by David Schwartz
estled in the Phoenix, Arizona suburb of Gilbert—a quickly growing community aspiring to be a magnet for algae businesses—Heliae is beginning to emerge from the shroud of secrecy that has surrounded them since being launched by members of the Mars family in October 2008.
So what is Heliae emerging into? “Our goal is to be a world leader in algae technology solutions. Together with the Town of Gilbert and the State of Arizona, we have the capabilities, the vision and the resources to make our state the global epicenter of algae technology,” says Dan Simon, Heliae president and CEO.
Heliae, which just opened its 15,000-square-foot demonstration facility, with a two-acre outdoor cultivation area, already began design on the next scale up, a commercial production facility on 20 additional acres in Gilbert. Their long-range plan is to license their technology and develop, design and manage algae production facilities with partners around the globe. Short term plans call for building a couple small production facilities to demonstrate commercial viability.
Dan, who joined Heliae to take the reins from Frank Mars in August of 2010, has a history about as intriguing as that of Heliae, so it is not surprising they found each other in the world of algae.
Dan’s entrepreneurial background dates back to the age of 14, when he started a painting company in San Diego. Perhaps coincidentally, much of his youth was spent surfing near the Scripps’ Pier in La Jolla. After studying economics and finance at the University of Colorado, he continued his economics education in Japan, then after graduation spent two years chasing his passion for horses on the rodeo circuit and leading horse back expeditions as a licensed survival training and hunting guide. After two years in the back country, Dan landed a job as an engineer with an industrial wastewater treatment company.
He spent the next two years designing, installing and servicing industrial wastewater treatment systems for heavy industrial manufacturing facilities and power plants in California and Mexico. “I loved big equipment and learned the industrial world from the water system up,” he says. “Cleaning it when it comes in, cleaning it when it goes out, and taking care of entire water and energy systems—a wonderful way to learn what our weaknesses are in terms of sustainability.”
From that foundation he returned to Japan in an intrapreneurial position, starting an energy services business for NCH Corporation (a NYSE listed holding company) where he merged an engineering and chemical manufacturing business to offer complete water and energy management solutions to large industrial firms throughout Asia. After expanding the company to over 200 employees in 12 countries and moving from Tokyo to Kuala Lumpur, to Bangkok, and back to San Francisco, over a five-year period, Dan left the company to bring his family back to Steamboat Springs, Colorado.
At 29, Dan left NCH and accepted a position with TIC/Kiewit, with the goal of building an international power, refinery, and mining construction company from scratch. He started at the bottom, learning the skills of the various trades as he progressed up the ladder, building cement plants, mines, and various types of power plants.
Seeing the rapid growth in the renewable energy markets, he founded a renewable energy finance and development business as a subsidiary to his parent company. In 2005 he saw the coming boom in the ethanol industry and agreed to purchase the development company from the parent and moved the business into his barn at his ranch in Steamboat Springs. From there, Dan brought in a partner, defined their strategy, and began a capital raise effort to build one of the largest ethanol production companies in the world.
By 2006, they founded BioFuel Energy, LLC, brought in a group of financial partners including Cargill and a few investors from New York, and by 2006, had raised about $150 million in equity and over $230 million in debt to design, build and operate the two largest dry-mill ethanol plants ever developed in the U.S. By 2007, they took the company public, raised another $120 million, for expansion and completed the plants in June 2008. In July 2008, the commodity markets tanked and within a ten day period his company lost almost $50 million on corn contracts.
Most of 2009 was spent restructuring their debt, stabilizing the company’s cash position, and optimizing the ethanol plants. By 2010, the company’s operations were running well and the company had become the fifth largest pure play ethanol producer in the world, producing 230 million gallons of ethanol with over $455 million in revenue.
In June of 2010, Dan was ready to leave the company he had co-founded, knowing it was operating well and would continue to be a leader in the ethanol industry. Dan’s departure was driven by a recognition that the ethanol industry was not going to transition to cellulosic quick enough for his original vision of building a true bio-refinery.
Dan had seen corn ethanol production as only the first stage of the industry. But once the business got going and he saw the cellulosic technology slow to develop, his passion to drive renewable energy and sustainability turned his interests toward alternative technologies. “I realized it was time for me to get out and look for a technology that satisfied my passion for renewable energy and was ready for commercial expansion. After searching a number of sectors, the next generation of biofuel technologies offered the greatest potential,” he says.
So he started looking at projects in the cellulosic world including sugar models, switch grass, wood waste, seaweed, new natural gas technologies, and then began focusing on algae with a few venture capitalists in Silicon Valley. While that search was happening, he received a cold call on his cell phone from Frank Mars. “I didn’t know anything about Mars, Inc.” he says. “I knew their brands, but didn’t know the Mars Incorporated story. They asked me to come in and look at the business and give them my perspective. Once I looked at it carefully the potential became clear, and I was ecstatic when they asked me to come on board as the President and CEO to take the company to the next level.”
We met Dan at the recent ABS and spent some time talking about his “coming to algae” story, and how it ties in with the evolution of Heliae.
What attracted the Mars family to algae in the first place?
They recognized impending constraints for both food and fuel that are going to fall upon all of us within our lifetimes. They wanted to target a strategy, something that was going to both support investments of members of the Mars family, as well as be part of a bigger solution to how we were going to get to the next decade, and the next century.
They spent a while looking at various technologies and ended up focusing on algae, recognizing that it had the most potential because of its flexibility and benefits for both food and fuel. They started the company looking for the right climate and the best technology base, which is how they got to Arizona. There was a great public-private partnership potential there, as well as the technology and expertise from Arizona State University, the Science Foundation of Arizona and the University of Arizona. They invested with the Science Foundation of Arizona into Arizona State University’s algae technologies, which was called LARB, working with Dr. (Qaing) Hu and Dr. (Milton) Sommerfeld to develop algal strains specifically for jet fuel.
What was their incentive to develop jet fuel?
Dr. Hu had done enough analysis on the strains that he was working on through chemical mutagenesis that they could make C-15 and C-16 chain links of carbon, and that fit very well with jet fuel. In addition, members of the Mars family are also pilots, had been in the military, recognized the importance of oil independence, and so they thought if they were going to create a strategy out of this, it should be making jet fuel from algae in a sustainable manner.
In 2008, they started developing the strains and spent a full year improving the growth, adaptability, optimization of the strain and increasing lipids. Then in 2009, they decided to scale it up and make sure they could do it commercially. They built panel reactors and a pilot facility with dewatering and extraction right on the Arizona State University campus, working out of a 10- by 20-foot closet and 5 acres of open land.
They scaled up to about four acres of panel reactors and ponds and worked on increasing production as much as possible on site there until, by the end of 2009, they realized they needed to expand. So they built a headquarters building in Gilbert, Arizona and moved into it in October of 2010. That’s when I came on board, starting as a consultant in November.
We began looking at the strategy and realized that while we now knew enough about the strain and what it was going to take to process, there needed to be more value than just jet fuel. Jet fuel was ultimately going to be the minority portion of the biomass we were growing and, coming from the ethanol industry, I recognized that was not the way we were going to build a profitable business. So we started to build the demonstration facility to learn what mix of algae products offered the greatest return to shareholders.