Solazyme is continuing to move away from the pack in algae oil. The South San Francisco-based company has raised $45.4 million in a Series C funding, according to PE Hub. Investors included Braemar Energy Partners, Lightspeed Venture Partners and Harris & Harris group. The total includes $6.4 million in convertible securities. That brings the total raised by Solazyme, when grants and everything is mixed in, to close to $70 million by some estimates. The company is both one of the oldest algae oil companies (dating way back to the first half of the decade) and one of the most novel. Rather than grow algae in ponds or closed-in water tubes called bioreactors through phototsynthesis, the company has identified species that grow by feeding off sugars in the dark. Solazyme effectively puts these algae and discarded plant matter into kettles and brews up algal blooms. The algae is then harvested for oil. Solazyme also genetically optimizes the natural strains of algae. By eliminating the need for water, Solazyme doesn't have to worry about separating the algae from the water to harvest oil, a big problem. It can also control the growth of algae. The company initially tried to grow algae through photosynthesis but switched. (See further explanation of the company's technology and business plan from founders Harrison Dillon and Jonathan Wolfson in this masterpiece of cinema.) Solazyme also likes to point out that it has made oil, barrels of it, unlike many of the twenty plus algae companies out there today. It also has a development deal with Chevron. The company will also sell oil to the cosmetic industry and likely the food industry. I actually tried some brownies made with algae oil. They were good. The money will be used to scale up their existing manufacturing facilities. (Right now, the company is housed in a building that once served as an ice cream factory.) Critics, though, note that sugar isn't free, and say that the ecomonics of growing algae with water and free sunlight may win out. So we must wait and see The company also isn't the only one working on novel extraction or growing techniques. OriginOil is concocting a system that will force feed algae and then extract oil from the hapless critters with microwaves. Synthetic Genomics, meanwhile, is working on genetically modified algae that will expurgate their own, like sea cucumbers.

The European venture capital sector contracted by 35 percent in the second quarter, it's worst quarter in nine years. Roughly €858 million were invested over 167 deals, down from €1.33 billon in 286 deals during the same period last year. Investments in particularly strong EU portfolio areas like IT and healthcare were down 40 percent and 46 percent, respectively, on the quarter. The venture capital industry in Europe focuses traditionally on mid- to late-stage deals that funnel money to smaller, established companies. Compared with the startup culture in the U.S., European VCs tend to look for companies that have already proven themselves through commercial production or solid protoyping results. However, these companies are also closer to those exits that everyone talks so much about, but no one actually sees. That the U.S. recession has slowly rippled its way across the Atlantic is no surprise. What is surprising is the level of the impact - the British economy ground to a halt in the second quarter, the industrial-driven Germany economy actually came down 0.5 percent, and the French played a great game of catch-up with a 0.2 percent drop in GDP. The Poles are waiting in breadlines. This means the same thing it does in the U.S. for venture-backed companies. Bruised, mature markets with little liquidity aren't able to absorb exits the same ways they were able to in the past. So there are two tactics here: move more funds into later stage investments and try to build up companies at the end of the pipeline, or get down in the mud and find early stage companies to incubate. While the former seems to be the accepted approach in the U.S., it looks like the Europeans are moving toward the latter. Seed and first-round investments comprised 44 percent of second quarter deals, the largest such market share since the second half of 2001. 3i, formerly the EU's largest VC firm, probably has mixed feelings about getting out of the early-stage game back in March. This may also explain Wellington Partners' recent move to California. Greentech and energy investment soaked up €147 million over 10 deals in the second quarter, it's largest ever, placing it behind IT and health care as the third largest venture-backed sector in the European market. In fact, the quarter's largest deal came from German solar company Sulfurcell Solartechnik, which received €85 million in a late-stage deal. Speaking of... Germany topped the VC list for the first time during the quarter. I haven't checked out the deal breakdowns by country yet, but I'd wager the majority of those investments are going to solar companies, and that the majority of those companies are somewhere in the upstream part of the market. Process engineering and manufacturing improvements are just the sort of early-stage deals that a mature solar industry should be attracting. If that's really the case, then Germans have it right on - this industry doesn't need another First Solar, it does need a couple more Suniva's though.