VentureBeat

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.

VentureBeat talked last night with Roger McNamee (pictured left), asking him why his firm, Elevation Partners, would want to buy into Palm, a company that many people see having a tough time ahead, given intense competition.

Some doubt its chances of survival as a standalone company.

[See our initial coverage of Elevation's $325 million in investment into Palm. Also see the Mercury News coverage. The Elevation-Palm deal comes amid a wave of M&A activity -- see coverage here of Flextronics' acquisition of Solectron yesterday. Finally, the acquisition of Avaya, a computer networking company, for $8 billion by Silver Lake Partners and TPG, announced yesterday, is the latest in a trend of massive private equity buyouts.]

Here’s how McNamee explains the Palm deal. His starting thesis is that mobile is big and getting bigger — that technology is increasingly allowing people to take and get content wherever they want. Only about seven percent of cellphones are smart-phones today. Within some time frame, say ten years, all devices will be smart-phones, he said. And with only a few players with the know-how to offer a full platform — he counts three, Apple, RIM and Palm — this bet makes a lot of sense, he said.

Here’s more on why: A significant cycle of hardware innovation over the past year has made mobile devices smaller, but those devices are imperfect, he said. Each of them — the Q, the BlackJack, the Pearl and the Palm Treo — have had their own limitations. “It’s really hard to do more than one thing really well,” McNamee notes.

Because hardware has made so many advances, the accompanying software makes a significant difference. Apple succeeded with the iPod not merely because it gives you a hard drive to carry tunes around with you, but also because of its surrounding architecture, including The iTunes store and supporting software. People won’t buy music from a platform that doesn’t have all these parts, he said. The same success has been seen by the video-console players, where McNamee has looked closely: One vendor takes charge of the key components and makes them all work together.

So what are the characteristics of the players most likely to succeed in the smart-phone industry? McNamee lists them: They’ve got to be innovative, have software, have good systems engineers and be ready to take risks.

Who fits the bill? “At a minimum, RIM, Palm, and in three weeks, Apple,” says McNamee, “But not everyone.” Many software makers failed at making the transition to graphical mode interfaces on the PC; similarly, many phone companies won’t transition either, he said.

Because all phone will one day be smart-phones, “this is not a winner-takes-all situation,” he said. He believes Apple’s iPhone will be successful. Its base of some 100 million iPod users, mostly satisfied customers, gives Apple a huge start. RIM also continues to do well. And Palm, too, has got what it takes. Having recruited Jon Rubinstein, and benefiting from idea guy Jeff Hawkins, the company has a team of innovators that is difficult to replicate.

And thus begins the slow, steady grind by Palm to reassert itself.