The Goldilocks Challenge: Getting it 'just right' at Aurora Algae

“We renamed ourselves Aurora Algae,” said Aurora CEO Greg Bafalis, “but I would have changed it to Algae Inc, if I could have,” as he began to update us on the company’s progress. “What we determined last year was that it is really a high tech farming company.”

It’s been a big year over at Aurora. In February, the company also added Silicon Valley veteran Scott McDonald as CFO. By the time spring rolled around, Aurora had raised an additional $15 million in a funding round led by Oak Investment Partners, with the continued support of Gabriel Venture Partners and Noventi Ventures.  The Series B financing brought the total amount of money raised by the company to more than $50 million. In June, Bafalis came in as CEO, replacing Bob Walsh.

At the time, Oak Investment venture partner (and now Aurora chairman) Brian Hinman noted that “Aurora Biofuels has made a significant genetic engineering achievement in doubling the productivity of its proprietary algae, and this round of funding will allow the company to demonstrate the productivity and production processes at scale.”

By summer, the company had completed its name change, and announced that it was transitioning from a pilot technology development to full-scale commercialization of the Company’s proprietary algae products, including high concentration eicosapentaenoic acid (EPA Omega-3 fatty acids), high-density proteins, fish meal and biodiesel.

Aurora Biofuels pilot project in Vero Beach, FL

It’s key technology? An optimized strain of pale green, salt-water algae, lighter in color than wild-type algae, allowing deeper penetration of sunlight, thereby extending the zone for algae reproduction and increasing yield.  The company has also adapted a technique used in the waste-water industry for low-cost algal harvesting.

With that as background, we spent some time exploring Aurora’s opportunities with its new CEO, who formerly led biodiesel producer Green Earth Fuels.

BD: What attracted you to the company?

GB: At Green Earth i had looked at a lot of the alternative feedstocks, including a lot of algae companies. It always came down to me asking for some algal oil to test, even  as little as a gallon, and you’d always get a set of good answers and no algae. So I was a real algae skeptic.

But here at Aurora I found a company that was doing the right things, and was focused on proper science.

BD: Give us some examples.

GB: Well first of all, we were focused on location, and saltwater algae that would get out of all those questions about water consumption. Also, we had a pilot that has been running successfully for three years.

BD: Well, companies like Cyanotech, Martek and Earthrise have been doing that for years – what’s different here

GB: Those companies are all doing some good things. I think they are stuck with the wrong locations. Like Earthrise in the Salton sea, or Cyanotech in Hawaii, Those locations don’t give you the low cost, dry, consistently warm climate you need. Like we have found in the northwest in Australia. I mean, I wouldn’t like to be growing algae in New Mexico right now – what it is, about 25 degrees right now – nothing’s going to grow.

BD: Yet these companies that are out there of have been doing a lot of good business.

GB: Yes, Earthrise and Cyanotech are doing spirulina, and are kind of locked into it. But then someone figures out in China how to grow it more efficiently than you can, and you’re done. You have to always be the lowest cost producer.

BD: So, you’re pointing to a Goldilocks problem – getting it just right. If you aim at too narrow a market, such as very high-end nutraceuticals, you can get locked in to locations that don’t work for expansion. If you aim at the broad market, such as fuel-only, you may not be able to succeed on a cost-basis without going to a high-capital, massive operation?

GB: Goldilocks? That sounds just right, as we see it.

BD: Tell us about Western Australia.

GB: Well, we did a very through research, and we focused in on Australia because it had the right characteristics. Along the Northwest shelf we found an old algae farm, and there’s plenty of co2 from local natural gas production. Western Australia has just the right combination of light, heat, and dry weather. We are constructing now and expect to be finished in January.

BD: Dry? Others have emphasized looking for wet locations.

GB: Rain is bad because there are contaminants. We focused on salt water algae to avoid questions over water.

BD: What other geographies work for you?

GB: There are a number of places that have great sunlight, and dry weather at many of them. The key is a source of industrial CO2. We have some ideas, but are focused on Australia. We have tens of thousand of acres for expansion, far more than we need at present, and plenty of CO2.

BD: Tell us about your partnerships.

GB: No partners that have really done much with, though we have had a partnership in Florida that has helped us run our pilot there. We’re vertically integrated, and we have a growing and harvesting solution that works.

BD: The next phase?

GB: We have a 2012 start scheduled for our next phase in commercialization.

BD: Will you do your own biodiesel production, or are you going to be a supplier of oils to other producers?

GB: We’ll make our own.

BD: What about other products?

GB: We’re staying with fish meal, omega-3s and biodiesel for now, but we have other capabilities with our algae, and we’ll explore those down the line.