Funding for Next Wave of Biofuels Trickling In, Finally


It was about this time last year that the economic downturn’s effects on the ability of next-generation biofuel companies to raise funds became really apparent. Companies that could have more easily snagged funds in better economic times saw their commercialization plans stalled. Bill Roe, the CEO of cellulosic ethanol company Coskata — a startup which was initially backed by General Motors (s GM) and Khosla Ventures — said at the Wall Street Journal ECO:Nomics conference in March 2009 that the company was essentially in a holding pattern on its first commercial-scale plant unless it could get a loan guarantee from the Department of Energy, as investor funding had dried.

But now, more than a year later, a few of these next-generation biofuels companies have started to draw in some of the investment that they so desperately needed last year. Coskata just raised another $23.75 million according to a regulatory filing, from investors including Khosla Ventures, Advanced Technology Ventures and French oil giant TOTAL.

EdenIQ, a startup spun out of corn ethanol maker AltraBiofuels to focus on cellulosic ethanol, managed to raise $12.4 million in Series B funding from investors including The Westly Group, Kleiner Perkins, Element Partners and Morgan Stanley, the startup announced last week. This funding comes two years after the company launched with over $30 million in funding from AltraBiofuel investors including Kleiner Perkins.

Is the funding drought for cellulosic ethanol over? Well, synthetic biology and biofuel developer Amyris’ recent filing for an initial public offering seems to have helped. The company plans to raise $100 million in an IPO and has already raised a total of $244 million. Amyris plans to start producing its synthetic organism-based biofuel at commercial scale in 2011. It’s backed by Kleiner Perkins, Khosla Ventures, TPG Biotechnology Partners and Advanced Equities Financial Corp, and while it’s not profitable, Amyris has been generating significant revenues for years and has partnered with major sugar producers in Brazil.

So it seems like funding has started to open up once again to these companies, but the real question is how much will be needed to move them to commercialization — the major hurdle for all these next-gen biofuel makers. Waiting for the cellulosic ethanol industry to move into commercial production is like watching grass grow.

Coskata unveiled a demonstration plant in Madison, Penn., in October that is ready to crank out 50,000 gallons of biofuel per year. It’s a big milestone for the company in terms of production capacity. But the demo plant, which the company considers a “semi-commercial facility,” remains a far cry from the scale (50 million to 100 million gallons per year) that Coskata envisioned before getting waylaid by the poor economy last year.

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Cleantech Market Overview, Q1 2010

Image courtesy of Coskata.

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