Venture Capitalists Fuel Altra’s Ethanol Development Drive

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It has become clear that ethanol and biofuels are no longer the pie-in-the-sky pipe dreams of environmentalists.


Microsoft Inc. founder Bill Gates has come onboard with investments, President Bush has talked it up and even many conservatives are sold on it. Just ask R. James Woolsey, a Booz Allen Hamilton vice president and former CIA director, who uses solar power to run his small farm.


“We’ve got the tree-huggers, the do-gooders, the sod-busters, the cheap hawks, the evangelicals, and Willie Nelson (in favor of biofuels),” Woolsey says. “Now I probably ought to add the Silicon Valley entrepreneurs and the venture capitalists.”


He’s right about that. Altra Inc., the Los Angeles-based developer of renewable fuel projects, has just completed a second round of equity funding that raised more than $120 million.


In addition to Altra’s lead investors, Kleiner Perkins Caufield & Byers, Omninet Private Equity, Sage Capital Partners L.P., Angeleno Group LLC and Khosla Ventures, included in this round are several prominent private equity firms and financial investors including Duff Ackerman and Goodrich LLC and Advanced Equities Inc.


Altra completed its initial equity funding in April and has now raised or is completing the placement of more than $250 million in equity and debt financing.


Altra has been in the business of developing renewable biofuels since 2004. Instability in the Middle East and rapidly rising Asian demand for oil has fueled interest in alternative power in the United States, where the biofuel industry has been growing faster than 20 percent per year for the past 5 years. Altra is capitalizing on the mandate for renewable fuels provided by the sweeping energy bill passed by Congress in 2005.


Altra’s plan is to bring biofuel refineries online quickly. It has completed the acquisition of California’s only large-scale operating ethanol plant 30 million gallons per year up north in Goshen. Altra has begun development of a larger 60 million-gallon per year ethanol facility in Coshocton, Ohio, which will serve the East Coast and is expected to be completed next September.


Long limited to small volumes, ethanol could finally come into its own, thanks to cellulosic technology, which generates ethanol from agricultural waste like switchgrass, cornstalks and sugarcane. Cellulosic technology could make the fuel cheaper, more available, and more sustainable.


But true ethanol acceptance is still a long way from reality. So far, only a handful of pilot plants and one demonstration plant have been built. And then there are difficulties of growing and collecting cellulose crops, transporting the fuel (ethanol can’t be transported through existing oil pipelines), persuading gasoline stations to dedicate pumps to ethanol, and expanding the number of cars that can use ethanol fuels.


Still, it represents one hope of breaking the world’s 84-million-barrel-per-day oil habit.


On Demand Media


Altra wasn’t the only Los Angeles County tech firm that was seeing green in the third quarter. More than $795 million was distributed in 70 deals, according to online analyst socalTECH.


The totals were up from the same period last year, when there was an investment of $431 million in 52 deals, but down from the second quarter, when there was more than $1 billion in investments in 94 venture-related deals in the area.


Next to Altra, which raised $120 million in August for its renewable fuel projects, the major recipient was Santa Monica-based Demand Media, which buys domain names and Web content sites.


The company, which was started by former MySpace.com chairman Richard Rosenblatt, first raised $120 million to open its doors. Now, it has secured a second round of $100 million from 3i, Oak Investment Partners and Spectrum Equity Investors.


With its $220 million in place, the company just bought out eNom, a domain name registrar and Internet services provider. Demand Media’s business plan is unusual. The firm buys up or creates generic Web sites that have no staff generating content of their own.


Rather, they will exist simply in hope you will land there either by mistake, confusion or idle curiosity and to make money when you land there by having advertisers (provided by the likes of Yahoo Inc. and Google Inc.) pay for your click through to that site. The company now is busy buying up cheap ways to feed content into the sites, and hopes to rely on the public to produce stuff, too.


Droning Along


Monrovia-based Aerovironment Inc., which designs unmanned aircraft for the U.S. Defense Department, is looking to raise $115 million through an initial public offering.


In an SEC filing, Aerovironment, which is listed on the Nasdaq as AVAV, reported its revenues as $139 million in fiscal year 2006 with a net income of $11.4 million.


Founded by aerospace inventor Paul MacCready, the company is primarily involved in energy systems, electric vehicle systems and unmanned planes.


Goldman, Sachs & Co., Friedman Billings Ramsey, Raymond James Financial and Stifel Nicolaus are underwriting the IPO.


MySpace Mania


MySpace.com just keeps getting bigger and bigger or at least valued higher and higher.


RBC Capital media analyst Jordan Rohan said in a report tthat he foresaw the popular social networking site being worth $15 billion “within a few years.” Rohan justified his “audacious claim” citing MySpace’s “raw, unprecedented user/usage growth.”


Rohan was comparing it to the $1 billion (and higher) price tags that are currently hovering around rivals YouTube.com and Facebook.com, as well as the market capitalization of $120 billion for Google Inc. All this for a company that News Corp. bought for $580 million less than a year ago.



Staff reporter Dan Cox can be reached at

[email protected]

or at (323) 549-5225, ext. 230.

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