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Summary:

Corn-based ethanol has been crashing with the economy, but the prospects for cellulosic ethanol seem a little brighter — SunEthanol, based in Hadley, Mass., says it’s pulled in $25 million in a Series B round, and changed its name to boot. Now known as Qteros, after […]

Corn-based ethanol has been crashing with the economy, but the prospects for cellulosic ethanol seem a little brighter — SunEthanol, based in Hadley, Mass., says it’s pulled in $25 million in a Series B round, and changed its name to boot. Now known as Qteros, after its Q microbe technology, the company raised the cash from a group including billionaire George Soros and big oil.

Noticeably absent from the list of investors is South Dakota’s VeraSun Energy, which filed for Chapter 11 bankruptcy protection in October. VeraSun took a minority stake in Qteros, then SunEthanol, in August 2007. (Qteros CEO William Frey tells us via email that despite not participating in this round VeraSun continues as a shareholder in the company.)

The Series B financing was led by new investor Venrock, along with previous investor Battery Ventures. Other new investors include London’s BP, no stranger to cleantech fundings, and Soros Fund Management. Series A backers Long River Ventures and Camros Capital also participated.

BP already has a hand in cellulosic ethanol, putting $90 million into Cambridge-based Verenium, another Massachusetts-based biofuel firm, in August. BP has also invested cash in the Energy Biosciences Institute, an academic and industry collaboration, as well as California biofuel startup Synthetic Genomics.

Qteros has what it says is a unique microbial solution for converting non-food plants and waste into biofuel; its Q microbe simplifies the process, eliminating the need for a separate enzymatic breakdown step. The technology was originally seeded and spun out of the University of Massachusetts Amherst by Battery Ventures.

Earlier this year, Qteros picked up some talent from chemical giant DuPont for its executive team, naming William Frey as its new CEO in June. Frey previously led DuPont’s work in advanced biofuels and cellulosic process technologies. Former Qteros CEO Jef Sharp, who continues to sit on the board of directors, now serves as executive V-P at the company.

That same month, Qteros signed a deal to work with Harvard University on developing new strains of the company’s Q microbe, with Harvard researchers looking to boost the amount of ethanol that can be produced with the microbe. And Qteros made another deal in August, announcing that it would work with MBI International to scale up its Q microbe process.

Qteros said it’s ready to scale up with this latest funding, with plans to build a pilot plant and eventually move to commercial operations, and said it’s hiring additional engineers and scientists as part of the expansion. The company is getting new digs for all those new people, opening up a research center in Marlborough, just outside of Boston. Qteros currently has its research center in Amherst.

The company has yet to pick a location for the pilot plant, but according to its web site, Qteros is looking at its home state of Massachusetts as well as neighboring Connecticut for the new facility.

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By David Ehrlich

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