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Joining the cleantech bandwagon: Vinod Khosla

Update: Here's our column about this in Tuesday's Mercury News.

khosla.jpgThe cat is out of the bag concerning Vinod Khosla's new status at Kleiner Perkins, with this interesting post by Dealflow. To summarize, Khosla has opted to go solo, investing his money "alongside" Kleiner, when he wants to, but is no longer investing for Kleiner. Perhaps more interesting, though, is one of his new areas of interest: Cleantech.

Investing in clean technologies has become trendy recently, something we've kept our eyes on for quite some time, here, here and here.

That Vinod Khosla, one of the most successful venture capitalists during the boom years of the late 1990s, is looking at biofuels, fuel cells and solar underscores that the sector has finally become mainstream.

First, here's DealFlow's description of Khosla's interest:

Investing alone also lets Khosla explore industries VCs have rarely funded in the past. Recently, he has looked at investing in bio refineries, which use sustainable crops or agricultural waste to produce fuel. He has also considered synthetic biology, the creation of new life forms (or alteration of existing life forms) through genetic engineering. He's also interested in fuel cells and solar cells.

As Rob Day, the cleantech blogger at SF's Expansion Capital Partners notes, DealFlow doesn't mention any specific such investments. Day, who is about as close to the sector as anyone, says "rumor is that Vinod put some personal money into Ion America (the formerly-stealth solid oxide fuel cell company) alongside John Doerr." We haven't confirmed this, but here's our post on Ion America.

(UPDATE: We just closed the loop with Khosla. He tells us he has been working with the founder of Ion America before it became a company and has "attended most of the board meetings but I am not now and don't expect to be and have never been a board member. I just try and assist the entrepreneur.")

Kleiner is considered a leader, not a follower, in Silicon Valley investing, and Khosla's interest is likely to grab some attention. This could mean the valley will step up its activity in the area, where it has so far lacked leadership, according to Day.

But here are some other interesting data points (continued....):

Blackwolf Partners, a San Francisco venture firm, is aiming to raise a $100 million first fund to invest in early-stage energy and consumer companies, according to VentureWire (sorry, sub req. and no link).

Partner Charlie Walker did say that Blackwolf will only focus about a third of its investments in the energy and water market, because focusing everything on the sector was too risky.

Here's an interesting tidbit, though, from Blackwolf's web site on its strategy, which argues there is a sweet-spot at the juncture of consumer technologies and cleantech:

A vast array of companies are responding to these trends with changes to existing products, services, content and packaging, and in some cases are creating entirely new product categories. As such, this sector is pervasive and growing. In some cases, such trends have become mainstream (e.g., automobile pollution control), in others, new products co-exist with traditional product offerings (e.g., organic food), and in still others, new products are seriously challenging the existing offerings (e.g., bottled water and sports drinks over soda).

More mainstream venture firms are pursuing the sector full-force. Foundation Capital is notable here, with partner Warren Weiss having made four investments, and looking at a fifth. Last week, we wrote about two Silicon Valley water start-ups in this article, one in which Weiss is invested (Novazone). He's also excited about San Mateo's Silverspring Networks, which we'll try to write more about later. Weiss is non-sentimental about it all. He's driven, he says, mainly to exploit his experience with technologies he's familiar with -- chips, storage, software and operating systems -- and applying it to cleantech. For a number of reasons, from regulatory pressures, to the increasing price of oil, to the pervasiveness of Internet technology, "the timing is right" he tells us.

Finally, Marty Lagod, a partner at the smaller fund, Firelake Capital, has invested in nine cleantech companies, six of them in Silicon Valley, a number he says he found surprising. He didn't think he'd find so many opportunities here, but he's found a stream of dot-com survivor entrepreneurs wanting to start companies that carry more meaning. "I've named them the 'tech refugees,'" he says. "They want huge markets and opportunities. They're also saying, 'I care.'"



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