KiOR: The inside true story of a company gone wrong

The end of the honeymoon, and a change of CEO

The honeymoon ended almost immediately. It was clear that the newly-minted KiOR would be moving to America. Khosla’s request to the company was to hire talented, highly experienced and creative technical personnel, and the US bench was the deepest. But, where?

Strong disagreements ensued. At first, the company set up shop temporarily in Houston. The company consisted of Rob van der Meij (President and CEO), Paul O’Connor (CTO and KiOR Board member), Jacques De Deken (Director), Hans Heinerman (Director), Robert Bartek (Applications Manager), Steve Yanik and Mike Brady. Dennis Stamires was appointed Senior Fellow Scientist, on a consulting contract.

Denver and Houston were the Headquarters finalists. The pro-Denver contingent preferred to be close to the National Renewable Energy Laboratory in Golden, the University of Colorado and the Colorado School of Mines. It was an area, where, as one member of the team put it, “a lot of highly educated persons were living. R&D work was going on at NREL on renewable fuels and the NREL management had expressed interest in collaborating with KiOR.” Papers putting the case for Denver were circulated amongst management on March 19, 2008 and June 1, 2008.

So, why was Houston chosen?

Ultimately, three factors came into play. One, the company was already there. Second, Houston afforded access to expertise in catalysts and in FCC unit development and operation.

The third Houston advantage was more problematic but ultimately decisive. By April 2008, in the April/May 2008 period, arguments and disagreements emerged between Rob Van der Meij and Paul O’Connor. The issue regarded, as one person familiar with the problems remembered it,“ primarily, Van der Meij’s style of management and the direction KiOR was going.” Not long afterwards, Samir Kaul, representing Khosla Ventures on the KiOR board, was called in, and ultimately Rob van der Meij departed in May.

Fred Cannon

Among the candidates to replace van der Meij was Fred Cannon, an executive formerly the head of AkzoNobel’s (and later Albemarle’s) catalyst business. He had worked with O’Connor in the past. As the Harvard Business Review outlined:

O’Connor had a hunch that the still-nascent technology to convert Biomass into Liquid Fuels (BTL) would make significant advances over the next decade. “In 2004, BTL was still virgin territory in terms of patents and processes,” recalled O’Connor. “I believed that if we went into this now, we would be leaders.” O’Connor took his idea to Fred Cannon, then Houston-based vice president for Albemarle’s Alternative Fuels division. Cannon was excited by this idea, and the two presented it to the president of Albemarle. However, the president declined to invest in BTL.

Cannon had a successful interview with Khosla and was hired as the new President of KiOR in June 2008. Management then decided to locate the KiOR lab and office facilities in Houston where Cannon was living.

KiOR consultant Dennis Stamires remembered:

“By locating in Houston, there was a very limited number of qualified technical personnel with the type of expertise needed by KiOR available to be hired, or willing to move to Houston to work for KiOR. Therefore, a lot personnel was hired who had no experience in the area of KiOR’s business or qualified for the job. Some were friends or ex-colleagues to Cannon and O’Connor.”