Topping a $113 million Series B round for biodiesel developer Imperium Renewables in February 2007, Tuesday's announcement of an approximately $130 million Series B round for Range Fuels Inc. represents a huge endorsement of venture capital investment in biofuel production.
Biofuels was the third-largest sector among surging cleantech markets to attract venture capital last year, trailing only the solar and transportation markets with $265 million in total investment. A large portion of that is attributable to the Imperium deal, which was dedicated to the construction of a number of deep-water-port production plants.
But much of the remainder went to earlier-stage biofuel plays with a more traditional venture capital model of investing in breakthrough technology, while leaving later-stage financing and revenue models flexible for licensing deals and project debt. Deals for specialized biomass conversion technology developers Gevo Inc., Amyris Biotechnologies Inc. and Coskata Inc., and for seed developer CellFor Inc., were based more on the promise of proprietary technology in driving a wave of innovation in the sector, rather than realizing a return on production of biofuels.
With Range Fuels' new round dedicated to the construction of a commercial cellulosic ethanol plant in Georgia, lead investor Passport Capital is betting that there is a future for equity investment in capital-intensive plant development.
The deal is all the more impressive in light of the fact that Imperium's gambit of quickly flipping the company to the public in an IPO failed last December. The company had hoped to capitalize on publicity surrounding biofuel development to raise a much larger amount of equity funding from public investors for plant development, but dropped its IPO to pursue other forms of financing that, in the long run, may prove cheaper for the company's owners.
To be sure, Range Fuels' early investors, including the biofuel industry's biggest backer Khosla Ventures, are betting that completion of the company's first commercial plant will just be one milestone in advancing the long-term prospects of cellulosic ethanol. The goal would be to augment or displace so-called Monsanto Moonshine, which is based on high-yield corn seed, that now dominates the biofuel market. Cellulosic feedstock can be grown much more cheaply than patented high-yield corn crops, and Range Fuels uses a thermo-chemical process that breaks down woody biomass much more cheaply than most cellulosic processes, which use enzymes.
Presumably, the company's business model relies on further capitalizing on that technology beyond its own immediate plans for production facilities, and investors equity support of the company will not be its only financing route. Range Fuels previously announced that it received a $76 million grant from the U.S. Department of Energy and a grant of $6 million from the State of Georgia. - Clifford Carlsen
See April 1 press release from Range Fuels Inc.
See November 2007 story from Tech Confidential
See July 2007 story from Tech Confidential
See September 2007 story from Tech Confidential
See Jan. 4 story from Tech Confidential
For more, see Seekerblog, earth2tech, PetroZero and ecoenergynews
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