Ohio Venture - OVA Review Newsletter
News from the Ohio Venture Association meeting on March 9, 2012

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Keynote Address:

Dr. J. Kevin Berner
Chairman and CEO
Phycal, Inc.

In the unending search for low-cost renewable energy alternatives to hydrocarbons and fossil fuels, biomass remains among the most promising alternatives. And because of its legacy, however brief and long ago it might have been, as the world headquarters of the oil industry during the late 19th century, Northeast Ohio offers some ready advantages in building these sorts of companies.

"Cleveland's a pretty good place to build this kind of company," Dr. Berner told OVA members at their monthly lunch in March. One of the residual effects of John D. Rockefeller's oil empire is that there is still a strong base of chemical engineering knowledge here. "You can get great talent here for reasonable prices. Your dollars go a long way."

Dr. Berner, an MIT-educated economist, engineer and the former head of McKinsey & Co.'s North American manufacturing practice, is putting that notion to the test these days as he builds Cleveland-based Phycal. The company is producing advanced bio fuels, including ethanol, by manipulating and harvesting cassava (a sugar substitute) and various forms of algae. The U.S. Department of Energy recently awarded the company a $50-million research grant, much of which is being used to build two alternative energy plants and related farms in Hawaii.

"What we intend to do is build two 50-million-gallon-a-year ethanol plants in the state of Hawaii. Each of those will require about a 30,000-acre farm. We just had our first peek at what this looks like in Hawaii, and these are very good results. (We got) 1,500 gallons of ethanol per acre per year...this is a very big number. There are companies that are very interested in this."

When the price of sugar got too high, Phycal came up with cassava plants as a higher-starch, lower-cost alternative. Growing cassava requires less nutrients (including nitrogen and water) than competitive crops, he said. It also has lower technology risk, lower capital costs and requires lower carbon input than competitors, such as Brazilian sugar cane. He conceded that at present, this fuel is less cost-efficient than natural gas. On the other hand, Phycal's ethanol plant is a platform that can also produce such products as jet fuel.

"The amount of innovation that is going on in the world in biofuels is staggering," Dr. Berner said. But unless you're a company the size of a major oil firm, you won't command all the technologies it will take to harness all the components of this value chain. So the company is talking to many potential partners, and remains open to possible purchase offers.

"When we get this thing up and running, it will be the second-largest algae farm on the planet," he said. "We are aggregating land in Hawaii. I spend about one week a month there. This is a capital-intensive business, which means venture capital is a very expensive way to fund this...in our case, what we'd done is go out and find funders that are a little bit more patient sources of capital, because new energy technologies take a long time. If you were to find a brand new source of energy today, and you said, go, it would take you about 10 years to bring it into production."

More information:

Webcast from the Meeting:

Click on the image below to view the entire presentation as video.

Video Webcast from Recent Meeting
Webcasts produced by Tom Kondilas.

OVA's New Video Archive is Online:

OVA is pleased to have recently added an archive of program videos to its website. You'll find the full video record of most OVA formal programs since 2008 at www.ohioventure.org/video-archive.html.

Upcoming Meeting Dates:

  • May 11, 2012
    Panel Discussion
    Featuring a Company Showcase

See complete details and registration for these events.
 

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The Oho Capital Fund

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Early Stage Partners

Edison Ventures

Draper Triangle Ventures

Fir Hill, LLC

Ciuni & Panichi

Copy by John Ettorre
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