VC investor Vinod Khosla has said on more than one occasion, "If you're not afraid of failure, it frees you up to succeed."

This particular transaction involving green chemical firm Draths and the now-public "tailored hydrocarbon" firm Amyris might qualify as the failure that frees up Mr. Khosla to continue to succeed. 

Late last month, Draths was sold to Amyris for $7 million in Amyris stock after having raised more than $27 million from Khosla Ventures, CMEA Ventures, and TPG Biotech. Here's a link to the SEC filing, thanks to the ICIS Green Chemicals blog. Note that Khosla Ventures is an investor in Amyris.

Draths claims a platform technology that allows nylon, polyester, and other polymers currently made with petroleum-based chemicals to be made from renewable, bio-based sources. The firm's website targets its first two commercial products as caprolactum used to produce bio-based nylon fibers and Purified Terephthalic Acid (PTA) to produce bio-based polyester (PET) polymers

As we've reported recently, the Amyris (Nasdaq: AMRS) business model is focused on producing custom petroleum alternatives using sugar feedstocks and genetically modified yeasts that can process sugars into the company's base hydrocarbon (rather than alcohol), branded Biofene. From there, Amyris can make “specifically tailored” hydrocarbons for cosmetic, detergent, lubricant and fuel markets. The company has estimated that it is capable of producing around 50,000 specific types of molecules. According to a revised business plan from earlier this year, Amyris is currently focused on commercializing high-margin perfume additives and shark liver oil substitutes, with a hope to break into the higher-volume, lower-margin diesel market in the future as increased production capacity brings costs down.

Amyris reported Q3 revenue of $36.3 million with a gross profit of just $500,000, a 1.5 percent margin. Amyris' production outlook has dropped heavily for the 2011 fiscal year, from 6 million to 9 million liters to 1 to 2 million liters. This was due to difficulties with its production process as the company tried to ramp up output. It is also largely due to the company's reliance on contract manufacturers as it continues to increase in-house production capability. On a positive note, Amyris signed a deal with ETH Bioenergia and Usina Alvorada in Brazil to increase its access to feedstock. Starting in 2014, Amyris will have access to two million tons of sugarcane crush capacity via an ETH mill.

In October, in advance of the sale, almost all of Draths' employees were laid off, according to the Lansing State Journal.

Here's the Khosla cleantech portfolio. Draths falls into the "plastics and chemicals" slice.