Raising money for algae
This week two algae-to-fuels firms took different pathways to raise new capital while they work out how to commericialize their technologies. The hundreds of start-ups looking to cash in on the little green organisms are likely watching closely.
San Francisco-based Solazyme has raised an impressive $52 million in its fourth round of venture capital funding. Unfortunately for the algae industry, the round does not signify that new investors are flocking to this corner of cleantech – there was only one new investor, Morgan Stanley, participating. Oil company Chevron has stayed on as a strategic investor through its venture capital arm.
Solazyme takes an unusual approach to the science* of growing algae for commercial oils – it grows microalgae in the dark in large fermentation vessels. Instead of feeding photosynthetic algae sunlight and CO2, the firm fattens its microalgae on cellulosic materials. Then it processes the algae to extract the oil. Currently, the firm is selling the oil into the cosmetics and food industries, but it still sees its largest market as biofuels.
PetroAlgae, a less well-known start-up, has filed for a $200 million IPO. The firm plans to license its technology to grow photosynthetic algae in flexible plastic bags. Unlike the big bucks raised by Solazyme, however, industry watchers suspect this play will flop, possibly souring the investment community on the whole algae idea.
The timing of PetroAlgae’s IPO does seem premature. I wrote about the nascent algae industrya year and a half ago, at the time, company leaders were working to bring down the engineering and processing costs to make algal oil. At the time, costs would need to come down by about a factor of ten – which has not likely happened since then.
The soft-bodied cells are attractive for biofuel production because they don’t contain tough lignin and hemicellulose that are hard to break down into fuel feedstocks. But instead, algae need to be fed and housed – at considerable overhead. And then the oil must be separated from the algae cells as well as from the water the algae grow in.
Cleantech investing by venture capitalists, especially the ones who are already backing cleantech firms, seems to be rolling along despite the lackluster economy. But a busted IPO could cast a shadow over the many firms still working on their algal engineering.
* Congratulations, intrepid keyword hunters! You've found one of the six for the contest.