Khosla Ventures’ newest partner, Ben Ling, sits down with Paul Martino, a partner at Bullpen Capital, which co-produces Venture Shift. Ling has a Ph.D. in Computer Science from Stanford, and has held senior operating roles at Google, YouTube, and Facebook. Ling heads up Khosla Ventures' $400 million seed-stage program. It's a good job for him considering he's been doing a lot of angel investing prior to his role as a VC. Some investments include Path, Fab, Palantir, DogVacay, IndieGoGo, PracticeFusion, Pulse, Udemy, and more.
Paul: Hi guys, I wanna’ tell you a little bit about Ben’s background and I will bring him up here and we’re going to sit side by side and do some Q & A. Ben has really a phenomenal background. He’s got his Phd at Stanford back in the day . He worked at google in many roles including “checkout” he was the guy who brought out a lot of the ecommerce offerings to market. Worked closely with Mercy Myer, we’ll gonna get him some good questions about that in the Q&A. He was most recently the COO of Baidu and previously, he was also the Director of the Facebook platform, so really a guy whose worked it three or four of the most iconic companies that had been created in the past decade so with that, I wanna’ thank Ben please give him a round of applause and we’re gonna’ do some Q&A.
Ben: Hey, Paul.
Paul: Thank you, Ben.
Paul: All right, so I got about half dozen questions preprepared and we’re gonna’ throw it over the wolves here and see you guys wanna’ ask him.
Ben: That works.
Paul: Thanks again. So Ben you’ve made about 80 individual investments before you join Khosla so you’re obviously not new to the investing game, but tell me a little bit about what you think is gonna’ be most different now that investing is actually your day job versus being an operator which is where you were for the vast majority of your career.
Ben: You know what’s really interesting is that in the 6 weeks that I’ve been with Khosla, it’s been actually a lot more the same and the funny thing is I spent time with the team probably 3 to 4 months before joining them, and the 1st week that I showed up at the partner meeting, Samir said you know basically we gotten into agenda and we are already in the middle of discussion and Samir says, “Welcome Ben.” And then Vinod turns to me and says, “It feels like you’ve been here for months already.” And so the good thing is that at Khosla we are actually not so much like a standard Sandhill VV. We focus on two – it enabled me to do much more the same from an angel perspective which is one, work on really, really big problems with entrepreneurs and the second is, work with those talented entrepreneurs. We are not financial investors like other Standhill VC’s, we’re much more of the venture assistance model, which I’ll touch on.
Paul: Yeah, great! It’s actually a perfect reading. I mean, in many ways Khosla was one of the first funds to embrace this now en vogue. I think other people has copied this model, hey let’s go and get operating partners because that’s so great. I must say, Khosla was definitely one of the funds that was a pioneer in doing new and innovating things. So tell us what’s going on different. I don’t know if you noticed but Bullpen’s office is next door. We suffered through the 3 years of construction as your next door neighbor. We bugged you about that.
Ben: [crosstalk] Yeah, thank you for bearing that.
Paul: Anyway, I’m just saying, tell me what other innovative things are happening next door?
Ben: You know one of the key differences is that we think that the traditional board governance model of venture capital is broken , and so we used the term venture assistance. There are 4 different ways that we are different then other Standhill VC’s. The first is that, we are not financial investors. We focus on working on very, very big problems that impact the world. And so, if you look at our historical investment, we’ve done things in clean tech; we’ve done things in health; we do things in consumer. But we’re really focused on technologies and entrepreneurs that are working to change the world. So that was the first which is that, we’re less a financial investor as much – it’s more similar to Google for example than it is to a traditional Standhill VC, that’s the first thing. The second is that, we’re team based and instead of having a single partner that an entrepreneur works with and that’s the only touch point to the partnership, we’re very much team based.
And so when you worked with Khosla, you end up working with all of the partners. You get access to the Vinod for big vision thinking, you get access to me for product and engineering. You can go to market strategy, you can reach out to David. If you want a distribution strategy, you work with Keith. And so we’re very much of a team, we’re somewhat joking like a venture swarm, rather than a venture capital partner, that’s the second thing.
The third thing is that, we really don’t – we don’t like the board governance model. The board governance model, where there’s a venture capitalist that seats on the board and goes to the board meeting for like 6 to 8 hours and that the primary touch point with entrepreneurs. We don’t think that’s the right interaction model. We think the right interaction model is a regular checkins with the entrepreneur. We have these things which we call strategy reviews. Strategies and operation reviews that we worked with the entrepreneur on the key tactic and strategies that are key to their business. And they get access to all the partners during these reviews.
The fourth is that I guess, one of things that folks think about Khosla is that we like a lot of ownership in the company but we don’t run the company. What we prefer is a significant upside. If you think about it, if you are an entrepreneur and you are building a great company, do you prefer to own more or less of the company? And so we have a similar philosophy. If you are getting a team based approach, where there is team working with you, we’ll work with you on strategy and operations. We also like to work with you and have a large percentage of ownership but we are not here to run your company.
Paul: One and three go together and we’ve been saying this a lot in terms of new venture model. When your aren’t just a financial investor, and think about a different governance policy that works, you’re aren’t the former MBA, who’s seating there to go watch the investment. That’s not what your job is. To me, in many ways that’s the hallmark of what this new venture ecosystem is, you are there as a value added partner who’s there to actually solved the problem as supposed to watch the investment which when we were starting our first company, those are the only people available for us to go to
Ben: Yup, that’s right.
Paul: Last night, I looked through the 80 hundred company you’ve invested in. I just picked two random ones that stand out. Fab on one hand and Palentir on the other, couldn’t be two more different business models, couldn’t be two more different markets, couldn’t be two more different things; one is consumer with one is enterprise. So tell me about that dichotomy. Obviously when you’re thinking about an enterprise company versus when you’re thinking about a consumer company, what is the thought process looked like compare, why those two investments are both interesting?
Ben: Those two are actually very similar in two different ways. First is that they have great founders Jason at Fab and Alex at Palentir, they are both extraordinary founders. They are extremely bright, they are able to hire, they are able to recruit, they are able to evangelize their customers, so on and so forth. That’s one of the hallmarks that I look for as an angel investor and that we are also looking for at Khosla and the second is that, they are working at a very, very large markets that are right for the disruption. In Alex case, it’s an intelligence business and in Jason case, it’s the design market and if you look at this markets, they are huge multi-billion dollar industries, where tens of billions of dollars industries, and they are ripe for disruption. They are more similar along these lines than they are different.
Paul: The big investors fundamentally are people in market investors. I mean to some extent my opinion, Sequoia are the most successful time and time investor. They invest in market and they invest in people and I don’t think there’s any surprise. You heard what Mike Maple said when he was here on our – you were not here at that time but Mike talk about is, “Why start a small company, when you can start a big company. Why are you are wasting your time, if you can’t be a thunder lizard?” and the best entrepreneur are going to have that kind of philosophy.
Ben: That’s exactly right.
Paul: That’s great! So you and I overlap on a couple of investment. I was part of Keith’s mafia a few times as an angel before I started Bullpen. One the companies we’re in together is [inaudible] for example is doing very well.
Now that you are inside of Khosla and you see whole portfolio versus the 80 company you hand invested in. What are the one or two when you say, “Crap. this is so awesome! I’m in that company.” And it wasn’t what you did before right? It doesn’t count when you get the grandfather in, when you were the original investor in. You sit in that partner meeting and I can’t wait to get up-date on “blank” give me an idea what one of them might be?
Ben: Sure there’s a couple of really disruptive company that is disruptive company that I invested in and in that I would personally not invested in and they are the next generation food companies. And so, Hampton Creek is one example and they are basically beyond eggs. They are creating essentially an egg substitute that are made of plants and the idea is that eggs are used in a variety of ways in cooking for different purposes, sometimes it’s as a congealant; sometime to make it rise and sometimes for the taste. And so they are basically trying to figure the different chemical properties associated with eggs and reproduce it using plants. And so I think that’s a huge disruptive play. They are based in San Francisco and something that I probably would not invest personally but I think it’s extremely extraordinarily interesting.
Paul: That’s great, that’s great. The subhead of this conference Ben is “The Series A Crunch is on,” and obviously you are stage agnostic fund and you want to have a lot of ownership across the whole chain but there’s no question. There’s this imbalance between the number of guys who can get 500 grand and number of people who can get 5 million. What is your fund philosophy, what that means in terms of opportunities as the Series A kinda’ gold post, get move further and further back.
Ben: I’m not sure that’s it’s fair to say that series A go post get moved further back.
I think it’s fair to say though that, great teams working on large markets that have demonstrated tractions or have a clear plan to achieve traction still get funded. I’ve been investing personally for last past 4 years, and as a VC, was in the venture system for the last 5 to 6 weeks, but I see the same caliber, right? The companies that should get funded are getting funded.
Paul: It’s interesting, one of the counter arguments when Duncan Davidson put up the slide show on the venture cliff. One of the arguments is that the series A is flat like this, maybe that was the right number of people who funded all along and where the mistake got made, was the over investment in the seed for people who shouldn’t get the money to begin with?
Ben: That’s a reasonable hypothesis but there’s other views which is that it enables a of lot entrepreneur you have to be experimental and reach big and reach for their dreams. I think that is alternate hypothesis here too, perhaps you getting a high quality of entrepreneur. You are getting a bigger vision so on and so forth.
Paul: Interesting. So you did ecommerce, you’ve done dating at Baidu. I don’t know a lot of people in this audience know what Baidu is, but it’s one of the amazing growing company ever. The metrics are off the chart, you were the COO there. You’ve done dating, you’ve done ecommerce and you’ve done the facebook platform, what are you excited about next? Obviously, you told us this interesting story about the food. What the category, you’re sitting there Ben, I got to get into this category?
Ben: I think there’s two main categories. The first is data science, and if you think about a lot of problem in the world, if you have essentially all of the data, you could probably predict or answer all sorts of questions. So health is an example, if we have all the disease and symptoms and –