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Khosla Ventures: Investing in Ethanol September 19, 2007 Chris AbadMikhail Khleblaov Shadi Sedghi An-Chi Tsou

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Presentation on theme: "Khosla Ventures: Investing in Ethanol September 19, 2007 Chris AbadMikhail Khleblaov Shadi Sedghi An-Chi Tsou"— Presentation transcript:

1 Khosla Ventures: Investing in Ethanol September 19, 2007 Chris AbadMikhail Khleblaov Shadi Sedghi An-Chi Tsou

2 Khosla Ventures Background Company Focus –Significant/innovative technologies –Seed to late-stage investments –Breaking up monopolies- large markets –Investment of general partners capital Interest in Ethanol –2006 production facilities: $1.50-2/gal to $10/gal –Social interest

3 Comparative Risks of Fuel Technologies Source:

4 Fig: Carbon Emissions per mile driven of various fuels (Source: NRDC) CO 2 Emissions from Alternative Fuels

5 Ethanol Commonly produced by fermentation, through yeast Yield sugar extraction Advantages over gasoline –Alleviates shortages –More cost effective –Environment-friendly

6 Value Chain of Ethanol Production Raw Material Production Ethanol Manufacturing Marketing, Sales & Distribution Retail Corn Sugar Plant Cells Corn-milling Fermentation Cellulose Breakdown Transportation Storage Ethanol Byproducts Auto Manufacturers Political Ties Non-market Environment

7 Where should Khosla invest? Creation of Ethanol High source of significant technology –Corn fractionation –Enzyme-based process –Cellulose and Hydrolysis Large Market Opportunity –Gasoline prices increase –Demand for gas is steady

8 Where should Khosla invest? Getting Raw Materials Switch Grass –No fertilization; 12 feet tall –Bransby gallons per ton –Skeptics – 96 gallons per ton –Potential for improving cellulose breakdown process Corn –Abundant source in the US; 43% worldwide –Much research in the break down of Corn

9 Porters 5 Forces Rivalry - Oil companies Barriers to Entry - Government tariffs - Need for large volumes - Large capital requirement Threat of Substitutes -Products not in food chain - Cheaper options (ligno cellulosic) Supplier Power - Raw material production - Food industry competition Buyer Power -Demand for alt. energy - Vertical integration threat - High bargaining power

10 What ventures should Khosla avoid? Distribution and transportation –American politics Tarrifs: $0.54/gallon till 2009 –http://www.renewableenergyaccess.com/rea/news/story?id= Protected American ethanol production –Opponents Lower dependence on gas Ethanol production in Brazil

11 How to Invest Kieretsu-style, parallel investments Competitive –Energy sources (yeast variants, enzymes) –Ethanol creation (corn milling, feedstocks, sugar, etc.) Comparative –U.S. corn production

12 Value-Chain Coordination Clusters –Lower transportation costs –Improve communication Form key alliances –Farmers –Auto manufacturers

13 Innovation Ethanol Production –Energy sources –Corn processing/milling techniques –Corn production –Cellulose production Viability for investment –Energy sources- scientific breakthroughs, govt investment switchgrass_biofuel_green_ener.html

14 Future of Ethanol Technologies Source:

15 The Future of Ethanol Potential as additive/alternative to gasoline –Flexible Fuel Vehicles Highly complex political, economical concerns –Capital –Environmental 2007/06/20/ethanol_fuel_pump.jpg

16 Thank you! Any questions?


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