Session Moderator:
Moderates the transition between sessions, ensuring all attendees have voted and are settled. Requests attendees from a previous session to join the current one.

Vinod Khosla Introduction:
A renowned serial entrepreneur and venture capitalist with a passion for technology and global issues. Expertise spans various sectors of technology.

Eric Savitz Introduction:
An accomplished journalist with extensive experience at Barron’s. Currently heads the San Francisco Bureau at Forbes.

Fireside Chat Announcement:
Vinod Khosla and Eric Savitz will engage in a fireside chat about the current landscape of Silicon Valley, venture capital, and global developments. The moderator expresses excitement and gratitude for the opportunity to host this conversation.

Concerns about a Venture Capital Bubble: Recent Web 2.0 IPOs are trading below their IPO prices. Valuations in the private market appear to be higher than in the public market. Assessing the Bubble: Vinod Khosla emphasizes the irrelevance of stock prices in the internet bubble, focusing on actual usage and user engagement. Wall Street’s movements should be ignored. Addressing Private Valuations: Smart venture firms avoid chasing other people’s valuations. Entrepreneurs should choose their investors carefully, prioritizing chemistry and potential for support over valuations. Stretching valuations can lead to problems in subsequent rounds and demoralize employees. Choosing the Right Investors: Opt for venture investors who are a good cultural fit. Strive for reasonable valuations that benefit all parties involved. Avoid getting ahead of the curve, and ensure every funding round feels good to everyone. Managing High Valuations: In cases of excessive offers, advise entrepreneurs to decline even if it means foregoing free money. Retroactively adjust valuations if necessary to ensure fairness. Long-term success is more important than short-term valuation maximization. Venture Capital Excess and Its End: There has been an overabundance of venture capital, which is now coming to an end. Venture firms that chased valuations without due diligence are struggling to raise more money. Terminology in Venture Capital: Avoid calling investments “deals,” as it implies a buy-sell transaction rather than a partnership with entrepreneurs.

Overview:
Vinod Khosla, a renowned Silicon Valley venture capitalist, shares his perspectives on the current state of venture capital and its implications for startups.

Venture Capital Landscape:
The overabundance of venture capital in the past has led to overbidding and poor performance among venture funds. As a result, the availability of venture capital has slowed down. Venture funds prioritize fee collection over company growth, which conflicts with entrepreneurs’ goals.

Strategies for Entrepreneurs:
Entrepreneurs should focus on raising smaller rounds and conserving capital to minimize dilution. This approach ensures that startups go further with less funding, which is counter to most VC firms’ objectives. Entrepreneurs should be cautious in their spending and prioritize building a solid business model before seeking large investments.

Impact of Capital Availability on Startups:
Despite the slowdown in venture capital, it remains a favorable time for startups. Startups can achieve significant progress with minimal capital, leveraging services like Amazon S3. Optimizing resource allocation allows startups to minimize cash expenses and extend their runway.

Success with Limited Funding:
Examples of successful startups that thrived on limited funding are highlighted. With careful planning and resourcefulness, startups can achieve key milestones without significant capital.

Importance of Limited Funding for Entrepreneurs:
Vinod Khosla believes that raising limited funding is advantageous for startup success. Entrepreneurs with less funding spend more time testing assumptions before expanding.

Case Study: Instagram’s Success with Smaller Initial Funding:
Instagram obtained initial funding despite lacking a business model or traction. Khosla highlights that their subsequent success allowed them to secure more funding later.

Counterintuitive Insight: Success Rates and Initial Funding:
Khosla’s analysis suggests that companies that receive less than $2 million in initial funding have a higher probability of success. He emphasizes the significance of testing assumptions with limited resources.

Detailed Analysis of Investment Returns:
Khosla shares his analysis of investment returns at Kleiner Perkins. The study revealed that lower initial investments ($2 million or less) yielded higher absolute returns compared to higher initial investments ($10 million or more).

Reasoning Behind Lower Initial Investment Success:
Smaller initial investments require more collaboration with entrepreneurs to refine their business plans. With larger investments, entrepreneurs tend to rely on a presumed business plan and conduct less testing.

Crowdsourcing through Platforms like Kickstarter:
Khosla views crowdsourcing platforms positively, as they enable more experimentation and appeal directly to end users. These platforms offer an alternative funding source for entrepreneurs who may struggle to secure traditional funding.

The Dual Challenges for Entrepreneurs:
Khosla highlights two primary challenges for entrepreneurs: choosing the right team and deciding whose advice to trust. He emphasizes the importance of seeking advice from qualified individuals with relevant expertise.

Trusting the Right Advisors:
Khosla advises entrepreneurs to be discerning when seeking advice. It is essential to consider the qualifications and expertise of the individuals offering advice.

Avoiding the Pitfalls of Ad-hoc Advice:
Khosla discourages providing ad-hoc advice without fully understanding the strengths and weaknesses of the entrepreneur and their venture. Encouraging entrepreneurs to treat advice as impressions, emphasizing the need for caution when considering unsolicited advice.

Khosla’s Ongoing Commitment to Supporting Entrepreneurs:
Khosla reiterates his passion for guiding entrepreneurs and providing valuable advice. He acknowledges the importance of seeking advice from qualified sources and encourages entrepreneurs to approach him for guidance.

Successful Fund Raising:
Despite market challenges, Vinod Khosla raised a billion-dollar fund, highlighting the importance of solid performance. Investors were impressed enough to subscribe without a prospectus, showcasing their trust in Khosla’s track record.

Long-Term Value Creation:
Khosla emphasizes the significance of long-term, sustainable value creation over short-term market fluctuations. He cites Facebook’s growth as an example of enduring value, despite its ups and downs.

Mark Zuckerberg’s Vision and Determination:
Khosla lauds Zuckerberg’s unwavering belief in his mission, rejecting lucrative offers to cash out early. Zuckerberg’s conviction led to the creation of something significant, benefiting millions of users.

Courageous Decisions Made with Conviction:
Zuckerberg’s decision to open up Facebook’s data demonstrated courage and conviction in his beliefs. These choices were driven by a desire to create value, despite the potential risks and uncertainties.

Resilience in the Face of Criticism:
Zuckerberg faced constant criticism and negative coverage throughout his journey. Despite this, he remained steadfast in his vision, ultimately leading to Facebook’s overwhelming success.

Short-term profits vs. Long-term value:
Khosla emphasizes that he doesn’t focus on short-term gains or stock prices. He believes in investing in companies that are building something substantial for the long term.

Undervalued sectors:
Khosla mentions that clean technology has been a phenomenal area for his firm, despite depressed prices. He highlights a public company valued near a billion dollars, in which his firm owns more than 50%.

Focus on fundamentals:
Khosla stresses the importance of focusing on the fundamentals of a company, rather than stock prices. He cites examples of companies that have raised significant funding in the past six months.

Courage to invest in unpopular sectors:
Khosla demonstrates the courage to invest in unpopular sectors like clean technology, even when it’s out of fashion. He highlights recent investments in two new solar companies.

Advice to entrepreneurs:
Khosla advises entrepreneurs to focus on what they believe in and have the courage of their convictions.

Hiring partners:
Khosla explains that hiring partners is the hardest thing to do in the venture business. He emphasizes that the best person should be chosen, regardless of gender or race. He mentions that he has interviewed numerous candidates but only found two suitable partners in the last five years.

Bias against women in venture capital:
Khosla addresses the issue of bias against women in the venture capital industry. He strongly refutes the claim that there is a bias against women at Kleiner Perkins, where he previously worked for 20 years. He expresses his admiration for John Doerr and Bing Gordon, stating that they would never discriminate against women.

Healthcare Innovations:
Khosla highlights the EKG machine “AliveCore,” which can be integrated into an iPhone case for convenient heart health monitoring. “Dermatology instruments” for remote diagnosis and monitoring enhance healthcare accessibility.

Big Data for Data-Driven Insights:
“IASTI,” a company focused on data analysis, helps identify interesting questions from existing public data sets, uncovering hidden insights.

Agriculture Transformation:
Khosla invests in agriculture startups, including a “real-time measurement” system that optimizes nutrient distribution in soil. Innovations in salt production, ground beef, cheese, and even eggs demonstrate technology’s impact on diverse food industries.

Candy Reinvention:
Disrupting the candy industry, Khosla’s investment in a competitor to top brands aims to create healthier, tastier alternatives with 50% less sugar and no artificial ingredients.

Battery Advancements:
Khosla emphasizes various battery investments, including compressed air-powered batteries and a “quantum thingamajig battery” that exploits novel physics phenomena.

* Innovation and Reinvention:
Khosla sees vast potential for innovation, particularly in industries like healthcare, agriculture, and education. He predicts that within the next decade, smartphones equipped with advanced technologies will outdo 80% of tasks currently performed by doctors and teachers.

* The Importance of Failure:
Khosla emphasizes the value of failure as a means of learning and taking risks, which are essential for progress and innovation. According to him, avoiding failure indicates an unwillingness to try new things or take risks.

* Lean Entrepreneurship:
Khosla recommends raising a small amount of money in the initial phase to encourage experimenting and learning quickly through failure. In his opinion, this approach is better than securing a large sum and risking poor resource management and slow learning.

* Adaptability and Flexibility:
Khosla advocates for a clear, long-term vision combined with highly flexible tactics that allow for quick testing, adaptation, and changes according to the changing environment.

* Advice for Entrepreneurs:
Khosla advises entrepreneurs to email their business plans directly to him, assuring that they will all be reviewed and responded to. He recommends Entrepreneurs to utilize the resources on Kleiner Perkins’ website for guidance on presentation skills to investors.

Most Likely to Succeed Awards:
Life Sciences: Avena Next Generation Internet 1: Noodle Next Generation Internet 2: Social IQ Technology 1: Kiverdi Technology 2: ZipZap Mobile: ClickX

Special Prize:

Steve Blank’s book to all winners

Sponsors:

Global Media Strategy Communications Leadformix Sandhill Angels Angels Forum Venture Deal Enterprise Island

Mentoring Session:

Carol Sands, managing member of the Angels Forum

Enterprise Island:

Several companies have already set up follow-up sessions

SV Forum 2012:
The event was a success, and the organizers look forward to seeing everyone again next year