Venture Capitalist: Vinod Khosla

I have promised to feature some venture capitalists who are taking real risks and creating new jobs and businesses. This is in stark contrast to private equity and hedge funders who are playing Ponzi games or, given cheap capital, making sure thing leveraged buyouts of marginal beneficial impact to the economy. My first choice is the often controversial but also undoubtedly successful Vinod Khosla originally a founder  with Daisy System sand  Sun Microsystems. Hee later became a partner at Kleiner, Perkins, Caufield & Byers. There he helped bring to market such companies  as Juniper, Bay Networks and Cerant among others . In 2005 he started his own venture capital firm, Khosla Ventures.

What distinguishes Khosla from the formul-following private equity firms are two clear characteristics. First,  his willingness to bring new ideas and firms from start-up to full marketcontributing both capital and managerial skills to the new venture. In contrast, the private equity firms are out to loot the realtively strong balance sheets of their takeover targets.   Second is Vinod’s  willingness to venture his own money with the inherent high risks in markets  that can change rapidly with new feature and process innovations.  Again, in contrast none of the private equity firms exposed to financial capital markets seizing up – were willing to risk any moneys – not even  simple top-ups when the Treasury Secretary and Fed came calling . In short Vinod style Venture Capital is a world away from the sure-money approach taken by financial private equity and hedge fund firms.

It is interesting to note that the current Khosla  ventures are heavily outside of the Internet and computing technology fields of his previous successes and are now aimed at alternative energy and medical breakthru fields. It is also interesting to see the distinctive point of view that the man brings to the market – and some of the major  players. Now this is the type of capitalism that America is famous for – brought to you courtesy of an India-born American venturer.

It is this type of venture capital that is going to be needed over  the next two decades as the Energy Crisis is replaced by the Freshwater Shortage and then the Food Provision Dilemma  and the almost certainty of the need to rein-in  rising health costs. Perhaps this type of venture capital should be rewarded with lower capital gains tax rates for first sales of stocks  depending on the number of net  new jobs created by the venture. The government benefits because for every 1% of one time capital gains lost it has  two hundred new taxpayers creating a revenue stream hopefully for decades. Maybe one could raise the capital gains tax rate  for LOB takeovers to make up any other shortfalls.

Whatever the case, the US and the World is going to need more Khosla type venture capital, not the “for-our-own-gain” financial machinations of private equity and hedge funders.

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