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Summary:

No name is more synonymous with cleantech investing than Sun Microsystems co-founder turned venture capitalist Vinod Khosla. His Khosla Ventures invested between $60 million to $70 million into 14 cleantech startups in the first three quarters of 2007, according to third-party data; Khosla himself estimates that […]

vinodkhoslainterview1.jpgNo name is more synonymous with cleantech investing than Sun Microsystems co-founder turned venture capitalist Vinod Khosla. His Khosla Ventures invested between $60 million to $70 million into 14 cleantech startups in the first three quarters of 2007, according to third-party data; Khosla himself estimates that his firm has the largest cleantech portfolio on this planet.

He’s also highly controversial, often getting into public spats with writers, environmentalists and people who publicly disagree with his investing strategy. Critics charge he’s a lobbyist for his own investments. To us, he is one of the major engines behind building the cleantech ecosystem and finding the bleeding-edge technology to fight climate change. Here’s five questions we asked him during out interview for The GigaOM Show, which is going to be released on Thursday, Jan. 31 Feb. 7:

E2T: You invest a lot earlier than other cleantech investors. What are the winning factors you see for very early-stage cleantech companies as opposed to non-cleantech companies?

Vinod Khosla: The factors are the same. Between 1996 and 2001, the heyday of the Internet, more than half of my investments at Kleiner Perkins were less than a million dollars. It helps the team formulate their ideas, experiment a little more, evolve, test, market, build teams. It’s not unusual for us to start with $100,000 or $200,000 or $1 million or $2 million to try out a new science idea. Just like Juniper was started with $350,000, and later we did over $100 million of funding.

The way I like to explain it is if you are at this intersection where there are six roads going up — if you pick a road too early, you only end up where the road leads. So it’s sometimes worth spending some time at this intersection exploring all the avenues a little bit more and deciding which is the best one, where you have the best advantage, and where you can assemble the best team, and then picking a path.

E2T: You are a very prolific writer and controversial. Do you want to comment on the articles on Grist going back and forth with Joseph Romm, and what you’ve said in the past about plug-in hybrids as toys?

VK: I’m happy to address any topic. I’m not shy at saying the wrong thing. Either I have an opinion that I believe or I don’t. If I believe it, then I’m happy to say it. The fact is the carbon reduction per mile driven makes no sense at all for hybrids today. Something like a Prius is more greenwash than green. And I keep saying that especially with the U.S. grid. That is what I put on the web site, in response to Joseph Romm saying I was dissing hybrids. I was clarifying the numbers, the facts, the analysis. You notice he’s never done any analysis, or at least not posted any.

What are the carbon reductions per mile or per dollar spent on capital spending? If they spend $5,000 extra on a Prius, how much carbon reduction do you actually get other than handwaving and saying its just nice to do? McKinsey just did a study that said it cost $90 for a ton of carbon to reduce carbon using hybridization of cars. It is among the most expensive.

So if somebody has a little bit of money to invest and they want to do the best for environment, they should change their light bulbs. That saves them money and it is a negative cost per ton of carbon, while a Prius is $90 a ton to reduce a ton of carbon. One has to be economic about this. This is what analysis is about and this is often what is misunderstood.

E2T: You’re well known for having big macro views as to how these things have to change. What do you think is the single biggest failure of American environmental policy that we could actually do something about?

VK: For every nuclear plant that environmentalists avoided, they ended up causing two coal plants to be built. That’s the history of the last 20 years. Most new power plants in this country are coal, because the environmentalists opposed nuclear. When you ask someone like the NRDC, ‘Do you prefer nuclear or coal?’ They’ll say ‘We prefer nuclear to coal, but we don’t want either.’ It doesn’t work that way; we need power.

They’d like to see wind and solar photovoltaics. Well, it doesn’t work if it’s 40 cents a kilowatt hour, and it doesn’t work if you have to tell PG&E’s customers: ‘We’ll ship you power when the wind’s blowing and the sun’s shining, but otherwise, you gotta miss your favorite soap opera or NFL game.’ That’s just the reality, so you have to be pragmatic about this. What is the most cost-effective way to do it?

When it comes to automobiles we’re going to ship 1 billion new cars in the next 15 years worldwide, and any technology that doesn’t make at least 50 to 80 percent penetration — 500 million to 800 million cars over the next 15 years — is not going to affect climate change. To say something that might sell 20 million cars or 50 million cars is gonna matter, well, no. A Prius-like hybrid (there are other types of hybrids that are more promising) but a Prius-like hybrid will not penetrate 500 million cars over the next 15 years. So it’s a toy when it comes to climate change.

It’s a good investment, by the way. We have two battery investments, to make better hybrid batteries. So it’s not like I think it’s a bad market. Something can be a good investment, like batteries, without it being material to climate change. Now biodiesel or diesel from waste grease in San Francisco are toys. They are never going to replace petroleum because they are not going to be cheap enough.

E2T: What do you drive?

VK: I drive a Lexis hybrid. Look, I drive a hybrid because I can afford one. What is important is to take technologies that 500 million people can afford. That is a little different.

E2T: In an article you wrote a few years ago you said ‘I don’t see a carbon cap-and-trade system being viable in the U.S in the next couple of years because it would be so difficult to get it through.’ Do you still agree with that?

VK: No, I’m getting more optimistic that we can get [there]. Five years ago I didn’t think it was likely. I think during the next presidential cycle, in the next eight years after the new president is elected, I think it is reasonably likely we will have a carbon cap-and-trade bill. I think if we were pragmatic we would reduce it to two or three areas. If we just did cap and trade for oil, for coal, for cement and for steel, we would cover more than 80 percent of the emissions in this country and get a bill much sooner and there would be fewer parties interested in fighting the legislation.

  1. ‘man-made’ climate change is the biggest crock of crap that the counter-culture has ever tried to get over on the voting consumer.

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  2. “That’s the history of the last 20 years. Most new power plants in this country are coal, because the environmentalists opposed nuclear.”

    Ha! That’s hilarious! Where did Earth2Tech find this guy? Just because he has a lot of money doesn’t mean he should be given a platform for bull____.

    Almost every new power plant built in the U.S. in the last 20 years has been natural gas, and that’s pretty common knowledge. Number two? Wind power. You can look it up.

    Remind me to tell my broker not to let any money slip into Vinod’s hands – he clearly has no clue what he’s talking about.

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  3. [...] We know we’ve given cleantech venture investor Vinod Khosla a lot of ink this week, with our 5-questions interview. But, hey, we just follow where the money flows. According to a regulatory filing picked up by [...]

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  4. This is a great interview. I’m always interesting in hearing opinions from the edge, and Vinod always seems to be ready to provide them! I look forward to hearing more about his recent ventures on these pages.

    I linked to this interview in my blog for the Innovators-Network. I hope some of my readers visit earth2tech and read the whole piece for themselves!

    Best wishes for continued success.

    Anthony Kuhn

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  5. [...] 5 Questions for Vinod Khosla: Katie sat down with cleantech investment guru Vinod Khosla on the GigaOM Show to discuss careful early stage investment, self-promotion, and hybrid “toys.” Also check out Khosla’s investment in solid state lighting startup SJS Technology this week. [...]

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  6. [...] 5 Questions for Vinod Khosla, one of the most active investors in CleanTech. [...]

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  7. awesome interview, thanks!

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  9. Green energy is definitely the best solution in most cases. Technology like solar energy, wind power, fuel cells, zaps electric vehicles, EV hybrids, etc have come so far recently. Green energy even costs way less than oil and gas in many cases.

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