Sapphire Energy, Backed by Bill Gates, Tries to Tone Down the Hype as it Makes Gasoline From Algae

Bruce V. Bigelow11/13/08Follow @bvbigelow

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Sapphire Energy has not provided many details about its technology since CEO Jason Pyle stepped into the limelight six months ago to announce the San Diego startup has developed a revolutionary process for turning pond scum into high-octane gasoline.

“I have no intention of being secretive,” Pyle told me at the inaugural networking meeting of the newly formed San Diego Biotechnology Network, or SDBN. But after seeing the effects of the boom-and-bust cycle in two recent tech bubbles, Pyle says, “My goal is to maintain a serious and thoughtful approach in a frothy market. I don’t want Sapphire to get caught up in that hype.”

Keeping the media from hyperventilating, however, could be a tall order for a company developing technology with the potential to help the United States break its dependence on imported crude oil. And who can blame us?

At a time when U.S. gasoline prices were arcing beyond $4 a gallon nationwide, Sapphire said it had proven the feasibility of using algae to make “green crude” that can serve as an identical substitute for crude oil. Sapphire said its product, unlike other biofuels, could enter the pipeline at any petroleum refinery for processing into gasoline and other fuels.

The company calls it “the world’s first renewable gasoline.”

Sapphire’s process has been used successfully to make the three most important fuels, gasoline, diesel, and jet fuel, Pyle says, and all three products have been independently certified to meet fuel standards set by the American Society for Testing and Materials.

The prospects are electrifying, and interest in Sapphire has been extraordinarily high. Sapphire only added fuel to the fire, so to speak, when the company said in September it had raised $100 million in a second venture round from Bill Gates, Arch Venture Partners and others.

Aside from Sapphire’s corporate pedigree and the revolutionary potential of its technology, the company says its green crude is environmentally appealing because it will have no effect on global climate change. Sapphire says it’s technology is “carbon neutral” because its algae absorbs as much carbon dioxide as a car releases when its fueled by renewable gasoline.

In San Diego, Sapphire has been recruiting heavily for chemical engineers, lipids chemists, senior algal production scientists and other skilled workers at its headquarters on Torrey Pines Mesa. The startup currently has about 80 employees, Pyle said.

Sapphire’s CEO remained vague, though, about details of the company’s technology.

“We use genetic engineering, directed evolution, synthetic biology and (agricultural) breeding,” Pyle told me. But Sapphire’s approach specifically does not include fermentation, a technique adopted by some biofuels startups.

“All of our systems are photosynthetic,” Pyle says about a process in which algae “directly converts sunlight and carbon dioxide into hydrocarbon products.”

Sapphire already has demonstrated that its technology is feasible, and is now working to show it also can work on an industrial scale, Pyle says.

“We’ve proven this from sunlight-to-gasoline, from soup-to-nuts, so we don’t have any questions about whether the technology works. The only question is about the cost of production.”

He adds that Sapphire’s near-term goals “are to test our existing organisms and to grow those organisms in pilot plants into green crude on a scale larger than we have here in San Diego.”

The company has established a test facility in Las Cruces, N.M., and has been drawing on the scientific resources of New Mexico State University to help develop its fuels.

In an interesting twist, Pyle says the origins of Sapphire began two years ago as a handful of venture capital leaders began looking for the right technology. Typically, the innovator who develops a new technology looks for the right venture capital firms to provide funding for the idea.

Pyle says his discussions began with Kristina Burow, a chemist-turned-partner at Arch Venture Partners, biotech CEO Nathaniel David and scientist Mike Mendez. “We started analyzing different kinds of biofuel deals and technologies and asking ourselves what’s great about this and what’s not,” Pyle said.

After determining that their best prospect was to become a producer of gasoline and diesel fuels, Pyle says they set out to identify the best green technologies for making it. They found what they were looking for in the research of Stephen Mayfield, an algae biologist at The Scripps Research Institute in La Jolla, and Steven Briggs, a professor of cell and developmental biology at UC San Diego.

The founders and their scientific collaborators officially launched Sapphire in May 2007, and moved the headquarters from San Francisco to San Diego earlier this year.

In September, Sapphire generated a lot of buzz when it announced it raised $100 million in a second round of venture funding from ARCH Venture Partners, Venrock, the Wellcome Trust and Cascade Investment, a venture firm owned by Microsoft chairman Bill Gates. Pyle declined to say how much Sapphire has raised altogether.

With so much recent attention, it was perhaps inevitable that Pyle and other Sapphire leaders would step forward to publicly discuss their startup for the first time to the San Diego community.

The SDBN networking event drew scores of biotech workers Tuesday night, even though Pyle made no presentation. Hundreds of others attended presentations by two Sapphire scientists at a breakfast meeting hosted early Wednesday by Biocom, the San Diego industry group.

“Technologically speaking, we think of this as an immense challenge on the order of the Apollo (space) program or the Manhattan project,” Alex Aravanis, Sapphire’s senior director of BioEngineering told the Biocom audience.

Using genetic engineering and other techniques, Aravanis said a massively industrialized approach would be needed to grow algae in sufficient quantities to produce enough green crude to accommodate the 20 million barrels of crude oil consumed by the United States every day. Sapphire’s concept calls for creating enormous algae “farms” throughout the desert lands of the southwestern United States.

“This particular technology could be deployed at a very large scale, a scale that could make the U.S not only energy independent—but a net exporter of fuels,” Aravanis said.

He added that the algae developed by Sapphire can thrive in brackish saltwater, making it possible, perhaps, to tap sources of otherwise unusable water—such as the Salton Sea—to support such algae fields in the deserts east of San Diego.

It could take years to develop the necessary industrial processes, but Pyle says he’s excited and encouraged by everything that has happened and the interest generated so far.

“We’ve had conversations with all six of the largest oil companies in the world” he says.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow