If conventional wisdom mattered, super venture capitalist Vinod Khosla could not have picked a worse time to launch a massive venture capital fund focused on extremely risky green technology investments. Yet Khosla, a VC legend in Silicon Valley, not only pulled it off but ended up money away, according to the New York Times.
In fact, many of Khosla's investors are gun-shy state pension funds, still smarting from nasty losses suffered in venture capital and private equity placements that went horribly wrong in the economic meltdown of the past two years.
Such is the measure of Khosla's stature in Silicon Valley, where the name of this former partner in top-tier VC fund Kleiner Perkins and the co-founder of Sun Microsystems is synonymous with gutsy, contrarian, go-for-broke investing.
Big investments never scared Khosla, who began investing his own money into his own venture capital fund several years ago, making big bets on a slew of green technology startups, ranging from a cement maker that captures carbon emissions to a biofuels startup that hybridizes algae to product oils suitable for motor vehicle operations.
While other VCs have frowned on so-called "science experiment" investments that explored unproven and technically difficult technologies, Khosla sees these types of investments as a core function of venture capitalists that was somehow lost, according to the New York Times article. In addition, many Silicon Valley venture capitalists have turned their backs on cleantech investing, according to VentureBeat. Venture capitalists fear that cleantech companies generally require large amounts of startup capital. High-funding demands are a clear obstacle during a time of wholesale shrinkage in the VC sector.
For his part, Khosla has not shied away from cleantech to date and, rather, has poured his own money into his own private investment fund. In that still running fund, Khosla pledges profits to charities. In the present fund Khosla is looking for pure profits and is accepting limited partners -- that is, outside money.
The $1.1 billion will actually go to two closely related funds. The larger is a $800 million fund that will place investments of $5 million to $15 million in more established technologies. The other is a fund of $275 million that will be used to make smaller investments of $2 million in earlier stage technology companies.The fund is the largest launched since 2007 and one of the largest ever launched for cleantech. Khosla and several partners have invested hundreds of millions of their own money in the fund, a point that was likely key in attracting outside investors.
Khosla's resolve is admirable, particularly in light of the dark winds sweeping the venture capital landscape and the economic difficulties facing many cleantech companies in the photovoltaic solar cell market and biofuels sectors. For sure, a billion bucks can pick a handful of winners, particularly when Khosla has the pick of the litter in cleantech startups due to the reticence of so many of his peers.