Bill Gates' investment firm, Cascade Investment, is putting its money where the algae is, funding Sapphire Energy.

Based in San Francisco, Sapphire Energy is working on a process to make automobile fuel from algae. Last year, it announced that it had produced 91 octane gasoline from algae, and dubbed this fuel "Green Crude." The Green-Crude process can also be used to produce the chemical equivalents of jet fuel and diesel.

Thus far, no firm has succeeded at making algae-based fuel cost-competitive on a larger scale. Several companies have suggested that they'll be ready for commercial-scale production within the next three years, however. Sapphire Energy and other companies focusing on algae fuels, are betting on the idea that creating fuels from algae will be much cheaper than using feedstocks.

Sapphire just completed its series B round of funding, which is slated to be used to build up the company's operations with a goal of producing 10,000 barrels of Green Crude within three to five years. Along with Cascade's Investment, Arch Venture Partners, Wellcome Trust, and Venrock have backed Sapphire Energy, for a total of more than $100 million.

Cascade Investments has invested previously in alternative fuels, specifically in Pacific Ethanol. However, when that company's stock price fell, Cascade sold its shares.

Image — Sapphire Energy