CalPERS Could Bet $640M on Khosla

Venture capitalist Vinod Khosla is unlikely to retire anytime soon, but he could soon be investing in cleantech with the retirement funds of some of his fellow Californians. Khosla Ventures is in “advanced talks,” peHub reports, with the California Public Employees’ Retirement System (CalPERS), which as manager of some 1.5 million Californians’ pensions is the largest such fund in the country, to commit up to $640 million to the venture capital firm. CalPERS declined to comment and we are still waiting to hear back from Khosla Ventures.

If this deal moves forward it would make CalPERS the only other limited partner — other than Khosla himself — in the firm. This is unusual as most venture capital firms raise funds from a group of limited partners. Until now, most of Khosla Ventures’ money has come out of the founder’s deep pockets. This collaboration could bring together two bodies known for making controversial and socially conscientious investments. Like hedge funds, pension plans like CalPERS could provide capital-intensive cleantech ventures with the big funds needed to scale up to commercial size.

CalPERS has played with Sand Hill Road firms before, investing $500 million in a venture vehicle managed by Oak Hill Investment Management. Still, betting on Khosla Ventures with more than half a billion dollars is a potentially risky move as few of Khosla’s plays have yet to exit.

While not commenting on a potential deal with Khosla, CalPERS spokesperson Clark McKinley did say, “We’re long-term investors and we can be very patient.” This long-term investment strategy could match nicely with the long time horizon many cleantech firms are likely to take.

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