What's Under Khosla Ventures' FinTech Hood?

Khosla Ventures is known to be one of the hottest FinTech investors in the US embracing promising ventures. The VC has a very interesting selection of FinTech players in the portfolio along with more than 200 other companies across segments. Khosla Ventures fuels companies at multiple stages including seed-, early-stage ventures, later-stage ventures, private equity, debt financing and post-IPO equity investments.

But aside from being the top VC and having a strong league of FinTech companies in a bag, let’s take a closer look at Khosla Ventures and its investment endeavors.

Segments that the VC firm is interested in are advertising, agriculture/food, big data, chemicals/fuels, consumer, education, efficiency, enterprise, financial services, health, materials, power, robotics, space, storage and transportation.

Khosla Ventures is quite a player across industries as we have been often spotting the firm mixed up in the hottest deals of the month and among corporate investors swarmed around some of the hottest AI companies. Vicarious is one example; the company is building a unified algorithmic architecture to achieve human-level intelligence in vision, language and motor control. Currently, the company is focused on visual perception problems, like recognition, segmentation, and scene parsing.

Khosla Ventures was among the investors that brought 21 Inc. to the top of the best-funded bitcoin companies in 2015.

Moreover, in February 2016, Khosla Ventures was spotted among the Oscar investors that have brought almost half a billion to the insurance company making it the most-funded one in February. Oscar is one of the hottest InsuranceTech companies disrupting a trillion-dollar insurance industry and Khosla Ventures is a one of the forces behind it.

Portfolio Segmentation

Let’s look at the structure of Khosla Ventures’ portfolio.

The biggest segment in Khosla Ventures’ portfolio is represented by consumer-focused companies – 23%. The second place is held by companies offering solutions for enterprises (21%). Health-focused companies represent 14% of the portfolio and financial services is accountable for 9%. Overall, Khosla Ventures counts 217 companies in its portfolio across segments.

Obviously, the most interesting ones for us are financial services companies.

Khosla Ventures’ Funds

Khosla Ventures has two funds dedicated to supporting disruptive players across segments – Seed Fund and Main Fund.

Seed Fund is dedicated to bright entrepreneurs with crazy ideas that may have a significant chance of working. The firm doesn’t even look for complete teams, Khosla Ventures is looking for good teams that are able to identify the key technology risks of their approach along with the possible economic and market benefits.

The Main Fund is focused on slightly more mature teams and is aimed for ventures with an understanding of capabilities of the underlying technology, what risks remain and what is done to mitigate them, as well as a production/go-to-market approach. Clear identification of the key success variables and missing pieces is important.

What Khosla Ventures is NOT interested in:

  • Revenue projections:

Anything related to revenue forecasting along with marketing plan is a shot in the dark. All forecasts are wrong (including ours). Instead, focus on your burn rate and your path toward achieving milestones rather than false precision at this stage.

  • User-base growth projections:

The most interesting part is not the user-base growth projection with impressive numbers, but the way a startup will acquire its initial batch of customers and how it will be able to keep them.

  • Copycats:

Khosla Ventures is not looking for another Twitter, Uber or Google. Instead, the firm wants to see the first in the field. We will keep an open mind, but another me too product with slightly better features is seldom our cup of tea.

  • Startups that have a complete business plan and looking only for funding:

KV emphasizes the understanding of how the firm can help and that an entrepreneur needs that help.

  • Startups looking to be acquired:

As the firm states, An acquisition is a reasonable outcome but a horrendous plan. We invest in entrepreneurs who want to build long-lasting, highly profitable public companies.

  • Licenses:

Proprietary technology and a license for such technology is a good thing but alone, it is not enough. We want you to be the sole owner of the underlying ability to develop new technology. We invest in companies that plan to build significant technology development expertise in-house, so they can stay at the cutting-edge and respond to dynamic markets and competition.

And the single most important thing… Knowing whose advice to take and on what topic is the single most important decision an entrepreneur can make. – Vinod Khosla