- by Katie Fehrenbacher, November 11, 2014, Gigaom.com
[[{"type":"media","view_mode":"media_large","fid":"309","attributes":{"alt":"","class":"media-image","style":"width: 333px; height: 220px; margin: 3px 10px; float: left;"}}]]Biofuel company KiOR, which has become a symbol of the difficulties of venture capitalists investing in clean technology startups, finally filed for bankruptcy this week, many months after shutting down its biofuel plant and operating on fumes, unable to pay its debts. Many, including myself, have been predicting this for awhile and thought it would come a lot sooner. But affiliates of early investor and major shareholder Vinod Khosla, as well as Bill Gates (also an investor in Khosla Ventures), have been funding the company’s day-to-day operations, keeping it going throughout the year.
Affiliates of Khosla could end up with the assets of KiOR, as they’ve placed the only bid in the sale process, and if there are no better offers, KiOR plans to sell the assets to “senior lenders,” which means funds affiliated with Khosla. Senior lenders agreed to convert $16 million of senior secured debt into new equity in the deal. KiOR interim CFO Christopher Artzer said in the filings that after an asset sale or reorganization, KiOR will continue research and development efforts on its biocrude development technology.
As of the time of bankruptcy, KiOR had assets of $58.27 million and debts of $261.31 million. The company owes $77 million to Alberta Investment Management Corp., which is a fund that manages billions on behalf of the province of Alberta, Canada, and is also a limited partner in Khosla Ventures. KiOR owes $159 million to affiliates of Khosla. It also owes $69.4 million to the state of Mississippi for a loan to build the plant in Columbus. In addition to Khosla, Gates and the Alberta fund, major equity shareholders in KiOR include struggling San Francisco hedge fund Artis Capital Management, Frontier Capital Management and KiOR President Fred Cannon himself.
Rollercoaster ride
If you don’t know the back story of KiOR, I’ll go over it briefly. The Houston,Texas-based company emerged in late 2007 as a joint venture between Khosla Ventures and Netherlands-based biofuel startup BIOeCON. Khosla Ventures provided the early rounds of funding and BIOeCON provided the intellectual property for its “biomass catalytic cracking process,” a thermochemical process that’s been used in the oil industry for decades but that KiOR is using to produce biocrude from grass, wood and plant waste.
KiOR emerged at a time when Khosla was funding a dozen or so biofuel companies. Cleantech was going through a bubble period for venture capital investing in 2007 and 2008, with a peak in 2008 of over $4.5 billion invested. While a small handful of the biofuel companies that Khosla backed during this time — including KiOR, Amyris, and Gevo — managed to IPO in the following years, delivering the firm a return, most of these companies have since struggled and lost much of their value. Other companies never made it off the ground to an exit, like Range Fuels, which ended up shutting down its plant.