Armed with $40 million, Coskata now has the means to finish building a small-scaled biofuel refinery to demonstrate its technology.

The ethanol startup said Friday it has raised a Series C round, but didn't say how much. Private Equity Hub reported the funding amount.

The $40 million round is less than the $50 million Coskata had aimed for.

The Warrenville, Ill.-based startup is developing ways to turn cellulosic materials - plants that are not grown for food or trash that would otherwise fill city landfills - into transportation fuel. The process would shred the feedstock into pieces and heat them at a high temperature to turn them into synthesis gas, which is then converted into fuel.

Other biofuel startups, such as Fulcrum BioEnergy, also are investigating similar methods (see Fulcrum BioEnergy Turns Trash into Treasure). To compete effectively, these companies will have to figure out how to do it for less.

Coskata has vowed to make biofuel for under $1 per gallon, a promise that has met no shortage of skepticism (see Cellulosic Firms Match Coskata's Ethanol Claims).

The company, incorporated in 2006, has raised $76 million to date. The research the company is relying on started in 2001.

Coskata plans to use the funding to finish a 40,000-gallon demonstration plant near Pittsburgh next year (see Coskata Begins Building Demonstration Plant). The company initially had hoped to complete the facility as early as the forth quarter of this year and deliver the fuel to General Motors, one of its investors.

The startup also will start developing a commercial refinery. Last month, Coskata said it had teamed up with U.S. Sugar Corp. to look into building a refinery in Clewiston, Fla. The refinery would turn leftover, processed sugarcane into as much as 100 million gallons of fuel per year (see Coskata Lining Up Sugary Deal).

Blackstone Group (NYSE: BX) led the round and used money from its new Cleantech Venture Partners fund. New investors include Sumitomo and Arancia. Return investors are Khosla Ventures, Advanced Technology Ventures, Globespan Capital Partners and TriplePoint Capital. GM didn't pony up this time.