Khosla bucks sluggish VC market with $1.1bn in clean tech funds

Silicon Valley-based venture firm Khosla Ventures has created two funds totalling more than a billion dollars in its bid to accelerate high-risk clean tech research.

A primary fund of $800m (£495m) will provide investments of between $5m and $15m, while a higher-risk $275m fund will make investments of about $2m each.

The company is particularly interested in early-stage university-level research and development projects, and is taking an extremely aggressive funding stance. Founder Vinod Khosla has been quoted as saying that he expects many of his investments to fail.

"The broader capital base and team allow us to accelerate what we do, which I call venture assistance – we assist and mentor entrepreneurs," said Khosla. "We will continue to foster high-risk technology innovation and unproven but high-impact science experiments, now with greater resources."

Khosla, who co-founded IT giant Sun Microsystems and also worked as a general partner at VC firm Kleiner Perkins Caufield & Byers, has already established himself as one of the world's leading green technology backers, having previously invested up to $400m of his own cash in clean tech ventures.

But the new funds represent the first time that the company has raised money from outside investors. Investors are reported to have been encouraged by Khosla's investment of his own cash in risky ventures.

Gideon Yu, former chief financial officer at Facebook, joins Khosla as general partner, along with James Kim of CMEA Ventures.

Khosla's raising of $1.1bn in cash might have come at the perfect time. Although investment in clean tech is still down this year compared to the first half of 2008, there is nevertheless strong evidence of an uptick in the sector based on improved second-quarter figu res.