Jan 13, 2020 · 37m · 20vc
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
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20VC, Khosla Ventures Founding Partner Samir Kaul discusses his journey into venture capital, his core philosophy of prioritizing technical risk over market risk, and Khosla's unique methodologies for deal evaluation, valuation, and portfolio governance.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 29.9% of the talking time here. How this is scored →
Harry as informed peer 3.4 Guest teaching 3.6 Guest disagreement 1.6 Harry pushing back 1.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 6:37 Rejecting investor conservatism
Samir directly challenges Josh Kopelman's belief that market downturns should make VCs more conservative, arguing that venture success depends on taking radical technical risk.
Hardest push from Harry ▶ 23:24 Challenging the risk of carrying tech-heavy startupsHarry pushes back against Samir's preference for pure technical risk over market risk, questioning if carrying delayed deeptech startups personally isn't financially dangerous.
Biggest teaching moment ▶ 11:26 Explaining why pro rata is a cop-outSamir reframes standard follow-on logic, using a blackjack doubling-down analogy to demonstrate why blindly executing pro rata rights without re-evaluating risk is mathematically flawed.
Harry holds his own ▶ 13:50 Citing Peter Fenton on valuation trapsHarry demonstrates deep industry expertise by quoting Peter Fenton's advice on price sensitivity to challenge Samir's perspective on early-stage valuations.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Samir Kaul's Unconventional Path to Venture Capital | 1 | 2 | 0 | 0 | Samir outlines his career transition from academic genomics research with Craig Venter to Harvard Business School, Flagship Ventures, and co-founding Khosla Ventures. Harry asks standard introductory questions without challenging the narrative or offering expert commentary. | |
| Navigating Market Cycles and Radical Risk-Taking | 4 | 4 | 4 | 3 | Harry cites Josh Kopelman's thesis that market busts make VCs more conservative, prompting Samir to directly disagree and explain that venture returns require taking radical technical risk. Harry shows strong host preparation by injecting a notable peer's framework. | |
| Option Value Investing, Partner Vetoes, and Follow-On Strategy | 3 | 5 | 4 | 2 | Samir rejects standard industry practices by calling pro rata follow-ons a cop-out and explaining why Khosla avoids partner vetoes. Harry asks detailed follow-up questions regarding capital allocation mechanics and stack ranking. | |
| Evaluating Price Sensitivity and Early-Stage Valuations | 5 | 3 | 1 | 3 | Harry quotes Peter Fenton's advice regarding price sensitivity trap in early-stage deals, displaying strong domain context. Samir agrees, citing their early $30M valuation check for Square as an example of valuation irrelevance in mega-winners. | |
| Portfolio Time Allocation and Governance on Boards | 5 | 4 | 3 | 3 | Harry uses background research showing Samir's 3,000+ board hours to question how VCs give feedback without overpowering founders. Samir reframes how CEOs should evaluate board input, warning against both blind obedience and frivolous disregard. | |
| Embracing Technical Risk Over Market Risk in Regulated Sectors | 4 | 4 | 1 | 3 | Harry challenges the idea of taking technical risk over market risk, asking if carrying capital-intensive companies through long delays is dangerous. Samir validates the concern using the historical cleantech collapse while explaining how regulated markets offer defensibility. | |
| Formative Experiences, Overcoming Clean Tech Setbacks, and Impossible Foods | 3 | 4 | 0 | 1 | Samir shares an intimate account of personal self-doubt following the cleantech bust and how reading Eating Animals led to founding Impossible Foods. Harry facilitates a vulnerable discussion on overcoming failure. | |
| Quickfire Round: Books, Challenges, and Outsized Bets | 2 | 3 | 0 | 0 | In the quickfire section, Samir highlights downside capping versus infinite upside as his key career takeaway. Harry keeps a brisk pace to close out the episode. |
Statements from this episode (17)
Kaul: VCs are judged on net returns above 20% IRR, not win rates
“In this business, being conservative is a real problem, because 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 we invest in.”
Khosla Ventures allocates one-third of capital to non-traditional tech sectors
“And I think 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…”
Khosla Ventures has never had a partner deal veto in 17 years
“In my 17 years being here, I can't remember a veto. We don't really even have a number for a veto.”
Samir Kaul: Exercising default pro rata rights is a total cop-out
“So to me, I think pro rata is a total cop-out.”
Samir Kaul: Double down aggressively when positive startup signals emerge
“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've got to really push your chips to the table and have the courage to do that.”
Khosla Ventures invested in Square's Series A at a $30M valuation
“You know, I think when we invested in the Series A of Square, I think it was around a thirty million dollar valuation. It was Jack and Jim in a PowerPoint.”
Founders should start board meetings with one slide on key concerns
“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 toget…”
Kaul: A CEO who blindly follows board advice is unfit for the role
“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.”
Fully loaded deep tech R&D costs $250,000 per scientist annually
“R&D is 250 K fully loaded per scientist, per engineer, per year.”
Venture capitalists fleeing the sector killed the early cleantech industry
“It's what really killed the cleantech industry. And there are a lot of reasons, but one of the reasons was that all my fellow brethren in the venture industry ran for the hills.”
Kaul: Khosla's biggest wins came from regulated sectors like healthcare and food
“Square is in the banking industry. Gardent and Oscar have been in the healthcare industry. Impossible Foods is in the food industry. These are, you know, very, very regulated markets, and they've been some of our biggest wins.”
Khosla Ventures' cleantech portfolio will generate a positive overall return
“We will end up positive, and there's a number of companies that are worth north of a few billion dollars there that are making real impacts.”
Kaul: Consumers refuse to pay price premiums for green energy or fuel
“And we learned that consumers won't pay more for power. Consumers won't pay more for fuel for their cars.”
Kaul: Consumers will pay premium prices for healthier food and alternative protein
“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 kid's body.”
Khosla Ventures provided Impossible Foods' initial $3M seed check
“Nine years ago in our office, we gave Pat the first three million bucks.”