Sun Microsystems founder targets $1bn for first institutional fund

Khosla Ventures, led by ‘one of the most successful venture capitalists in Silicon Valley’, is for the first time raising external institutional money. It has already secured a $200m anchor investment from CalPERS.

The California Public Employees’ Retirement System has committed $200 million as an anchor investment for Khosla Ventures Expansion Fund, a growth capital fund run by Sun Microsystems founder Vinod Khosla. The fund aims to raise $1 billion and is the first vehicle for which Khosla has raised institutional capital, according to CalPERS documents.

Vinod Khosla

CalPERS, which approved the commitment in December but only disclosed it this week, described Khosla as “a visionary and a knowledgeable investor who is adept at spotting trends and capitalising on them through his research and investments,” in a recent investment committee meeting note.

Khosla co-founded Sun Microsystems in 1982, before leaving to join venture capital firm Kleiner Perkins Caufield & Byers. Khosla Ventures, which he founded in 2004, has to date made more than 70 early and later stage investments, mostly in the cleantech area.

Khosla Ventures Expansion Fund will continue the firm’s cleantech focus, with around 75 percent of the vehicle directed toward environmentally friendly technologies. The remainder of the fund will be invested in information technology businesses.

CalPERS considers its investment in Khosla’s fund to be a “breakthrough opportunity for [the pension] to align itself with one of the most successful venture capitalists in Silicon Valley at a meaningful scale”.

Media reports in the summer of last year suggested that the pension was considering backing Khosla with $640 million as a sole limited partner. Neither CalPERS nor Khosla Ventures were available for comment.

CalPERS, which currently values its portfolio at $176.5 billion, recently hired Joseph Dear from the Washington State Investment Board as its chief investment officer. The pension is at present battling with the denominator effect; as of 31 October, its actual allocation to its alternatives programme stood at 13.8 percent, well above its target of 9.5 percent.