Green:Net: From Founding Sun to Funding Clean Power

Over the next 10-15 years we will fundamentally reinvent the structure of society, said Vinod Khosla, founder of Khosla Ventures, speaking today at the Green:Net conference in San Francisco. Khosla, who was interviewed onstage by Fortune’s Michael Copeland, explained that he’s now investing in areas that two years ago he would never have considered, such as renewable plastics, agriculture and new chemicals.

He credited the shift to two things: One, he’s looking in more places for ideas tied to improving the environment rather than just in computer sciences departments or IT areas; and two, there are more people choosing to get their PhDs in green energy. “Today energy is the first choice among people looking to do PhDs, so we will see innovation because all these bright minds are choosing to think about the problem,” Khosla said.  “We used to take our best physicists and put them in Wall Street. What a shame.”

He also shared the parallels between greentech investing and the telecom and information technology investments he made in the late 90s. In 1995 and 1996 anyone in the telco business would have told you that nothing is going to change and that IP communications wasn’t going to be used, he said. But then the economics of IP communications made more sense and the old economic model broke. He said that will happen in the cleantech as well once the innovations and regulatory environments change.

Copeland attempted to get Khosla to play a game of hot or not with regard to new technologies, but Khosla refused. He did explain that he’s interested in areas with potentially huge markets where technology can differentiate between products. So LED lighting is something he’s interested in, as is clean coal.  Another area he’s into is precision agriculture — two words I thought I’d never hear a venture investor talk about.

And that was the crux of the interview. Khosla sees a wholesale shift in society, and is asking questions that stretch far beyond the IT world to find his investments in the technology breakthroughs that could prove to be the equivalent of the transistor for energy.  Along the way he expects about 50 percent of his portfolio companies to make money and 50 percent to lose money — proving that even as society changes, the venture industry stays the same.

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