Issue Date: September 7, 2009
Khosla Grows Investment Funds
Khosla Ventures, a venture capital firm founded by Vinod Khosla, has raised more than $1 billion for two new funds that will invest in early-stage clean technology and information technology firms. This is the first time the firm has brought in external money; previously Khosla and his partners used their own capital to back entrepreneurs.
The two funds, Khosla Ventures Seed and Khosla Ventures III, will invest in clean energy, efficiency, sustainable materials, and computer technology. “We believe the infrastructure of society will be open to technical reinvention, creating very large new opportunities,” says Khosla, who made his money as a founder of Sun Microsystems.
The seed fund is the smaller of the two, with roughly $250 million for investment in higher risk projects, including ones that are still housed in universities. According to Jim Jaffe, CEO of the National Association of Seed & Venture Funds, once a new technology is past an early proof-of-concept stage, it needs seed funding of $500,000 to $2 million to survive and grow. But investors are rare at that stage. “What Khosla is doing is a very valuable thing; it validates the fact that there is an opportunity and that, yes, the money is needed,” Jaffe says.
The Ventures III fund has raised $750 million for more traditional early- and midstage investments. It will provide capital to help companies scale up. Khosla has brought on two new partners, Gideon Yu, former chief financial officer of Facebook, and Jim Kim, who previously worked at venture firm CMEA Capital, to mentor company founders. Vinod Khosla and his partners have also contributed some of their own money to the new funds.
Khosla Ventures is known for investing in start-ups with secretive green technologies that are targeting large markets. For example, Calera claims to have a process that captures waste carbon dioxide, turns it into calcium carbonate, and then uses it in cement. Seeo is rumored to be developing a stable, energy-dense lithium-ion battery with a polymer electrolyte.
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