[Corrected 7/1/09]

The atmosphere at last Wednesday’s XSITE energy breakout session was electric—clean electric, that is. The topic of the hour was the future and feasibility of wind, solar, and other alternative energy industries in New England. Rob Day, president of the Renewable Energy Business Network, moderated the panel, which included Jay Fiske (a VP at solar firm Wakonda Technologies), Daniel Goldman (EVP and CFO of GreatPoint Energy, a developer of coal gasification technology), Gerry Haines (EVP and chief legal officer at biofuel firm Verenium), and Roger Freeman (president of wind power firm Solventerra Energy).

The energy industry is staring down the barrel of heavy government involvement in its affairs. The Waxman-Markey bill, which at the time of the panel was still being debated in the House of Representatives, poses both potential opportunities and potential headaches for the clean energy industry. The new emissions regulations aimed at the largest polluters, intended to force large energy companies to develop cleaner fuels, may provide a huge boost to smaller cleantech firms. “The problem with Big Oil is, even with incentives given to work on alternative fuels, they’re not really in the tech development business, so we work with them,” said Haines.

Waxman-Markey’s detractors, however, say that the stricter federal standards for controlling carbon emissions leaves less room for companies, especially smaller ones, to adjust to local conditions. The costs that are more easily absorbed by large oil or coal interests may prove more challenging to a small cleantech company.

When asked how startup energy firms could cope with more stringent government regulation, GreatPoint Energy’s Goldman noted that utilities, for the most part, have always been regulated, and that “we have to accept that we work in a regulated industry, and that government policy plays a very significant role.” On the other hand, he said, most companies “can’t afford time to sit in Washington influencing members of Congress.” He advised that smaller cleantech companies not try to lobby for policy changes on their own, but to piggyback onto the efforts of larger companies. “Figure out how your company’s interests align with, say, GE, and leverage off their focus.”

When asked to comment on the difficulties that energy startups face in acquiring venture funding, Solventerra’s Freeman, the former managing director of the nonprofit Citizens Energy Corporation, said that the lack of potential for a big—or bigger than expected—payoff was the problem. “Energy is a tangible business. You put x amount in and get x amount of energy out. You can measure the risk pretty successfully, so it doesn’t attract as much venture investment.”

“It’s not Web 2.0,” said Day.  “You have to actually make something.”

Fiske noted that in the current economic climate, investors might be cautious, but alternative sources of funding for cleantech have never been more abundant.  Cleantech can always look to “SBIR grants, competition winnings, and of course, the three Fs—friends, family, and fools.” [Editor's note: this quote was originally misattributed to Daniel Goldman. We regret the error.]

Day asked the panel to describe some of the barriers in New England to the success of cleantech. Freeman said that Boston’s deeply engrained parochialism means navigating a maze of regulation for even the simplest matters. Major additions and infrastructure changes can only be that much more of a headache. “It took my friend two years to get a permit to build a deck. How long do you think it takes to get one for a wind turbine?”

“The good thing is, we have a forward-thinking administration here in Massachusetts,” said Goldman. The Patrick administration, he says, is a staunch supporter of cleantech innovation.

Wakonda’s Fiske said that Massachusetts could be doing more to capitalize on its intellectual resources, and that universities in particular could better support spin–offs and the commercialization of their research. The panelists all concurred that the concentration of both high-level research institutions and scientists was New England’s greatest advantage.

“Intellectual capital,” said Haines, “is our best resource.”

Comments | Reprints | Share:          

Greenfuel Technologies, the Cambridge, MA, biofuels startup that closed its doors last month after running out of venture cash, is trying to scrape together some money for its creditors and investors through a sale of intellectual property and other assets.

In a post on its website today, the company said it’s entertaining offers for its basic algae production technology—big tanks designed to be installed next to facilities such as cement plants that emit lots of carbon dioxide, which can be captured and converted into plant matter through photosynthesis.

The company also said it’s selling intellectual property related to “downstream processing” of the algae, thin film technology, algae selection and optimization techniques, and “Generation 1 and 2 bioreactors (tubular).” The company is planning a sealed bid auction for the assets, and says a detailed description and bid sheet is available to interested parties.

According to an e-mail tip received from “Anon GreenFueler”—presumably, a former employee of the startup—there are “several interested parties currently vying to bid for the trade secrets, know-how, and equipment held by GreenFuel.”

Greenfuel struggled for eight years to commercialize its algae production system, which was intended to produce material that could be converted into either protein-rich feedstock or ethanol for cars and trucks. But the company was unable to raise the Series C funding it needed to build its first planned industrial-scale production facility in Spain. The company laid off about half of its staff in January and shut down entirely on May 13.

Comments (2) | Reprints | Share:          

[Updated 7:30 p.m., 5/13/09, with input from former GreenFuel interim CEO Bob Metcalfe, see below.] Cambridge, MA-based GreenFuel Technologies, which struggled for eight years to commercialize an industrial-scale process for growing algae that could be turned into biofuels or food, is closing down for lack of financing and selling off its technologies. Greentech Media broke the story earlier today.

Duncan McIntyre, an associate at Waltham, MA-based Polaris Venture Partners, which participated in several venture rounds that raised more than $70 million for GreenFuel, told Greentech that the company could not raise the funds needed to build planned test facilities in Spain. “We are closing doors. We are a victim of the economy,” McIntyre told the publication.

Xconomy is seeking comment on the reported closure from GreenFuel CEO Simon Upfill-Brown. But Bob Metcalfe, a Polaris partner who was GreenFuel’s interim CEO prior to Upfill-Brown’s hiring and is its current board chairman, confirmed the shutdown in an e-mail message. “Simon Upfill-Brown and Holly Flesh [the company's vice president of business operations] are now working to sell GreenFuel’s technologies,” he wrote. “You could help by sending potential buyers their way.”

GreenFuel’s ride was a bumpy one. The company built its first field bioreactor, using specially bred strains of algae to capture carbon dioxide emissions and rapidly convert them into biomass through photosynthesis, at MIT in 2004. In 2005 the company hired energy industry veteran Cary Bullock as CEO to lead efforts to scale up the process. But in 2007, the company had to shut down its third-generation bioreactor facility in Arizona after the plant produced more algae than the company’s equipment could handle. At the same time, the company learned that its algae harvesting system would cost twice as much as expected. Some 25 employees, about half the company’s staff, were laid off as a result of the plant shutdown.

Metcalfe relieved Bullock as CEO after the setback, and spent the next year coordinating cost-cutting efforts, raising cash, restarting the Arizona bioreactor, rounding up strategic partners, and recruiting new leadership.

Things seemed to be looking up for the company by mid-2008. In March of that year the company signed a deal with Spanish cement maker Aurantia that was expected to bring up to $92 million to the company. (Cement plants are a huge source of carbon dioxide.) New CEO Upfill-Brown joined in July, and the company obtained additional Series B funding and began work on a fourth-generation algae bioreactor in Cambridge. By October, GreenFuel had finished the first phase of its work at the Aurantia plant, a 100-square-meter prototype greenhouse and harvesting operation. A 1,000-square-meter facility was to be ready by 2010, and the company was beginning to collect some of the funds promised by Aurantia.

But the startup was hit hard by the economic crisis and by the decline in petroleum prices from their 2008 peaks, which took much of the bloom off the biofuels rose. Upfill-Brown was not able to raise a Series C investment round on the timetable that he and Metcalfe had originally projected. In January, the company laid off 19 people—again, just under half of its staff—and decided to outsource the design and engineering work on the Aurantia project.

“We’ve got to weather this economic storm as best we can…” Upfill-Brown told Bob at the time. But he said he was optimistic about the company’s direction: “We pretty much feel GreenFuel is ahead [of other biofuels companies]…We’re going to keep plugging away, stay ahead.”

Apparently, the company could no longer keep its head above water. Which could become an increasingly familiar story as biofuel startups—none of which have come close to producing ethanol or other fuels at prices comparable to those of fossil-based fuels—burn through their cash and look to empty-handed investors for additional capital rounds.

Comments (5) | Reprints | Share:          

With a new CEO (almost) in place, two potential term sheets on the way for a long-sought new round of financing, and another pair of partnership deals in the works, Cambridge, MA-based biofuels company GreenFuel Technologies could be on the threshold of a major new phase of its operations.

That was the picture painted by interim CEO Bob Metcalfe, on the heels of Tuesday’s announcement that after a year-long hunt, the company had found a new chief executive who will start next month. In an interview on Tuesday after the announcement, Metcalfe, who will become chair of GreenFuel’s board, spoke about the difficulty in finding energy entrepreneurs, as well as the company’s brightening future.

GreenFuel is developing algae bioreactor systems to convert carbon dioxide emissions into renewable, clean-burning biofuels. Last June, the firm had to close its third-generation algae greenhouse in Arizona, which had produced too much algae for the system to handle properly. Around the same time, it also learned that its algae-harvesting system would cost double the planned amount. The setbacks forced the layoffs of roughly half the company’s 50-person staff and the appointment of Metcalfe, a general partner at major GreenFuel investor Polaris Venture Partners, as interim CEO.

Only “interim” almost became interminable. Metcalfe says the long CEO search—led by Polaris general partner Peter Flint, in conjunction with Hobbs and Towne, a search firm specializing in the alternative energy field—highlights the difficulty in finding executives with experience in clean energy fields who also have a startup, entrepreneurial mindset (this is something Xconomist Bill Aulet has blogged on here). “The hard part is that unlike the computer industry and the Internet industry, there aren’t a lot of two-time serial entrepreneurs around,” Metcalfe says. “Most of the qualified people have worked for British Petroleum for 25 years. They don’t really have the small-company experience which we think is important. Simon does.”

He’s referring to new CEO Simon Upfill-Brown, who will start in mid-July. Even before then, Metcalfe will be working to hopefully arrange a Series C financing round for the company. GreenFuel recently completed a $13.9 million extension of its Series B round—$5.7 million of which was debt conversion—from inside investors, including Polaris, Access Private Equity, and Draper Fisher Jurvetson. “We just did our third close on the B—that’s a 2005 B that had three closes,” Metcalfe says. “We’re still planning to do a C.”

I asked him about the timing of the new round, and in a typical fashion, he quipped: “Yesterday would be okay.” It might not be too long after that, though. Two potential deals are likely coming in July, he says. “But neither one of them is in the bag…we don’t have a term sheet yet.”

Completing that round is the last of seven steps Metcalfe laid out shortly after taking the reins at GreenFuel last summer. “We have one more to go,” he says. The Ethernet inventor seemed to relish the possibility of wrapping up the deal before Upfill-Brown arrives. “This is my crack at the C round, and then if those two prospects don’t mature as we’d like them to, then Simon will lead the next crack at the C round and I’ll help him as chairman.”

He’s also working on some key partnership deals, to follow on one we wrote about in March to build an algae-based fuel plant in Europe; that deal could be worth up to $92 million.

The new deals relate to GreenFuel’s efforts to boost the size and productivity of its algae farms, Metcalfe says. The firm is now hard at work building its second 100-square-meter algae farm in Cambridge, MA. “It should come on line in July,” says Metcalfe. He says the company is talking with two potential new partners about extending this work on an even bigger scale. “It’s with those partners that we’ll make the move to 1,000 square meters,” he says. Any operations on that scale, though, won’t be in Cambridge. “Those will be in places with more sun.”

Metcalfe says the goal is to sign the partnership agreements later this month or in July. Then, he says, “we would hope to get to 1000 square meters probably in a year,” stressing that this estimate is a “very round number.”

Getting such a deal done, especially in conjunction with lining up a new financing round, would be a great cap to his CEO stint. Still, he doesn’t sound too sad to be leaving. “I’ve learned a lot about energy. I’m not a natural choice to be the interim CEO of GreenFuel. It’s been fun being on the steep part of the learning curve.”

Comments | Reprints | Share:          

GreenFuel Technologies, the algae farming startup headed by Polaris Venture Partners (a major investor in the company) general partner Bob Metcalfe on an interim basis since last June, finally got its CEO, the Cambridge, MA-based company announced today. The new top executive, who won’t start until mid-July and was not available for direct comment, is former Dow Chemical executive Simon Upfill-Brown (there’s got to be a pun here combining GreenFuel/Upfill-Brown, but at my editor’s urging, I’m not going to try for it).

“Algae has come of age. And I’m enthusiastic about joining GreenFuel’s formidable team,” Upfill-Brown, a native of South Africa and a chemist by training, said in a statement. “By developing and scaling our algae farming technologies, we aim to play a huge role in solving the world’s energy problems: mitigating CO2 emissions and producing renewable fuels, while adding to feed and food supplies rather than reducing them.”

Upfill-Brown, who will also join GreenFuel’s board, served as the longtime CEO of Haltermann Custom Processing, a Houston provider of specialty chemical manufacturing services that was bought by Dow Chemical in 2001. He served as General Manager of Dow Haltermann until 2008, when the unit, with some $230 million in annual sales, was spun out from its parent. Among other activities, Haltermann works in biodiesel, for which GreenFuel plans to be an algae oil feedstock supplier.

As we reported last summer, GreenFuel was forced to close its algae bioreactor systems, which seek to convert carbon dioxide from fossil-fuel plants into clean-burning algae-based biofuels, after more algae was produced than the firm could properly process. The setback led to the layoff of half of GreenFuel’s staff as well as the removal of CEO Cary Bullock, who remained as a top sales executive.

Enter Metcalfe, who has guided GreenFuel to string of recent successes. In March, Xconomy broke the news the company had won a contract worth up to $92 million to build an algae-based fuel plant in Europe. And last month came word that the firm had collected $13.9 million in funding from inside investors—including Polaris, Access Private Equity, and Draper Fisher Jurvetson—in an extension of its Series B round.

Last July, shortly after he took the reins, Metcalfe issued a seven-step plan for GreenFuel’s recovery. The hiring of a new CEO leaves only one step in his plan unmet, the completion of a Series C financing round.

Comments | Reprints | Share:          

Greenfuel Technologies, the Cambridge, MA-based algae farming company temporarily headed by Polaris Venture Partners general partner Bob Metcalfe, said today that it has collected an additional $13.9 million in venture capital from inside investors in an extension of its Series B funding round. The money, which will be used to retire debt and scale up an algae farm project begun in January, comes from Polaris as well as Access Private Equity and Draper Fisher Jurvetson.

As we reported last summer, Greenfuel was forced to shut down its algae bioreactor systems, which are designed to convert carbon dioxide from fossil-fuel plants into clean-burning algae-based biofuels, after the reactors began producing more algae than the company could properly process. The snafu resulted in the layoff of half of the company’s staff as well as the departure of CEO Cary Bullock, who was replaced by Metcalfe for an “interim” period that has now lasted 10 months.

In a letter to investors last June, Metcalfe laid out a seven-step plan for getting the company back on track, including cutting expenses, raising interim cash, scaling back and restarting the Arizona-based algae greenhouse and completing a planned demonstration there, accelerating development of the company’s next-generation bioreactors, developing plans for a commercial-scale greenhouse and signing up at least one commercial partner, hiring a new CEO, and completing a Series C equity financing round. Metcalfe said in late January that the first five steps of that plan had been completed.

In a press release today, Metcalfe said the completion of the extended B round marked the beginning of the end of the company’s interim period. But the company still has some work to do—including completing the last two steps of its plan. “GreenFuel’s algae farming technologies are advancing in our 100m² bioreactors, but they are not yet fully developed or scaled,” Metcalfe said. “In the coming weeks, we expect to announce signed development and scaling projects, the arrival of our scaling CEO, and the raising of a strategic C round. These announcements will mark successful completion of our seven-step Interim Plan.”

Greenfuel believes that its bioreactors can produce algae that can be harvested, dried, and converted into food, animal feed, or biodiesel fuel. Sited next to CO₂-producing sources such as coal-burning electrical plants, algae bioreactors can theoretically be 20 times more productive than corn or soy farms, without using up agricultural land or clean water, the company claims.

Comments | Reprints | Share:          

GreenFuel Technologies seems to be continuing its rebound under interim CEO Bob Metcalfe. The Cambridge, MA, alternative energy company has reached an agreement—worth up to some $92 million—to build an algae-based fuel plant in Europe, according to sources close to the firm. What makes the deal even more interesting is that it was reportedly negotiated largely by former GreenFuel CEO Cary Bullock, who stepped down from the top slot when Metcalfe took the reins last June on an emergency basis, but stayed on at the company in a business-development capacity.

GreenFuel is developing algae bioreactor systems to convert carbon dioxide emissions into renewable, clean-burning biofuels. The company declined to confirm or deny the report of its European deal. But Xconomy’s sources indicate that achieving the full value of the deal is likely contingent on GreenFuel building a small-scale pilot plant and meeting cost and productivity goals along the way.

The deal seems to mark a major step on the comeback trail for the battered firm. As we reported late last June, GreenFuel had to shut down its third-generation algae greenhouse in Arizona, which had produced too much algae for the system to handle properly. Around the same time, the firm had also learned that its algae-harvesting system would cost twice as much as planned. The twin pieces of bad news forced the layoffs of roughly half the company’s 50-person staff and the appointment of Metcalfe, a general partner at lead investor Polaris Venture Partners, as interim CEO (the other lead investor in GreenFuel is Draper Fisher Jurvetson).

Metcalfe quickly outlined a seven-step recovery plan for the firm: you can find a copy of his letter to investors and employees here. And in late January, he reported that the company “completed, and in cases blew away” the first five steps of that plan. The firm’s success in growing revenues while simultaneously cutting expenses had resulted in it pushing the deadline for its so-called interim period, the time by which the company needs to complete a new round of funding, “from December to March to now June,” Metcalfe reported. The two, still-uncompleted steps are finding a permanent chief executive to replace Metcalfe and closing a new, Series C financing round.

We’re working to learn more about this deal. But one of the most intriguing pieces of news involved former CEO Bullock’s instrumental role in bringing it about. Bullock, a respected energy industry veteran, had led the company since the spring of 2005. In the vast majority of management overhaul cases we know about, the departing CEO is encouraged or forced to leave the company altogether. But Bullock, who reportedly felt passionately about the company, stayed on as vice president of business development. Could this be a new type of case study in finding ways to retain talent—and making a management change work for everyone?

Comments (9) | Reprints | Share:          

GreenFuel Technologies “completed, and in cases blew away” the first five steps of its seven-part recovery plan, interim CEO Bob Metcalfe reports. After successfully raising revenues while simultaneously lowering expenses, the Cambridge, MA-based renewable energy firm has pushed the end date for its so-called interim period, by which it needs to complete a new round of funding, “from December to March to now June,” Metcalfe reports. The two remaining, uncompleted steps are finding a permanent chief executive to replace Metcalfe and scale the company’s growth, and closing that new, Series C, financing round.

GreenFuel develops algae bioreactor systems that convert carbon dioxide emissions into renewable, clean-burning biofuels. As we reported at the end of June, just days after Xconomy’s launch, the company had been forced to shut down its third-generation algae greenhouse in Arizona, which had produced too much algae to handle properly. GreenFuel had also learned that its algae-harvesting system would cost twice as much as anticipated. The setbacks led to the layoffs of roughly half the company’s 50-person staff and the appointment of Metcalfe, the Ethernet inventor and Polaris Venture Partners general partner, as interim CEO. (Polaris and Draper Fisher Jurvetson are leading GreenFuel investors).

A few days after our initial report, we published a letter from Metcalfe, apparently aimed chiefly at investors and GreenFuel employees, outlining his plan for recovery. Its seven steps were:

— conserve cash and cut expenses
— raise interim cash in the next 30 days
— scale back, then restart, the firm’s third-generation algae greenhouse in Arizona and complete a long-planned algae growth demonstration there
— “accelerate the scale up of our fourth-generation algae greenhouse technology, now in early operation at a 550-megawatt coal power plant in ‘Asia.’ An engineering scale greenhouse must be completed at our Arizona facility by October.”
— “develop a project plan for a commercial scale algae greenhouse and sign by November at least one letter of intent with a compelling partner.” (Metcalfe disclosed at the time that GreenFuel was already talking with partners about projects ranging between $10M and $30M)
— hire a new CEO
— close GreenFuel’s next, expansion round of financing

Under that plan, the CEO was supposed to have been successfully recruited by November and the financing closed by year’s end. The success with the other five parts of the plan seems to have allowed some breathing room on those two fronts.

“We continue our search for a scaling CEO (to replace me) and due diligence toward the close of our C round of finance,” Metcalfe wrote Friday in an e-mailed update. “Our algae farming systems are increasing production, particularly in Cambridge, where our Winter days are growing longer and the Sun higher in the sky.”

More news should come soon, Metcalfe says.

Comments (6) | Reprints | Share:          

This is the week that everybody in the media seems to be gazing back upon 2007, but here at Xconomy, well, we’re not that into the first half of the year. No offense intended to January, February, et al—we just weren’t around yet to cover all the people, companies, and happenings that surely made those first six months of the year a fascinating time in the New England innovation ecosystem. So, in honor of the hemi-anniversary of our June 27 launch (no need to send gifts, a few extra clicks will do), we present the Xconomy Half-Dozen-Stories-of-the-Half-Year Awards.

The “Who Knew?” Story of the Half Year:
Boston: The Hidden Hub of Music and Technology
Wade, a recent transplant from the West Coast with a healthy interest in the intersection of technology and entertainment, began to notice that the Boston-area music-tech scene is a lot more rocking than stereotype would lead you to expect. He spent weeks exploring a fascinating web of companies, all combining music, computing, and the Web, and unearthed a hidden technology cluster. The story was part of the inspiration for Xconomy’s upcoming Battle of the Tech Bands.
Runner Up:
VC Varsity (showcasing the little-known athletic prowess of the area’s private equity circuit)

Home-Team Victory of the Half Year:
iRobot v. Robotic FX
We did our journalistic best to be objective in our coverage of Burlington, MA-based iRobot’s patent-infringement and trade-secrets-violations cases against an Illinois rival and the firm’s founder (a former iRobot employee). But the whole massive shredding/tossing of evidence thing… Well, it makes an impression, doesn’t it? Evidently it did on judges in Massachusetts and Alabama, because they endorsed settlements that put Robotic FX out of business and locked founder Jameel Ahed out of the industry for the next five years.
Runner Up:
Red Sox v. Rockies

Story Tip of the Half Year:
Upheaval at MERL
Don’t want to reveal too much about how this one came in, except to say that in a town like this one, kids’ playdates are shockingly prone to becoming parental networking events.
Runners Up:
IRobot’s Dumpster Diving Detectives (the classic anonymous phone call)
The Inside Story of Eons Layoffs (the classic insider source)
Metcalfe Takes GreenFuel Reins (the semi-classic e-mail tip, but we would have had the story two days earlier if our spies at Lanes and Games had recognized the thin Bob Metcalfe look-alike they thought they were seeing as the real, and newly svelte, Metcalfe)

Comment Catfight of the Half Year:
Sermo Strikes Back
I guess when you write a story about how a bunch of people are really ticked off about something (in this case, about some bloggers exposing a security loophole for Sermo, a popular Cambridge-based social networking site for physicians) it shouldn’t be too surprising that the story itself elicits some debate. But man, those doctors can get ornery! (And by doctors, I’m including the bloggers, too. Because I’m Switzerland, okay everybody?)
Runner Up:
What’s Wrong With Energy Investing? (And what’s wrong with making the simple observation that investing in alternative energy is a necessary, but wholly insufficient way to deal with the energy problem?)

Anticlimax of the Half Year:
Carl Icahn Shakes Up Biogen Idec
The activist investor burst on the scene in August. Biogen was up for sale by October. Pundits and bloggers (ourselves included) speculated about who would buy the pioneering Cambridge biotech, but in December, with no offers on the table, Biogen took itself off the block. Of course, you know the story ain’t over…
Runner Up
Genzyme Buys Bioenvision (a once-fiery shareholder revolt fizzles at the 11th, make that 13th hour)

Google IPO Impersonation of the Half Year:
VMware
Hopkinton, MA’s EMC sold just 10 percent of its Palo Alto-based VMware subsidiary in this offering, but what an offering it was. The stock (NYSE: VMW) debuted at $50—a 72 percent premium over its offering price—and soared to a high of $125.25 within a few months (it’s now down to a mere $86 and change).
Runner Up:
Athenahealth (NASDAQ: ATHN) (The Watertown, MA-based, provider of online billing and other business services for medical practices priced at $18 and debuted at $30.)
Also Ran:
EqualLogic (NASDAQ: DELL) (The Nashua, NH-based maker of network storage ditched a planned IPO in favor of a $1.4 billion cash sale to Dell Computer—evidently the largest all-cash acquisition of a venture-backed company in history.)

Comments (1) | Reprints | Share: