Raising Money for the New Biofuels: A Digest Special Report
by Jim Lane (Biofuels Digest) …We say that biofuels are “capital-intensive,” mainly to be polite. It’s like saying that Genghis Khan, Alexander the Great or Attila the Hun had “land interests”.
…Put it this way. How much capital would you need to build enough capacity to equal just 30 percent of the current demand for fossil petroleum, and it cost you $8 per gallon for the capacity?
Um, $3.2 trillion. That would be roughly halfway between the GDP of France, and Germany. Even if 30% of that is equity, that’s more than $1 trillion.
Enough to make even a really tough $20 million Series C venture round look like – well, grains of sand on a wide, wide beach.
In today’s Digest we look at some of the the hottest ways to raise money.
…The lowest-cost capital you will ever find is the kind from Washington, DC, in the form of R&D grants. These days, anything that has a really meaningful number is going to require a co-investment on your part, but that can often take the form of existing assets or operating costs that you can dedicate to a new project (e.g. salaries for research teams). It’s called “cost share,” and the government likes to tout how much private capital is “leveraged by our investment in R&D”. …Don’t forget that the CIA has a venture capital arm…
…In these post-Solyndra times, there’s not much on offer at DOE, but the US Department of Agriculture still has substantial loan guarantee authority through its B&I program.
The available amounts may be smaller – if you are looking for $100 million in LGs, that window has passed for now – and the restrictions may feel arcane.
…Yes, Virginia, the US government, under the Defense Production Act, can invest directly in defense-critical industries – and advanced drop-in biofuels qualify – if the President finds that either needed materials are either unavailable or available at unaffordable costs because manufacturing has not reached economies of scale.
…Whether you are raising capital for a seed round, Series A or Series E – venture capital, though harder than ever to find, is an incredible source of early-stage finance, as well as providing an incredible set of advisors who can connect a venture with strategic partners, downstream customers, upstream feedstock providers, as well as help navigate the financial path from formation to exit.
…Larger amounts, and later rounds, require unusual vehicles that have access to a big pool of managed funds. That’s where hybrid, multi-class firms have been emerging – these firms make venture investments, but also invest in ways that are more reminiscent of private equity or public equity, and can provide not only seed and early-stage investment, but can boost in the later stages.
…Strategics? They giveth and, in some cases, they taketh away. Aside from the large balance sheets from which their funds flow, they can provide crucial access to feedstock, and crucial credibility through brand association.
…Ah, yes, the deep deep pool of capital available through the institutions – mutuals, pension funds, insurance companies, sovereign funds and so on. Generally they focus on public equities – so they’re available only post-IPO, but the pool of capital is immense.
…There’s capital aplenty. It’s tough to find. Best to be well armed with a great story – but most importantly, great partners. READ MORE