Virdia Moves Into Mississippi To Turn Wood Chips Into Sugars

Sugar can be a sweet investment.

We are not talking the stuff that coats donuts but compounds that get fermented into car fuels, nutritional additives or even plastic. The rise of the biofuel industry has boosted research in sugar production and in particular the processes of converting plants into fermentable sugars.

A California startup called Virdia said Tuesday it’s getting ready to jump into the market after raising a new round of venture capital and lining up an incentive package from Mississippi.

Virdia recently raised roughly $20 million in equity from investors such as Khosla Ventures and Burrill & Co. and $10 million in debt from Triple Point Capital to make that important leap into commercial production. Virdia also has snagged a package of $75 million in loans and up to $155 million in tax breaks over 10 years from Mississippi to build sugar processing plants.

The company, which has raised $35 million in equity since its inception, plans to start building its first plant later this year and expects to spend two years completing the project and getting the plant up and running, said Philippe Lavielle,Virdia’s CEO. The first plant will have the capacity to produce 150,000 tons of sugars per year, he added. The company will need to raise more capital to build the plant; Lavielle declined to disclose the total cost. It plans to eventually build a plant that can produce 500,000 tons of sugars per year.

Sugar is a key ingredient for biofuels and other chemical products, and its production has attracted venture capital in recent years as more companies work on turning sugars into biofuels to run cars and trucks. Instead of using corn and drawing criticism for taking food away from people and livestock, a slew of biofuel developers have been working on ways to convert non-food plants, from fast-growing switchgrass and agricultural wastes, into sugars and then fuels.

Breaking down the tough cell walls of plants and converting as much cellulosic materials into sugars as possible – and doing it in large volumes and cheaply – aren’t easy. Turning sugar into fuel presents a host of other technical difficulties. Solving both sets of challenges requires a lot of money, and it can lead to delays in launching products and making money. As a result, companies have emerged in the last several years to make only sugars or to sell both sugars and fuels.

There were hardly any companies that focused only on making cellulosic sugars back in 2008, and that presented a good opportunity for entrepreneurs and investors, an investment banker told me then. Aside from Virdia, companies that work in this field also include Pennsylvania-based Renmatix, which is backed by venture capital firm Kleiner Perkins, Comet Biorefining in Canada and BlueFire Renewables in California.

Virdia was founded in 2007 to focus on cellulosic sugar production and was initially based in Israel. It was called HCL CleanTech until recently because the name isn’t a marketing-friendly moniker, Lavielle said. HCL is a nod to the hydrochloric acid that the company uses to make sugars.

The company’s process can convert 95% to 97% percent of the sugar content of a plant into compounds it could sell, said Lavielle, who declined to divulge production costs. Virdia, which has been running a pilot plant in Virginia to fine-tune its sugar conversion process, plans to use wood chips from timber plantations as the feedstock. The company won a $9 million federal grant last year to improve its technology and plans to work on the project with LS9, which will use the sugars from Virdia to make fuels and other products.

Although Virdia is targeting the fuel, food and industrial chemical markets, some of the best opportunities for now lie in the food business, where a big demand already exists, Lavielle said. The company also plans to target corn ethanol producers who want a substitute for corn sugar. The company isn’t willing to discuss who its customers are yet.

“They are paying high prices for corn and needing to transport corn. I can see a number of ethanol plants using our sugars,” Lavielle said.

source: forbes