# An algae startup emerges with a pilot plant in Alabama

Just a bit of information has trickled out about five-year-old startup Algae Systems over the years. It’s been working on growing algae offshore in big plastic bags using waste water, which was originally a concept out of NASA. It later picked up assets and patents from the defunct algae startup GreenFuel.

The company also turned some heads early on just because it’s home to an interesting group of characters. CEO Matt Atwood is a young chemist, entrepreneur and avid Burner, and Vice President John Perry Barlow, is the John Perry Barlow, the Grateful Dead lyricist and the co-founder of the Electronic Frontier Foundation. They raised some angel funding from billionaire Edgar Bronfman Jr.

But this week, the stealthy startup finally came out of quiet mode to talk about a pilot plant it just completed in Mobile Bay in Daphne, Alabama. The 25-person team started building it last summer, working with the local utility Daphne Utilities, and just finished it in June of this year.

The plant takes disinfected waste water from the city of Daphne, combines it with CO2, and fills up large plastic bags offshore in nearby Mobile Bay. The waves naturally mix the substances around, the sun shines on the bags, and after about four days, algae grows.

The algae is then harvested, and the left over water in the bags is cleaned. The result is that Algae Systems can sell both the harvested algae to make diesel and jet fuel, and at the same time the waste water is cleaned and can be reused. “It’s impossible to have a biofuels company and be profitable and stable only off of fuels because it’s such a low value commodity,” Atwood told me.

The plant in Mobile Bay is at demo scale right now, and it is treating 40,000 gallons of waste water per acre per day. In terms of fuel production that’s about 3,000 gallons per acre per year with their current productivity numbers. Atwood expects that to increase.

At the heart of the plant is Algae System’s “hydrothermal liquefaction” tech, which at 550 degrees Fahrenheit, turns algae and the sewage into a liquid that’s like a crude oil. Adding other substances they can make the different types of fuels.

When I ask why the company chose the city of Daphne and Mobile Bay, Atwood explains that for the first plant, it needed the “right partner.” Daphne Utilities is small but progressive and forward thinking. Atwood and the team also managed to recruit Daphne Utilities General Manager Rob McElroy to join their group now that the pilot plant is up and running in the Bay. Barlow was responsible for siting the plant.

The pilot plant is the first step for Algae Systems. The next step is to build a commercial plant and raise funding. As many of our readers know, this is a point in a startup’s life commonly called “the valley of death,” because many startups languish in between initially starting to prove their tech and building it at commercial scale.

Algae Systems is looking to raise a Series B round, and a commercial plant could cost between $80 million to$100 million. In addition to angel investor Edgar Bronfman Jr, Japanese conglomerate IHI invested $15 million into the startup. Funding for cleantech and biofuel companies in Silicon Valley has been tight for several years now. Strategic investors will probably be a lot more open to this type of investment. Algae Systems has other helpful partners. The Department of Energy delivered a$4 million grant to a partnership led by SRI International to work with Algae Systems tech. Algae Systems also has a long time relationship with another startup called Global Thermostat, which bills itself as a carbon negative capture company. Atwood said that Algae Systems plans to work with Global Thermostat to integrate its tech with theirs and build a plant.

Ways to turn algae into fuel have long been under development by large companies and startups alike. Solazyme is one of the startups that managed to break through, and scale up their tech. Craig Venter’s Synthetic Genomics ended up moving away from and downgrading its original algae fuel research. Startup GreenFuel is now living a second life through Algae Systems’ deployment.

It’s a hard business to be in, to be sure. But given Algae Systems multiple revenue streams, and multi-purpose plants, it could have an advantage in specific environments that need low cost clean water and biofuels.