SunEthanol Converts Name to Qteros, Raises $25M to Convert Non-Food Plant Materials and Waste into Ethanol

11/18/08

It doesn’t get much more homegrown than this one: SunEthanol—a Hadley, MA-based developer of a process to produce ethanol using a microbe discovered here in the Bay State—has changed its name to Qteros and raised $25 million in a Series B round of financing. (Mass High Tech broke the story this morning.)

Qteros is one of local stories that Massachusetts officials like Gov. Deval Patrick are expected to tout during the Conference on Clean Energy in Boston this week, which is dubbed “Clean Energy Week” in the state. Indeed, company chief scientist and University of Massachusetts microbiologist Susan Leschine discovered the microbe behind the startup’s process for making ethanol nearly a decade ago, in a soil sample collected near the shores of the Quabbin Reservoir in western Massachusetts.

The startup’s so-called Q Microbe (named after the Quabbin and the inspiration for its new company name) produces enzymes that efficiently break down high-cellulose materials including non-food plants and crop waste like cornhusks into sugars and ferments those sugars to make ethanol. And it all happens in one step, in contrast to the typical two-step method that requires a separate fermentation process after the plant materials are reduced to sugars, Qteros CEO Bill Frey told me. In June, Qteros announced that the company had formed a partnership with researchers at Harvard University to develop genetically modified strains of bacteria to improve the efficiency of its process.

“The avoidance of the capital for enzyme production and then the cost of enzymes themselves is where (our microbe) has its true value,” says Frey, who left his post as head of the biofuels division of chemical giant Dupont to take the helm at Qteros in June. “This is a unique process and nobody has a bug [or microbe] that does what our bug does.”

Qteros has also attracted an intriguing roster of investors. Venture firms Venrock and Battery Ventures led the Series B round of financing, which included contributions from British energy powerhouse BP, Soros Fund Management, and repeat backers Camros Capital and Long River Ventures—the latter two of which are based in Massachusetts and invested in Qteros’ $3.6 million initial round of financing announced last year. Battery also invested in the first round.

With the injection of capital, Frey says, Qteros plans to build a pilot manufacturing facility (possibly in the Bay State but not yet determined) and double its current staff of about 20 workers over the next year. The company plans to begin commercial production of its ethanol in 2011, the CEO says.

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