Capitalist Khosla Joins in Effort to Save the Planet
There's little about the building where Vinod Khosla runs his tiny
venture-capital firm to suggest he's at the forefront of a global effort to
revolutionize how the world gets energy.
Small signs point discreetly to Khosla Ventures and other
tenants at the low-slung building tucked inside a quiet Silicon Valley office
park. One of the USA's richest men, Khosla is sitting in a sparsely furnished
conference room in a blue pullover and blue slacks. He sips tea as he describes
how his children view his rising passion for renewable energy.
"They think it's cool Dad is saving the
planet," he says with a grin. Then he pauses, uncomfortable with how that
sounds, and adds that he's not a fan of such "grandiose" statements.
Yet, saving the planet is what Khosla and a growing
number of financiers, entrepreneurs and political luminaries hope for as they
chase new ways to wean the world from oil, coal and other non-renewable energy
sources now threatening the environment.
Google's (GOOG) young founders, Sergey Brin and Larry
Page, just announced plans to pump millions into the effort. Former vice
president Al Gore, who shared the Nobel Peace Prize for drawing attention to
global warming, has joined one of the Valley's most prominent venture capital
firms in its "green tech" investing. Virgin Group founder Richard
Branson is offering a $25 million prize to anyone creating the best way to
remove greenhouse gases from the atmosphere.
Khosla, 52, isn't as well known. But the co-founder of
Sun Microsystems (JAVA) has quietly emerged as one of the biggest forces in
green tech less than four years after starting Khosla Ventures along famous Sand
Hill Road. The route is home to many of the world's most powerful start-up
Khosla won't disclose how much he's invested in energy
start-ups since launching his firm. But Khosla Ventures, where he invests only
his own money, pops up in many of the biggest deals in an industry now investing
boatloads in the sector. His six-employee firm ranked No. 1 in deals during the
first nine months of this year; it participated in 14 worth $68 million, the
National Venture Capital Association (NVCA) says.
VCs in the USA invested an average $15.5 million in each
of the 168 green tech investment deals through the third quarter, a USA TODAY
analysis of the trade group's data found. That's nearly twice the $8 million
average for deals overall, underlining fears shared by Khosla that a green tech
bubble may be forming.
"I suspect we'll see some yo-yos," Khosla says,
referring to the boom-and-bust cycle that's marked many nascent industries in
That higher risk is a big reason why Khosla, who came to
the USA 30 years ago from India, started Khosla Ventures with his own money,
rather than raising a fund with money from banks and other investors. "I
could afford to lose my own money," he says, "but I couldn't afford to
lose other people's money."
Repaying the world
Khosla has a lot of loot to lose.
estimated his wealth at $1.5 billion in the magazine's list this fall of the
richest Americans. That's money from his years as a partner at Kleiner Perkins
Caufield & Byers, the VC firm Gore just joined; Khosla worked there before
starting his own shop.
He's still interested in making money. But he tempers
that with a desire to make the world a better place, too. Khosla is an
"extremely smart man" repaying a world that helped make him wealthy,
says Mark Heesen, president of the NVCA.
Most VCs invest in start-ups on behalf of institutional
investors and rich individuals, hoping to profit when successful companies sell
themselves to bigger businesses or to the public through initial public
Venture capital is one of the riskiest forms of
investing, because start-ups often flop. The risk is even greater in green tech
ventures because they require more capital to build ethanol factories or huge
solar collectors than do typical tech start-ups, Heesen says.
Bill Wiberg, a partner at Advanced Technology Ventures
near Boston, agrees. "You just have to believe the end opportunity will
warrant the time and the capital," he says.
Researchers in government and the private sector have
pursued alternative energy sources for years with only middling success. Beyond
the challenge of raising money and fighting powerful oil, gas and automobile
industries, scientists have failed to produce an alternative that's cheaper than
But Khosla thinks the technologies he's backing are near
where they can compete against oil without government subsidies now required to
make them competitive. "I want oil to compete with us — not the other way
around," he says.
Near Macon, Ga., for example, Khosla-backed Range Fuels
last month started construction on a factory meant to produce the gas
alternative ethanol. His other investments include GreatPoint Energy, which
plans to make low-cost natural gas from coal. (Wiberg's firm also invested in
GreatPoint.) Plus, Khosla has helped finance dozens of other ventures in solar,
wind and geothermal energy.
He says many of these technologies can be proved viable
in the next five years. "In 20 years, we'll have a very different
world," he says. "I'm far more optimistic than anyone else."
His optimism reflects years of accomplishments — and
changing market dynamics. Oil prices have been rising most of this year,
reaching as high as $98 a barrel last month. It closed Monday at $94.13.
Higher oil prices help close the gap with pricey
alternatives such as solar panels. Oil could fall back to $70 a barrel, says Wal
van Lierop, CEO of Chrysalix Energy Venture Capital in Vancouver. "But over
the next year," he says, "the tendency will be up, and very soon, we
will go to $100 a barrel."
Khosla grew up in New Dehli, where he got an electrical
engineering degree from the Indian Institute of Technology, a school on par with
Harvard University or Massachusetts Institute of Technology.
He moved to the USA in 1976, getting a master's degree in
biomedical engineering from Carnegie Mellon and an MBA from the Valley's
Stanford University in 1980. After co-founding Sun, he joined Kleiner Perkins,
where he remains an affiliated partner. Kleiner has backed some of the biggest
names in tech, including Amazon and search king Google.
The Chindia challenge
Some of the most promising research in renewable energy
is in wind generation and solar thermal — using the sun's energy to create
steam that powers generators of electricity, says Steve Chu, director of the
University of California's Lawrence Berkeley National Laboratory.
Google's non-profit arm, Google.org, is investing in
eSolar of Pasadena, Calif., developing power plants powered by the sun. And it's
backing Makani Power in Alameda, Calif. Makani is working on high-altitude wind
Ultimately, new energy sources will only work if they're
adopted in China and India, Khosla says. They are two of the world's
fastest-growing countries, with a nearly insatiable appetite for oil and coal to
fuel industries that many scientists blame on rising overall world temperatures.
He calls it the Chindia challenge.
"If India and China don't adopt these low-carbon
technologies," he says, "then the whole planet is toast."
Courtesy:- USA Today