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September 24, 1999


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The Midas Touch

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Sonia Chopra Vinod khosla

Vinod Khosla dreamt of starting his own technology company when he was 15. Today, Khosla, 44, a mover and shaker, has the industry and the media following the projects he touches and turns into huge successes.

In a recent article, The Wall Street Journal said "Khosla has the hot hand in Silicon Valley right now."

Known as one of the most savvy of entrepreneurs in the business, Khosla's rise began with the creation of Sun Microsystems at 27.

He certainly made all the right moves to attain that goal. Enrolling at all the prestigious universities: The Indian Institute of Technology, Carnegie-Mellon University and then Stanford University, both for graduate studies.

After he graduated, he tried unsuccessfully to start a business in New Delhi, where he was born and raised. Then he founded Daisy Systems, followed by Microsystems until joining Kleiner Perkins in 1986.

Now, Khosla, a general partner at the luminary venture firm Kleiner Perkins Caufield & Byers, was the main reason for the success of Cerent Corp, a telecommunications-equipment start-up that was purchased by Cisco Systems Inc in a $ 6.9 billion deal announced two weeks ago. As Red Herring magazine noted in his latest endeavor he turned an $eight million investment into a $ 2 billion profit.

The deal apart from marking a phenomenal return on the initial investment is also an example of what the telecom industry is willing to pay for innovative technology.

Cerent was Khosla's concept that he developed it in 1996. He finally made it "a record purchase of a closely-held technology company," said The Wall Street Journal.

And that's not all he has on his resume. He was also a big part of starting Juniper Networks Inc, another maker of telecom gear, "whose shares have skyrocketed ever since the company went public in June," said the Journal. Other investments that went public this year include Viant and Extreme Networks. Yet another, Lightera, was acquired by Ciena.

He also backed Internet portal Excite Inc, which was acquired in May by At Home Corp for $&nsbp;6.7 billion. The Journal said the combination of these adds to Khosla having "a heck of a year."

Khosla has won accolades because of his ability to build companies. He plays an active role and is not satisfied to sit back and let others work the plans while he okays the progress.

Khosla likes to go big with one idea at a time.

In the case of Cerent, the idea was to make the rings of fiber-optic cables that encircle most metropolitan areas more efficient for carrying both telephone calls and computer traffic.

In other instances, he tries to help people with good ideas. A company called Excite approached Kleiner Perkins five years ago, seeking backing for new technology for searching databases. Eight other venture firms had turned them down.

Khosla gave the six founders $ 6,000 to buy a disk drive, then suggested they use their technique as a search tool for the then-emerging worldwide Web. He remained a mentor, cheering them on and always encouraging them to think bigger.

When Microsoft Corp offered to buy the company, then called Architext, in December 1995 for $ 70 million, he persuaded the founders to spurn the deal.

Maybe hindsight came easy to Khosla. Two decades ago, Khosla was a founder of Daisy Systems Corp., a maker of computers and software for computer-assisted engineering. Later, he helped found Sun Microsystems Inc, whose workstations drove down prices.

Khosla is never at a loss for ideas. He is plugged to new things emerging because he listens and pays attention to new things.

Ever since joining Kleiner Perkins in 1986, Khosla has played key roles in starting companies that are involved in multimedia, semiconductors, video games, Internet software and computer networking. Khosla, obviously has a plan for the next new thing -- application service providers, companies that run corporate software programs as a service over the Internet. Khosla was so impressed by the potential of this category that he incubated two companies, Corio and Asera. He is the chairman of both firms.

There has been at least one time that Khosla had been wrong. He backed 3DO Co, a game-maker whose shares now sell for a fraction of the initial offering price in 1993.

Khosla believes in closeness in family. He has four children. He makes it a point to see them everyday. His rules for life include having breakfast and dinner with his family.

"I don't take risks with anything in life after my children," Khosla said. He attributes his success to hard work, entrepreneurial spirit, and good luck.

He shares this story: Back in 1996, while working with Juniper Network on the company's strategy for better Internet routers, he saw the possibilities for the related market by renovating an old fashioned protocol, Synchronous Optical Networking (SONet). Khosla was sure that this standard technology could perhaps be repurposed to create an IP services platform over fiber-optic cables.

"I saw the possibilities," said Khosla modestly.

Khosla had deep faith in this concept. So, he spent some time doing his own research and a year later he invested $200,000 into a team he created to investigate the idea. Later, it kicked in an unusually high 30 per cent investment, and Cerent was born.

While capitalists are often credited with funding some of the best ideas ever pitched in Silicon Valley, conceptualizing the idea for a start-up is an altogether different, and remarkable feat, said Red Herring magazine. "It is a true testament to the talents of maybe a handful of venture capitalists and Khosla is one of the great," it said.

Khosla believes hands-on experience is a must for venture capitalists before starting out.

"A lot of guys who've never started a company, have no operating experience. And they think investing will make them rich," Khosla said in an interview. "That is not how it works. You have to get your hands dirty, get into the nitty-gritty grime and dirty stuff yourself."

In his new venture, Khosla's turn-key web sites for corporations will offer extranets with password-protected, personalized information to business customers. Called Asera, which means "fast" in Latin, the sites formally opened three weeks ago, after receiving $10 million in funding.

Khosla's vision is to duplicate and improve upon a web-based business-to-business transaction model invented by Cisco for in-house use. The company has spent $50 million developing the site in 1995.

He was so impressed with Cisco's efficient means of communicating with business partners over the web that he asked Cisco's Chief Information Officer Pete Solvik to share the secret of the design. Not only did Solvik assist Asera's extranet design but he also invested his own money in Asera.

The design is supposed to allow Asera to "Cisco-ize and Dell-ize" the rest of the world. Analysts agree that with Khosla's track record, it is definitely worth keeping an eye on.

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