Mascoma – revolutionizing the Ethanol market!

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Mascoma Corporation is a promising start-uptrying to become the first commercial developer of cellulosic ethanol. Atlas Venture joined the recent financingroundtogether with follow investors General Catalyst Partners, Kleiner Perkins Caufield & Byers, Vantage Point Venture Partners, and Pinnacle Ventures, as well as existinginvestors Khosla Ventures and Flagship Ventures.

Current ethanol demand today is around 4B gallons, estimated to grow to 9.0b in 2011 in the US alone. This demand is federally mandated and also being driven by (1) phasing out MBTE as oxygenate; (2) increasing gas prices; (3) increasing tax subsidies.

Today ethanol in the U.S. is made primarily from corn, a resource with multiple uses with limits to its long term capacity. If all the corn in the US was converted to ethanol it would lead to only 12% of fuel requirements. The economics of corn feedstock limit continued growth for continued corn based ethanol.

Ethanol made from cellulosic biomass (e.g. grass, wood, and various agricultural and forestry wastes) – seen by many experts as the holy grail in the Ethanol market – takes advantage of significantly lower raw material cost, more plentiful and varied feedstocks, and expands the potential for ethanol to blend with and displace gasoline with a cleaner, renewable, domestically-produced liquid fuel.

Jeff Fagnan, Partner in charge at Atlas Venture for the Mascoma investment, believes that: “Cellulosic ethanol is widely viewed as the future of ethanol given the cheaper and more abundant feedstock it uses. Mascoma, based on its novel approach and its strong, experienced management team, has great potential to become the leader in this fast growing, multi-billion dollar bio fuels market.”

Takeaway: After the photovoltaic / solar market boom, the ethanol / bio-diesel market could potentially be another market with rapid future growth and subsequent technical innovation, triggering further start-ups as well as investments from the venture community.

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