GreenFuel Technologies, one of the first companies to enter the algae biofuels business, is shutting down after running out of money.
Investor Duncan McIntyre of Polaris Venture Partners on Wednesday confirmed GreenFuel Technologies' demise, saying that the company is a "victim of the economy." The closing was reported by Greentech Media earlier on Wednesday.
McIntyre said investors, who have raised more than $70 million for GreenFuel Technologies since 2001, are exploring ways to sell the company's intellectual property and assets.
"The economy is a challenge to this industry so we are shutting our doors," he said. The company's CEO, Simon Upfill-Brown, had been seeking to raise money over the past several months. A company representative said the company doesn't intend to issue any statements on Wednesday.
The financial situation at GreenFuel Technologies had been degrading since last year, despite the fact that the company had landed a $92 million deal to sell algae-growing greenhouses to a cement maker in Spain.
In January of this year, the company laid off about half its staff, bringing the number of employees to 19. At the time, employees complained that the operation and finances were mismanaged.
Victim of credit crunch or poor execution?
GreenFuel's idea to use specially bred strains of algae to consume large amounts of carbon dioxide to make biodiesel captured the attention of many entrepreneurs and the media. But the company ran into trouble making the transition from pilot test to commercial product, referred to as the "Valley of Death" among investors.
Since 2001, GreenFuel Technologies has had a number of missteps.
Its first pilot project with Arizona Public Service tested ways to feed pollution from a power plant to algae growing in plastic bags. The company discovered that manually harvesting the algae made that process too expensive and had to create another product--a greenhouse for growing algae.
The company also replaced its original CEO with board member Bob Metcalfe, who ran the company until he found a replacement.
Although the biofuels industry as a whole is struggling right now, a number of companies have formed to turn the algae into biofuels, pharmaceutical products, or animal feed.
Algae is considered a promising feedstock for those products because it's rich in oil and can grow on marginal land. But no company has made algae at commercial scale that can be grown and harvested at a price competitive with petroleum-based products.