Metcalfe Takes Reins at GreenFuel After Key Setbacks; Company Lays Off Half its Staff, Seeks to Raise Cash
Unanticipated setbacks with GreenFuel Technologies’ unique bioreactor system led to the layoff of half the company’s 50-person staff and Bob Metcalfe’s appointment as interim CEO, Xconomy has learned, adding detail to what we reported yesterday. Cambridge-based GreenFuel seeks to use algae to convert carbon dioxide emissions into biofuel. However, in the last few weeks, the company was forced to shut down its third-generation algae greenhouse in Arizona, which produced too much algae to handle properly. That was coupled to another blow, in which GreenFuel learned that its algae-harvesting system would cost twice as much as anticipated.
The setbacks have prompted the severe layoffs and a push to quickly raise an undisclosed amount of additional cash to keep the company afloat over the next six months. Says Metcalfe, in a letter written (presumably to investors and employees) last Monday, “With a lot of help, I will speedily make the case to investors that last week’s setbacks can be reversed successfully. The proposed six months of interim cash will likely come from current investors in July.”
Metcalfe’s comments, along with some details of the setbacks, were all included in the letter. He provided the communiqué, which he termed “neither a press release nor a secret,” to Xconomy this morning.
As reported yesterday, the famed Ethernet inventor, now a partner at Polaris Venture Partners in Waltham, replaces former CEO Cary Bullock. Metcalfe’s letter notes that Bullock will remain as a company director but switch roles to become vice president of Business Development. Moreover, that was not the only change of leadership. Jennifer Fonstad, a board member representing another major investor, Draper Fisher Jurvetson, becomes chairman of the board. The rest of the core management team will apparently remain intact. According to Metcalfe, co-founder Isaac Berzin will continue as director and chief technology officer, co-founder Holly Flesh will serve as VP of Business Operations, and Wayne Hopkins will remain as VP of Engineering.
The plan is that the interim period will not last beyond year’s end. In Metcalfe’s note, he called the greenhouse shutdown in the Arizona desert a “success failure” typical of efforts to commercialize emerging technologies. “Our current third-generation engineering scale greenhouse grew algae faster than expected, demonstrating again that CO2 recycling and algae productivity can be achieved at scale in our high-technology greenhouses. However, this very success triggered failure, as we could not harvest the rapidly growing algae quickly enough. Their unexpected density limited light and nutrient supply, which caused them to start dying. As a result, the greenhouse had to be shut down.”
The letter continued, “But that was not our only setback last week. We also learned from outside experts that our third-generation algae harvesting system, as currently designed, would cost more than twice our targets. Going to scale with such harvesting costs would still likely produce economically viable supplies of biodiesel, ethanol, and/or feed from our algae slurries, but we’ve decided that the best course is to continue driving toward lower costs, higher returns, and larger markets. The best course is to accelerate scaling of our fourth-generation greenhouse technology.”
The company and its new management has undertaken a seven-step plan to get back on track. In addition to the already-reported staff reductions and efforts to raise interim cash, it includes:
—scaling back the algae greenhouse in Arizona, restarting its operations, and completing an algae-growth demonstration planned for August.
—accelerating development of the company’s fourth-generation greenhouse technology. “An engineering scale greenhouse must be completed at our Arizona facility by October,” Metcalfe’s letter says.
—developing plans for a commercial-scale algae greenhouse, and by November signing “at least one letter of intent with a compelling partner.”
—finding a new CEO, also by November.
—completing the company’s next expansion round of equity financing by year’s end.
In its conclusion, Metcalfe’s letter sounds an optimistic note: “That’s quite a lot, but I am enthusiastic. I keep asking the trillion-dollar question that led to the founding of GreenFuel: Why expensively sequester CO2 when it can be profitably recycled?”