Summary:

Algae fuel startup Solazyme already had a long list of backers — from Chevron’s VC arm to Morgan Stanley — but this week, the company says it’s added two more high profile names: investor Richard Branson and food and personal product giant Unilever.

Solazyme CEO

Algae fuel startup Solazyme already had a long list of backers — from Chevron’s VC arm to Morgan Stanley — having raised over $125 million throughout its seven years of existence. But this week, the company says it’s added two more high-profile names: investor Richard Branson and food and personal product giant Unilever.

Neither Branson nor Unilever disclosed the amounts of their investments, but Solazyme said the financings were part of the Series D round announced last month. Solazyme said in August that it had raised $52 million for the Series D round, but reportedly the amount has been bumped up to $60 million since then.

British entrepreneur Branson, best known for his Virgin brand that’s spawned everything from planes to cell phones, personally invested in Solazyme for this round, while his venture firm Virgin Green Fund has backed other biofuel companies like Gevo. Branson said in a statement that he was “excited about Solazyme’s potential to make oils for fuels, chemicals and foods at scale.”

Unilever, which makes food and personal care products that can use algae oil, already had an R&D partnership with Solazyme, and has tested the algae oils in its products. The Wall Street Journal reported yesterday that Unilever wants to use algae to replace palm oil, because the harvesting of palm oil has led to deforestation in Indonesia and Malaysia and has drawn the criticism of environmentalists.

The first applications for Solzayme’s algae oil will be food and products like lotions. When I visited Solazyme’s headquarters last year, I drank some of the company’s prototype algae milk (like soy or rice milk), and checked out some of their oils and lotions under development in their labs (see image to the left). In that sense, Unilever will be a very important partner.

Ultimately, the company wants to scale up algae oil production to tackle the biofuel market: hence why a company like Chevron is interested. The company is looking to commercialize its technology in the 2012-2013 time frame, with a production cost target of $60 to $80 per barrel. To get there, it will have to build a commercial-scale algae plant, which can cost over $100 million.

Unlike some algae fuel companies that grow algae in open ponds, Solazyme engineers efficient algal strains and grows its designer algae in fermentation tanks without sunlight by feeding it sugar, then using existing industrial equipment to extract the oil. Solazyme is a leader in the algae fuel space, but competes with Sapphire Energy, Craig Venter’s Synthetic Genomics, Aurora Biofuels and a handful of other companies that are looking to scale up algae oil production. The market could even be getting too heated; earlier this year, a company called PetroAlgae, which grows algae, filed an S-1 announcing its plans to go public.

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