SM: How did you finance your initial ad campaign to allow you to obtain $2 million in sales?
GK: I have some friends in the venture capital world. I showed them what I had and where I wanted to go, and they decided they wanted to join. This was Sweetwater Capital. Most of the work they have done was in the oil, gas and mining fields. This was definitely an out of the box approach for them.
SM: Did they come on board to fund the skin care business?
GK: The skin care business as well as all of the plant-related stuff. We are now at a point where Nova Skin Care is being spun off on its own as a separate company. The algae and vertical growing systems are going to remain the primary products of Valcent. They knew that we were heading off into two different companies when we started this.
SM: How much funding have you raised?
GK: We have brought in $10 million in funding, so I don’t think we have done bad.
SM: What has been going on with the other piece of the business?
GK: I first started out looking at algae as an option for sequestering carbon dioxide. I wanted to systematize the production of algae for the sequestering of carbon dioxide. In a joking fashion I told my investors that algae also have a lot of lipids in it which can be converted into bio-diesel. That set all kinds of bells off and everyone got excited because of the trends in the oil and energy markets. Funding became a lot easier for the algae projects.
We are developing a closed-loop bioreactor that is vertical. The idea is to become the best at producing large quantities of algal biomass. We have spent a lot of time and money on that. Between that and our vertical growing system for vegetables, we now have a 6.2 acre research facility that is pretty state of the art. It’s in a small town called Anthony, a suburb of El Paso.
SM: Are you already producing bio-diesel?
GK: We started with a bench top model which is played with the lab. We then moved to a unit which was 15 feet high and self-contained. We now have a 30-panel reactor, which we have been running for one year. We are in the process of building a 100 panel-reactor which is one-eighth of an acre. With that we will go into a partnership and we are interested in doing a one- to five-acre pilot facility. Our job is not to produce the bio-diesel; we are there to grow the algae and help get the oil out of the algae. Once that is done we are out of the picture. We are farmers for all practical purposes.
SM: What is the state of the union of the bio fuel market?
GK: There have been a lot of surprises in the last year. As the demand for bio fuels increased we saw a great fluctuation price for the feedstock that went into bio fuels. As the price increased people saw opportunities to sell any type of vegetable fuel into the bio fuel market because it was worth more in that application than in a food application. This has created a shortage of food in a number of locations around the world. People are hurting badly because of the demand for bio fuels.
Some countries have now restricted the sale of edible oils. Bio fuel producers are having a hard time getting feedstock. There are a lot of bio diesel factories that are now sitting there empty. Three or four years ago, when they started building, there was a lot of play in the market and oil was $60 a barrel. By the time the plant was finished they got hit with the reality that there was no feedstock, or the feedstock they had access to was so costly, that it was not worth the effort to turn on the plant.
There have been some great breakthroughs in energy production from solar and wind sources. We are also looking at nuclear again. These technologies are great for powering homes but there will always be a demand for liquid fuels. When we look at all the crops on the planet, from a potential yield point of view algae is the number one pick. It is a more complicated crop than people would imagine. If you are trying to grow it in a commercial operation you have to deal with monocrop challenges. There is an art and a science to it.
We are attempting to understand it. We take a different approach because we only work with naturally occurring, indigenous species of algae. We do no genetic manipulation work whatsoever. I don’t think that is a smart move, because no matter how well you know this organism, it is going to get released into the environment. Algae are a keystone species, so it would not be smart to mess with them.