The Most Successful VC Isn't Who You Think
By Melanie Warner

(FORTUNE Magazine) – Five years ago, if you had asked people to name the Valley's top ten venture capitalists, Vinod Khosla probably wouldn't have made the list.

After several missteps in the early '90s (anyone remember DigitalFX or OnLive Technologies?), Khosla, a partner at Kleiner Perkins, has forged a reputation as the best backer of network-equipment manufacturers. His investments have been so lucrative that Khosla now holds the unofficial distinction of being the most successful venture capitalist of all time. Several of his fellow VCs believe that Khosla has made more money for his firm than any other of their brethren--even beating his legendary and flashier partner John Doerr. A perusal of SEC filings bears this out: In the past year and a half KP has raked in more than $16 billion in returns from Khosla's deals. Of that, Khosla and his ten partners make 30%, or almost $5 billion--not bad for a few years' work.

Khosla's formula for success is uncomplicated: He championed geeky network infrastructure startups when B2C and B2B companies were all the rage because he recognized that demand for Internet bandwidth was only going to grow. His winning streak started when Juniper's founder, Pradeep Sindhu, walked into his office in early 1996 to sell him on some interesting ideas for new Internet routers. At first Khosla gave the Xerox PARC engineer several hundred thousand dollars to play with; later he pitched in $4 million more, for an eventual 23% of the company. Khosla's investment in Juniper set a record of its own. Common wisdom is that Benchmark holds the record for the most money made from a startup investment ($2.5 billion from eBay), but Kleiner holds shares in Juniper worth more than $8 billion.

Khosla is no one-trick superstar. After his success with Juniper, he invested in other equipment makers. The majority of them, including Cerent, which was acquired late last year by Cisco for $7 billion, and Siara Systems, acquired this year by Redback Networks for a record-setting $10.3 billion, have been blockbusters. (For more on Khosla's picks, see "Sand Hill Road's Networking Guru Plugs Us In" in the fortune.com archive.)

When asked whether he is aware of his reputation, Khosla, 45, says he's not interested in talking about money. "I'm more interested in helping entrepreneurs build great companies than in rates of return." Though Khosla hopes to create Juniper-like returns with every investment, the distinction of a truly successful VC, he says, is building companies that create long-term value and tons of jobs.

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