StepOne Blog

Those of you following Silicon Valley’s Khosla Ventures will have read last week that founder Vinod Khosla has succeeded in raising $1.1 billion for early-stage investments in cleantech and information technology startups. The money has been split into two funds: an $800 million fund for large initial investments ($5-15 million), and a $275 million fund for smaller seed investments ($2 million) in what Khosla describes as “science experiments.”

For more on this fund, read our earlier coverage of Khosla Ventures.

From Andrea Chang, head of StepOne’s US office:

“I attended a lunch-time chat yesterday with John Bautista (a partner at Orrick) and Des Cahill (an Executive in Residence at Plug and Play). They gave lots of really useful and interesting advice regarding how startup companies should approach their valuation. One piece of advice that seemed especially relevant for StepOne clients wanting to raise money in the US was to look at convertible debt as a much less expensive and complicated option versus equity. Helping our clients decide how to approach these types of decisions is what StepOne is passionate about!”

Vinod Khosla has recently been reported to be closing $1B in new funding for his firm, Khosla Ventures. The announcement runs counter to months of reporting about the difficulty in fundraising found in the VC community. Adding to the air of confidence is the rumor that $200M of the fundraising has come from CalPERS, the nation’s largest public pension fund.

The money has been divided into two  – $250M will be set aside for seed-stage investing while $750M will go towards late-stage investments. The large commitment to late-stage investments comes as little surprise to those following Khosla’s investments: a big jump into cleantech has meant that the firm is betting on riskier businesses that will likely require more capital to become profitable. The $250M for seed investments, on the other hand, demonstrates the funds commitment to early-stage Venture Capital at the same time that many have been questioning the viability of the VC model.

The vote of fundraising confidence reflects StepOne’s view that venture capital is certainly not dead in the valley. While both investing and fundraising have been affected dramatically by the recession, money will continue to flow through Silicon Valley, supporting the best ideas and entrepreneurs.