Clean-tech has generally fallen out of favor with venture capital investors, but not Sapphire Energy Inc.
The 5-year-old Torrey Pines-based startup, which is pursuing a green-algae-to-crude-oil technology, has earned the distinction of being one of the richly funded clean-tech startups in the U.S. as the year 2012 comes to a close.
The company has now raised more than $350 million to date, including a $144 million series C round of financing in the spring.
That figure puts Sapphire into the ranks of the top dozen most heavily funded startups in the country.
The total includes a $50 million grant from the Department of Energy that was used to help build a commercial scale algae-growing farm in New Mexico.
The 300-acre commercial scale farm was completed in August.
Fits the Current Refinery Mold
“We’re developing a crude oil that can be refined in any refinery,” said Tim Zenk, a spokesman for the company. “In fact, our technology plays right into the existing network of refineries. Our product will fit the existing profile of products that can be refined into diesel, gasoline and other commercial products.”
Zenk said that Sapphire’s new Green Crude Farm will produce 100 barrels of crude daily by 2014, bringing commercialization of a technology that began as a simple idea in 2007 to fruition in a few years from today.
Sapphire has the financial backing of a number of impressive investors, including science-focused, Seattle-based Arch Venture Partners; Cascade Investments, the venture arm of technology tycoon Bill Gates; Venrock, the investment arm of the Rockefeller Family, and the U.K.-based biomedical-focused Wellcome Trust, the second largest family-run trust in the world. Monsanto Co., a major global force in the agribusiness sector, is also an investor in the company.
Unlike more traditional VC firms that seek a big return in a short time period, Zenk said Sapphire’s mix of investors involved in the business are willing to wait out the long lead times required to commercialize the technology.
“Patience is required when investing in alternative energy, as it can take up to 30 years to be successful,” he said. Most venture funds last but 10 years, and just don’t have the patience it takes, he said.
Jim Lane, editor and publisher of Miami, Fla.-based daily trade publication Biofuels Digest, recently included Sapphire in his annual list of the 50 hottest bioenergy companies.
Lane said he’s been impressed with how the company has approached commercialization of the technology, relying on using methods and processes already being used in other industries.
For example, Sapphire is adopting techniques of rice farming to the production of the algae, as well as techniques from wastewater management to the large scale production and processing of algae into a petroleumlike product.
“They are minimizing the risks of innovation,” said Lane. “In fact, they are risk ‘minimizers’ not risk takers.”
Lane explained that the company has hired experts in other industries to better adopt and adapt existing technologies form other industries to the production of crude oil from algae.
Jeff Webster, who was named COO, in October, was previously COO at South San Francisco-based Solazyme Inc., a public company pursuing a similar algae-to-crude technology, brings a wealth of food manufacturing experience from Tyson Foods, where he was in charge of the division that sells ingredients to the human, pet and animal feed markets.
In addition, Lane pointed out that chairman and CEO Cynthia Warner, who has been the top executive at the helm since 2009, is also a veteran from a related industry.
Warner, who trained as a chemical engineer, knows her way around the oil and gas industry, having worked at British Petroleum and Aramco Oil Co.
“They have a lot of visibility and credibility,” said Lane of the management team.
Sapphire ranks high in credibility because the company “is hitting all of its milestones on the path to commercialization,” he said. “That’s a major accomplishment.”
Patent Advantage
The company also has a leg up on its competitors, since Sapphire has filed for 280 patents covering various aspects of the technology of turning saltwater raised algae into crude oil.
Zenk said the company wants to be competitive with the cost of a barrel of oil processed from such sources as tar sands or more than 6,000 feet deep under the ocean.
That price is currently hovering around $85 to $90 a barrel, and Sapphire is within striking range of that price as large-scale production approaches.
Since crude comes from ancient plant material, the production of oil from algae farms won’t be all that different than taking the oil from the ground, which has been there for tens of millions of years, Zenk said.
By the year 2020, the U.S. government predicts that 50 percent of the liquid fuels will come from renewable sources, and Sapphire will be one of the major suppliers, according to Zenk.
“We’re focused on becoming one of those new sources of crude oil, and we think we’ll be successful at that,” Zenk said. “We believe there is no one like Sapphire” in the sector.