SAN FRANCISCO--Vinod Khosla is famous for investing lots of money in green technologies. But when it comes to his role models, it's all Steve Jobs, not Al Gore.
Khosla was interviewed today at the AlwaysOn GoingGreen conference here, where he espoused the idea of making big bets on potentially game-changing companies.
Even though Khosla got into green-tech investing out of environmental concerns, he said environmentalists have been a barrier to green tech because they assume that people need to pay more for cleaner alternatives to the status quo. They understand what the problems are, but when it comes to coming up with technology solutions, he said, "they don't have clue."
"Green-tech investing can't defy the laws of economics," which is that people will buy the cheapest goods possible, he said. "This idea that we can sell more expensive products is not a good bet."
Khosla has made headlines before by complaining that Prius hybrids are greenwash because, on a global level, only a small percentage of consumers will be able to afford them. Perhaps a few people in San Francisco and Germany are willing to spend more on "green" products, but they won't scale, if they won't meet the "Chinia price," or a price Indian and Chinese consumers will pay, he argued.
Khosla's namesake investment firm raised more than $1 billion to invest in a range of clean-energy technologies, such as LED lighting, solar energy, and battery technology, as well as all manner of infrastructure products, such as low-polluting steel, cement, and glass. In all but one or two investments, he assumes that there will be a price on carbon emissions to make them economic.
The guiding principle for all Khosla's investments, he said, is that it's not worth it, unless there's a chance of a technical breakthrough rather than an incremental improvement.
To achieve those sorts of radical jumps in energy, you need start-ups led by people with an "unreasonable vision," he said. One company on which he made $1 billion is Kior, which had a vision to making petro-fuel replacements from wood which, at the time of its founding, ran counter to the industry's emphasis on ethanol.
Another example Khosla gave is tech icon Apple, which he said is such a successful company because it benefits from Steve Jobs' vision and passion. The iPhone succeeded so spectacularly because Jobs ignored the conventional wisdom about what a smartphone should look like and followed his personal vision, he said.
"Whether it's social change or inventing the next iPad of iPhone, it's all about stretching the limits beyond the reasonable and having a passion for it," Khosla said.
Elephant in the room
Khosla remains bullish on green-tech investing despite a significant downturn in the amount of money venture capitalists have put into the field this year and the , the government-backed company whose failure has created a political uproar.
The Solyndra effect on solar companies is that it will be more difficult to continue raising money, he said. But he said it's the normal course of investing that the vast majority of start-ups fail. "When you lose, you lose one times your money. When you win, you can make 10 times or 100 times your money," he said.
Khosla is well-known for making bold statements and being controversial. In his complaint that environmentalists have blocked green-tech progress, there is some nuance. He said a viable strategy is to initially target a product at environmentally minded consumers willing to pay a premium and then reduce costs over time.
"If you can get down the cost curve and then sell to the broader market, that tactic is a good idea," Khosla said. "But only to get started, only to get down the cost curve so you can compete in the marketplace."