S-1s are great. You can't learn everything about a company from them, but you can learn a heck of a lot. And when the company is pretty indicative of an entire subsector, you can use that company's data to help illustrate trends across a market.
Gevo's S-1 is well worth reading through. Because the company is, I think, fairly illustrative of what many venture-backed "2nd generation biofuels" stories have looked like. I don't have any insider knowledge of Gevo, so it's also a good one for me to talk about simply from what's in the S-1 and available to all...
Here are some interesting (to me, at least) tidbits:
1. The funding path [caveat - this is all as estimated and perhaps miscalculated from the info available in the S-1, treat accordingly]
Gevo was founded in 2005, as cleantech was heating up, by some CalTech researchers. It was seeded along the way (it appears to be in several different Series A rounds or tranches) by Khosla Ventures.
In 2007, the company raised a $3M Series B, from Virgin Fuels. Around that time they started ramping up R&D expenses. So it appears that the company had met some lab-scale indicative technical milestones and raised some money to hire researchers to figure out how to scale the technology to the pilot stage. Apparently there was a lot of optimism around what these early indicative results looked like, because from what the S-1 implies (piecing together share amounts, price per share, etc.) the Series B was done at a $22.5M pre-money. Also at the same time, additional Series A-4 capital was raised -- Khosla Ventures putting in one final tranche at a slight discount to the Series B? Unclear.
In 2008, the company raised a $17M Series C, with new investors Burrill and Malaysia Life Sciences Capital Fund alongside existing investors. This round saw a pretty big step-up in valuation, to a $48M implied pre-money. It appears that much of that step-up is attributed to having licensed a key piece of the IP from UCLA.
In 2009 they raised a $33M Series D, at a pre-money greater than $80M, with oil company Total as the new money. By now the company had opened up that pilot facility, had begun construction on their first demo-scale plant, moved to Colorado, formed a partnership with a key commercial/production partner, and started ramping up the G&A spend. Undoubtedly, much of that round was intended to finance the construction of that plant.
Earlier this year they raised another $33M in a Series D-1. At a very big step up in valuation, to an implied current post-money of $314M. But there are some interesting features to this valuation. If the company IPOs this year, those shares get re-valued to 75% of the IPO price. If the company IPOs instead next year, those shares get re-valued to 60% of the IPO price. If the company doesn't IPO by the end of next year, the price per share of the D-1 is effectively cut in half retroactively. So the management team is pretty motivated to make this IPO happen.
Gevo isn't the most capital-intensive biofuels play I've seen, but it's still typical of this type of play in terms of the amounts that have been raised along the way. And you can see how the investors have guided the company through that, with the step-ups at what look to be pretty typical biofuels company proof points, and the inclusion of strategically-minded investors to provide those step-ups. Good benchmarks for other companies to keep in mind.
2. What project developers?
Gevo, like other 2nd gen biofuels players, is clearly wrestling with the challenges of both 1st time project finance, and then the overall drying up of project financing for biofuels altogether (not exactly en vogue at the moment). They're not expecting to have commercial revenues until 2012 (!) but they're already having to plan around this significant problem.
For capital efficiency's sake, they're looking to do retrofits of moribund ethanol projects, and have partnered up with ICM (an ethanol plant engineering firm) to identify and build out the first such plant.
And they've formed their own subsidiary which will be funding the projects, at least during the development stage. So not dependent upon 3rd party project developers, but doing it themselves. TriplePoint provided some debt financing to enable the first such project.
It's an interesting illustration of the difficulties of go-to-market for new techs of this type, and also some interestingly creative thinking and partnership-making around it.
3. What customers?
You can't go public without revenues... er, at least you can't go public without customers, right? So Gevo has several big customers lined up for 2012 when they start commercial production, including: LANXESS, Total, Toray, United Air Lines, and CDTECH.
Of course, since that's out in 2012, those customers aren't going to lock themselves into any unbreakable commitments in 2010. So those are non-binding letters of intent.
That having been said, there is indeed an existing market for isobutanol, so it's not a complete gamble that they'll be able to sell out initial production. As long as they can sell at market prices...
4. The venture / project finance IPO
The company has about as much cash as capital that they took in from the Series D-1. Their cashflow statement suggests they're burning about $5M/qtr in cash, and they've committed to buying an ethanol facility for around $20M (including retrofit costs).
This is in many ways a venture capital / project finance fundraising. Not your classic IPO liquidity event... Is that a bad thing? Not necessarily, there's plenty of examples of companies that appropriately tapped into the public markets to finance energy projects, even for more unproven plays like wildcatting. But this IPO should be viewed by reporters and cleantech GPs/LPs through that lens.