Legendary venture capitalist Vinod Khosla speaks to reporters following his address Thursday at the Algea Biomass Summit in Seattle. (TechFlash photo)

Silicon Valley venture capitalist Vinod Khosla has looked at dozens of startup companies trying to make fuel from algae. But the technology titan -- who made his name in the software business but has become one of the leading investors in clean tech -- hasn't found a company that can cost-effectively do it.

But he's still looking, telling the more than 600 attendees at the 2nd Annual Algae Biomass Summit in Seattle today that "somebody will break the code."

"I am convinced algae will work, but it will take a different out-of-the-box approach," said Khosla.

In a wide ranging discussion with reporters following the talk, the founder of Sun Microsystems touched on everything from technology subsidies to the presidential election to T. Boone Pickens' plan for natural gas -- and what he described as the myth of the dot-com bubble. Highlights from his comments:

On biofuels from food crops:  "Today, people ask me, are biofuels good or bad? That is like asking if drugs are good or bad. Well, it depends on whether you are talking about cocaine or aspirin. ... There are different politics and different environmental impacts and different social consequences of each of those. ... Food-based fuels, when they are not scalable, they are not going to be cost-effective and they are never going to get to replacing oil. And if replacing oil is our goal, the only place you get that sort of capability is out of non-food fuels."

On T. Boone Pickens' plan for natural gas: "The Pickens' plan ... at least the automotive part of it, is a dead end. ... I don't think he understands that we don't want to change the whole infrastructure. ... That doesn't  get us to the 80 percent reductions we need."

On oil companies: "It is important to realize that the oil industry is interested in one thing, which is making profits. ... If you showed them a better way to make money that they are not reliant on Hugo Chavez, you think they wouldn't prefer to work with you? Absolutely."

On subsidies: "I don't think any technology should get subsidies beyond, say, seven years or something. Otherwise what is the goal? ...Subsidies are helpful in getting things started."

On the economic crisis and clean-tech investing: "I think the implementation phase of projects, which need large amounts of project financing and all of that, are very much on hold today because of the credit crisis. ... That is a serious concern today, especially project financing for renewables, which is slightly higher-risk financing than, say, financing the next coal power plant. ... I think the venture capital business, which is pretty used to risk -- and, in fact, only invests in risk -- would do fine with the research stage of companies."

On failure: "It doesn't matter that most efforts are unsuccessful. Only one has to be successful to take over the world. ...You don't know the 1,000 Google-like companies that fail, but you hear the ones that changed the world. You only need one to change the world."

On the dot-com bubble: "What the stock market thinks is not what the reality is. We all know the dot-com bubble. I contend there was a bubble on Wall Street, but there really wasn't a real bubble. If you look at Internet traffic ... it increased continuously every year since. So, you know, what is the real bubble? ... To me, real usage of the Internet is the reality."

On whether the U.S. will lead in clean tech:  "There are good ideas everywhere in the world. The U.S. does not have a monopoly in good ideas. What is true is that the U.S. tends to have many more people willing to take the risk."

On capital for new clean tech companies: "I think the money will be there."

On the standard of living in 25 years: "There is no question in my mind that we will have a higher standard of living in 25 years than we do now. We will use a lot more energy than we use today. ... I am not one of those naysayers who thinks we should use a lot less energy. Energy translates into lifestyle. We need to produce it a lot cleaner. I am a technology optimist. I am not a naysayer. I am not a believer that we need to stop living the way we do."

On John McCain and Barack Obama: "I think Obama will be much stronger for clean tech. So that is going to be good news. I think it is very likely. I am one of those Republicans who is for Obama. I am happy to say that because McCain has reverted back into a different conservatism that -- it is not fiscal conservatism either. ... We have the right policies. We need stability of policy. We need to make them long-term."