Out of the laboratory, into the marketplace

It has been a wild ride for biofuels-focused Solix BioSystems Inc. But since bubbling up from the Engines and Energy Conversion Laboratory at Colorado State University, Solix has kept moving forward despite the gyrations of the biofuels industry.

Solix started out with two basic product lines: It designed systems called photobioreactors — large pools, in a sense — for growing algae on an industrial scale, and it produced an algae-based biomass that can be converted into a wide range of biofuels for vehicles and airplanes.

As promising as that sounds, it’s not easy to build a profitable business around either or both of these products, yet. And so Solix nowadays is marketing its biomass more aggressively, seeking customers for higher grade products than biofuels. Because its biomass is rich in protein and carbohydrates, it has the potential as a source for various food ingredients or as an animal feed or for aquaculture.

Think nutraceuticals, such as Omega-3, pharmaceuticals and specialty chemicals.

Algae are photosynthetic organisms that have been on Earth for millions of years.

Solix traces its founding to EECL director Bryan Willson. It is one of two companies — the other being EnviroFit International — launched by Willson and his team that have made it out of the lab.

The company is now moving off the CSU campus and into new digs on Vine Drive in Fort Collins.

Like EnviroFit, which has shifted its save-the-planet emphasis without abandoning it, Solix has survived partly by keeping its options open.

When it was launched in 2006, biofuels appeared to be close to moving from a “craft” fuel status to a true alternative to petroleum-based energy. World events conspired against the nascent industry, however, with funding presenting an obstacle to startups in the field amid falling natural gas prices.

Still, Solix in large part has stuck to its initial business plan, said chief operating office Richard Schoonover: “Focus on the development of systems for the liquid fuels market,” and to be a vendor of the end products.

But, he said, it couldn’t stop there.

“Bridging the gap between pilot-scale facilities and the first commercial plant capable of producing enough product to enter the transportation fuels market, in any meaningful fashion, is difficult at best because of the magnitude of capital required,” Schoonover said.

So Solix shifted its emphasis, because, after all, a revenue stream is a revenue stream for a startup. Solix now believes it can sell both its technology for large-scale producers (as they come along) as well as the biomass fuel it produces, along with its new natural byproducts line.

The early biofuels players who stuck to one niche have mostly gone away. The survivors have been agile, adaptable, opportunistic — and well-funded. Solix has raised $66 million in six years, and closed its C round in August, a $31 million shot in the arm that will help it move into the byproduct realm. As noted by Schoonover, the market for its patented algae-to-fuel technology has been slow to develop, but the demand for biofuel products remains constant.

These byproducts have higher profit margins than basic biofuels and have shown promise.

When Solix emerged from the EECL, the biofuels industry was gathering momentum, albeit with a wavering direction, and commercial markets were emerging for its products. It recruited Joel Butler from his Silicon Valley career base in 2009 as vice president for research and development, to bring his commercialization and marketing experience to bear on Solix’s products. With an earlier, $16 million B-round of funding at his disposal, Butler had intended to market the company’s algae-growing systems hard. But buyers were harder to find. That’s why, again, Solix shifted focus to the algae-based products themselves.

It’s tough to make a living selling low-end biofuel on a large scale, given the production costs involved in making the stuff from algae. But higher-end products reward the vendor with higher margins, and Solix was discovering that its production system was capable of delivering the craft biofuel products along with the low-end type.

When it sought new cash last summer, the pitch was simple: Invest in us, and we’ll serve the complete range of customers for biofuel products.

The investment firm 12BF Global Ventures waxed enthusiastically about its stake in the “new” Solix.

“We are thrilled to be part of Solix’s transition,” David Waserstein, director of investments at I2BF and a board member at Solix, said. “The biofuels sector will reward those than can both achieve scale and serve multiple markets with their products.”

Energy experts have been predicting the busting out of biofuels for years, and it does appear that many of the primary requirements for its scalability — large-scale R&D, startup funding, industry critical mass, crucial cost triggers of petroleum-based fuels, concern about global warming — may now be in biofuels’ favor.

Whether they truly are remains to be seen.

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