Alameda startup Aurora Biofuels raises $20 million

Alameda startup Aurora Biofuels raises $20 million
East Bay Business Times - by Mavis Scanlon
June 13, 2008

Alameda renewable energy startup Aurora BioFuels Inc. is out to prove its technology to produce bio-oil from algae is viable on a large scale. The company has raised $20 million in a second round of venture financing to do so.

The second round was led by existing investor Oak Investment Partners, which was joined by existing investors Gabriel Venture Partners and Noventi. It follows the $3.2 million Aurora raised in early 2007. That initial round went to honing Aurora's technology in the lab and a small pilot program, said Matt Caspari, Aurora founder and CEO.

"This (new) money is to scale up," Caspari said, "taking what we've already done outdoors to a real-world environment."

Interest in algae as a biofuel feedstock for transportation fuels is growing. The plant, commonly called pond scum, is oily and grows very fast. It also does not compete with agricultural resources that can be used as food.

There are at least 15 startups trying to develop algae as a fuel source, including Aurora, Solazyme of South Francisco, Live Fuels of Menlo Park, and New American Energy Inc. (operating as Mighty Algae Biofuels) of Redwood City. Aurora's technology, developed at UC-Berkeley, uses open ponds to grow algae, which Caspari said he expects will "get us to the lowest price point."

Two-year-old Aurora is still operating in what Caspari called "semi-stealth" mode - he declined to say how many employees the firm has or how many it expects to hire - and also declined to discuss his exact definition of large-scale other than to say it is "significant."

Aurora's business model calls for ultimately selling bio-oil from algae into the existing refinery and distribution system, but Caspari declined to say what the company's time frame is for getting to market. He expects to sell to major integrated oil companies or other biofuel refiners, who would then convert the fuel to transportation fuel.

Although the idea for turning algae into fuel dates back several decades, "at the moment no one has proven that algae can work at scale," said Jim Long, venture partner at Gabriel Venture Partners and chairman of Aurora's three-person board of directors. Since the ultimate objective in producing algae oil is to lower dependence on foreign oil, "from our perspective it's better if many people are successful."

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