Range Fuels

has scored $100 million to bring it closer to the finish line in the race to bring cellulosic ethanol to the masses.

An undisclosed investor led the round with $25 million, while previous investor Khosla Ventures kicked in another $25 million, according to VentureWire and PE Week, which reported the funding Friday.

In a sector that has seen its share of sizeable rounds in the last two years, Broomfield, Colo.-based Range Fuels’ funding isn’t as breathtaking as it once would have been.

After all, Seattle-based Imperium Renewables in 2006 raised $113 million in equity financing and was working on securing a $101 million line of credit.

And in September, Amyris Biotechnologies, said it had closed the first tranche of what will be a $70 million round of venture funding to advance its work with biodiesel, biogasoline and bio jet fuel (see Biofuels Get Financing Downpour).

But the hefty financing has some industry watchers wondering if companies like Range Fuels have been tagged with valuations that are too high.

Unlike traditional ethanol, which in the United States is made from corn and as a result faces many challenges including shrinking margins and canceled plants, cellulosic ethanol is made from nonfood biomass. That’s attractive because it’s expected to help ethanol producers avoid problems like volatile corn prices by using feedstocks such as switchgrass, wood chips and corn cobs.

But so far, companies developing the next-generation fuel haven’t been able to produce it on a large scale, or at an affordable price.

So when Amyris announced its tranche in September, it raised red flags for Matt Horton, a principal with @Ventures.

"It concerns me that [riskier biofuel startups with new technology] are able to raise money at such valuations," which could set investors up for a fall if the companies don’t meet their milestones perfectly, he said in September.

Range Fuels has been among the companies gunning hard to be the first out with a large plant.

In November, the company said it had signed a $76 million agreement with the U.S. Department of Energy to build its plant, which will use wood and wood waste as its feedstock and have the capacity to produce more than 100 million gallons of ethanol per year.

Going forward, Peter Hebert, managing partner at Lux Capital Management, doesn’t think the sector will continue to see these types of financing deals.

It will take a significant public offering for such deals to work out for investors, Hebert said, and an ethanol company with little to no revenues and current market conditions is not a winning IPO combo.

But not everybody is so sure that the value suggested by the amount being doled out by investors is that outlandish.

It can take $100 million to $200 million to get an ethanol plant up and running, said Rick Kment, a biofuels analyst for research firm DTN.

At least with Range Fuels, it’s hard to tell if the company is being overvalued without knowing how the company plans to spend its latest financing round.