Food first. Fuel later.

That's the new business plan of Aurora, formerly Aurora Biofuels. The company emerged out of research conducted at UC Berkeley in 2007 with a business plan to grow algae in open ponds to produce fuel.

Now, the company is in the midst of a reorganization, according to sources. When it emerges, Aurora will put a strong emphasis on growing algae for omega-3 fatty acids and proteins for the dietary supplements market. It will also sell cell mass as animal feed. Aurora had mentioned the possibility of selling cell mass (i.e., the leftovers after the oil has been extracted) as pet food in the past, but the push on oils for human dietary supplements, particularly with a vigor that will equal or exceed the company's push into fuel in the near term, is new.

Why the switch? The vast majority of biofuel startups have encountered difficulty in getting past the experimental stage. Range Fuels, Mascoma and others have delayed plants because of a lack of available capital. Others, like algae pioneer GreenFuel Technologies, which raised over $70 million, went under. Large oil producers like ExxonMobil have invested in biofuel start-ups, but have yet to commit to full-scale production agreements with them.

Further, the price of fuel fluctuates. Many startups were formed in the 2004-2008 era when predictions of $200-a-barrel oil weren't that far-fetched. Now, oil burbles around $75 a barrel.

By contrast, the chemistry and markets are much more stable. Potential suppliers have to meet certain technical and safety thresholds, but once they do, they can secure lucrative contracts. Put another way, it's easier to get on your plate than into your gas tank.

Besides, how do you think salmon get their omega-3s? Through a food chain that starts with algae.

Solazyme, one of the algae leaders, opened a food lab last year and began selling algae oil to the cosmetics and food industry for revenue. (The brownies taste pretty good. See video.) Others, such as Cobalt Biofuels, have begun to emphasize biobutanol for the chemistry industry and have put less stess on biobutanol as a substitute for jet fuel. Zeachem now talks of producing acetic acid and other materials for the plastics industry; the company started with a push on cellulosic ethanol from poplar trees. LS9 produces chemicals for the fuel industry, but also has a deal with Proctor & Gamble.

Aurora declined to comment. The company's website partly reflects the name change: it is listed as Aurora and Aurora Algae on various pages of the website, while the URL is still www.aurorabiofuels.com. The company also has begun to talk about tasty omega-3s on the site, but in very general terms. One page of the website lists the opportunities in "pharma, feed, food and fuel." Note how fuel is listed last.

Back in February, then-CEO Robert Walsh, a veteran of LS9 and Shell, resigned from Aurora, and the CFO retired. In March, Aurora raised another $15 million. In March, it raised $15 million more and appointed Scott McDonald as CEO.  The company said it would use the money for advanced algae biofuel development and did not mention food.

Aurora's founders optimized a genetic pathway in a strain of algae that effectively turbocharges the growth and reproduction cycle. Back in 2009, the company talked about $2-a-gallon biodiesel by 2011 or 2012. But by the end of that year, it failed to get a Department of Energy grant. The management changes, and now the strategy change, followed soon afterwards.

Tags: algae, algae fuel, aurora, aurora biofuels, biodiesel, cobalt biofuels, ls9, solazyme, Solazyme, zeachem