Green Energy Reporter

1 September '09
3:42 PM UTC
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Khosla Raises $1bn for Clean tech funds; Bets Biofuel is a Winning Horse

It’s official: Khosla Ventures has closed two new funds with more than $1 billion in capital commitment. The Sand Hill Road VC has made a name for itself by investing in cutting edge biofuel startups with promising technologies that for the most part are years from going commercial. There had been rumors over the past few weeks that founder Vinod Khosla was up to something. We’d written about that here.

The news is impressive for two reasons: One — while the narrative on the state of the economy has improved over the past few weeks, the fundamentals remain challenging and are pushing key investors to keep their purses locked. If they do dip in their toe, they tend to back safe, more proven technologies like solar and wind. This brings us to our second point — When it comes to clean tech, Khosla prides itself on its deliberate choice to go for the cutting-edge startups that are backed by strong fundamentals (good management and impressive brain power) but with ideas that one could dub “out there,” having yet to prove they can make the transition from the lab to the market place. In these challenging times, success convincing investors to back this approach that focuses less on the bottom line potential and more on the technological process is, in itself, an achievement.

One of Khosla Ventures’ current investments is LS9, a developer of enzymes-based diesel fuel. If this California company can scale up its process to an industrial level, the company, which is led by a Royal Dutch Shell veteran, will have invented renewable crude…. There’s also HCL CleanTech, which has developed a process that turns cellulosic biomass into fermentable sugars. Fermentable sugars are a key building block of leading biofuels, including biobutanol and biodiesel. Khosla invested $5 million in that company last July. Read More »

Tagged: algae biofuel, Exxon Mobil, Facebook, Gideon Yu, HCL CleanTech, Jim Kim CMEA Capital, Khosla Ventures, Khosla Ventures $1bn funds, Khosla Ventures III, LS9, Pierre Lamond, Synthetic Genomics

22 July '09
1:07 PM UTC
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Funding

Khosla’s Clean Tech VC Fund Beats the Odds, Raises $1bn

: This man likes biofuels

A widely used catch phrase – or some variation of it – appearing in the media since the official start of the crisis this fall, goes something like this: “the global economic crisis, has left the [add required sector, in our case clean tech] reeling, unable to tap crucial funding…. ” This generic phrase and its variations have been used over and over to describe a harsh reality, specifically how the credit crunch has left industries across the board at a standstill, unable tap financing to support their growth.

Then there is Khosla Ventures, the Sand Hill Road clean tech-focused venture fund, which will be announcing sometime this week the closing of two funds totalling $1 billion, all dedicated to supporting early clean tech investments. This is impressive, considering that most don’t expect this sort of capital raising to happen until well into 2010.

But it seems that Khosla Ventures, founded by Silicon Valley veteran Vinod Khosla, can afford shortcuts. For one, Khosla is a co-founder of Sun Microsystems and a former partner at Kleiner, Perkins, Caufield & Byers, two leading Silicon Valley pioneers. Also, back in 2004, when clean tech was an afterthought and social media à la MySpace was all the rage, he launched Khosla Ventures, one of the sector’s first clean-tech focused VC fund.

Forbes.com reports Khosla is on the verge of announcing two new funds: a $250 million vehicle for seed-stage investments and a $750 million fund for larger deals dubbed “KVIII.” One fund has closed already, and the other could close soon, Forbes reports, citing people with knowledge of the funds. Khosla himself is expected to invest $150 million of his own money in the new funds. Other reported investors include CalPERS, the pension giant with $179.2 billion in assets.

But in a move underscoring how in this buyers market investors are more careful with how they put their money to work, there’s word that Khosla will set up a conflicts committee to oversee the $750 million KVIII fund. This was done to ensure that all of this fresh capital does not only support existing investments. The committee, which has yet to be formed, would specifically screen follow-on investments in existing Khosla companies that didn’t have another outside lead investor.

About the conflicts committee and why it was formed, Forbes writes:

“Khosla’s compromise was to suggest a review committee that would screen certain proposed investments before his firm funded them. One person with knowledge of the funds said the committee would review follow-on investments in existing Khosla companies that didn’t have another outside lead investor. Companies with another lead investor wouldn’t be reviewed–ostensibly because they’d already been endorsed by another VC firm, not just Khosla.”

Khosla has built a reputation for investing in high risk, cutting edge technologies. We last wrote about the fund last month when it joined Burill & Co. in a reported $5 million investment in HCL CleanTech, a developer of sugar-based biofuel. Another high risk investment for Khosla is its stake in LS9, the San Francisco-based developer of bacteria-based diesel. Such ventures are promising on paper but require multiple rounds of financing to even have a chance to go commercial.