Khosla Ventures: Biofuels Gain Liquidity

Khosla Ventures: Biofuels Gain Liquidity

Khosla Ventures is a venture firm founded by Vinod Khosla in 2004 with the following year joined by Samir Kaul. Khosla, with his background in technology, had much experience in start ups, such as Daisy Systems and Sun Microsystems, focusing main in the IT industry and thoroughly enjoying the challenges of building companies from concepts. With the hiring of Samir Kaul, an experienced biotech entrepreneur and investor, Khosla was going to refocus their portfolio on renewable energy defining the firms goal as to "fundamentally change the way in which fuel was manufactured and consumed ….all over the developing world" ensuring the technology was cost effective and affordable.

The cleantech industry was estimated to generate US$188 billion in worldwide revenues in 2010 and projected to be $349 billion in 2020. Biofuels was one of Khosla Ventures core investment areas having already made 12 investments in this area by 2011. The Biofuels portfolio had matured throughout the years based on the experience obtained by the partners. There are 3 distinct groups:

First Generation Biofuels: Corn/Sugar-based fuels. – The fund invested in two corn ethanol businesses. Although the performances of these investments were no up to their standard, it was a learning experience which allowed them to understand the direction of the industry.

Second Generation Biofuels : Cellulosic Ethanol – These were created from nonfood crops such as wood chips, switchgrass and agricultural waste, being the conversion process more complex than the first generation, but more supply of nonfood and much higher potential of production, 5 times the yield per acre of corn or sugarcane. By 2009, the technology had not evolved as they had expected and they continue to confront many obstacles.

Third Generation Biofuels: Advanced Fuels – These fuels consisted of more advanced chemical processes from alternative sources such as waste, algae and cellulosic feedstock. The companies that Khosla invested in included Amyris and KiOR, once again focused on re-inventing technology and this vision was only possible due to their experience in 1st and 2nd generation Biofuels. Their involvement with these companies also challenged the current financing