Khosla closes $1.05B fund, half to go to clean tech

Will Khosla re-energize the clean tech industry following the Solyndra debacle?

Khosla Ventures has closed its $1.05 billion Khosla IV fund, the VC firm announced late Thursday.  The new fund will focus on early stage investments in clean tech, IT, mobile, and Internet technology.  But in demonstrating his true commitment to clean tech, the VC firm confirms that roughly half of the fund will be devoted exclusively to clean tech investments, proving that the struggling industry still has some champions.

The move comes right after the Solyndra fiasco, in which the solar panel manufacturer filed for bankruptcy after receiving $500 million in federal loans.  The drama has exploded into a complex tangle of he-said/she-said, complete with alleged tax evasion and accusations of carelessness and failure on the White House’s part.  Solyndra CEO Brian Harrison officially resigned on Thursday.

Vinod Khosla is not daunted, however, calling the quagmire a “speed bump” for solar energy companies in a recent interview.  But he acknowledged that those in the solar energy industry will probably half a tough time raising funds.

Samir Kaul of Khosla Ventures is keeping a stiff upper lip.

“When you are in the business of innovation,  not every company will succeed.  However, we’re excited about the radical change happening in the industry and some of the new ideas and companies that are emerging," Kaul told me.  "There will be more good times and there will be more bad times.  As a Venture Assistance firm, we’re there to support those companies internally to get through these more challenging market environments.”

“We fundamentally invest in the companies that we expect to have significant impact, and that’s precisely what the Khosla Ventures IV fund will do,” said Vinod Khosla, in a statement. “We don't mind failing but do care that the impact be material if we do succeed; and we believe that our willingness to fail gives us an ability to succeed. We will continue to not compute IRR’s when investing as we believe in helping entrepreneurs build companies with high impact and high option value that are not subject to traditional financial metrics.”

The new fund follows the $1 billion Khosla III fund, which focused on early stage and growth stage companies, and the $300 million Khosla Seed fund, which focuses on high-risk, high-return investments.

Several biofuels and biochemical companies in Khosla’s portfolio have already seen some big exits, including industrial biofuels company Amyris, which raised $84.8 million in its IPO in 2010; Bio-isobutanol producer Gevo, which raised $123.3 million in its IPO in March 2011; and renewable fuels company KiOR, which raised $150 million in its June 2011 IPO.

Some of Khosla’s other investments this year include:

January: Ciris Energy, a natural gas production company for which Khosla led a $23.8 million Series B round.

February: Storify, which lets users create “stories” by compiling tweets.  The company raised $2 million from Khosla.

February: MyLikes, a word-of-mouth advertising platform that raised $5.55 million in a Series A round led by Khosla.

April: Big Switch Networks, which brings virtualization and cloud architecture to enterprise networks and raised $13.75 million in a round that included Khosla Ventures.

April: Evolv, a platform that optimizes the hiring process, raised $15.8 million in a Series C round which saw contributions from Khosla.

June: Touchstone Semiconductor, a developer of high-performance analog integrated circuit solutions, which raised a $12 million Series A round from Opus Capital and Khosla Ventures.

July: Ness, a personalized search engine that raised $5 million in a Series A round led by Khosla.

September: Lookout Security, which raised a $40 million Series D round in which Khosla participated.

Other noteworthy companies in Khosla’s portfolio include Square, GroupMe, PayNearMe, Jawbone, Meebo, and Soladigm, among others. 

Image source: forbes.com