Investors Talk Biofuels Winners, Latecomers to the Party, and $100 Billion Dollar Companies at Algae Biomass Summit

10/24/08Follow @gthuang

Algae-based biofuels are the topic du jour. And why not—the prospect of using pond scum to power 21st-century transportation and replace crude oil is pretty appealing. So one of the highlights from the Algae Biomass Summit in Seattle yesterday, besides the keynote by venture capitalist Vinod Khosla, was a panel of prominent VCs discussing the ins and outs of the fledgling biofuels business. Bob Nelsen, a co-founder and managing director at Seattle-based Arch Venture Partners, was joined by Jim Long, a venture partner at Redwood Shores, CA-based Gabriel Venture Partners, and moderator Josh Green, a general partner at Mohr Davidow Ventures in Menlo Park, CA.

Nelsen and Long plugged their portfolio companies in the algae space, of course, but they also engaged Green in a fascinating conversation about biofuels strategy and challenges. Green himself has no investments in algal fuels, but he’s open to the idea— “I’m agnostic, not an atheist,” he said. “But it’s late to get into algal fuels. The bar for differentiation has been raised, so you have to have something special.”

Nelsen (who’s an Xconomist) certainly thinks he has something special. He serves as a director of Sapphire Energy, a San Diego-based algae biofuel startup that has more than $100 million in the bank, and “anticipates commitments for future funds that are quite large,” Nelsen says. In addition to Arch Ventures, Sapphire is backed by Bill Gates, Venrock, and Wellcome Trust. “We want to create the market leader based on a real technological advantage,” says Nelsen. “We’re going to replace oil. It’s a grand goal.”

Meanwhile, Long is chairman of the board of Aurora Biofuels, an Alameda, CA-based startup out of UC Berkeley that uses genetically modified algae to create biodiesel. In addition to Gabriel Venture Partners, it is backed by Noventi and Oak Investment Partners.

So, apart from their respective bets, how do they think algae biofuel companies should differentiate themselves from the competition? Nelsen provided some high-level context. “You will see a couple high-profile [startups] from people who didn’t get into the initial party. We’re excited because we’ll be ahead. There will be many winners in this space.” He pointed out several ways for companies to … Next Page »

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

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  • http://www.biocepts.com Durwood Dugger

    You can tell the amateurs from the professionals in the algae oil discussions very easily. The amateurs are talking about “algae oil yields per acre.” The professionals are talking about the “algae oil costs per gallon and if it will compete with the lowest production costs of comparative petroleum based products.” Unfortunately, the amateurs thus far have been the vast majority of the naive players in algae oil development.

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  • Krassen Dimitrov

    I am very intrigued by this Sapphire company. Rob is a sophisticated guy. He’s not going to go out and pitch an easily debunkable idea (like Greenfuel Technologies, for example), yet some of his hits had turned out to be empty concepts. He got an exit on Caliper, then he was close to one with Nanosys when the market had a “Wait a minute, how exactly is this thing going to make money?” moment in 2004.
    From what little I have been able to learn about Sapphire, there is no clear-cut flaw, yet way too many unanswered questions remain. Something’s just not quite right… We’ll be watching with interest in the coming years.

  • Val Fitzgerald

    As K. Dimitrov said last year (see his above post) “way too many unanswered questions remain…”

    Chief among them might be, “What’s Sapphire Energy’s most recent stock price?” That’s one of the way too many unanswered questions!