Vinod Loves Alt Energy

From a WSJ article in Friday’s paper on the attraction alternative energy now holds for some venture folks:

Some of the same people who helped to finance Silicon
Valley’s succession of electronics-technology booms see promise in
energy technology. One of the valley’s best-known venture capitalists,
Vinod Khosla — who co-founded Sun Microsystems Inc. in the early 1980s
and is now a partner at Kleiner, Perkins, Caufield & Byers — says
he has distanced himself from his firm recently in part to focus more
on alternative energies.

Through a fund called Khosla Ventures, Mr. Khosla says
he has sunk his own money into a half-dozen start-ups over the past
four years involved in “clean fuel” technologies, such as making
ethanol a viable substitute for much of the petroleum now used to fuel
cars. One of those biofuel companies, BC International Corp. of Dedham,
Mass., has been around for more than a decade and is developing an
ethanol plant in Jennings, La., according to its Web site. Mr. Khosla,
who still keeps an office at Kleiner, declines to discuss any of his
investments in detail.

Mr. Khosla says he is particularly enamored with
technologies that help produce ethanol from sources other than the
edible part of corn, the main technique now in use in the U.S. By using
cornstalks, grasses and even woodchips — as President Bush suggested
in his speech — large-scale ethanol production would pose less of a
threat to food supplies, Mr. Khosla says.

Related posts:

  1. Solo & Seeding with Vinod Khosla
  2. Vinod Khosla on the the Risk-Money Connection
  3. Dialing Back the BTUs in Clean Tech Investing
  4. Alternative Energy Investing
  5. Khosla & the Nanotechnology Bubble

Comments

  1. Fartikus says:

    okay, let me ask what, if anything, these VCs understand about the actual science of alternative energy. i understand these guys are smart, but this is deep stuff.

  2. Paul K. says:

    Agreed. Vinod is a very smart guy, but that said, it is very deep technology.
    To be financially fair to Vinod, I think he is awfully good at playing waves of sectoral momentum. This may be as much a bet on a wave of interest and subsequent acquisition-driven consolidation in this area as anything else.

  3. raj says:

    Fartikus,
    Khosla is a smart guy. No doubt about it. He has a M.S in Biomedical Engineering from Carnegie Mellon and a B.Tech from Indian Institute of Technology, arguably the toughest engineering school (admission rate of less than 3%) and an MBA from Stanford.
    More about IIT here in CBS 60 minutes:
    http://video.google.com/videoplay?docid=-721133053692899260&q=indian
    His bets seem fairly intuitive and well-thought out. Success, of course, is not exactly assured.
    raj

  4. Brian says:

    Life would be interesting if these guys (alt space people are sometimes termed alt-spacers – will Vinod and friends become alt-energizers?) stretch the definition of alt energy to include solar power from space (SPS).
    It’s been suggested that SPS can act as a load leveler to existing infrastructure, but the concept is so far out of the norm it requires some attention from serious players before it will get any traction. Mention SPS around anyone who has been in the space launch industry for a while and you’ll see such a wistful look in their eyes …

  5. Bob says:

    These guys put their money where their mouth is. I think their information is more “in depth” than you give them credit for. You can talk and debate all you want, but someone has to come along and do something. That said, There are thousands of projects that started with a problem, and someone took a risk to fix it. The end results may or may not be what they expected, but at least they had the ****s to try.

  6. Neel Master says:

    The Feynmann approach to science was that if you can’t explain the basic principles to a layperson, than the logic is likely convoluted or inconsistent. That’s why he wrote “QED The Strange Theory of Light and Matter” for the layperson. Explains all the major facets of the theory that won him and others the Nobel Prize to a non-scientist. If I remember correctly (I read this in 6th grade) he mentions that a layperson can understand all the theory entirely, but if you want to actually do the math, make the measurements or contribute to the field you might have to stop in for a 6yr PhD at Caltech..
    I heard about a study at Harvard regarding a legal trial involving a nuclear plant. This trial required the instruction/education of a jury on salient points of the science. It was though it would be too dense for the average person to understand – but when presented in an approachable, step-by-step manner, the jurists were able to make rationale decisions based on the feedback.
    This is all a long-winded way of saying that it certainly helps to have an engineering background to help identify and invest in deals, but its not a pre-requisite. What I can bet Vinod can do that a VC with a triple-PhD in chemistry/energy/systems engineering couldn’t is a) find the leading minds to perform the scientific diligence for him b) get in the doors of the key executive of major companies who would be interested in this (Mosanto, P&G, Sempra, PW, etc.), c) attract executives to the company that can make it a success, d) attract public attention which helps in newer, uncharted investment sectors, e) provide capital that doesn’t have ROI/time horizon issues that most firms have to deal with which is important in these longer term bets.
    The fact that he doesn’t need to make any more money himself also biases his capital to investing in those companies that have the success to be truly disruptive (as opposed to positioning for an exit).