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Sweetwater Energy Inc. has closed on its Series A funding round, ending up with nearly twice as much as it was looking to secure.
The Rochester-based cellulosic energy firm closed the round after raising $9 million. It had sought $5 million. This round of funding began last summer but ramped up early this year.
The business-led by former Paetec Holding Corp. chairman and CEO Arunas Chesonis-plans to use the additional funds to launch its next stage of development, which includes Sweetwater's first commercial contracts and the design and fabrication of the first facilities for 2013.
Keith Wilson, Sweetwater's chief financial officer, said there are as many as 40 investors in the round and many were original investors in Paetec. Of those, there are five substantial investors and many are family offices, or affluent individuals with substantial means, who tend to be management-friendly.
Tom Merkel, head of the Rochester Angel Network's due diligence committee, has invested in Sweetwater. The company's leadership and technology drew him to invest personally, he said.
Merkel is an operating director at Delta Point Capital Management LLC, a Rochester-based private equity firm, and a group chairman for Vistage International Inc., an international CEO peer group.
"The leadership has a great track record," Merkel said, adding that Sweetwater's ability to raise more money than it initially sought-and in a difficult funding environment-is a tribute to the company leaders' past successes.
Merkel also is bullish on Sweetwater's technology.
"If they are able to do what they want to do, it should be a great success," he said.
Chesonis said the economic advantages of lower-cost petroleum substitutes are fueling the demand for Sweetwater's technology. The next stage of growth is going after commercial contracts, he said.
Sweetwater Energy uses its technology to produce low-cost sugars from non-food plant materials. The company's sugar solution will be sold to refineries, which use it to produce biofuels, biochemicals and bioplastics.
Sweetwater's initial $1.2 million round of seed funding closed in February 2010, financed in large part by Chesonis and Jack Baron, Sweetwater's president and chief operating officer.
That funding, along with grants from the New York State Energy Research and Development Authority and early revenue from Defense Department research sales to produce jet fuel for the U.S. military, allowed Sweetwater to develop its decentralized sugar platform technology.
That technology and other recent advances in the Sweetwater laboratories are being engineered into Sweetwater's first commercial facilities, officials said.
The business also has been increasing its workforce. Sweetwater has 19 full-time staffers, along with five paid interns. The new hires include Paetec alum Al Chesonis, brother of Arunas, as chief administrative officer, as well as Nina Pearlmutter, an intellectual property lawyer, and two chemists, one of whom graduated from Rochester Institute of Technology.
Sweetwater this year began operation of its pilot-scale cellulosic sugar processing facility at 500 Lee Road. Sweetwater's chemists and engineers are using the pilot system in conjunction with its laboratory to test new ways to optimize the extraction of useful sugars from a wide variety of plant materials.
Sweetwater plans to construct a demonstration-scale facility at the same location this year, which will allow final vetting of the Sweetwater technology on a commercial scale.
7/27/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.