Based in Pasadena, Calif., Gevo was founded by researchers at the California Institute of Technology. Led by Chemical Engineering and Biochemistry professor Frances H. Arnold, a group from the university including Matthew Peters and Peter Meinhold founded Gevo to develop bio-catalysts that could convert sugar into different types of fuel, Gruber said.

"The ideal technology will eat any fermentable sugar thrown at it from any source," Gruber said. The goal, he said, is to develop organisms that can process sugars and turn them into different types of fuel, beginning with butanol. "We are interested in becoming a broad-based fuel company over the fullness of time," Gruber said.

Butanol has several advantages over other bio-fuels like ethanol or bio-diesel, according to investors in the company. Unlike ethanol, butanol can be transported using pipelines, rather than having to rely on ground or air transport to bring the fuel across country. And butanol is a more powerful fuel than ethanol, Gevo investors said.

However, Gevo is still a long way from the commercial production of bio-butanol. The company, which currently has approximately 30 employees, has yet to establish a pilot facility. Still, Gruber expects that the company will be "well into the pilot plant stage," by the end of 2007.

Once the pilot plant is complete, it will still take another several hundred million dollars for the company to begin producing bio-butanol commercially, investors said. "It's going to cost hundred of millions of dollars to build some commercial plants," according to Khosla Ventures Managing Director Samir Kaul.

Investors said that despite the cost, the need from the market is tremendous. "Biofuels and industrial markets are trillion dollar markets," Kaul said.

Conclusions from a study conducted by the National Petroleum Council, an industry group that advises U.S. Energy Secretaries on policy matters, seem to agree. "The global supply of oil and natural gas from the conventional sources relied upon historically is unlikely to meet projected 50% to 60% growth in demand over the next 25 years," the report stated.

"This isn't a game for the weak-hearted," said Gruber of the costs investors could incur to meet rising demand from alternative energy sources. "If you're going to transform an industry, you're going to need real amounts of money to make a change."