Khosla closes $1B in new funds aimed at cleantech

Silicon Valley-based Khosla Ventures announced the close of $1.1 billion in two funds largely focused on cleantech, founder Vinod Khosla told the Cleantech Group, which broke the news Monday night.

A $275 million fund is expected to focus on the highest-risk projects, possibly at the university-level, while an $800 million fund is earmarked for early and mid-stage investments, with additional capital to be allocated as the companies scale. The two funds are expected to invest in markets including clean energy, efficiency, sustainable materials and information technology. 

Khosla said the firm plans to invest in "radical technologies with larger technological innovations." For example, Khosla Ventures would invest in thin-film lithium ion instead of bulk lithium ion, which other firms are investing in, he said. Similarly, Khosla Ventures would be interested in solid electrolytes instead of liquid electrolytes, which are drawing attention from other investors, he said.

"We don't do projects; we don’t do normal technology. Our focus is larger technological innovation, a lot of times coming out of universities and scientists and technologists," Khosla said. "Sometimes people call me and say 'We are low risk' and I say 'We are looking for high risk because it's innovation.' We’re not looking to play it safe."

Khosla said the funds aren't expected to focus on any particular technologies. He speculated that most of the companies would probably be located or have offices in the U.S.

"I'm one of the few Indians insourcing jobs instead of outsourcing," he joked.

Khosla noted that he likes to brand his style of investing as "venture assistance."

"We're not really investing in businesses. I think of myself as a techy nerd who knows how to help entrepreneurs," he said.

The two funds are the first from Khosla Ventures to include outside funding. Pension fund CalPERS was a participant.

Earlier this month, CalPERS, short for California Public Employees' Retirement System, disclosed that it committed $60 million in June to a targeted-$250 million Khosla fund focused on seed-stage companies (see Solar falls off the VC radar, but IPOs heat up). CalPERS said the round was closed. According to CalPERS, 75 percent of the fund is dedicated to cleantech, while the remainder is earmarked for information technology. Early this year, CalPERS said it also invested $200 million in the larger fund.

The Tennessee Consolidated Retirement System has also said it committed funds to Khosla Ventures. The group didn't specify the amount, but it made a total $150 million investment in funds managed by Hellman & Friedman, Khosla Ventures and TA Associates, according to PEHub.

Khosla Ventures has consistently ranked among the most active investors in clean technology since 2006.

According to the Cleantech Group's investment database, Khosla has participated in 61 investments in cleantech since 2006, including multiple investments into the same companies. Those 61 deals, including capital from other investors, represent $1.4 billion in venture funding for cleantech companies.

Among these investments are Ausra, Mascoma, Range Fuels, LS9, Sakti3, Coskata, Verenium, EcoMotors, Transonic Combustion, and Seeo (see Khosla-backed Coskata, EcoMotors come out of stealth, Cellulosic ethanol to be cost-competitive by 2009 says Khosla and Another week, another three Khosla biofuel investments).

Khosla said that biofuel is making progress to be cost-competitive with oil, and he expects that large-scale plants will break ground next year if financing conditions improve.

Khosla's investment team includes David Weiden, Samir Kaul, Ford Tamer, Alex Kinnier and Pierre Lamond. With today's announcement, Khosla added Gideon Yu and Jim Kim to the team. Yu most recently served as CFO of Facebook, while Kim's investment experience includes CMEA Capital and GE Capital.

Cleantech developments making news in the past 24 hours

• Metabolix, ADM to open new bioplastics factory
• Rockwool nears construction on Indian insulation factory
• Two Israeli wastewater firms to locate in Michigan
• Al Gore: Super grid is critical to combating the climate crisis
• A quest for CO2 and O2 optimal management with biofuel from algae

View the last week of cleantech developments here | Subscribe to full feed