Khosla Raises A Cool Billion For Green Investments

Veteran cleantech venture capitalist Vinod Khosla will be announcing a pair of new funds to invest from today, according to a story in Forbes. If their sources are correct, it would make Khosla one of the few who has managed to get fresh money from investors during the recession.

The funds will be split into a bigger and smaller size. To seed new startups, Khosla will set aside $250 million. A much more substantial $750 million will go to existing companies that need capital to scale up and commercialize their product.

The setup is pretty similar to the scheme set up by legendary venture firm Kleiner Perkins Caufield & Byers, which has its own $500 million Green Growth fund. That’s perhaps not a coincidence, as Khosla is an alumni of Kleiner Perkins. But having an unusually large secondary venture capital fund for cleantech is also becoming more common, because companies otherwise have trouble surviving the “Valley of Death” between being a startup and a large company.

It should be interesting to see where the money goes. Khosla is noted for taking a personal interest in new technology — but he has also been taken in on some very dubious investments, like a biofuel company called Cello that, as recently came to light, was an outright fraud. Khosla invested in the company at the height of the biofuel craze, and more or less took them at their word.

Forbes says that Khosla agreed to a “conflicts committee” for the new funds that will keep him from investing the new money in old investments that didn’t work out. However, follow-ups in old companies also aren’t prohibited.

And Khosla has plenty of companies to put money into, including a large portfolio of biofuel investments. Several years ago, Khosla was predicting that biofuels like cellulosic ethanol and algal biodiesel would be huge plays by today; obviously, that didn’t pan out.

But some of this biofuel startups, like Amyris and Coskata, are slowly moving to commercialization and may merit new investment. And companies in other fields, like Altarock (geothermal) and Infinia (solar thermal), are also coming along well.

Talk is growing of a spate of cleantech IPOs down the road; if the investors behind Khosla’s new funds played their cards right, they might just get to cash in their bets.

For those interested, I’ve included a graphic below from Khosla Ventures’ website showing some (not all) of their cleantech investments.