Khosla hunts for ‘black swans’

Venture capitalist and cleantech evangelist Vinod Khosla is placing his bets on alternative technologies that could potentially make at least 80% of global energy consumption cleaner in the next few years, he said at the Reuters Global Environment Summit in San Francisco in October.

(VCJ is published by Thomson Reuters, which produced the conference.—Ed.)

Khosla told the audience that he hunts for “black swans” in alternative energy—revolutionary and unforeseen ideas that change the world—and are as unexpected as the birds they are named for.

“There is no such thing as great visionaries,” Khosla said. “There’s a huge dose of luck… we just have to take more shots on goal.”

Khosla said Nassim Taleb, a Wall Street trader-turned-author, uses the term “black swan” in a recent book to describe unpredictable and consequential events in business that can be clearly explained once they happen, such as the current financial crisis.

But the world of technology creates opportunities for good black swans, said Khosla, who was dressed in his trademark all-black outfit.

Khosla Ventures, the venture firm he founded in 2004, invests in wind, solar, biofuels and geothermal energy companies. The firm also invests in cleaner battery technology and cleaner building materials. Khosla said that he expects more than half of the firm’s investments, which number about 65 startups, to succeed.

Betting on biofuels

Khosla said that clean technologies have to do much more than reduce carbon footprints to compete with traditional sources of energy or building materials, such as fossil fuels or cement. They also have to be cheaper than traditional power and have the ability to scale up to mass production.

Biofuels made from non-food based natural sources and waste—cellulose such as wood chips and switchgrass—were among the most promising sources of scalable clean energy alternatives, Khosla said.

He said he expects there to be at least six different ways of producing cellulosic ethanol within the next four years, and each of these methods will produce the alternative fuel at prices competitive with corn-based ethanol and regular gasoline.

Once the wider market sees that a cleaner fuel could be made cheaply enough to compete with existing fuels, Khosla said he expects a mass conversion to the cheaper and cleaner fuel, particularly because cellulosic ethanol can be poured into gas tanks with only minor modifications to the car.

Khosla agreed the future of biofuels remained uncertain because the technologies were still new, but defended his optimistic outlook by saying that millions of investment dollars have been poured into alternative fuels since 2006, which is accelerating research, production and eventual commercialization.

“Four years ago, when I said biofuels were interesting, people told me: ‘Don’t be flaky,’” he said.

Even big oil is taking an interest in the activity taking place with second-generation biofuels, so-called because they come after the push toward corn-based ethanol.

Other than biofuels, technologies that store solar and wind power to provide a consistent supply—not just when the wind is blowing and the sun is shining—would get more venture investment dollars, Khosla predicted.

An Indian-American who came to the United States as a student in the 1970s and is a fixture on Forbes magazine’s list of billionaires, Khosla said he is happiest poking around for the next big cleantech idea and chatting with entrepreneurs.

“I’m a techie nerd,” he said. —Anupreeta Das, Reuters