Bill Gates, Arch Venture Back Biofuel Maker Sapphire Energy

Gregory T. Huang9/17/08Comments (2)Follow @gthuang

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Algae-based biofuel is getting pretty big—at least as an investment. Today, the Wall Street Journal reports that San Diego-based Sapphire Energy has closed a round of venture financing from Bill Gates’s investment arm, Kirkland, WA-based Cascade Investment. Sapphire Energy, which is working on oil-producing algae, has now raised a total of $100 million, and is also backed by Arch Venture Partners, Venrock, and Wellcome Trust.

In addition to its Seattle-area backing, Sapphire has some Seattle competition. Last month, we reported on the algae-biofuel startup AXI, which was spun out of the University of Washington and seeded by Allied Minds of Quincy, MA. It will be interesting to see whether either company is able to zero in on the right strain of algae, and produce oil at costs competitive with crude oil.

According to the WSJ, Sapphire is working towards a 10,000-barrel-a-day algae-based oil facility, and can now concentrate on production and engineering problems. Meanwhile, Gates’s involvement may signal a broader interest in alternative biofuels. Earlier this year, Cascade Investment sold its stake in Pacific Ethanol. The Journal also notes that Vinod Khosla, who has invested previously in ethanol ventures, is giving a keynote talk at the Algae Biomass Summit next month. And Xconomy has extensively covered the saga of Greenfuel Technologies, the Cambridge, MA, startup headed by Polaris Ventures partner Bob Metcalfe, that is reportedly overcoming early technical problems at its algae farm in Arizona. Perhaps it’s time to hedge some bets.

Gregory T. Huang is Xconomy's National IT Editor and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com, call him at 617-252-7323, or follow him on Twitter at @gthuang.