Vinod Khosla's childhood in India instilled within him a set of priorities and morals that enabled his innate entrepreneurial spirit to reach its full potential in America. Khosla was born into an "officer caste," or caste, on January 28, 1955, as the son of an army officer. Though his father encouraged Vinod Khosla to enlist, Vinod Khosla dreamed of starting a Silicon Valley company at the age of fifteen. After he graduated from the Indian Institute of Technology, he encountered frustration in attempting to start an India-based company.
Khosla's zeal to work on the cutting edge of electronics marks his adult life. When he graduated from Stanford, he sent out 400 job applications only to small companies which started after 1976. Since he did not receive any job offers, he joined with Stanford business club partners in 1980 to start a computer-aided design software company named Daisy Networks. He moved on in 1981 when he realized the commercial potential of the computers manufactured and sold by Stanford graduate student Andreas Bechtolsheim. They brought in Stanford Business School classmate Scott McNealy and University of California computer specialist Bill Joy to start Sun Microsystems, and enlisted John Doerr of venture capital firm Kleiner, Perkins, Caufield, and Byers to provide startup funding. Though Khosla rose from chairman to CEO with his abilities to pick "great teams and come up with winning ideas", his "forceful" micromanagerial style supposedly lead Sun's board to cast him out in 1984. Parsimoniousness appears in the early adult Khosla: "'A typical anecdote: despite Sun's early and phenomenal success, Mr. Khosla wanted to buy only cheap Bic ballpoints to save on costs. '" Sun's $150 billion market capitalization in 2000 made it the largest Indian-founded corporation at that time.
After Khosla left Sun, he half-heartedly accepted an invitation from Doerr to join KPCB. Khosla worked part time for the first two years, and devoted himself to luxuriating in his wealth. Though he invested in long-term winners such as chipmaker Nexgen, which collaborates with Advanced Micro Devices to compete against Intel, "none of his early investments at KP were outstanding successes -- and three were among the most famous failures in Silicon Valley history".
His lack of overwhelming investment success and mounting disheartenment at the laggard pace of innovation brought him to leave Silicon Valley. Khosla "moved his family back to India [and worked] sporadically for KP over the next three years. 'I wanted my kids to know their parents, grandparents, cousins, and their culture. So we spent three years there before they got so old that their schools would be disrupted.'" Since he traveled between the Valley and India every six weeks, he would "'pick a topic and pick a book and by the time I got to India, I would be an expert in it'". His hours of reading and firsthand experience with India's weak communication infrastructure brought him to realize "'the importance of communications'". Khosla presciently "became convinced that Internet traffic would explode and there would be huge demand for bandwidth. He foresaw that demand would overwhelm the telephone companies' existing networks. For him, this meant funding new companies to develop new technologies." Khosla focused on building up the entire Internet infrastructure from connecting users to providing content.
His first blockbuster deal came in 1994, when he met six twenty-somethings who had created new technology to search very large databases. “Mr. Khosla told them they were on the wrong track altogether, that they should be thinking bigger. His suggestion: adapt their search engine for the Internet. He then handed them a $5,000 check on trust and told them to buy a hard drive big enough to test his theory.” When Microsoft bid $70 million for their company, then called Architext, Khosla persuaded the company’s founders to refuse the offer. At Home Corp. bought out their company, now known as the Web portal Excite, for $6.7 billion in 1999. Following his initial outlay into Excite, Khosla’s own ingenuity sparked another highly successful venture. His vision of encircling metropolitan areas with “rings of fiber-optic cables” to more efficiently transmit data led to the 1996 start of optical networking startup Cerent. Though Cerent had less than $50 million in revenues, their “microwave-sized box that could transfer 4 million phone calls per second from old copper telephone lines onto faster fiber-optic cables” brought Cisco Systems, Inc. to buy out Cerent for $8 billion. Khosla’s $8 million investment for a 30 % stake of Cerent returned $2.4 billion in three years.
Khosla’s sense of ethics and passion for technology lead him to coach his entrepreneurs. He works in his entrepeneurs’ interests in part by speaking directly and honestly to them out of his love for the companies in which he chooses to invest and his sense of obligation to investors. Though Khosla’s preference for “brutal honesty to hypocritical politeness any time of the day” strikes some as “arrogance and meddling,” he has never in 15 year voted against one of his company’s management teams even when he disagrees with a team. Entrepeneurs so highly regard the experience of working with Khosla that many collaborate with him again. Khosla parallels his role as “venture assistant” to raising a family: “Both are about relationships, about caring, and wanting to make a difference.” Not surprisingly, he sees his family role as more important than his entrepreneurial role. Khosla “makes a point of having dinner with his family 25 times a month,” and states that “I call my family my principal job and work my principal hobby, and I treat it that way. Family is priority one.”
On growing up in India: "'Frankly, the only people I knew when I was growing up were army people. You know how the army is. You don't even meet anybody in business.'" On the pace of business: "'To be ahead of the market you can't be a follower. You can't be following what is hot. You have to have your own belief system,' he says. 'But to me risk is a religion, and I think if you want to go after the big market, you need to take it. When we did Nexgen it was seen as a crazy idea to go up against Intel. [But] it fundamentally changed the pricing, performance, and dynamics of the microprocessor market'". Khosla has such creativity that one investment partner “tells companies in which Mr. Khosla invests to appoint ‘a senior vice president in charge of managing Vinod.’” How he keeps up-to-date: “First, I just read a lot -- more than most people. And I read basic science. I almost never go to the financial conferences. I go to the techie-nerdie conferences. I spend my time with engineers, learning. And so I sort of think all these really smart entrepreneurs with great technologies in their heads are really my teachers. They come and teach me a lot and I learn from them.”