LS9 raises $30M, adds BlackRock – what does it mean?

December 21, 2010 |

LS9's demonstration facility in Okeechobee, Florida

Yesterday, the news began tweeting around the internet that LS9 had raised $30 million in series D financing, and that the BlackRock investment group had led the investment round.

LS9, which was earlier this month ranked #4 in the 50 Hottest Companies in Bioenergy, up from #25 in 2008 and #8 last year, confirmed the news last night.

Well, what does that mean?

1. Long time raising. This was a tough round in a tough year, taking nearly a year to complete, but in the end all the existing investors participated — Flagship Ventures, Khosla Ventures, Lightspeed Venture Partners and CTTV Investments, the venture capital arm of Chevron Technology Ventures, and the company added one more investor to the group.

2. LS9’s take. “Our existing investors all returned,” noted CEO Ed Dineen, “and we added a marquee lead investor in BlackRock. It’s a shot in the arm for the team, but what it means is that we can execute on an expanded vision and strategy, allows us to add another dimension. We’ll continue with our key fuel development, and our P&G partnership, and we’ll be moving forward on the Florida demonstration project, but we’ll also be getting in and getting established in brazil, and strengthening our commercial team both here, and there.

3. BlackRock. For those less familiar with BlackRock, its a global investment firm with over $3 trillion in assets under management. The firm has not been deeply exposed to biofuels, primarily to date known for its one-time13 percent holding in troubled jatropha pioneer D1 Oils. But BlackRock, whose shares are trading at $188 after going public in 1999 at $14 per share, has been showing increased interest in cleantech, natural resources and the agricultural sector. It recently upped its holdings in wind developer Vestas to over the five percent reporting threshold, and formed the BGF World Agriculture Fund in July 2010 with $44 million. Overall, the firm’s Natural Resources Team manages $33 billion in investments in agriculture, energy, metals and mining.

4. Valuations. The valuation in this round is reportedly $190 million, according to Digest sources, which we understand is in line with the valuation for the Series C round.

Let’s look at the funding rounds to date.

Series A, 3/07, raised $5 million from Khosla and Flagship.
Series B, 10/07, raised $15M and added Lightspeed to the investor base and board.
Series C, 10/09, raised $25M and added Chevron Technology Ventures’ venture capital arm, CTTV Investments.
Series D, 12/10, raised $30M and added Blackstone.

5. Let’s compare this to Amyris. Right now, the firm has 43 million shares outstanding with a valuation of $1.01 billion. In March, just prior to filing its IPO, it closed a Series C round of $47.8 million at $17.56 per share, which we estimate gave the company a valuation in the range of $521 million at the time. Conclusion, there’s a big discount on LS9 compared to Amyris. Hence, we believe, the increased emphasis on chemicals and a major focus on Brazil, with the entry of new CEO Ed Dineen.

6. The scope of LS9’s Brazilian activities. “We don’t see ourselves having only one partnership in Brazil,” commented Dineen, “its more likely a multiple set of partnerships. One, for example, could be purely around sugar supply, and we do the processing into chemicals and fuels. One might be a partnership along the whole chain of chemicals and fuels, where we proceed jointly. At this stage, we’re not locking into any one particular direction.

7. On Brazil. “Over the last couple of years,” added Dineen, “progress has accelerated in Brazil, where you see critical mass building up as it has done in other developing countries. remember, there was a tipping point in China, too. AT one point, ibvestors were asked, how much product can you take in exports, as well as how much money can you bring in. Today in China they are now looking at a lot domestic demand.”

8. Timelines. “Our near term focus is on Brazil,” Dineen commented. “I can easily envision in 2011 some exploratory discussions in Asia. Directionally the chemical space is global, while fuels are likely to be more regional.”

9. More reading material on partnerships and alliances. In October we noted that a new class of alliances, partnerships, JVs and investments is emerging. We placed LS9 broadly within one of what we called “promise rings,”  for their variety of commitments and promises as well as the promise inherent in the technologies. In many cases the relationships are voluntary, or temporal – in some, hardened into board seats, investments and JVs. Ring #4 consisted of Chevron – Solazyme – NREL – UOP – Sustainable Oils – Targeted Growth – LS9 – P&G – Unilever – Bunge – Boeing – Masdar.

10. More on Brazil. In “The lands of sun and rain: biofuels turns to Brazil for sugar, markets, models,” we noted that “Many eyes, if not most, have turned towards Brazil, among the leading lands of sun and rain. Between its available acreage, its sophisticated systems for growing and processing sugar cane, and its vibrant domestic market for biofuels, its a tempting target indeed. High-tech companies such as Amyris, Solazyme, LS9, KL Energy, and many others have been moving aggressively to establish partnerships that will allow them to access Brazil’s low-cost, at-scale sugars.”

11. More on LS9. In “LS9’s magic bug,” we looked at new genes enabling one-step conversion of sugar to diesel. This July report focused on the first description of the genes responsible for alkane biosynthesis and the first example of a single step conversion of sugar to fuel‐grade alkanes by an engineered microorganism.”

Also, check out our interview with LS9’s CEO Ed Dineen earlier this month when we looked at timelines, directions, and priorities for LS9’s drive towards commercialization.

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