VentureBeat

It seems like a good idea, at first: Pipe carbon dioxide emissions from power plants or industrial processes through water containing algae, and the algae will absorb the CO2 for its own growth, in turn being harvested to make biodiesel. But like most good ideas, the implementation has proven more than a little tricky.

GreenFuel Technologies is a startup we’ve covered followed as it moved from high-flying newcomer, to apparent failure, back to spotlight darling. The “apparent failure” part began with problems in scaling. GreenFuel’s plan appears to work fine on a small scale, but when it tried to do a commercial-size project last year, the algae over-performed to the point of killing itself off, doubling costs and leading to layoffs of 50 people.

Instead of letting the company crumble, one of its investors, Polaris Venture Partners, sent in general partner Bob Metcalfe for emergency resuscitation. The move appears to have worked — a $5.5 bridge loan kept the company afloat until two months ago, when we were able to report a $92 million project financing for the company to build a bioreactor in Europe. Now $13.9 million more has been provided in an extension to its second round of financing, for further development.

However, that doesn’t necessarily mean blue skies ahead. In fact, a full $6.3 million of that amount will go toward retiring debt — likely the same bridge the company took to survive. The $7.6 million remaining isn’t much, especially considering that part is going toward construction of a project the company has not yet announced.

The big question is what will happen in Europe. The company is likely moving at a frantic pace to re-prove the technology and get a third round of funding, not to mention staving off competitors with the same idea (but more opportunities left to screw up).

The round was provided entirely be existing investors, with Access Private Equity leading, alongside Draper Fisher Jurvetson and Polaris. The company is based in Cambridge, Mass.