Cobalt Biofuels gets $25M

Mountain View, Calif.-based Cobalt Biofuels said today it raised $25 million to accelerate commercialization of its biobutanol.

The company had previously raised $10 million in two rounds of funding. The Series C round was led by LSP and Pinnacle Ventures. Also participating were previous investors VantagePoint Venture Partners, Malaysian Life Sciences Capital Fund and @Ventures, as well as new investor Harris and Harris. 

Cobalt is developing a biobutanol to be used in the biofuel and biochemical markets, CFO Steven Shevick told the Cleantech Group. Although the biofuel market is high profile, the industrial chemical market has the potential to be more lucrative, Shevick said.

"Butanol sells for a lot per gallon in that industry, more than it might sell for as a transportation fuel," Shevick said. "It's a good target for our first market."

Cobalt uses proprietary processes to engineer microbial strains to convert plant material to alcohol fuel. Cobalt says it uses several non-food feedstocks, including agricultural waste, energy crops, and byproducts of the food-processing and pulp-and-paper industries, Shevic said.

The company uses C-5 and C-6 sugars in its fermentation process, which allows it to use certain agricultural waste that other biobutanol companies can't, Shevick said.

Still, he said, the market opportunity is so large that many of the company's current competitors will have the opportunity to succeed, Shevick said.

Cobalt has proven its technology at the lab scale and expects to build a pilot plant, Shevick said. He declined to say how large the facility is planned to be but said Cobalt will strive to meet the guidelines of the U.S. Department of Energy, which has funded biofuel companies aiming to move from lab-scale production to a facility with an input of about 70 tons of feedstock a day. 

Biobutanol is used to make a number of polymers and plastics but can also be added to biodiesel, ethanol and gasoline for use in vehicles and planes (see Pratt & Whitney leads biofuels project for aircraft).

The potential has attracted industry leaders DuPont (NYSE:DD) and BP to spend $58 million to build a biobutanol demonstration facility and a 420-million liter ethanol facility about 360 kilometers (223 miles) north of London (see DuPont and BP building biobutanol facility in UK).

Biobutanol also has the potential to be distributed through the existing fuel supply infrastructure, to allow higher biofuel blends with gasoline and to improve fuel economy, according to the industry (see DuPont claims cellulosic energy efficiency code cracked).

In September, UK-based Green Biologics said it planned to raise £3.5 million ($6.33 million) to build a commercial-scale biobutanol plant in India by 2010 with Mumbai-based Laxmi Organic Industries (see UK firm plans biobutanol plant in India).

Cobalt has 25 employees. As a result of today's funding news, Fouad Azzam, general partner of LSP, plans to join Cobalt's board.

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