LOS ANGELES--Kleiner Perkins and Khosla Ventures-backed solar-thermal start-up Ausra is in talks with three potential buyers to sell itself, two sources familiar with the company told Reuters on Friday.
The buyers could take a majority stake or snag the whole company and the discussions are at a "very aggressive level," said one source familiar with the company, who was not authorized to discuss the matter publicly.
Both sources said the interested companies were global conglomerates in the power generation business but declined to name them. The companies already have various power products, such as steam and gas turbines, and are committed to renewable energy. One interested party has engaged with Ausra previously, one source said.
Ausra declined to comment.
A sale of the high-profile Silicon Valley start-up that has raised $130 million in venture capital would add to a string of recent deals and growing consolidation in the solar-power industry.
Chinese solar-wafer manufacturer ReneSola plans to buy Dynamic Green Energy while silicon maker MEMC Electronic Materials plans to acquire privately held SunEdison, which installs, maintains, and finances commercial solar systems.
Privately held Ausra, which is based in Mountain View, Calif., launched as a solar-thermal developer in 2006, when solar power and other clean technology were luring venture capitalists.
Two years ago the company landed a power purchasing agreement with California utility PG&E, a unit of PG&E Corp., for a 117-megawatt solar-thermal plant. Solar-thermal plants use the sun's rays to heat liquid to create steam, which drives turbines and generates electricity.
Earlier this year, the company switched tracks, saying it would move away from developing projects and focus on supplying large-scale solar steam generators.
This month Ausra said that it canceled its agreement with PG&E and sold the project's land to the largest U.S. solar-power company, First Solar, maker of thin-film solar cells.
Ausra also has deals in Jordan and Australia and other investors include Starfish Ventures and KERN Partners.
One source familiar with the company said that "extensive work" has been done at various stages of completion with the interested buyers.
"We're talking about meetings with dozens of people involved," said the person, who also was not authorized to speak publicly about the discussions.
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The venture fund of famed venture capitalist Khosla Ventures is betting that today's science experiments will be the companies that reinvent industry.
Khosla Ventures on Tuesday said that it has raised two funds to invest in green-tech and IT-related start-ups. Khosla Ventures III has $750 million to invest in traditional early to mid-stage companies, while a newly created $250 million fund called Khosla Seed will seek out higher-risk projects.
Vinod Khosla
(Credit: Martin LaMonica/CNET)As part of the expansion, the investment company said it has hired Gideon Yu, the former chief financial officer of Facebook, and venture capital investor Jim Kim, who joined from CMEA Ventures.
Khosla, a co-founder of Sun Microsystems, has become one of the most high-profile investors in green technology and an advocate of changes in U.S. energy policies.
Many venture capital firms have cooled on energy-related start-ups because many were pulled into investing more than they were comfortable with to finance expensive endeavors, such as biofuel refineries or solar manufacturing plants.
In an interview, Khosla said that venture capitalists, many of whom joined green tech from biotech or IT, should not have been financing large-scale projects, but instead focusing on nurturing new companies.
"This is the 1980s style of venture capital--real technical risk with small amounts of money and small teams," Khosla told The New York Times. "Clean-tech companies taking large amounts of money--that's project finance, not technical risk. That's a differentiation most people have lost."
The Khosla Seed Fund is seeking to address what many experts say is a yawning funding gap: tiny firms that need seed funding.
Venture capital funds typically aren't structured to invest under a few million dollars in a single company as they are looking for a ten-fold return within a few years. Yet many companies, including those in green technology, would prefer to get less money from investors and not yield as much ownership to outside investors, said Susan Preston, an expert on angel investing who manages the CalCEF Angel Fund.
Some business, such as service businesses or companies that focus on energy efficiency, can be good long-term investments but not suit the venture model, she said. And many banks have become conservative in their lending, making the gap bigger.
"There are lots of very valuable and economically viable companies that have great cash flow but are not venture-backable because the market potential is not very large--it could be that it's a localized business," she said.
Having funds specifically set up for seed funding doesn't necessarily mean that venture capital is obsolete. But those VCs with larger dollars could come at a later stage of development.
"I've seen more development of smaller funds in clean tech than any other sector because there's a recognition of the need for this additional layer of funding," Preston said.
In a statement, Khosla said that its Seed fund will target those companies, which may have roots in university research, that can't find funding elsewhere.
"We will continue to foster high-risk technology innovation and unproven but high-impact science experiments, now with greater resources," Khosla said in a statement.
Some of the examples of the "radical approaches" that Khosla Ventures has already cited include Calera, which is sequestering carbon in the process of making cement, and Kior and HCL, which are using novel techniques to make fuels from biomass.
The California Public Employees' Retirement System (Calpers) is expected to commit up to $640 million to clean tech-focused firm Khosla Ventures, according to a report at Private Equity Hub which cited two sources.
Calpers has already created a $400 million clean-tech fund which launched last year.
Vinod Khosla, head of Khosla Ventures.
(Credit: Martin LaMonica/CNET News.com)But a capital commitment the size of $640 million to a venture capital fund is significant as it can provide the capital required to scale up energy industry start-ups.
Ethanol companies, for example, need hundreds of millions of dollars to prove out their technologies at a commercial scale.
Khosla Ventures has invested in a number of ethanol companies including Range Fuels and Mascoma, which both require money to build beyond their initial pilot plants.
Billions of dollars have gone into clean-tech start-ups. But many industry observers expect many of those to falter in the face of a "funding gap," or "Valley of Death," between technology development and commercial production.
Until now, Khosla Ventures has been funded by family money from billionaire Vinod Khosla.
Updated 2:30 p.m. PST with funding amount.
Khosla Ventures, the venture capital firm of Sun Microsystems co-founder Vinod Khosla, has invested in Pax Streamline, maker of turbines, heating and air-conditioning systems, and aerospace technologies.
Khosla and Pax Streamline CEO Jay Harman did not disclose the amount of the investment, which was formally announced Friday, but Harman said the funding is "substantial." According to a source familiar with the deal, Khosla invested an estimated $6 million in a series A round of financing; and if the company meets certain business goals, the VC firm will put in another $6 million.
Khosla partner Ford Tamer will sit on the board of Pax Streamline, and Harman will serve as interim CEO.
Jay Harman
Pax Streamline is a relatively recent spinoff of Pax Scientific, an 11-year-old research and development company based in San Rafael, Calif. Pax Scientific was founded on the premise that design in nature could improve the efficiency of industrial design of everything from air conditioning fans to water pumps to and computer cooling systems. Harman's design for fans, pumps, and propellers mimic the geometries of spiraling whirlpools--and industry experts believe these designs can reduce friction, wasted energy, noise, and unwanted heat.
Pax's projects take a cue from a design theory called biomimicry, coined by Janine Benyus. Biomimicry argues that nature uses only the energy it needs, fits form to function, and recycles everything.
Pax Scientific, which has numerous private investors, has already spun out companies for computer systems (PaxIT), wastewater management systems (Pax Water Technologies), and car cooling systems (PaxAuto). Paul Hawken, co-founder of garden retailer Smith and Hawken, is CEO of three Pax spinoffs. The company formed Pax Streamline within the last two months to address new markets for turbines and aerospace technologies, according to Harman.
He said that Khosla's investment will open doors for the company.
"There's no one that doesn't answer Vinod Khosla's phone call," he said. "It's very helpful when you have new technology and are looking for attention from Fortune 100 companies. He is a real visionary."
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