Investing in the Biomass sector needs determinants for growth and succes. Some factors are: Stay small scale Keep it compatible with regulations and the supply chain.

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After the hype in biomass investments that started 6 years ago with the emergence of ethanol and biodiesel it is time to evaluate the factors of succes in this industry.

A while ago Amol Desphande wrote an article about “Investing in the Biomass Industry”, Since he is a partner of Kleiner Perkins I thought it would be interesting to share some of his conclusions with you on what factors are for CleanTech Growth when it comes down to the Biomass segment.

Key factors for CleanTech Growth in Biomass

To start with Amol questions the succes of investments in large scale refineries and plants, whether they are first or second generation fuels. According to him the attributes of successfull biomass technologies are:

  • Small scale and should be able to operate in a distributed manner
  • Should be compatible with the curent supply chain compatible (e.g., grid connection, pipeline access points)
  • Should use a feedstock that has an existing supply chain in place
  • Has a beneficial re-use
  • Free of harmful contaminants or odors
  • Uses available feedstocks of low value and that require minimal pretreatment
  • Costs less than $5 million to demonstrate at semi-commercial scale
  • Consumes minimal water and parasitic energy
  • Has one step for its primary energy conversion (i.e., one primary unit operation, like an anaerobic digester)
  • Takes less than six months to build a commercial plan from “shovel in ground”

Scale down, to scale up

In short, a technology should fit the current infrastructure and regulations on a almost plug-and-play style. Together with a strong focus on the downscaling of the biomass technology these characteristics make a rapid roll-out of the technology possible.  Next to learning opportunities, keeping the scale small limits the capital intensity of the venture and therefore risks for a venture capitalist. As a most venture capitalist, Amol notes that these factors may be important for selecting a technology to invest in. The most important aspect, however, remains the quality and integrity of the management team.

While practicing what they are preaching, Kleiner Perkins has invested in companies with technologies that have these characteristics, such as Amyris, Harvest, Mascoma, and Sundrop Fuels.





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