Latest green technology developments:
Vinod Khosla is rocking after barely two years — Khosla (pictured below), the Silicon Valley venture capitalist who hit it big during the telecom boom in the 1990s, turned two years ago to embrace green technoloy. We thought his outlandish bets on untested technologies such as celulosic ethanol - which most experts caution will be only be commercially viable in two years, at the earliest — would take some time to show results.
Yet his investment in Cambridge, Mass.-based Celunol last year (we believe it was May; we’re checking) as part of a $60 million venture capital round, has already yielded fruit. San Diego’s Diversa just bought the company for about $182.45 million. Cellulosic ethanol is a process that uses non-food plants and other waste to make ethanol, and it is much more efficient, and thus better for the environment, than regular corn-based ethanol.
This is good news — and it’s bound to set a wave of green-colored VC lemmings in his direction.
This will too: Boston’s EnerNOC, an other energy company, has filed for a $100M initial public offering on the Nasdaq. It helps manage power supply and demand on the grid, helping make it more efficient. The company had raised around $28 million in funding since 2003 — from Foundation Capital, Draper Fisher Jurvetson, Braemar Energy Ventures and DFJ New England — another solid result.
Green tech investments tripled last year.
Update: George below rightly points out there were other invetsors in Celunol besides Khosla Ventures. Others wre Braemar Energy Ventures (yep, same Braemar that backed EnerNOC), Charles River Ventures and Rho Ventures.
Update II: We’re still waiting for public documents to confirm how long Khosla and other investors will have to hold their stock (see comment below), but we’re told it is six months. Moreover, we’re told Khosla made about five times his investment in the company, and that he first invested about two years ago (keep in mind that he invested in a portion of the $60M, and that some of the $60 million my have included prior money before the company was restarted by venture investors).
As for the Diversa-Celunol merger rationale, here’s what we’re hearing: You need three components for biochemical cellulosic process: a) pretreatment b) efficient bugs and c) low cost enzymes. Celunol provides technology for the bugs (from University of Florida research), while Diversa provides low-cost enzymes.
17 Comments
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George Zachary said:
Matt - as a side note, we (Charles River Ventures) are happy to have been side-by-side partners with Vinod im Celunol.
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Ian Fernandes said:
This shows that you can make money as a VC even when there is no technology and no product and the company is going nowhere. I looked at the acquiring company “Diversa”. This is not an acquisition but rather a merger of two companies that are going nowhere. Diversa went public in 2000 and at one time had a share value of $140/share, i.e the
VCs and other financial backers and intermediaries probably made a lot of money. It is now less than $10/share and looking
for some buzz to pump its share price.
I doubt that this is the type of exit that khosla was hoping for. -
Jon said:
It would be far more impressive for a venture “capitalist” to make it on his own instead of lobbying the government for tax breaks, subsidies and other regulatory interference in order to slant the market in his favor. When the market is allowed to choose winners in the energy sector and Khosla is still successful, then I’ll be impressed.
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Gregor Macdonald said:
Commercial agriculture is made possible by fossil fuels. Therefore, commercial biofuels will only be possible by heavy use, of fossil fuels. That said, as we go out the spectrum of myriad plants, the EROEI does and will improve. It’s important to be both supportive of the start-ups in this space, while also being critical of the claims made for what biofuels can ultimately accomplish. Total displacement of fossil fuel liquids in the USA will never happen. Corn ethanol for example has already reached its zenith, imo, as a replacement for the carcinogenic MTBE. That’s a great story. But that’s the end of the story, imo, for Corn Ethanol. Nothing will change the fact that the USA will need to migrate back towards light rail, and fast rail, and other public transportation. There are decent investment opps going forward in biofuels, but, the great investment opportunities are not in biofuels. Infrastructure, and the coal to liquids and coal to gas areas, are where the big action will take place.
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JD said:
My understanding is that the invetors in Celunol are holding on to Diversa stock. $182 million off of around $60 million invested is good, but not great in terms of venture-type returns, right?
Plus it seems like this is almost a reverse merger, with Dviersa moving to spend significantly more time on biofuels than its other lines of business… and relocating its headquarters to Cambridge.
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Andre Verdez said:
Jon, progress in green technology cannot be achieved under the watch of private investors alone. It will ultimately be a product of concerted collaboration between multiple stakeholders, including private organizations, civil society, and yes, governments. What we’re looking at here isn’t lobbying for the rights of Web 2.0 companies to proliferate needlessly to make the world a happily social place, but having all concerned parties weigh in on the shared issue of the environment. If impressiveness is the measure of relevance, then it is impressive that Khosla is trying to tackle the issue through multiple pathways.
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Kari Lemons said:
Corn ethanol and soy biodiesel are not sustainable in the current model of production.
But cellulosic ethanol and Algae biodiesel hold best hope for sustainability. Will biofuels ever replace petro, no never.
But the goal should be to use every technology not have them compete. The current biofuels are a transition step to the next best technology, what ever the market decides that is. There is a company now that is building the first cellulosic ethanol plant in California, Colusa Biomass (CLME.PK). They are solving a very bad waste problem for CA agriculture in the process by using rice straw as the feedstock. Rice straw burning was banned by the Air Resource Board and finding a use for it has been a top priority. I am not an employee, but I do own some shares.To respond to the person who talked about susidies for biofuels, all of renewable technologies combined do not get 1/10 of the subsidies and federal benefits that big oil does. Big oil gets Master Limited Partnership corporate structures, drill for free on public lands and waters, use of the military to guard pipelines all over the world, let alone take over Iraq, etc. etc. When all renewable technologies get equal federal and state subsidies, tax benefits, and research dollars then we can compare apples to apples.
Using these renewable technologies is a personal choice and choice requires education. That is where the Biodiesel Council of California enters as a educational non-profit.
http://www.biodieselcouncil.org
New members wanted and donations always welcome!
I want to drive a plug-in diesel hybrid on B100. 100MPG on 100%biodiesel thats my dream!
Plugged into my future solar power roof!Kari Lemons
Outreach Director
Biodiesel Council of California -
Doug Feldman said:
Governments can and do play a critical role in the creation and monitoring of markets. Once the market is established, there will be progressively less need for government intervention. Any transition away from fossil fuels and towards cellulosic represents a benefit to the environment and a renewed investment in domestic production, jobs growth, and internartional political security.
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Anders Carlius said:
Just give us a leveled playing field with fossil fuels on the other side and we will level them with new green technology.
Go green - no pain added - get wood based gasoline from REAC Fuel at $2/gallon. We would like to have more incentives, but we do not need to, we will win the game.
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AP Style said:
Brazil has become “energy-independent” it seems. But I believe it is powered by sugar crops down there.
I love this concept, but corn (we in the States are not quite there in terms of cellulose, etc.) is an expensive crop to divert to energy and what it takes to grow it may well offset the green benefits. Not to mention the lobbies, subsidies, politician hype, etc. surrounding current crops. Better CAFE standards are still needed and battery technology must still be greatly improved.
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Matt Marshall said:
JD, would agree that the return multiple wasn’t that huge in VC term, but they’ve made a return in a very speculative field in less than a year. i’ll try to confirm how much they’re locked into this.
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Matt Marshall said:
ok, looks like agreement will be finalized by end of second quarter, and that shareholders will have to hold for a while, perhaps six months. still waiting for more documentation, but here’s what we know so far:
“Under the terms of the merger agreement, Diversa will issue 15,000,000 shares to acquire the outstanding equity of Celunol. In addition, Diversa will provide Celunol with up to $20 million in debt financing to fund its operations prior to the closing, which will be assumed by Diversa at the closing. On a pro-forma, fully diluted basis, Diversa stockholders will retain ownership of approximately 76 percent of the combined company, and Celunol stockholders and optionholders will own approximately 24 percent. The merger agreement has been unanimously approved by each company’s board of directors and is subject to approval by their respective stockholders, regulatory agencies, and the satisfaction of other customary closing conditions. The transaction is expected to be completed by the end of the second quarter of 2007.”
http://www.sec.gov/Archives/edgar/data/1049210/000119312507026358/d425.htm
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Matt Marshall said:
Have updated again. We’re hearing Khosla made 5x his money.
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