# Waste to Power Startup Ze-gen Raises $20M A massive cauldron of bubbling construction debris doesn’t seem that valuable, but a group of investors that are backing waste-to-power startup Ze-gen certainly think it could be. This morning, Ze-gen said it has raised$20 million in a Series B financing from Middle Eastern industrial conglomerate Omaz Zawawi Establishment, along with Ze-gen’s existing investors Flagship Ventures, VantagePoint Venture Partners and Massachusetts Technology Development Corp.

Ze-gen takes organic waste like wood and plant matter (primarily from construction sites) and gasifies it, producing syngas, which can be used as fuel. The syngas can be produced for cheaper than natural gas and can be used in power plants. Using waste as a feedstock is not only usually cheaper, it also has the eco-value of reusing trash that would have been disposed of in a landfill or in other less sustainable ways.

Ze-gen is raising funds now in order to move into commercial production, which it previously said it plans to start before the end of the year. But the company told us in an email today that it is actually now looking to start commercial production by the latter half of 2010. The company will likely build syngas production plants close to industrial customer facilities that would be using the syngas for power.

A lot of companies are working on converting biomass into syngas, and the basic technology has been used for decades. But Ze-gen says its single-step process is more efficient and more cost-effective. Other companies like Coskata are gasifying biomass into syngas but then taking more steps to turn that syngas into biofuel. Enerkem is working on making cellulosic ethanol using wood from used utility poles, and it said yesterday that its first commercial-scale plant is within a few months of starting production.

When it comes to next-generation biofuel investments in 2009 it seems like investors are doubling down on past investments or shying away from any funding — basically the stronger biofuel startups will get stronger and the weaker ones will be in trouble. Last week cellulosic ethanol maker ZeaChem (which sounds way too much like Ze-Gen) said it raised $34 million in a later stage funding. But also this week, GreenFuel, which produces algae from recycled CO2 and turns it into biofuel, said it has cut almost half of its staff, and doesn’t appear to have been able to close a crucial Series C funding round. It will be interesting to see how much money is pumped into next-gen biofuels in 2009. Federal support and some promising technologies are counterbalanced by a very difficult funding market. In 2008, biofuel was the second-most-funded area, bringing in 11 percent (or$904 million) of the year’s total funding, according to the Cleantech Group.