat to lead the round because we’re already in the company and we already own some of the companies.

In terms of total dilution of the founders, it’s less for them. That’s how we treat the seed company investments, it’s really option value investing. We want to be in a position to really lead the next round. And with that seed money, some of the key risks which will help us decide whether or not this is a multibillion dollar potential opportunity or not. For traditional Venture investing, the way I look at it is, at our firm we have four managing directors. We rate the companies as a one to four, and a one means absolutely, this is awesome, we should absolutely pile in money and do it. And a four is, well I wouldn’t do it. I don’t think you should do it. But in the end it’s your call. In my 17 years being here, I can’t remember a veto. We don’t really even have a number for a veto. And the reason is, it’s so hard to tell when you make these early investments, that seed, series A, series B, sometimes even series C, what the outcome is going to be. And if you present at a partner meeting, and it’s not the company that I’m sponsoring, I’m getting about a couple hours of exposure to it versus one of my partners is getting dozens and dozens of hours. If I don’t trust my partner’s judgment, they shouldn’t be my partner. And I think when you don’t veto, you actually have more of a license to give really tough, critical feedback. And so the partner in question can go home and sleep on it and then look in the mirror and decide whether he or she really wants to do the investment. But they know that they can. And there’s nowhere to hide. Like, “Oh, well Samir vetoed that.” And guess what that company was? It was Airbnb. They have to really look at themselves and be like, “Okay, here’s the feedback I got. Do I really want to do this?” But in the end, it’s your responsibility and your decision and it allows for much more honest dialogue. Other places where you have a veto, you see a lot of politicking, “Hey, vote for my deal, I’ll vote for yours.” People don’t want to say what they think, they don’t want to make someone feel bad and veto their company. This kind of transcends our firm, this notion of, people get a lot of rope, but we’re incredibly brutally honest and transparent with them.

Harry Stebbings:

 In terms of the reinvestment, what does that look like?

Samir Kaul:

If you and I made a bet at the beginning of the Super Bowl and I said, “Hey, you can change your bet, Harry, at halftime.” Of course, you would do that. You have more information. So to me, I think pro-rata is a total cop-out. I think when a company comes for a reinvestment, we need to have a strong opinion on it. We should be redoing all of our diligence, and seeing if the key risks have been addressed and what we think of the team, and what we think of the prospects, what we think of the competition. But we should then make a decision. I mean, the only time we should do pro-rata is if that’s the maximum allocation we can get. Or we think that the company is worth continuing and we don’t want more exposure. But if we don’t do our pro rata, the round falls apart. Other than that, we should either do more than pro rata or much less to zero of pro rata because we get to change our bet. And if you don’t change your bet, and the house is against in blackjack, every hand you have, the odds you’re going to lose are greater than the hands you’re going to win. So if you get something where you can double down or split, you’ve got to push all your chips to the table because if you just make the same bet on every hand you’re going to lose. It’s just math. And it’s the same thing in Venture. The odds of one of our initial investments being successful is lower than 50%, sometimes it’s 10%. And so when you get a signal that it might be better, you got to really push your chips to the table and have the courage to do that.

Harry Stebbings:

So do you start ranking your companies quarterly and then allocate capital accordingly? What does that granular decision making look like?

Samir Kaul:

I don’t think we stack rank them, but we definitely look at our companies every quarter and say, where are the ones where we think we can make a very good return? Not only can we make a very good return, but our involvement would help drive that to a better outcome. But there’s some companies that are just doing great and our involvement isn’t going to be that consequential. We can help recruit or stuff like that, but it doesn’t make sense for us to allocate more time to them. But there are companies that if we spent more time, whether it’s helping recruit, or helping make introductions or helping strategize, that we could have a marked difference, and something that could go from a moderate to a high return of investment. If we spend more time, we should be doing that. We evaluate that, and those companies change. Sometimes those companies spend a lot of time in a year and either they graduate to, they don’t need our time as much, or it doesn’t matter how much time we spend on it, it’s not going to be a big return. And those companies come in and out. But we definitely spend a lot of time thinking about time allocation. We don’t stack rank our companies.

Harry Stebbings:

In some cases, price is maybe higher than one would like in a lot of cases today. Peter Fenton said on the show when it comes to price sensitivity, “Never turn down a deal based on valuation. It’s a mental trap.” How do you think about your own price sensitivity today?

Samir Kaul:

I think that’s a great point. I think it also depends on what stage. So if you’re looking at a company that’s valued at $15 or $20 billion, of course you have to think about valuation. Right? And it also depends on your return threshold. But at the stage that Peter looks at companies or I look at companies, the company is going to be a success or not. It doesn’t matter. When we invested in the series A of Square, I think it was around a $30 million valuation and it was Jack and Jim and a PowerPoint, and it seemed incredibly expensive back in 2008 or 9 when we did this investment, it seemed incredibly expensive at that time to pay $33 for a PowerPoint. And obviously now, who cares. Company’s worth $25 billion. If it was $33, $93, it wouldn’t have made a difference. And so I do agree with Peter on that. If the upside is a billion dollar company and you’re in early, you just have to have the conviction that you want to do the investment and go do it. But when we come to writing the series A-like checks, obviously, not every company achieves that or very few do, but we have to have an opinion that it could.

Harry Stebbings:

You did mention time allocation and it’s one that I struggle on, because I hear a lot of different opinions on the show. Some say you spend time with the winners, that’s what’s going to drive the returns. Others say, spend time with the strugglers, the winners don’t actually need you. How do you think about time allocation and actually where you divide your time between the portfolio?

Samir Kaul:

I look at it as an X, Y axis of which of the companies are going to drive returns for our fund. Because again, we don’t get a scorecard in terms of percentage of successful companies. Our scorecard is cash on cash return and IRR. So I look at which investments are going to potentially drive returns for the fund on one axis. And on the other axis, “Is my time involvement going to make a difference?” So there are plenty of successful compromises where I could spend all the time in the world on it. It’s not going to change the trajectory of the outcome. And those are ones that you shouldn’t spend a ton of time on, because all you’ll probably end up doing is bothering the entrepreneur. But for many companies, and the ones that I take the biggest pride in, there’s a large potential return and our time actually helps drive that. Those are the ones that are the most fun to work on. On the strugglers, it’s really tough. We get so emotionally involved in our companies, it’s hard to just abandon them. And that’s probably one of the things that we all could do better, is knowing when to cut off companies sooner. Not spending as much time with a company, they just aren’t going to drive a return. We do that because we are emotionally attached to the company, we’re loyal to the entrepreneurs. Sometimes there is an outcome, like an acquisition or something that would provide some return, but again, it’s not the return, but it provides a home for the technology, and a home for all the employees, if there’s a soft landing. That’s definitely worth spending a lot of time on. There’s a company that I spend a lot of time on where we’ve gotten $0 back, but we’ve landed the company with a good home, and where dozens and dozens of employees that we’ve helped recruit that have steady jobs and good jobs and that’s great. And that’s meaningful and definitely worth the time.

Harry Stebbings:

In terms of where you spend your time, a lot of that is also on the boards themselves. And from my Crunchbase research, it’s about over 3000 hours that you’ve spent on boards. So with the experience in mind, how have you seen yourself evolve and develop over time as a board member?

Samir Kaul:

That’s a good question. And my entrepreneurs would probably answer that better. I think I’m understanding where and when to push. And where are the parts of the company that the board can add the most value. And I help my entrepreneurs with that as well. So I tell them, “Hey look, make sure at least 48 hours before the board meeting, you’ve sent a pre-read. And for goodness’ sake, please don’t just read us those slides. You’ve got three to four hours, with six or eight busy, intelligent people hopefully. And you’ve got us in a room together now for four hours. Do you really just want to read us slides? Is that what you want to get out of that? Or do you want to assume, which you should, that we all do the pre-read and start this board meeting with one slide where you say here are the two or three things that are keeping you up at night and then we can use the board deck as a way to kind of talk about it.”  But I think that’s really important. And I think the other thing is rather than having the entire management team present at every board meeting, let’s pick, you obviously need the CFO and things like that to present, but, let’s pick one thing that we’re really going to drive deep on. Is it research, is it sales and marketing, is it HR, is it regulatory? Whatever it is. Let’s really do one focus area per board meeting where whoever the leader, he or she of that particular organization could come and present and meet the board and give us an impression on one of those areas.

Harry Stebbings:

What advice would you have for me? I joined my first board a year ago. What advice would you have for me having had all the board experience that you have, in terms of how to really build that environment of safety for the founder, in terms of how to really bring the best of yourself to the board meeting, how to build the relationship with the other board members, is that important?

Samir Kaul:

I think you need to develop trust with the entrepreneur, that I like to think I have. I’m sure I don’t with all of mine, but with many of my entrepreneurs, they know that I have their back, but I’ll also be the toughest on them. And tell them like it is, at least from my purview. Doesn’t mean I’m always right. And I think the very good entrepreneurs really appreciate that, that you don’t throw them under the bus. You’re very direct and honest with them, when you need them, you’re there. I think my entrepreneurs would tell you that, “Hey, if they need someone, a board member to interview somebody, go recruit someone, go make an introduction,” they can count on me to do that. They also know that if they mess up or if they’re missing something, I’ll be very very tough on them. And there’s ways to do it. You don’t humiliate people, you don’t do it in a public setting, you don’t yell at them, you don’t use unnecessary language, but you drive the point home and I think the good entrepreneurs appreciate that and want that.

Harry Stebbings:

Are you ever worried about the weight of your words, being so direct and candid as you are, and as David accounts, or appreciates, he told me. Are you ever worried that actually, the weight of your words as a board member and the figure that you are, it carries a lot of weight?

Samir Kaul:

It’s a great question. I often tell some of my CEOs, “Look, for God’s sake, don’t listen to everything I say. And certainly don’t do everything that I say because I don’t have the context you do. I’m spending some time with you on a weekly or monthly basis. You’re living this 24/7. But listen and see what you can apply, or what you agree with to make your business better. If a CEO, if he or she just listens to everything I say, then they’re definitely not the right entrepreneur. They’re definitely not the right CEO. And they can’t whipsaw because one person tells them something. So I’m very clear with them before we get into the relationship, that look, I’m going to have strong opinions. I’m going to be your biggest supporter and your toughest critic. And you have to figure out, of the things I tell you, what are worth listening to and what aren’t correct, and that’s going to be your job. But do not whipsaw based on what I tell you, because I don’t have the context, the expertise. You need to use that information to the best you can.

Harry Stebbings:

I think the best can determine the 10% to take and the 90 to probably disregard. 

Samir Kaul:

There’s two types of disregard. There’s some portion of that 90% that you disregard because you’ve already thought of it, tried it and you know that it doesn’t work. And then there’s the other part where you go and you think about it and then you come back with a reason why it won’t. If someone disregards something just on a whim without any real logic or data behind it, I lose as much respect for them as I would if they just did everything I said.

Harry Stebbings:

When you ask investors what they like to see, it’s always a great founder, great product, big market. And then I have other people on the show that say, “Actually, I don’t look for big markets. That’s actually irrelevant. I look for markets that are tiny and growing” or whatever the explanation could be. How do you approach market sizing today Samir?

Samir Kaul:

I don’t want to take any market risk. I want the market to be big. But I also really like to pride myself on finding a market for technology that’s yet to innovate. Because I want to take large technical risks. That’s what I love. And that’s why I’ve invested across so many different sectors. And the common thread is always, there’s some massive technology, risk or change that I’m investing in. And that’s my favorite thing in the world to do. But I don’t want to take market risk. I don’t want to take tons of R&D engineering technical risks only to know that no one cares. So for example, if there’s a big market and I think the current product is not great and I can put a product in there that’s 10x better, I’m pretty sure that people will buy it. Okay. And if it takes an extra two years of R&D to get 10x better, that’s fine. I can model that. R&D is 250K fully loaded per scientist, per engineer, per year. That’s my cost. That’s my burn. So if it’s going to take two years longer, I know how much more money I have to put at risk in order to get to a point where it’s going to fly off the shelf. The problem with going to market, small markets are just really tough. You don’t know how big the market is. You need to do market discovery, you don’t know what your cost of sales is, you don’t know how long it takes to spin up a salesperson, what their quota should be. You don’t know what the payback period is. The customer acquisition costs, and those things have unlimited downside, you just don’t know. You could spend millions and millions of dollars on marketing and sales and a sales force and not know what the result is and you can’t model that. Whereas on technical risk, I know exactly how much it’s going to cost me per year of delay.

Harry Stebbings:

I always feel, “Oh my God, I’m just incredibly nervous about having to carry the company for years, personally.” How do you feel about that, and is that actually quite a naive thought process given the cost basis that you understand?

Samir Kaul:

No, that’s not naive at all. It’s what really killed the Cleantech industry. There are a lot of reasons, but one of the reasons was that all my fellow brethren venture industry ran for the hills, and then you had all these companies, some that deserve to fail and some that deserve to live, that unfortunately didn’t get that chance because there was no more money. In many of those companies, we were the funders of last resort, and that was quite a big burden and we carried it for some and were unable to carry it for others. But now I think about if there’s a rainy day and we’re delayed by two years, and that two year burn that I just calculated for you is beyond the means of us, who else should I bring in? Or who else would be there to invest? And in a lot of those companies the answer is, well it’s not going to be another Venture group. It’s going to be a strategic. And for a strategic you have to carry the company longer to get it where it’s appetizing for a strategic, and the strategic process also doesn’t just take a couple of months. It could take a year. So you can start that process earlier. We’ve seen examples of those across our portfolio.

Harry Stebbings:

Why do you like regulated markets, and have there been some big lessons for you and scaling efficiently in these regulated markets?

Samir Kaul:

I don’t think I look for regulated markets. I think in healthcare and food, energy have just been regulated markets. I do think that the regulated markets tend to fit the pieces that we mentioned, which is they tend not to have had as much innovation, because people are scared of them and if you can enter those markets with a technology innovation, you can get in at a low valuation cost point. The markets tend to be pretty sticky because there’s not a lot of competition and you can have some of the great successes there. But they take a lot of guts, they take a lot of money and they take time. But some of the most successful companies in our portfolio have been in regulated markets, Square and the banking industry. Guardant and Oscar have been in the healthcare industry, Impossible Foods in the food industry. These are very, very regulated markets and they’ve been some of our biggest ones. They also form a natural barrier to entry. 

Harry Stebbings:

So the regulation is defensibility.

Samir Kaul:

Yeah. As much as it’s painful to get through, but once you do, you do.

Harry Stebbings:

What was one of the most formative moments and experiences for you as an investor? Does it stick out to you and how did it change how you think?

Samir Kaul:

It’s probably right when I started working with Noubar and Flagship. I was meeting Steve Quake who at that time, Steve is one of the legendary professors in biophysics. He’s now co-head of Chan Zuckerberg, was a Howard Hughes tenured professor at Stanford. When I met him, it was right after I left business school in 2002, and he was a professor, a junior professor at Caltech, and he had published a paper on single molecule sequencing, which would be ultimately what Illumina has done. At that point, Illumina was probably worth $300 million and now they’re worth $46 billion, and now everyone’s getting their genome sequence, et cetera. I know that wasn’t particularly Steve’s technology, but getting to meet someone like that. Steve and I are still very close friends. We’ve done three companies since, together, you can read a scientific paper, partner with a professor and then start a company. Then we started a company called Helicos that went public. And I was like, “this is what I want to do the rest of my life.” 

I was technical enough where I could get the credibility of the scientists and the professors and I had enough business acumen where I could help them commercialize. And I said, this is what I wanted for the rest of my life. And with Helicos we brought on Steve Chu as an early advisor, he’s a Nobel Laureate. When working with Vinod we did Gevo, which is a public company with Frances Arnold, who had just won the Nobel prize. We’ve done two or three companies with Shuji Nakamura who won the Nobel prize in physics, and at UC Santa Barbara, Pat Brown at Impossible. And there’s many more examples of this ability to partner with these world-class scientists right out of the university, just based on a published paper, and then build a company that goes public, build a company that sells burgers in every Burger King in the country. Like it started in 2002 with Helicos and I haven’t looked back since. It’s the most fun I have in this job.

Harry Stebbings:

Failure does happen, and in Venture, happens often. How do you think about learning through failure and when you think back on this, is there a moment that really sticks out to you?

Samir Kaul:

I’ve failed a lot. You could argue that the whole Cleantech sector was a failure. I’m proud of our portfolio there. We will end up positive, and there are a number of companies that are worth north of a few billion dollars that are making a real impact. But in the middle of that Cleantech bust, where companies were failing, there was no funding. It was just a mess. It was a dark point for me, personally. And I had to really do some real soul searching. I was like, am I even any good at this? Do I know what I’m doing? It’s just a human emotion, right? It’s easy to kind of brag about all your winners, but the reality is where you learn more and where you get better is when you really evaluate where you’re really bad at things and getting self-aware about that.

And so it was actually in that time, it sounds funny, but I read a book called, Eating Animals by Jonathan Safran Foer. Because I was pretty depressed. I was like, I can’t believe that in San Francisco with all this Venture backing, we can’t do anything about climate change and that no one cares. And we learned that consumers won’t pay more for power, consumers won’t pay more for fuel for their cars. And I’m like, I can’t believe this, are we really just going to let climate change go unabetted, and with all the money we’ve spent and technology, can’t make a difference there? And I read this book by Jonathan, and you learn in that book that animal farming is either equal or more bad for the environment than coal plants. And I was like, “Wow, that’s pretty interesting.” And then a Whole Foods opened up in our neighborhood in San Francisco and we’d shop there, and I noticed the clientele there, it wasn’t just rich venture capitalists or rich entrepreneurs or bankers or doctors, it was a whole swath of society who were paying double or triple the price for an organic mango versus a regular mango, or for some crazy kombucha thing, paying eight bucks a bottle.

And I was like, “Oh my goodness, I got it.” Animal farming is as important a thing to address as coal, and the consumer actually gives a shit about it and will pay more for it. We want everything to be cost neutral, but at least will give the company a chance to get to scale. Well, they’ll pay more for it. People will pay more for food, they’ll pay more for what they put in their bodies. They’ll certainly pay more for what they put in their kids’ bodies. And if we address this, it also has this massive impact on the environment, which was pretty much the main reason I left Flagship to move out to California and start Khosla Ventures. And from that came Impossible Foods, started with Pat in my office. All of these food companies, this was nine years ago, and my friends were like, “You’re crazy.”

Most of my friends that were doing Cleantech, God bless them all, have all moved on to do tech and  they’re doing enterprise and consumer. And that’s great. They’ve all done well, they’re smart and they’re having a lot of fun. And I remember this moment because my wife, we’re about to celebrate our 20th anniversary in June, she said, don’t give up on it.”We didn’t move out to California and make these sacrifices to just do what everyone else does. You need to stick with this. You’re passionate about the environment and you got to find a way and you will.” And this was an epiphany for me. And next thing you know, I went and we got Impossible. Nine years ago in our office we gave Pat the first 3 million bucks, we partnered on it and now the company’s, doing great. And we’ve done a bunch of other things with food, Ripple, NuTech and others as well. And then I started to go back to doing more healthcare investing where Guardant and Oscar and a number of other companies came out of. 

That moment was my darkest moment by far. A lot of anxiety, a lot of stress, a lot of self doubt led to where now everyone’s investing in food and everyone’s congratulating us on Impossible, which we still have work to do. But nonetheless, it’s been really exciting.

Harry Stebbings:

Was your wife’s statement reinforcing support that mitigated the self doubt? How did you get over self doubt? It’s something I often have the whole time.

Samir Kaul:

Being honest, it was. Obviously my wife’s support is the most important thing in the planet to me. I started to see a therapist, who I still see and I recommend to everybody. It’s a great thing to do. And I read a lot of books like, Eckhart Tolle’s Power of Now, which talks about living in the present and not thinking about the past and future. And meditating and making time for myself, exercising more. There’s not one answer unfortunately. But there are answers, and I think those things collectively come together. I have to remind myself, you still go into self doubt a lot. Keeping those things together and trying to be as regular as you can. That makes a big difference.

Harry Stebbings:

Well Samir, I’ve so enjoyed this. We’re moving into the quick fire round now. So, I say a short statement and then you give me your immediate thoughts. Are you ready to dive in?

Samir Kaul:

I’m ready.

Harry Stebbings:

Okay, so the favorite book and why? What must we be reading?

Samir Kaul:

There’s a book called, Start Something That Matters by Blake Mycoskie, who was a founder of Toms, which is just outstanding. I mean, I’ve mentioned Eating Animals and Power of Now. But I’d say that book talks about a guy who didn’t mean to start a big enterprise like Toms. They just wanted to make shoes. Who was in Argentina and saw shoes being made, thought you can make them in the United States. And contrary to everyone who he talked to, that no, for every shoe I sell I’m going to give one away. And people thought that was the dumbest business idea and it turned out to be the best business idea. Start Something That Matters. If you have a mission, you’ll create a movement and that’s really helped guide my thinking on the type of investing I want to do.

Harry Stebbings:

What’s the single biggest challenge of your role with Khosla today?

Samir Kaul:

We get so emotionally attached to our companies. It’s knowing when to shut them down and stop supporting them. It’s heart wrenching. That’s the toughest thing.

Harry Stebbings:

What do you know now that you wish you’d known at the start of your career in Venture 17 years ago?

Samir Kaul:

That you can only lose one time your money and that you can make infinite amounts. I would have taken even wilder bets earlier in my career.

Harry Stebbings:

When you look back at Khosla, what are you most proud of?

Samir Kaul:

Our desire to be, and sticking to, our mission of being bold, early and impactful in everything we do.

Harry Stebbings:

And then, final one. The most recent publicly announced investment. And why did you say yes and get so excited?

Samir Kaul:

The most recent one is a company called Lightship, which is doing direct to patient clinical trials. The biggest driver of cost and pharmaceutical companies, and why drug prices are so high, is that the trial process is so long and expensive. And if you can shorten the trial time, every day you shorten clinical trials, it’s $1 million that is saved to the healthcare system. Instead of having you go to Stanford or Berkeley, go to the hospital, wait in line, figure out where to go to participate in a clinical trial, they’ll do it all at your home. They’ll find you online, they’ll enroll you online, a really easy way, and they’ll do everything at home. And we think that’ll make clinical trials as much as 30 to 40% more efficient.

Harry Stebbings:

Samir, as you can tell, I’ve so enjoyed this. Totally broke the 20 minute rule, but it’s been such a pleasure and thank you so much for joining me today.

Samir Kaul:

Thank you for having me. It’s been great.