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While biofuels sputter, green chemicals attract cash

Biotech company Genomatica raises $15 million in venture funding to test the process of making industrial chemicals from sugar water.

After betting big on biofuels with little success, investors appear to be switching gears to focus more on making chemicals from plants.

Chemical company Genomatica on Thursday said that it has raised $15 million in series C financing, which was led by TPG Biotch, a venture capital arm of private equity company Texas Pacific Group. With the money, Genomatica plans to start building a demonstration facility later this year to produce the industrial chemical 1,4-butanediol, or BDO, from sugar and to expand its product line.

Working with bacteria to make chemicals. Genomatica

Genomatica is one of several biotechnology companies using genetically modified organisms to make fuels or chemicals from plants. In biofuels, few companies have been able to produce fuels from non-food feedstocks at large scale because of technical challenges or difficulty raising money from risk-averse bankers.

Chemical companies face similar challenges, but they typically can charge more for their products, said Christophe Schilling, the CEO of Genomatica. "Fuels represent a significantly larger market in terms of volume, but it does have the challenge of delivering at costs at points competitive with fossil fuels," he said. A pound of BDO, for example, costs several times more than a pound of ethanol.

Genomatica has developed a strain of the e.coli bacteria to convert sugar water, either from sugar cane or sugar beets, into BDO. Schilling said the company projects it can undercut the cost of BDO made from oil or natural gas on price alone.

The demonstration facility, which Schilling expects to be completed next year, will be used to test with partners the quality of BDO for making products, such as spandex fibers or plastics used in cars.

Another biotech company, Codexis, plans to produce both liquid fuels and chemicals through its process. It's one of a handful of green start-ups which plan to go public. Two other companies targeting the market for plant-derived chemicals, Segetis and Rennovia, recently raised money from venture capital companies.