#107 - Vinod Khosla and Sam Altman

**Craig Cannon** (0:00)
Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Vinod Khosla and Sam Altman. Vinod is the founder of Khosla Ventures, a firm focused on assisting entrepreneurs to build impactful new energy and technology companies. Previously, he was the founding CEO of Sun Microsystems, where he pioneered open systems and commercial risk processors. You can find Vinod on Twitter at vkhosla, and Sam's on Twitter at sama.
All right, here we go.

**Sam Altman** (0:30)
My name is Sam. Today we're talking to Vinod Khosla. Vinod is the founder of Sun Microsystems and Khosla Ventures. He's been involved in the creation of dozens of billion dollar companies, and I think it's one of the most interesting thinkers that I've ever spoken to about how to build an ambitious company and team and everything else you need. So thank you for taking the time to talk to us today.

**Vinod Khosla** (0:51)
Great to talk about it.

**Sam Altman** (0:53)
I want to start with the very beginning and how to think about the idea and the mindset for a company.
One thing you've said before that I really love is that there's a huge difference between a zero million dollar company and a zero billion dollar company. And maybe you could start with just explaining what you mean by that.

**Vinod Khosla** (1:10)
To me, when you set out on a journey, your mindset determines who you bring on board, how you approach it, what you set up, what deals you do or which investors you've got.
In a zero revenue company, if you think zero million, you're thinking a certain way to tactically achieve a short-term goal. Zero billion dollars, you start building from day one the company and the people you'll need to build the company. One of the things people seldom realize when they're starting up, you don't ever plan what you're going to do. You build a plan to plan.
And who helps in that planning as you plan iteratively, as you evolve your strategy and your tactics. That team, which I call the kitchen cabinet of a company, is the essence of what your company will become. So one of my favorite tweets I like tweeting out is, a company becomes the people it hires, not the plan it makes. And that's grossly underappreciated.

**Sam Altman** (2:24)
And is the biggest difference between the zero million and the zero billion dollar company the initial people you hire in your experience?

**Vinod Khosla** (2:30)
It is the initial people you hire, but also how you approach the initial tactics. My other great analogy, if you have a large vision, you're climbing Mount Everest, it's never a straight line. Nobody's climbed Everest in a straight line. You get to base camp, you get to camp one, camp two, camp three, camp four.
If you get the right approach, you're obstinate about your vision, which is Mount Everest, but you're flexible about tactics as things change, as you zig and zag, when you pivot. These are all things on the way to staying with the vision. Now, you can also do the same tactics without worrying about the vision. And my big beef with a lot of investors is they want revenue, they want to meet plan, as opposed to collect assets for this larger ascent to Mount Everest. So you can clearly set up base camp where you get revenue, stability, cash flow break-even, the ability to raise more money in the wrong place. If your goal is to get to Everest, but you still get the revenue. You might have 20 million, 50 million, 100 million of revenue, but it doesn't help you get to Everest. Or you can take a little longer, a little harder, get to the base camp that lets you get the resources to keep the journey to your vision. There's a huge difference, and the team is the biggest difference, but there's also strategy differences.
By the way, investors, in my view, matter a lot in this, because you make short-term versus long-term trade-offs.

**Sam Altman** (4:17)
What percent of investors in Silicon Valley do you think are good long-term company builders?

**Vinod Khosla** (4:24)
As I get in a lot of trouble for saying this, I think 90% of investors add no value.
In my assessment, 70% of investors add negative value to a company. That means they're advising a company. This is part of team building, too, for entrepreneurs. They're advising a company when they haven't earned the right to advise an entrepreneur. So some of the junior people here, when they ask me, hey, at this other firm, young people are going on boards, can I be on a board? I say you haven't earned the right to advise an entrepreneur, so it's unfair to the entrepreneur.