The Blackstone Group has quietly led a $40 million Series C round for Coskata Inc., a Warrenville, Ill.-based developer of technologies for processing biorefuse into ethanol. The investment came out of Blackstone’s inaugural Cleantech Venture Partners fund, which is in the process of being raised. Jamie Kiggen, a Blackstone senior managing director, will join the Coskata board.
Other return backers include Advanced Technology Ventures, Globespan Capital Partners, GreatPoint Ventures and Khosla Ventures. The company also counts General Motors as a strategic equity partner from its Series B round, but the troubled automaker did not participate this time around. To date, Coskata has raised over $76 million.
Blackstone is one of many firms raising new funds to help industrial cleantech companies (biofuels, electric vehicles, etc.) bridge the gap between traditional venture capital and project finance. Others include CMEA Ventures, Kleiner Perkins and C Change Capital.
“This money isn’t a substitute for project finance,” says a source close to Coskata. “But it does allow the company to improve scalability while we wait for the project finance market to return.”
Specifically, Coskata will use most of its Series C funding to complete a demonstration facility that is near completion in Western Pennsylvania. It also has commissioned design work for its first actual plant, which would be financed via a combination of strategic partnership and low-interest guaranteed government grants. A Series D round is also expected, but no specifics have been mapped out.
“We’ve maintained from the outset that our primary business model would be technology development and technology licensing,” says Coskata CEO Bill Roe. “At the same time, it’s important to get that first 100 million gallon plant up and running… in order to show how everything really works at scale. But we’d mostly do the financing on someone else’s balance sheet.”
Coskata believes that its technology has a capital ticket of $4 per gallon of installed capacity, which means its 100 million gallon facility would run around $400 million. Its 40,000 demo plant only costs $160,000.
Roe declined to comment on Blackstone’s participation, or that of any other specific investor outside of GM.