Billionaire venture capitalist Vinod Khosla
, one of the first Indian entrepreneurs to strike it big in the US, is known to take several off-the-beaten-track investment calls. He, in fact, doesn’t like to be called a VC investor — he prefers the title “venture assistant”, someone whose job is to help out promising businesses.
Khosla, an IIT-Delhi and Stanford alumnus who cofounded Sun Microsystems in 1982 and later started his own firm Khosla Ventures, doesn’t believe in attending board meetings, placing greater emphasis on one-to-ones with entrepreneurs.
An industry veteran, he has witnessed many technology and business shifts over the past three decades, but the 64-year-old has no immediate plans to hang up his boots. His company has made several bets in the clean-tech space and more recently, in biomedicine and robotics. Khosla Ventures’ recent successes include payments startups Square and Stripe and delivery firms Instacart and DoorDash. Khosla is also an investor in Impossible Foods, which serves up meatless burgers.
In a chat with TOI, he covered a range of topics, from the origins of the startup ecosystems in India and the US, regulation of the Big Tech companies and American politics to opportunities in artificial intelligence (AI).
You visit India every few years. What do you think of current startup ecosystem in India compared to its state four-five years ago?
It’s clearly getting more entrepreneurial. There are higher quality startups and I met about a dozen of them today. They are as good as Y Combinator startups that I see in the US. That’s encouraging. They are still mostly in the software domain and narrower areas, unlike in the US where we see very broad domains. This is why I was encouraging people to look at other areas such as food, 3D printing and manufacturing.
Look, this kind of ecosystem needs some successful entrepreneurs who can mentor the next generation. Then things get bigger and better. People like Sachin Bansal start companies again, then scale gets larger. India will do well as an entrepreneurial ecosystem, especially globally.
Do you think Flipkart exit was a pivotal moment for Indian startup ecosystem?
Flipkart would have been successful no matter what. But the exit created enough liquidity for people from Flipkart to start their own companies and invest in other startups. Or they can mentor people at other startups. Exits like Flipkart are pivotal in changing the mindset of entrepreneurs that we can build larger companies.
What are the areas where Indian ecosystem must catch up with China or US?
Fintech is very clear. There is Ant Financial in China, but there is nothing comparable to that in India. China has done well, and they are a little bit ahead of India in startups; whether it’s Alibaba, Tencent or Baidu, each has picked an area of its own. I am hopeful we will see that emerge in India too.
In fintech, Indian firms have faced unfavourable policies, and RBI has a conservative approach on issues such as cryptocurrency. What is regulators’ role in growing the ecosystem?
You know, regulators have a serious responsibility — they have to make sure fraud does not happen. But by and large, Indian regulators have been very open-minded compared to their counterparts in other parts of the world. Take for instance the Digital Sky initiative (for drone operators). Aadhaar was a good example, but UPI is even better one. Not enough startups have popped up to take advantage of UPI, payment systems or banking/new insurance. But I get the sense that regulators are working with startups in a good way.
Blockchain is the only area where we haven’t seen huge progress. And you know, blockchain had one disadvantage — all its use cases were illegal and so regulators naturally (were against it). All its uses were monetary. Non-monetary uses of blockchain are very valuable. Data privacy should be done in blockchain, so you don’t have to trust anybody. Nandan’s [Infosys chairman Nandan Nilekani] new effort around federated data is great. Setting new standards will enable a new set of entrepreneurs.
In digital infrastructure, India is ahead of many countries. Look at Aadhaar, UPI and Digital Sky; these government efforts make the scene more progressive. In the US, things are owned by a private corporation, whether it is Facebook for messaging or Google for search. So, setting up standards is a really good idea.
RBI’s stand on cryptocurrency has led to some startups shutting down…
I am supportive of the stand that the RBI has taken. I think Bitcoin’s use is mostly illegal. If you are going to have an orderly society, you can’t have money outside the system. But having blockchain-based services like privacy will be a great idea.
What is the mood in Silicon Valley? Many new firms, like Slack and Zoom, are getting listed, but there’s also the talk of regulating Big Tech.
The regulatory stuff does not impact startups; it gives them an advantage. Bigger technology companies have more constraints and anti-trust concerns. It may impact the buyout market, where big companies were acquiring startups.
Some US presidential candidates have proposed breaking up big companies.
As you know, politics is politics. You must take extreme positions to get noticed. On most policies, very few candidates are taking positions that they will carry through, like healthcare for all at a cost of trillions of dollars. And frankly, there are 20 of them, so they have to distinguish themselves. They will all move to the centre to take on Donald Trump.
How should anti-trust regulators in markets like India view the developments?
I think data privacy is an issue and steps are being taken; Indian regulators should keep an eye on that. Antitrust, I would let the world sort it out. India is a competitive market anyway, and no matter what area, foreign companies don’t do as well here as they do in other emerging markets. That’s because Indian entrepreneurs are pretty good and competitive. Tell me which telecom company can compete with Reliance Jio? They can’t, because of the bets Mukesh Ambani places.
Indian government’s tech policy talks about treating data as a public good, and data localisation. Is that the way forward?
Look, there are two things. One is what is fair and what you can get away with regulating. Outside the advertising model, data is still valuable, but not as valuable as people think. My view is that most of the artificial intelligence (AI) systems will need new kinds of data, and not old data. If you ask six-yearolds to learn what is a table, you don’t give them six million examples of a table. You give them three and they do a pretty good job of telling what is shaped like a table.
I am very confident that the next generation of AI systems won’t need huge amounts of data in the next five years. Privacy may still be an issue, but data I don’t know.
Some investors think India can take advantage of technology skillset in AI and machine learning, as it did during IT boom. What are the challenges on this front?
India has talent. There are two kinds of AI. One is researching and developing new techniques. And then there is applied AI, where I think Indian companies will do really well. You take Healthify, they are doing a pretty good job of applying AI. Research in AI is the domain of PhDs. I haven’t seen much activity in India where they may be developing new algorithms and looking at new domains.
In hyperlocal delivery space in the US, Khosla Ventures is an investor in DoorDash and Instacart. Is this segment the future of commerce? Swiggy and Zomato are burning a lot of capital here.
Both companies [Instacart and DoorDash] have very different trajectories and strategies. DoorDash can become very large; Instacart is in the specific area of groceries. There is a tendency in India to back the winner rather than multiple players. However, I don’t track the India market that closely.
DoorDash faced controversy over treatment of gig economy workers. What is the ideal way to deal with it?
Once a problem emerges, the next generation of solutions comes up. It is always an iterative process. Now that the problems have surfaced, startups are addressing them. Whoever treats workers better is going to get better workers. You will see a generation of startups working for hourly employees.
Any startup you regret not investing in?
Everyone wishes they had invested in Airbnb. We looked at them pretty late, in Series C.