What Forbes and others were reporting earlier this year is now official: Famed cleantech investor Vinod Khosla has officially raised $1 billion for two new funds, largely from outside investors, a substantial portion of which will be focused on cleantech startups. This is the first time Khosla has turned to external investors; he was previously using his own funds to invest in startups (quite unusual for a VC).
To me, this development says two things: First, it’s pretty bullish for the cleantech sector. Khosla, one of the most active and aggressive investors in cleantech, has moved away from the personal investing model and managed to convince limited partners to commit a whopping $1 billion. At the same time, it also shows how long cleantech firms take, and how much money they need, to mature compared to, say, infotech firms. Khosla has very few exits or matured revenue-generating companies in his cleantech-dominated portfolio, which he’s been building over several years.
While Khosla didn’t go into detail about who all his new investors are, the press release includes a quote from Joncarlo Mark, senior portfolio manager at CalPERS. According to documents from back in June (hat tip peHUB) the California pension fund has committed to invest $60 million into what it calls a $250 million early-stage clean technology fund.
Of the $1 billion for Khosla Ventures, $250 million will go into an early-stage fund called Khosla Ventures Seed Fund, which Khosla interestingly describes as looking for “the highest risk projects,” which he says, “often cannot find any other funding” (is that supposed to make LPs feel secure?). The remaining $750 million will go towards Khosla Ventures III, which will be a more traditional venture investment fund looking at early-, mid- and later-stage firms.
According to a Forbes report from July, Khosla is doing something unusual with that larger portion; he’s set up a way to help protect investors against risk in the form of a conflicts committee that will review investments. Forbes suggested that Khosla likely set this up to allay investors’ fears that there would be too many follow-on deals from his previous investments in the later-stage $750 million fund.
In addition to the funds, Khosla Ventures is bringing on two new partners to help manage investments: former Facebook CFO Gideon Yu, and former senior partner with CMEA Capital, Jim Kim. Kim has a cleantech background, having worked with A123 Systems, Danotek and Solyndra at CMEA and before that GE Capital. Yu, on the other hand, I would guess is probably going to be looking closely at information technology startups, which will get part of the new Khosla funds. These two partners follow on the addition of Pierre Lamond — the National Semiconductor co-founder and partner at Sequoia Capital.
In Khosla’s announcement this morning, he also gave a quick nod to some new portfolio companies that have gotten Khosla backing recently and have been under the radar: solar startup Skywatch, cellulosic biofuel firm HCL CleanTech, and Hybra-Drive, which is described as being “in efficiency.”