VentureBeat

A combination of rising food prices and environmental concerns has helped spark a backlash against biofuels. Once viewed as a key component of any successful climate mitigation strategy, biofuels — particularly those derived from food crops, such as corn ethanol — have seen their popularity wane in recent months as scientists and policymakers alike have come to realize that their costs may far outstrip their perceived benefits.

Brazil has arguably become the poster child for biofuel enthusiasts, who point to the success the country’s sugar cane-based ethanol program has achieved in weaning a significant number of consumers off fossil fuels. The government’s early, aggressive use of price controls and subsidies helped jump start a market that now provides over 30% of the country’s automobile fuels — one that Amyris Biotechnologies, an Emeryville, Calif., based synthetic biology startup, is hoping to tap into.

Several startups in the U.S., including LS9, Codexis and Synthetic Genomics, the company started by Craig Venter, are using synthetic biology to engineer microorganisms in order to produce hydrocarbon-based fuels. They have received millions in VC funding from the likes of Lightspeed Venture Partners, Flagship Ventures and Khosla Ventures. Amyris has just announced a partnership with Crystalsev, one of Brazil’s largest ethanol distributors and marketers, to commercialize advanced fuels — diesel, jet fuel and gasoline — derived from sugar cane.

The new venture, Amyris-Crystalsev, expects its first product, a form of diesel that reduces emissions by 80% over conventional diesel due to the less carbon intensive production process, to reach the market in 2010. Amyris will hold the majority the majority stake in the venture. Santelisa Vale, Brazil’s second largest ethanol and sugar producer and Crystalsev’s majority stakeholder, will provide 2 million tons of sugarcane crushing capacity.

Amyris uses a suite of molecular biology and genetic tools to insert new pathways into microorganisms and coax them into secreting hydrocarbon-based fuels. Unlike current biofuels, these are fully compatible with existing engines and distribution infrastructure and achieve net emissions reductions. Moreover, the process can be scaled up to obtain higher cost efficiencies and lower energy consumption during production.

The venture will start producing its fuels with sugarcane to take advantage of Crystalsev’s market clout in Brazil but expects to diversify into other plant-based and cellulosic feed stocks. Though it plans on eventually expanding its distribution worldwide, the partnership will initially focus on the U.S. and Brazilian diesel markets. Amyris-Crystalsev will open their R&D headquarters in Campinas, a region located between Sao Paulo and Ribeirao Preto, Brazil’s sugarcane capital. The first pilot facility will begin operations next year.

Tropical BioEnergia SA, a joint venture operated by Santelisa Vale and Maeda Group, has also just unveiled a new partnership with BP, in which the latter will assume a 50% stake. Tropical BioEnergia SA is currently building a 115 million gallon a year ethanol refinery; the new partnership will invest close to $1 billion — the largest such investment made by an international oil company in the Brazilian ethanol industry — in this and a second refinery. BP and Tropical BioEnergia plan on producing conventional sugarcane-based ethanol.

Amyris cites industry estimates predicting that demand for petroleum diesel is expected to grow 4% annually and to exceed 600 billion gallons by 2020 to underline the appeal of its new venture. With the demand for corn ethanol likely to slow as a result of the current food crisis, sugarcane-based fuels may soon become the favored alternative.

Amyris, an Emeryville, Calif. company using synthetic biology to create a fuel to replace petroleum, said it has raised the first portion of a planned $70 million second round of funding.

Duff Ackerman & Goodrich Ventures (DAG Ventures) led the financing, and was joined by earlier investors Khosla Ventures, Kleiner Perkins Caufield & Byers, and TPG Ventures, which together had invested $20 million last year.

The company, which was vague about its plans when we wrote about them last year (see coverage), has revealed more of its strategy. It will create three transportation biofuels: bio-gasoline, bio-diesel, and bio-jet, but signaled they won’t hit the market until 2010 at the earliest. The plan is to use fuel sources such as sugarcane, corn and cellulose to produce transportation fuels more efficient than the prevailing alternative, ethanol. Ethanol is costly because of the need to separate it from water during production, and because it can’t be used without retrofitting cars.

Significantly, the company is valued at $470 million after the investment, making Amyris one of the most valued biofuel companies in the U.S. even though it is still private. Chief Executive John G. Melo mentioned the value in a discussion with VentureWire (subscription required).

Other players in this market include Gevo, Ls9 and Synthetic Genomics. The latter company recently raised a second round giving it a $300 million post-money valuation.

Amyris said it wants to raise the rest of the $70 million by the end of the year, and has commitments for the rest from undisclosed strategic investors.

Craig Venter, the controversial entrepreneur who led the private-sector effort to sequence the human genome, is now seeking a patent for a “minimal genome,” a type of synthetic biology aimed at creating life forms, or living “machines.”

It may even be used for creating ethanol or other biofuels, something that several other companies are working on.

The US patent application (see the application here), filed by Hamilton Smith and colleagues at the J. Craig Venter Institute in Rockville, Maryland, claims ownership of a set of less than 400 genes required to sustain a free-living microbe. According to a New Scientist article:

The patent states that a synthetic genome bearing the genes could be inserted into a bacterium stripped of its own DNA. The idea is that this bacterium will become a “chassis” for synthetic biology, used to carry genetic circuits with novel functions. The patent also claims a specific application: producing ethanol or hydrogen for fuel.

There’s more coverage about Venter’s efforts here.

Synthetic fuel is something Amyris in Emeryville, Calif. backed by Kleiner Perkins and well-known investor Vinod Khosla is also trying to do, as we reported here. Khosla has backed LS9.com, which is doing something similar.

Two high-profile Silicon Valley investors known for their aggressive support of alternative energy have helped pump $20 million into a new Emeryville biology company called Amyris.

The investment is notable because Amyris is using synthetic biology to search for an ideal alternative fuel to replace petroleum. It is looking for a molecule similar to ethanol, a biofuel derived from plants such as corn, but even better. News of the investment plans came in June, but the company said the money has now arrived. It made several other announcements, including a new chief executive.

Khosla Ventures, the venture firm of Vinod Khosla, led the investment. He was joined by Kleiner Perkins, the venture capital firm of John Doerr. Khosla and Doerr have drawn attention with their significant investments into alternative energy. Kholsa, in particular, has made numerous investments into ethanol facilities. Texas Pacific Group Ventures also invested.

Despite his ethanol investments, Khosla has said ethanol is not the best alternative energy source long-term. In fact, we wrote yesterday about Khosla’s search for an efficient way to produce say, butanol and other biofuels that would be better than ethanol. Ethanol faces limitations as an alternative fuel to petroleum, because of the cost needed to separate it from water during the production process.

Amyris so far has focused on other projects, such as pharmaceuticals, including creating a low-cost malaria drug, artemisinin. But Amyris founder Jay Keasling, and head of the company’s scientific advisory board, has been researching butanol and other chemicals as a UC Berkeley professor of chemical engineering and bioengineering.

Keasling and British Petroleum (BP) are two of the leaders on butanol research. So it is also significant that Amyris has announced the appointment of John G. Melo, previously president of U.S. Fuels Operations for BP, as chief executive officer. He has experience running BP’s ethanol operations. The company’s Web site also shows it is hiring fermenting experts.

Amyris co-founder Neil Renninger vice president of development, said the company’s core team comes from Keasling’s lab and that the goal is to design biofuels that the market wants. Butanol is an example of a molecule the company is targeting, but there are others too. “There’s a spectrum of molecules,” he said. The company is focused on making enzymes that are optimal for breaking down cellulose, which can be used for producing biofuels.

Rob Day, of Expansion Capital Partners, another investor in clean technologies, said there are lots of efforts underway in the race to find a better biofuel, and that its possible that one particular technology will take a dominating position. Khosla, more than anyone, is investing in many different efforts, on the idea that one of them will pan out, he said. “If you back a lot of horses, it’s more likely you’re going to win.”

Joining the Amyris board are Doerr, Samir Kaul, general partner of Khosla Ventures and Geoff Duyk, managing director, TPGV. “Greentech could be the largest economic opportunity of the 21st Century,” said Doerr said in a statement. Doerr has repeated this phrase often, a change in tune from a few years ago when he was saying the Internet represented the biggest opportunity.

Here is a shotgun of the latest stuff in raging Silicon Valley, leading of course with video:

VideoEgg gets easier — VideoEgg, a site that lets you download software so you can post video on any site, has partnered to make the process easier at key sites. Users at Bebo, Dogster, Hi5, AOL, Current.TV and Tagged can post video content from mobile or other devices to those sites, and VideoEgg’s small browser plug-in that makes it easy to get code for a video and upload it as easily as you can post photos, it says

Zillow.com sets homeowners free, allows them to enhance their home value — You could see this coming. Start-up Zillow infuriated some homeowners and agents by estimating the property values of homes across the nation, and listing them online. Some people felt they were being unfairly treated. Now the site is letting homeowners contribute information about their own homes, listing upgrades, remodeling and other notes (waterfront view, parking, roof composition) — showing ways the homes may be more valuable than simply historic or comparable home prices would indicate. Homeowners can then recalculate their home values, but Zillow insists it will keep showing its existing estimates too.

Fon, the WiFi company backed by Google and Sequoia, releases subsidized router — For $5 you can get a router from Fon that lets you participate in a WiFi scheme where you can let other people hop on to your router for Internet access in return for the right to hop on to theirs when you need it. See the demo here by Fon chief executive Martin Varsavskky, or click on the image, and then push play.

Gore partners with Yahoo on Current TV – A couple of days after we mention Google has hired an “astroturf” lobby firm in Washington that poked fun of politician Al Gore, we find that Gore is suddenly partnering with Google’s competitor, Yahoo, on the Current TV project. This, even though Gore started the project in partnership with Google. The partnership will combine professional and user-generated video clips, and will be the first time Yahoo has included commercials with user-generated content.

The eBay dead-company listings phenom is picking up — We first mentioned the eBay trend here. Several others have since listed, including Madhens, a way for publishers to auction of ad space. Now, here’s San Francisco’s Crispads, which has been listed several days with a starting price of $90,000 but no bidders.

Who Is Jonathan Ive? He’s Apple’s design guru, and has notable advice — With all the go-go tech-happy Web 2.0ers rushing out features, Apple’s Ive has a tip you might be able to use. Here’s Business Weeks’ summary:

The man who, after Jobs, is most responsible for Apple’s amazing ability to dazzle and delight with its famous products, chose instead to talk about process — what he called “the craft of design.” He spoke passionately about his small team and how they work together. He talked about focusing on only what is important and limiting the number of projects. He spoke about having a deep understanding of how a product is made: its materials, its tooling, its purpose. Mostly, he focused on the need to care deeply about the work.

India getting more bubbly by the day – Back in July, we wrote about angel investor Ram Shriram’s view on India’s boom, and how valuations are rising. We remarked on the escalating value being assigned to a high-tech park in India. Well, the value has just doubled again, this time to $20 billion. The Indian state of Haryana is developing a research and education “Nano City,” modeled after Silicon Valley, and it was first billed to cost something like $2 billion. Then we saw some reports inflate this to an unqualified “$10 billion.” Now, apparently there is going to be $20 billion invested. Of course, when you read the reports carefully, there are different definitions being used for these numbers (costs, investments, and so on), but they all seem to refer to how much money is being invested in this area — and it keeps growing. And when you consider it is supposed to generate a fourfold return, that means we’re looking an $80 billion jackpot. It all started with Sabeer Bhatia, co-founder of the Hotmail e-mail service, who had planned to raise $550 million to start the project, modeled on Silicon Valley — without specifying a time frame.

Mr. Cheney picks the “right side” of Menlo Park — We were wondering why Vice President Dick Cheney was visiting with venture firm Sequoia. Turns out, he was raising money for the Republican Party at a reception at the big-name firm. The politics on Sand Hill road are delineated. The other big-name firm, Kleiner Perkins, which is just across the street, is led by John Doerr, and Democrat supporter and loud advocate for clean-tech. Even Vinod Khosla (still has offices at Kleiner, though has officially left the firm), an espouser of Republicanism in the past, is pushing an oil tax.

News site Topix sees growth improve by 24 percent over the past month — If you haven’t seen its time-line news feature, check it out. You can do a search of a term and see a line graph that shows how popular the term was in articles carried over the past year. So for “Hurricane Katrina,” for example, you can see where news spiked, click on that period and review events as they unfolded. It appears to have bolstered Topix’s growth.

Craigslist is rocking — About half of the growth in visits to online classified ads is going to San Francisco online classified site Craiglist, according to comScore Media Metrix. Craiglist is considered by many in Silicon Valley’s tech crowd to be clunky, a homely Web 1.0 site lacking the jazz of newer players, such as Oodle. But it is getting the job done. Web sites featuring classified ads drew 47 percent more unique visitors this July than the same month a year ago, while Craiglist’s visits about doubled, to 13.8 million unique visitors.

Intel’s new laser for chips could speed up communications 1000-fold — Intel’s new research has found a way to create a laser out of hybrid chip materials, and Dean Takahashi of the Merc has the details (registration required).

HP investigations deepen — Now we’re hearing that HP planted software on journalists’ computers, and the NYT is reporting that HP even considered planting moles within journalists’ offices.