Leading clean-tech investor Vinod Khosla is betting big on high-risk untested technologies, confident that transformative breakthroughs in climate tech will outweigh current volatility and uncertainties
Vinod Khosla, who amassed significant wealth as the founder of Sun Microsystems, has focused his venture capital firm, established in 2004, on advancing green technologies.
Despite encountering setbacks, particularly following the 2008 financial crisis, which saw valuations in green tech plummet, Khosla has maintained a strong emphasis on low-carbon innovations. He has also diversified his investments into areas like artificial intelligence, including a notable investment in OpenAI in 2019.
While some investors express concern over the future of green tech due to policy uncertainties and declining valuations, Khosla remains optimistic. He stresses an essential aspect of his strategy: investing in technologies that are expected to become cost-competitive independently of long-term subsidies or future carbon pricing.
For instance, Khosla has been cautious about investments in start-ups like Sweden's H2 Green Steel and Hybrit, which are producing low-carbon steel but at a premium compared to conventional steel. He argues that many of these technologies will not become as cost-effective as traditional methods, potentially hindering their scalability.
Instead, Khosla prefers investing in high-risk, high-reward ventures, such as Limelight Steel, a California-based company aiming to replace coal-fired blast furnaces with laser-powered furnaces. He believes that while these technologies pose significant technical risks, they could achieve substantial cost reductions if successful.
Among his most ambitious investments is Commonwealth Fusion Systems, a leading start-up in the fusion power sector. Fusion power, promising vast amounts of carbon-free electricity, has yet to be realised, but CFS is working on a prototype fusion plant in Massachusetts, anticipated to be operational by 2027.
Khosla's recent investments include superhot geothermal energy, which harnesses higher temperatures at greater depths to generate more power than conventional geothermal plants. His firm has backed two US start-ups, Quaise and Mazama Energy, exploring this innovative approach.
In the transportation sector, Khosla continues to seek disruptive technologies. He has invested in QuantumScape, a company developing advanced solid-state batteries. Despite fluctuations in its valuation, QuantumScape recently saw an increase following a licensing deal with Volkswagen. Additionally, Khosla has invested in Glydways, a start-up that is creating autonomous vehicles for public transit that are designed to be safer and lighter due to fixed routes and reduced collision risks.
As regulatory landscapes shift, particularly with expected political changes in the US and EU, Khosla remains undeterred. He emphasises the importance of investing in technologies that can thrive without prolonged government support, arguing that excessive subsidies could lead to backlash and hinder long-term progress.
Khosla views the growing trend of green protectionism, where the US and EU impose tariffs to reduce reliance on Chinese clean tech, as an opportunity for further innovation. He believes this shift will pave the way for a new phase of industrial development, presenting additional prospects for visionary investors like himself.