Viewing posts tagged "Synthetic Genomics"

Hot Algae Nights: Venture Investment In Biofuels

VC investment tends to come in stages.

In the biofuels realm, 2006/2007 was the corn and food-based ethanol stage. That has not worked out too well for VC investors or corn-farmers who dabbled in ethanol factories.  It has been a boon for bankruptcy lawyers, though.

The years 2007/2008 were the cellulosic biofuels phase. That's somewhat in remission with occasional VC outbreaks.

And 2008/2009 has been the era of algae biofuels.

Venture Capital Investment in Algae Biofuels

Considering the immense technical risks and daunting capital costs of building an algae biofuels company, it doesn’t seem like a reasonable venture capital play. And most if not all of the VCs I’ve spoken with categorize these investments as the longer-term, long-shot bets in their portfolio. But given the size of the liquid fuels market, measured in trillions of dollars, not the customary billions of dollars, it makes some sense to take the low-percentage shot.

These startups run the gamut of algae technologies – open pond, closed pond, photobioreactors, aphotic, naturally occurring algae and genetically modified.

And these firms are going to continue to need capital.  According to Jennifer Fonstad of VC investor, Draper Fisher Jurvetson, “The current strategy of many of these companies has been to turn to the government stimulus plan – this is the risk capital we can rely on today.” Ms. Fonstad was an investor in the now defunct GreenFuel.

Michael Kanellos covers recent algae activity with LiveFuels here.  Jeff St. John gives an algae rundown here.  I covered Synthetic Genomics' funding here.  And GTM Research has a brief algae summary report here.

I'm not a phycologist, but after hundreds of conversations with experts and a few years of research – my take on vehicle-scale fuel from algae is that it can be done but it's going to take a lot more time, money, land, water and resources than currently anticipated.

“VCs cannot come in here and just harvest ripened fruit – this is not shovel ready technology,” according to Dr. John Benemann on Venture Capital in algae.

Exxon Ups the Algae Ante Big Time

Wow.

Synthetic Genomics announced a $300 million agreement with Exxon to research and develop next generation biofuels using photosynthetic algae. And according to the New York Times, Exxon is going to invest another $300 million in in-house research.

That investment will occur over a number of years – but that's still a lot of cash.  It's more than the total amount of venture capital invested in algae startups since 2005.  A drop in the bucket for Exxon but still, big money. Synthetic also has a deal with BP to genetically engineer microbes for green chemistry.

I've written extensively and skeptically about the hype in this very nascent industry and the breathless claims of algae biofuel firms scaling up at a "pump-parity" price. But Exxon believes and has put its money where its mouth is. (Actually the money came from Exxon Mobil Research and Engineering). And it's going to take an investment of this scale to get algae to market in any significant way. 

Here are some recent algae blog entries:

• Algenol: the Elephant in the Room

• Algae Fantasists

• Open Ponds vs. Closed Bioreactors

The Times quoted Synthetic Genomics dynamic founder, J. Craig Venter, as saying, “I came up with a notion to trick algae into pumping more lipids out."

But here's a telling line from the story: "Both companies said they still had a range of problems to solve that include determining what types of algae to use and whether it is more efficient to grow them in open ponds or in closed containers called bioreactors."

If these are still questions at SGI and Exxon – how to grow the algae and which species or strain – then these firms have betrayed that we are still very early in the Research portion of the program, we are not yet at the Development part of R&D. 

Venter is a man of action and it's not a good bet to wager against him. But the problem with algae – is that it's not just tricking the algae to pump more lipids out.  There's an entire process chain in algae farming that needs to be optimized – algae growth, algae harvest, drying and more. And again, if they are still talking about closed photobioreactors for mass algal fuel deployment, then Exxon and SGI have a lot to learn.

Still – great news for algaepreneurs and an investment at the necessary scale in dollars and time to get algae out of the test tube and into the tank. More on this story soon.

The U.S. uses billions of barrels of gasoline each day.