Bloom Energy piles on even more funding

Silicon Valley fuel cell startup Bloom Energy is looking to raise another $160 million in convertible notes, and has closed on $130 million of that round, according to a report in the Wall Street Journal’s Venture Capital Dispatch. The fourteen-year-old company has already raised $1.2 billion, and had been expected to have already held an IPO by now.

Fuel cells are large devices that take a fuel (usually natural gas or biogas) and oxygen and run these substances through a chemical reaction (using a catalyst and stacks of materials) to create electricity. It’s set up like a battery (with an anode, a cathode and an electrolyte) but it generates energy, instead of storing energy like a battery does.

Bloom Energy's fuel cells, image courtesy of Bloom Energy.

Bloom Energy’s fuel cells, image courtesy of Bloom Energy.

Companies and utilities can buy the fuel cells (or buy the power from the fuel cells) to run their services without connecting to the power grid. Using natural gas and biogas as a fuel they can also lower their carbon emissions footprint and meet internal sustainability goals, or state or federal mandates.

Bloom Energy has managed to sign up a considerably large amount of customers for a startup selling energy hardware, and they’ve been particularly successful in the Internet and telecom markets in California. Google, eBay, Apple, Adobe, AT&T and others have purchased Bloom Energy’s Bloom Boxes, or energy servers, as they call them. So have big corporations like Coca-Cola and Walmart. Bloom Energy has said that it has over 130 MW of its units installed in the U.S. as of August 2014.

BloomEnergy_dudestouching

But the issue has been that Bloom Energy has needed to lower the cost of making its fuel cells to become profitable, and that can only happen when it manufactures its tech at scale, which requires a lot of financing to do. They’ve also had to develop newer generations of the fuel cell where the stack (the piece where the core chemical reaction happens) lasts longer than early versions.

According to the article, Bloom’s convertible notes would convert to preferred stock in the event of an IPO of at least $25.76 per share. Investors were offered shares at $25.76 per share, at a valuation of $2.7 billion, starting back in 2011, said the report.

While the investors in this new round weren’t disclosed, previous investors in Bloom Energy include Kleiner Perkins, NEA, DAG Ventures, GSV Capital and Credit Suisse. Bloom Energy also closed an important financing deal with power company Exelon last year to finance the deployment of 21 MW worth of its fuel cells (over 100 individual fuel cell units).

Some critics have been skeptical of exactly how much Bloom Energy’s Bloom boxes can reduce carbon emissions compared to the power grid. Bloom has also aggressively taken advantage of state subsidy programs to operate.

New Zealand fund invests $60M into biofuel startup LanzaTech

The New Zealand government’s $27 billion fund set up to cover future pension payments has invested $60 million into startup LanzaTech, which uses microbes to turn industrial waste gas into biofuels and chemicals. LanzaTech was founded in 2005 in New Zealand, but now has headquarters in the U.S. in Illinois, and plans to have its first commercial plant in operation in 2016.

The $60 million from The New Zealand Superannuation Fund is an extension of the Series D round that was announced earlier this year (and we covered here), bringing the Series D round to $112.6 million. In total LanzaTech has raised $160 million to date. The New Zealand fund has also backed other later stage energy startups like fuel cell maker Bloom Energy, and says it has a return of 9.9 percent.

LanzaTech demo plant at BaoSteel Steel Mill.

LanzaTech demo plant at BaoSteel Steel Mill.

Other investors in LanzaTech include Khosla Ventures, Mitsui, Siemens, CICC Growth Capital Fund I, Qiming Venture Partners, K1W1 and the Malaysian Life Sciences Capital Fund. Khosla Ventures, which funded the company early on and has a large portfolio of biofuel and biochemical startups, is LanzaTech’s largest shareholder.

LanzaTech’s secret sauce is that it’s developed genetically modified microbes that eat waste gases — like carbon monoxide and carbon dioxide — that are produced in industrial processes, like steel manufacturing and oil refining. The microbes digest the gases and can produce various biofuels, like ethanol, or biochemicals, which can then be sold or used.

LanzaTech demo plant with WBT in Taiwan.

LanzaTech demo plant with WBT in Taiwan.

LanzaTech has been working with Chinese steel manufacturers Baosteel and Capital Steel and Chinese coal producer Yankuang Group to commercialize its technology. In China, LanzaTech’s partners have been willing to fund these initial plants, which has helped keep Lanzatech’s capital costs relatively low.

If the technology works as advertised at scale, the company’s technology could be a powerful tool to help clean up toxic gases that are spewed out at power plants and factories. The byproducts of the cleaning is the renewable fuels and chemicals, which can help cover the costs of installing the LanzaTech technology.

Report: Bloom Energy raises another $130M

The Valley’s fuel cell startup Bloom Energy has now raised over $1.1 billion, according to a report. While Bloom has gotten strong traction, particularly with data center operators, fuel cell manufacturing is difficult and capital intensive business.