Biofuels firm runs out of gas

Biofuels Capital Partners has abandoned its inaugural fund-raising effort after 18 months, according to a former partner at the firm. The San Francisco-based private equity firm was looking to bridge the gap between early stage cleantech venture capitalists and expansion stage project financiers in the biofuels market.

Firm founder Robert Johnsen told PE Week last year he had secured commitments for about half of the freshman fund, which he had targeted to raise $250 million, and he was planning to cap the vehicle at $300 million.

The firm closed a deal with an investment company in New York to help it raise the remainder of its fund, he says, although he would not disclose the company’s name. Johnsen could not be reached for comment last week.

Venture capital interest in biofuels has waned somewhat in 2008. VCs invested $223 million in 20 companies during the first three quarters of this year, down from $580 million that went into 24 companies during the same period in 2007, according to data from Thomson Reuters (publisher of PE Week).

But Biofuels’ trouble had less to do with the market than the time it took to round up investors.

“Bob just got tired,” Carlos Pineda, a former partner at the firm, says of Johnsen. “He gave it about a year to raise the fund and saw he would have to give it another year. He just decided he’s better at founding companies. You have to have a lot of economic staying power to raise a first-time fund.”

Johnsen is a repeat ethanol entrepreneur. After working with venture-backed Celunol Corp. as an investment banker, he joined as CFO and later became its CEO. The company developed technology to increase the fuel yield from the carbohydrates in biomass.

Celunol raised about $14 million in May 2006 from Braemer Energy Ventures, Charles River Ventures and Rho Ventures. The company sold to Diversa Corp., now called Verenium (Nasdaq: VRNM), in February for $154 million.

Johnsen also co-founded and ran Mascoma Corp. in 2005. The Cambridge, Mass.-based company, which is developing technologies for cellulosic ethanol refining, raised $39 million in three rounds in 2006 from Atlas Ventures, Flagship Ventures, General Catalyst Partners, Khosla Ventures, Kleiner Perkins Caufield & Byers, Pinnacle Ventures and VantagePoint Ventures.

Johnsen has landed on his feet. He is currently listed as president and CEO of Cambridge, Mass.-based Promethegen Corp., a company he co-founded to focus on metabolic engineering for better biofuels. The company has raised $300,000 of a $1 million offering of convertible promissory notes, according to regulatory filings. Some of that money was invested by Johnsen, but he’s also gained support from Gregory Stephanopoulos, a chemical engineering professor at the Massachusetts Institute of Technology who had been an advisor to Biofuels Capital Partners. Stephanopoulos is listed as chief scientific officer of Promethegen, which has a website under development.

The other partners of Biofuels Capital Partners have found work as well. Ralph Jefferson is working at Fontaine Clean Energy Partners, a private equity fund that will invest in clean energy and technology. Bob Barton is back to work at Catalyst Financial Group, which arranges financing for utilities. Pineda is the senior development officer for General Compression, a startup that is developing a wind turbine energy system.