Oil Giant BP Backs Biofuel Startup Verdezyne

Verdezyne, an engineer of yeast that eats plant sugars and excretes biofuel and biochemicals, has just landed an undisclosed investment from British oil giant BP (s BP) and Dutch biochemicals company DSM. Mark the news down as another biotech-based startup teaming up with the industry incumbents to scale up their green fuels and bio-chemicals.

The undisclosed round will fund the Carlsbad, Calif.-based startup’s operations through the next two years, as well as help it build two pilot plants to churn out both ethanol and adipic acid, a precursor to nylon and other polymers, CEO William Radany said last week. Previous investors Monitor Ventures and OVP Venture Partners also took part in the new round.

As for projects and partnerships with BP and DSM, Radany wouldn’t get into too many specifics, but said Verdezyne was looking at “additional relationships” that could fit into both companies’ broader green fuels and chemicals efforts. “The companies’ technologies seem to be very complimentary,” he said.

A lot of biofuel and biochemical startups are inking partnerships with oil, chemical and consumer products giants, which have deep pockets and a broad distribution channel that can help bring these still expensive and hard-to-make products to market. Amyris (s AMRS) has a deal with Procter & Gamble (s pg) to produce chemicals for consumer products and is working with Brazil-based sugarcane ethanol and electricity company Paraiso Bioenergia. Codexis (s CDXS) is working with Shell (s RDS-A) and Brazilian ethanol giant Cosan (s czz) on a $12 billion sugarcane-to-biofuel project.

Other such partnerships include Exxon’s (s xom) $600 million partnership with Craig Venter’s Synthetic Genomics to genetically engineer algae for biofuel, as well as agricultural products giant Cargill’s partnership with Gevo (s GEVO), the Khosla Ventures-backed cellulosic ethanol company that went public in February.

Verdezyne was founded in 2005 as CODA Genomics, a University of California at Irvine spinout that used computational technology to design genes for the research world. Three years ago, the company hired Radany and shifted to the idea of making their own biofuel and biochemicals. The company has raised at least $15 million in a round it began in 2009, and raised a second undisclosed round in November.

Verdezyne has been able to design yeasts that eat both sugars such as glucose and ribose Radany said. Verdezyne has a deal with big yeast maker Lallemand to put Verdezyne’s ethanol-making yeasts into use in a pilot project expected to start later this year. This year will also see the start of another pilot project using yeasts that make adipic acid, which he said the company can do at costs lower than traditional methods using petroleum as a feedstock.

Verdezyne will still need help with breaking down cellulosic (and hemi-cellulosic) materials into the sugars it needs to eat to tackle converting grass, straw, sugar cane stalks and other such tough plant material into chemicals. Interestingly, one of BP’s other big moves into biofuels came in January with its $98 million purchase of Verenium, a startup that makes enzymes that break down cellulosic biomass into sugars — a technology that could be quite complimentary to what Verdezyne can do with sugar feedstocks.

Verdezyne isn’t the only startup with deep expertise in genetic engineering research to seek biofuel and biochemical markets. Genomatica, another startup that started out as a genetic engineering software and technology provider, just landed $45 million to develop microorganisms to convert sugar into chemicals like BDO, and is also working on bugs to turn syngas into chemicals.

Image courtesy of jurvetson via Creative Commons license.