Khosla Ventures (EF, Wednesday, Week 8)
entrepreneurial-financeyear-twoSignificant challenges to cleantech:
-- Capital intensity/development risk --- huge debt and equity required to find out if a firm's technology will scale
-- Government/regulation risk --- government policies are unpredictable and outside firms' span of control
What is Khosla buying with early-stage investments?
A call option on many, many cleantech startups.
Serious challenges to cleantech:
-- "IPO window" is a fickle thing; large incumbents are not really ready to buy now (Exxon-Mobile is not snapping up promising cleantech startups). => traditional VC "needs a big sucking sound at the end" of a five-year investment window to enable timely exit
-- Dearth of late-stage investors ready to sink cash into cleantech to enable firms to scale up
Jim Matheson (Flagship) on the two critical parts of being a VC:
-- Can your fund make promising bets (and avoid bad bets)?
-- Can your fund persuade other people to put their own money up alongside yours? Their capital is cheaper...