Wednesday, August 17, 2011

Most alternate fuel investments dip in 2010

By James M. Connolly

Investors placed $930 million into alternative fuel technologies in 2010 nationally, marking a four-year low, according to a report by Boston firm Lux Research.

While overall investments in fuel technologies was off, funding reached an all-time high of $698 million for companies with flexible technologies that can use a variety of feedstocks or generate diverse end products.

Lux noted that investors have grown more selective, providing larger amounts to fewer companies, and that those companies that are flexible in terms of the type of feedstock they utilize or the end product they deliver can provide secondary revenue streams and limit the impact of price volatility.

Lux analyst Andrew Soare cited the successful initial public offerings of Amyris Inc. and Solazyme Inc., both in California, and Gevo Inc. of Colorado, and the growth of companies such as Qteros Inc. of Marlborough and Mascoma Corp. of Lebanon, N.H., as evidence of the appeal of flexible technologies. “A handful of fuels-focused start-ups continue to draw investors, including waste-to-fuels companies Enerkem (Montreal) and LanzaTech (New Zealand), and cellulosic ethanol companies Qteros and Mascoma. But flexibility is part of their DNA as well, in that they derive fuels from multiple feedstocks,” said Soares in the report.

Lux also noted that synthetic biology’s inherent flexibility is a “wise investment”, and has attracted the most funding since 2004 at $1.84 billion, but the other flexible technologies also merit investment.

The reports also said that investments will favor fewer companies in later stage funding because most alternative fuel technologies today are past the point of initial seed funding, and are seeking capital to scale up manufacturing. Lux said it expects new corporate investors to enter the space, such as waste management companies.