Vinod Khosla: One Fund Down, One to Go

Last fall, we reported that Vinod Khosla was in talks with CalPERS to raise up to $640 million to help finance his predilection for capital-intensive clean technologies.

Tonight, Forbes reports that Khosla is about to announce not one but two new funds backed by outside investors, including a $250 million number for early-stage investments and a $750 million fund for later-stage deals. According to the magazine, one fund has closed already and the other will be finalized soon, possibly within days.

Khosla, the Sun Microsystems co-founder, superstar venture capitalist and, in recent years, alternative energy advocate, has been investing out of his own pocket since forming Khosla Ventures in 2004. The firm has backed roughly 80 companies across a range of stages, most in clean tech.

Among some of the firm’s biggest bets has been the ethanol plant company, Coskata, which has raised $76.5 million so far (including from Globespan Technology Partners and a few others); ethanol plant operator Cilion, which has raised around $209 million, largely from Khosla Ventures; and Mascoma, another cellulosic ethanol company that has raised $100 million.

General Motors last year made investments in both Coskata and Mascoma. (Likely those stakes are now in the hands of GM’s creditors.)

We’ll be digging around tomorrow for more information about Khosla’s LPs. In all likelihood, CalPERS remains the firm’s anchor tenant. Back in March, the $182 billion pension disclosed in an internal memo that it was committing $200 million to the Khosla Ventures Expansion Fund, concluding that the fund could be a “breakthrough” chance for CalPERS to align itself with Khosla. “Over the last five years, KV has developed market-leading knowledge in the area of clean technology,” CalPERS stated at the time. “As a result, the current KV portfolio is well diversified across a number of sub-sectors.”

Interestingly, Forbes says that Khosla ‘is understood to be ponying up more than $150 million for the new funds himself.” Typically, so-called emerging funds, even those of seasoned money managers, require that GPs chip in no more than 2 to 3 percent of their own capital in new vehicles.

Forbes’ sources also say that Khosla is offering his investors protection in the form of a so-called conflicts committee, which will review those deals in which Khosla is making follow-on investments in companies he has already staked with his own money and for which he proves unable to line up an outside lead investor.

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