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PetroAlgae still sees green in pond scum

Even with the demise of an algae biofuel pioneer this week, PetroAlgae and others are sticking with it because they believe in algae's advantages over other feedstocks.

The demise of algae biofuels start-up GreenFuel Technologies sent a chill down the spine of many fellow entrepreneurs and investors this week, but the chairman of PetroAlgae will have none of it.

John Scott, who heads the board of the Florida-based algae fuel company, sent a letter on Thursday to PetroAlgae shareholders (click for PDF), saying that the public company now has a market capitalization of $835 million and has signed on a customer. GTB Power will use PetroAlgae's algae-growing equipment at 10 facilities in China and Taiwan, and PetroAlgae expects to sign other licensing deals this year.

Like many algae advocates, Scott argues that algae is more promising than soy or corn because it can grow in different environments and can yield products other than fuel. He predicts that PetroAlgae will be the first company to commercially produce algae biofuel.

The corporate update follows the disclosure on Wednesday that GreenFuel, a pioneer in algae technologies, had run out of money and was seeking to sell its assets. It's estimated that there are now more than 50 algae biofuel companies, many of which were started in the past three years

PetroAlgae's algae-growing test facility in Florida. PetroAlgae

GreenFuel's demise has some people nervously asking what it might mean for other businesses in green tech, which often require a lot of capital to scale.

Investor Rob Day predicts that there is "a lot of bad news yet to be seen in cleantech venture capital." Many start-up companies raised a lot of money at high valuations but are having trouble getting follow-up financing because of the economic downturn, he said.

GreenFuel investor Duncan McIntyre of Polaris Ventures Partners called the company a "victim of the economy."

Others suggest that management missteps may have more to do with GreenFuel's problems than the economic downturn.

"GreenFuels' demise (is) a cautionary tale for cleantech companies who put hype over business fundamentals," Willie Brent, senior vice president in public relations firm Weber Shandwick's clean-tech unit, declared on Twitter.

A few other algae companies took the opportunity this week to tell me that developing technology and building facilities--in this case, algae farms--is not necessarily the best route to commercial success.

Some companies, such as Texas Clean Fuels, intend to sell equipment. And engineering company CH2M Hill is looking at growing algae in conjunction with wastewater treatment, which a company technologist calls a more "practical" approach to growing algae-based biofuel.