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Vinod Khosla: An Investor Is an Employee You Can't Fire

By Vinod Khosla · Investing · 2 min read

Every piece of equity you give — the money you get is the smaller part of what you get. Advice and the right approach is the much more important part. An investor is an employee you can't fire. That's how you should think about it.

Key Points

The money is the smaller part — advice and the right approach matter much more
An investor is an employee you can't fire — all the same principles apply for picking them
Most investors are negative value add to ambitious companies — they want liquidity, not your vision

An investor is an employee who you can't fire. That's how you should think about it.

The Money Is the Smaller Part

Khosla: Every piece of equity you give — the money you get is the smaller part of what you get. Advice and the right approach is the much more important part.

There are investors who are happy with three times their money — in fact want to sell as soon as they can and make 3x, 4x. And then there are people who care about your vision, who understand the technological approach you're taking, and will be much more tolerant as things go wrong. Those are the factors I suggest people optimize for.

The money is the smaller part. Some investors want 3x and a quick exit. Others care about your vision and tolerate things going wrong.

An Employee You Can't Fire

Khosla: I think an investor is an employee who you can't fire. That's how you should think about it. Otherwise all the same principles apply.

How do you know if an investor truly cares about your vision? Talk to other founders — especially founders who've gone through a large vision and had hiccups along the way. When things go wrong along an ambitious path is when you can actually judge an investor.

An investor is an employee you can't fire. Judge them by what happens when things go wrong.

Most Investors Are Negative Value Add

Khosla: I get very frustrated with investors because they mostly detract from value. Most investors are negative value add to a company that's trying to be ambitious. If they're just trying to get to liquidity as soon as possible, there's plenty of investors who do that well.

Most investors are negative value add to a company that's trying to be ambitious.

Giant Vision Plus Step One, Two, Three

Khosla: Have I had founders where I say 'that's too ambitious'? That's never happened. What I've said is: that's ambitious, that's awesome — build the team for it. Now what is step one, two, and three? Let's be thoughtful about how you discover the risks on the path to the vision.

The only recipe I've ever seen work for making really impactful companies is both a giant vision and a good step one, two, and three. You have to have both. Neither without the other will work.

The only recipe: a giant vision and a good step one, two, three. Neither without the other works.