Khosla Ventures Not Letting Declining Venture Market Slow It Down

If it seems like Khosla Ventures has made some headlines recently, that’s because the super-busy firm has.

The firm is reportedly closing in on raising $3 billion across a trio of funds, per The Wall Street Journal. That’s even as the venture market continues its slowdown and others like San Francisco-based Founders Fund and New York-based Tiger Global announce cuts to their new funds.

However, Khosla hasn’t just been busy raising money — it’s been busy spending it too. The firm, which has backed notable companies such as OpenAI, DoorDash and Block, has spent this calendar year picking up its pace of investment after slowing in the second half of last year.

The numbers

Per Crunchbase data, Khosla has increased the number of deals in which it has participated in each of the past three quarters — and it’s on pace to make that a four-quarter stretch with the final quarter of this year.

Ironically, deal value has not increased dramatically even as deal count has.

For instance, in Q3 2022 the firm took part in 18 deals that totaled $634 million. However, last quarter it participated in 22 deals that totaled only $592 million. (It is important to note that the total amount of deals is not Khosla’s stake but the total amount invested by all investors. Individual stakes by VC firms in a single round usually are not announced.)

Big deal?

That’s not to say Khosla has not taken part in some good-sized rounds this year.

The firm took part in New York-based Teamshares’ $124 million Series D led by QED Investors in August. Khosla also participated in a $97.4 million Series B for AI coding platform Replit in April.

Khosla co-led an $86.5 million Series C for microbiome health startup Viome in August.

This acceleration in dealmaking comes as other well-known investors such as Sequoia Capital, SoftBank Vision Fund and Tiger Global all have continued to slow their dealmaking pace as venture funding has dipped.

Of course, Khosla itself is not investing at the same pace it did when venture investing went crazy during 2021. Between Q2 2021 and Q1 2022, Khosla completed a whopping 126 deals — with 41 in Q3 2021 alone.

While it may never reach those levels again, the firm apparently has now raised a fresh $500 million for a seed fund, $1.6 billion for its main fund, and a $900 million growth fund.

According to the WSJ report, Khosla will focus that new cash on backing startups in research-intensive areas including nuclear fusion, humanoid robots and AI.

Khosla obviously sees significant opportunity where some others are preaching caution. It’ll be interesting to see how much faster it decides to go.