Mendel Biotechnology Inc. became the latest longtime food crop seed developer to focus on biofuels, landing a substantial though undisclosed Series D investment led by ZBI Ventures to promote genetically enhanced strains of biomass crops for cellulosic ethanol.

The 10-year-old Hayward, Calif.-based company had relied primarily on research contracts and grants for developing enhanced soybean and corn seeds before this year, raising a little more than $10 million in equity funding, but the new round combined with an undisclosed investment from BP plc in June give the company a substantial war chest to aggressively pursue the fuels market.

"We started talking about the fuels market about four years ago, but we didn't have a lot of capital to work with, and didn't start working on it until about two years ago, with cellulose as the focus," said Mendel CEO Neil Gutterson. "With this investment we are set for a few years, and won't have to raise money for awhile, when we expect to have results to support a next major stage of financing."

In addition to the venture arm of New York hedge fund giant Ziff Brothers, the new round includes Capricorn Investment Group, the Palo Alto, Calif.-based investment vehicle of former eBay Inc. president Jeff Skoll, and Comprehensive Financial Management of Redwood City, Calif., which invests for eBay founder and chairman Pierre Omidyar.

Skoll has been active in investment and advocacy in alternative fuels and alternative energy development, including providing funding for the Academy Award-winning Al Gore documentary "An Inconvenient Truth," and backing venture investments in electric car developer Tesla Motors Inc. of Menlo Park, Calif., biodiesel refiner Imperium Renewables Inc. of Seattle, and Targeted Growth Inc., a Seattle-based biotech seed developer.

Gutterson said that since its founding in 1997, Mendel has focused primarily on seed development in corn and soy crops, and the company has a substantial partnership with agricultural chemical giant Monsanto Co. of St. Louis, which initiated equity investment in the company's $4 million Series A round in 1997 alongside a $26 million research deal. Monsanto also invested in the current round, as did the San Francisco-based Biotechnology Value Fund, which led Mendel's $6 million Series B round in March 2002.

Mendel chairman Brian Davis joined the company as a director with Series A investment, representing Empresas La Moderna SA de CV, an affiliate of Mexican seed giant Seminis SA de CV, which invested alongside Monsanto. Empresas continues to hold shares in Mendel through a subsequent corporate entity, but Davis has been a longtime independent director, and became chairman of Mendel in June.

Davis said the company's partnership with Monsanto remains extremely important, but he said the recent investment rounds have put the focus of the company's new research squarely in the area of biofuels.

"We want to have a balanced approach because the Monsanto program is an important part of Mendel's portfolio, and we will have Monsanto products coming out on the market in the next few years," Davis said. "But the cellulose path is one that has an important future outside food crops and in areas where you are not competing with food crops."

Mendel is working primarily with a fast-growing grass called miscanthus that has properties for easy conversion to cellulosic ethanol, and the company earlier this year acquired a miscanthus seed development program from Germany's Tinplant Biotechnik und Pflanzenvermehrung GmbH for an undisclosed amount of cash.

The company has identified and patented the use of genes to control many aspects of plant growth and development, and Gutterson said its research focuses both on increasing agricultural yields and developing properties to make plants more easily convertible to fuel. Mendel is the third biotechnology seed developer this year with major venture funding rounds to focus future development on biofuels. Targeted Growth raised $22.3 million in February in a round co-led by AllianceBernstein LP and Capricorn, and Thousand Oaks, Calif.-based Ceres Inc. raised $75 million in an September deal led by New York-based Warburg Pincus

Neil Wallack, president of ZBI, said the energy-focused investment firm was attracted by Mendel's track record in other agricultural areas, and the experience it brings to fuel crop development.

"Mendel is a unique company, with strong commercial collaborations, in the agricultural sector through Monsanto, and in the biofuels sector through BP," said Wallack. "We are excited to work with Mendel as they develop a pioneering BioEnergy seeds and feedstock business, and continue as a leader in agricultural biotechnology with Monsanto."

Gutterson said Mendel did not use an outside financial adviser in putting the new investment round together, and the company had legal work on the deal from Bob Kadlec of Sidley Austin LLP in Los Angeles.