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Summary:

Now that corn-based ethanol is looking more and more unsustainable — and is the latest media punching bag — it’s time to make way for the next generation of biofuel startups. LS9, a San Carlos, Calif-based start-up that touts itself as a “renewable petroleum company” plans […]

ls91.jpgNow that corn-based ethanol is looking more and more unsustainable — and is the latest media punching bag — it’s time to make way for the next generation of biofuel startups. LS9, a San Carlos, Calif-based start-up that touts itself as a “renewable petroleum company” plans to announce on Tuesday that it has closed a second round of funding for $15 million (update: the release was just issued).

The company said in March that it had raised $5 million in a series A round. This series B round was led by Lightspeed Venture Partners, with participation by existing investors Flagship Ventures and Khosla Ventures.

Being one of Vinod Khosla’s growing biofuel investment portfolio, LS9, has received a lot of media attention, including favorable mentions in the Economist and the WSJ. The company’s biofuel technology does make for an interesting story: use synthetic biology to develop biofuels from traditional feedstocks that contain more energy than current biofuels, require less energy to produce and can be distributed through the existing petroleum infrastructure.

If LS9’s technology can come anywhere close to delivering on those three biofuel improvements, it could make its investors a lot of money — oh yeah, and more importantly help transition us to the use of more clean-running vehicles.

One of the major drawbacks of current corn-based ethanol is that because it’s corrosive it requires a separate distribution network to transport it. The recent reported ethanol glut and price drop has supposedly been aggravated by not enough ethanol-specific transportation infrastructure.

LS9 says its biofuels lack oxygen, similar to petroleum, so can be shipped in the existing infrastructure. The two-year-old company faces competition from other startups that are trying using biological processes to tweak biofuel production. For instance, Redwood City, Calif., based Codexis, is making “biopetrol” through a process they call “molecular evolution,” where numerous enzymes are developed and selected in a process not unlike natural selection.

Amyris Biotechnology, of Emeryville, Calif., which said it raised the first part of a $70 million round in mid September, is turning to living organisms to make a gas substitute. And Synthetic Genomics, Craig Venter’s Rockville, Md.-based startup is probably the most high-profile company in this area.

With fresh $15 million, LS9 plans to work on the commercialization of its fuels. A lot of biofuel startups have been raising large sums of money to get cellulosic ethanol and other types of biofuels into the production process: Amyris’ plan to raise $70 million, Virent raised $21 million last month, Ceres raised $75 million for energy crops, and the DOE is giving $385 million to six companies working on cellulosic ethanol. Large scale manufacturing plants can cost in the range of hundreds of millions of dollars.

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