the co-founder of Wind River Systems, a software company started in his Berkeley, CA garage in 1981 that went on to generate more than $400 million in annual sales and eventually get acquired by Intel (NASDAQ: [[ticker:INTC]]).
By 2003, Fiddler had gotten interested in biology, and was taking classes at UC Berkeley. He listened to the young entrepreneurs that had an idea of algae for biofuel. And he provided some critical seed capital in the beginning, parceled out more money to Solazyme as it hit its early milestones, and has invested in every round since, Wolfson says.
By 2004, the company faced a serious identity crisis, which could have been the end. Solazyme’s original idea—like most algae biofuel companies today—was to use the natural power of the sun and plant photosynthesis to enable algae to grow and pump out its precious oil. This could be done in large open ponds, or inside stainless steel vats with lights inside to grow the algae in a more controlled environment. Both of those ideas, were in minds of Solazyme’s founders, “completely wrong.”
Essentially, they didn’t like using open ponds because they didn’t think such a process could be done cost-effectively at large scale. There were too many variables in the environment that would wreck the efficiency of a system, like competing algae species, bad weather, and the fact that algae create “shade” at the surface of water that doesn’t allow sunlight to reach more than a few centimeters below the surface of water. A controlled bioreactor could solve some of those problems, but it was too expensive, required a lot of electricity to power the lights, and couldn’t be done at scale.
Instead of focusing on algae’s ability to capture sunlight, which wasn’t great, Solazyme focused instead on its second property—its ability to convert simple sugars into oils. This was a property that had evolved throughout millennia, as algae found ways to store fat it could survive on for weeks even if trapped under a rock with little to no light. Molecular biology had shown that algae had the most exquisite pathways for converting sugar to fats and oils, and storing it. So Solazyme ripped up its business plan, and said it would ditch the idea of algae through photosynthesis. It would find feedstock from higher-order plants, like sugarcane or switchgrass, which had evolved a biological structure that was more efficient at capturing sunlight. And it would essentially feed that source of sugar into industrial fermentation vats filled with algae, which would then convert the sugar into oil. It would all be done inside a controlled industrial environment that already existed, to make antibiotics, industrial chemicals, or anything else made in fermenters. It didn’t require expensive lights to drive photosynthesis. And Solazyme wouldn’t have to spend huge amounts of capital building new facilities—it could lease existing facilities that were often cheap and underutilized. And once it made the oil, it would be compatible with all the existing infrastructure for distribution, refining, and retailing that Big Oil companies have been building up for decades.
“This business is about cost, volume, cost, volume, cost, volume,” Wolfson says. “It’s not that complicated. You are competing with petroleum.”
This change of heart in the business plan, as you might imagine, led to a delicate conversation with the board of directors.
“I went to the board and said, ‘I know we told you we could do this, but I don’t think we can,'” Wolfson says. The original technology idea was misguided, and would take too long to come to fruition. The alternative was this second idea, which might work, but was completely unproven.
This is where the entrepreneurial spirit of a place like the Bay Area took over. “There was not that much money invested in the company at the time. The board had entrepreneurs and risk-takers. It was still a seed round. They said ‘go for it,'” Wolfson says. “They could have made our lives difficult, but they were supportive.”
Fast forward to the present. Solazyme has stuck with
