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Silicon Valley's green energy "portfolio players": Vinod Khosla, Marty Lagod

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Khosla
Vinod Khosla, the Silicon Valley venture capitalist who arguably made the most money of any VC during the Internet boom of the late 1990s, is going gangbusters again.

He has just hired a third partner (more below) to help him in his new focus on ethanol and other alternative energies, in what appears to be a bold "portfolio play" -- a shotgun approach whereby he invests in an entire portfolio of companies in one field, preferably complimentary, in the hopes that at least one or two of them will hit big.

Yes, we've reported a lot about Khosla's moves, but this is a guy we'll be following closely. As Silicon Valley broils in near 100-degree weather, and a layer of smog chokes the area, and we log a record day of energy use, and as oil hits $80 a barrel, and both Greenland and the Middle East seem to be falling apart, the quest for affordable alternative forms of energy is, in our view, the most crucial task Silicon Valley has right now. (Note: We're not saying that everyone should focus on this, because there are limited profits in each sector; as social goods go, though, this is at the top of the list.)

During the Internet boom, Khosla focused on what was most important then: telecom. He read and thought deeply about networking technology, and then binged on a host of investments. The result: He made billions of profits from the sale of networking companies like Siara and Cerent, and from IPOs like Juniper Networks. This time, he is using his ability to "go deep" in ethanol, the corn-based fuel that he thinks could help replace petroleum within the next few decades. We've reported on his various investments, which include Mascoma and Celunol.

He has hired two partners already this year, and today the WSJ reports (sub required) that he has hired Cargill Scientist Doug Cameron to be his "chief scientist," and one more sign that Khosla wants to "own" this field. As the WSJ reports, Cameron, 49 years old, started Cargill's internal biotechnology research and development group and worked at the Minneapolis food and agricultural company, a major producer of ethanol fuel for seven years.

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Lagod
Khosla's strategy reminds us of the portfolio play in solar technology by another Silicon Valley investor, Marty Lagod, of Firelake Capital. He's made ten investments in energy, as an early round investor. His solar investments are in Miasole, Advent and Nanosolar. Two of those are in Silicon Valley, and both are going to build factories to produce their new solar cell technologies. This sector will even add jobs, he noted. He wants to make three more solar investments this year.

Lagod agrees he and Khosla have similar "portfolio play" strategies. "This is a monster market," he said. "You don't know who is going to win. You're at a craps table and you're betting on all of them." And the more investments you make, the more information you have, and the better investor you are, he added. "We're going real deep."


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Comments

It is not trivial to recognize that ethanol and particularly the majority of Khosla's investments in it, are not "corn-based", but mostly based on cellulosic approaches to producing ethanol that are more likely to use other types of feedstocks besides corn.

NSR on July 19, 2006 4:13 PM
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Khosla is betting the farm (all of our farms, actually) on cellulosic ethanol. However, he is tryingt to legislate success for this enterprise. Meanwhile, he is making a lot of bogus claims in promoting his ideas:

http://i-r-squared.blogspot.com/2006/07/vinod-khosla-debunked.html

Cheers,

RR

Robert Rapier on July 24, 2006 7:25 PM
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Khosla is betting the farm (all of our farms, actually) on cellulosic ethanol. However, he is tryingt to legislate success for this enterprise. Meanwhile, he is making a lot of bogus claims in promoting his ideas:

http://i-r-squared.blogspot.com/2006/07/vinod-khosla-debunked.html

Cheers,

RR

Robert Rapier on July 24, 2006 7:25 PM
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