Khosla Ventures and angel investing | Ben Ling

So talk to us about after Facebook. What did you end up doing after Facebook?

So I was at YouTube for a couple years. I ran partnerships and platform there. And then I was back at main campus running search products with Marissa for a couple years there.

Oh, so you actually went back to— from Facebook back to Google?

Yeah, they recruited me back. Yeah.

Wow, you can run, you can't hide. And now you are at Khosla.

That's right.

Yeah, maybe talk to us about the transition there. How did you think about that, and how did it happen? Did you go to the bar again?

Yeah, well, no, I had invested personally for about 4 years prior to joining Khosla Ventures in a variety of companies, and I really liked investing. I liked working with entrepreneurs who were looking to shape the future of the world. And I thought it was fun and interesting. And so when the time came, I looked at a couple of different firms, spent time with Vinod. I've known Keith for many, many years, and I liked the guys there and their approach. And so that's how I decided to join in 2013.

And there's certainly some similarities in Khosla's approach and the Draper approach, sort of bet on big things and work with entrepreneurs. So maybe tell us a little bit about your— when you were an angel, what kind of— what were you looking for? Were you sector-focused? Were you people-focused?

No, it was 2 things. It was like the first is a large space, something that will be a large space in many years. So it doesn't have to be a large space right now, but it's a market that will be very large in the future. And then the second is great entrepreneurs. And that's sort of more like of a gut and interviewing type of interaction.

And what is the biggest— couldn't agree more. What is the biggest risk you see in taking that approach? Have you—

Well, the biggest risk is that you're betting on people that are relatively unknown. And so that is also the biggest upside because they're not well known. And so that's where you can get disproportionate gains because You're willing to make the bet and others may not be willing to.

Yeah, before I came to Draper University, the idea of you don't know what you don't know is a bad thing, but now sort of you don't know what you don't know is a good thing because some things didn't work 10 years ago. You almost don't want the entrepreneur to have that scar, and you just want them to try it again. It could work.

I think it depends on the business. There's some businesses for which it doesn't matter, and there's other businesses for which it really matters. But having the naivete to believe that those known problems would— the problems that are known to others but not yet known to the entrepreneur can be easily conquered is a good thing, because sometimes they can be easily conquered because of a shift in landscape of consumer behavior or regulation.

Right, or certain infrastructure costs going down.

Absolutely.

Investments from your angel investing portfolio you want to highlight that maybe exemplifies some of the things you were looking for? Like 5, 10 years ago, you were looking at a company that the market didn't exist, you invested, and 5, 10 years later, it actually did happen? Anything comes to mind?

Sure, I can give you a couple of examples. One of the prominent examples, I think— so right before I joined KV, I invested in Zenefits.

Mm-hmm.

So Parker was known to be a very, very smart individual, and I liked him a lot. And you knew that he worked extremely, extremely hard, and he knew a lot about this space. And so I thought Parker was an excellent entrepreneur, and I continue to believe that. And so I invested. I was one of the first investors in the company. And I think that he has done a phenomenal job of driving Zenefits to that space, to the growth rate that it achieved. There were some things that went askew and went off the skids a little bit there, and David's doing a great job there now. But that's an example of an early bet on an entrepreneur, and the space really did—

Yeah, certainly 10 years ago, this SaaS HR space wasn't, you know, you think of it as big companies, right? I mean, who, you wouldn't use a startup. But today, certainly, it's, there are many more clones out there.

Right.

It's a real space. So now you're part of a, you know, great institution. Does that change the way you look for entrepreneurs or investing?

Yeah, I think it's a different bar and it's a different approach. I do mostly Series C and A and B, but mostly A. And so at the A, we're looking for product-market fit, and we're looking for the potential for it to be a really, really large company. So not just a billion-dollar company, but hopefully a $10 billion company with high option value. So even if the base business becomes a billion-dollar company, we want there to be future option value of an Everest business of a $10 billion company. Okay.

And at that series, I mean, as an angel investment, you don't ever think about downside protection, but at Series A, do you start thinking about if it doesn't work, there is a downside? How do you think about that? Or do you at all?

I wouldn't say that it's not a consideration, but that's not the primary consideration. Primary consideration is the potential upside. I mean, because that's how the industry and the business works. Right.

I'll ask this one last question, then you guys feel free to— if you have questions, feel free to queue up. Do we have a mic? Oh, good. So here, I'll let you man the queue. Be the moderator. What advice or caution would you give to this group? And I think most of— we probably have 2 types of students, one type looking to start a business, raise money, another type may not be quite ready, they may wanna work for venture-backed startups. Perhaps you could give them some advice on what to do or what not to do for both of those scenarios. So if you were a, you know, going back to the YouTube days or Google days, if you were a hiring manager, what were you looking for? And what are some of the pitfalls? And now as an investor, an angel investor, what would you be looking for and what would you caution against?

Okay, so let's split that up. So if you were to join a company rather than start a company today, I think it's very important to analyze 2 things. The first is the prospects of the company. And how much trajectory— how its trajectory is, and then how big it can actually become. So, it's similar from taking an investment standpoint, because you're investing your life, you're investing your time. And so, it's important to know what this company is going to do and where it's gonna be in 3 or 5 years. Not where it is right now, but where it's going to be in 3 to 5 years, presumably with some of your help. You're not gonna be the only person there, obviously, but you may be able to help the trajectory of the company. It's important to know what the trajectory of that company is. That's one. And the second is who the manager is that you're going to be working for. Because if you're able to work with a great manager who can mentor you, and you can learn an order of magnitude more in an order of magnitude less time if you find the right people who are willing to mentor you. And I think that in the early stages of the career are super important because your skills and advantages compound over time. So you can advance faster, and when you advance faster, then you learn more, and then when you learn more, then you advance faster. And so it's disproportionately to your advantage to do that. If you were to start a company, I think it's important to sort of think about the 2 types of companies that you might start. And I'll sort of bucket them into venture-backed companies and then non-venture-backed companies. So I'll start with the second first, because people generally don't talk about this. There's a lot of— in Silicon Valley, folks somehow People somehow believe that the only way to go is big or bust. So it's like, I have to have a venture-backed business, it has to be a billion-dollar company, or nothing at all. And that's further from the truth, that's anything that's further than the truth. Because there's many, many great lifestyle businesses. And I hear people say, oh, lifestyle business, that sounds like a really bad thing. But there are many lifestyle businesses that can generate $5, $10 million in revenue a year. They may never become venture-backed businesses. But if they generate $5, $10 million a year, and you're running it with a team of 20, 30 people, and you're the founder, you own 50%, 10%, you generate $2.5, $5 million, $10 million a year. That is not bad. And there's clearly businesses that are in that category. They're not venture-backed businesses, and so you shouldn't raise venture capital. You may wanna have some friends and family, some angels, but you don't necessarily want venture money backing you, because then they try to push you to become much, much larger. And when you push to become much, much larger, sometimes you just bust. versus having a really nice sort of business. And then the other side is the venture-backed business, and that's— it has to be a really big opportunity, has to be a billion-dollar company, or has the potential to be a billion-dollar company or more. And so I think folks are pretty familiar with that. And for there, I think choosing the right space and really testing product-market fit are obviously very, very important.

Thank you.