Oxford Capital Partners and Carbon Trust Investments have done just that, investing $1.58 million in the hope of a handsome return in the next few years.

The man is Dr Edward Green, a chemical engineer who founded Green Biologics just five years ago and now employs 25 staff. At the heart of his company are thermophiles – microscopic, heat-loving organisms that thrive on the high temperatures found in compost heaps and hot springs.

Thermophiles are capable of breaking down the tough cellulose that holds plant fibres together, releasing the sugars within. The sugars can then be fermented to produce a range of useful solvents that are normally extracted from oil. Chief amongst these is butanol which has almost as much energy, weight for weight, as petroleum. It’s a biofuel – a fuel of the future.

When Dr Green saw the potential of compost thermophiles, he set up his company with no money and no intellectual property rights. Now, he has selected and genetically-developed the organisms, securing patents on the most productive. He hopes that in a few years these amazing creatures will have made Green Biologics a £100 million company.

The market is already developing. As of 1 April, the Renewable Transport Fuels Obligation will require 2.5 per cent of all petrol and diesel sold in the UK to be made up from biofuels. An EU Directive means that by 2010 5.75 per cent of our petrol and diesel must be biofuel.

“For 20 years, from day one, I’ve worked on biofuels and it felt like an exciting and a great thing to do,” says Dr Green, who actually comes across as calm, focused and not the excitable kind. “It was difficult to see why biofuels were not being adopted, but the price of oil was relatively low and we didn’t have concerns about the security of oil. Now, oil is over US$100 a barrel and the US is a net importer of oil. A third great driver is global warming. So I’ve not changed tack, but the market has changed and come towards me.”

Dr Green has found genuinely alternative biofuels that are likely to be more sustainable than their rivals. So-called ‘first generation’ biofuels such as ethanol are already in trouble, making ‘second generation’ biofuels like butanol even more promising.

Ethanol is fermented from starchy food crops such as corn. Professor Robert Watson, the Department for the Environment’s scientific adviser, this week warned that it would be “insane” if the EU’s biofuels policy is “actually leading to an increase in the greenhouse gases”. But ethanol is doing exactly that.

Corn takes enormous fossil fuel energy to grow: it needs oil-hungry tractors, fertilisers and pesticides. So fermenting corn into ethanol has little effect on carbon outputs. Instead, demand for corn to make ethanol has doubled the price of corn which would otherwise be used for food and is encouraging even more intensive production. This is threatening global food supplies and damaging the environment. Ethanol can’t be transported in pipelines because it absorbs the high moisture content in the air, so it has to be moved everywhere by oil-guzzling tankers. And ethanol can only make up around ten per cent of engine fuel, because in higher concentrations it starts to corrode seals and gaskets. Butanol, in contrast, can safely reach concentrations of up to 50 per cent.

Dr Green is using his thermophiles to ferment non-food waste. Lab trials have already confirmed the proof of principle, fermenting up to 300 litres of feedstock. Now, Green Biologics is upscaling that research, testing the technology on contrasting streams of waste in two countries.

One waste stream is South African molasses, a glutinous by-product of sugar production that is commodity-traded as cattle feed. “Molasses is the biggest opportunity because of the size of the sugar industry,” says Dr Green. “The cost of feedstock is a factor and ideally we want low-cost feedstocks that are also sustainable.”

The other waste stream, in Sweden, is black liquor. This residue of the paper pulp industry is already burned to fuel paper mills, making them energy self-sufficient. But fermenting black liquor to butanol should maximise its energy potential.

“We focused on non-edible waste streams like forestry and agricultural by-products because there are plenty of them and you don’t get into this ‘food or fuel?’ debate that surrounds corn,” says Dr Green. Other possible waste streams for the future include food waste from supermarkets and glycerol left over by bio-diesel production.

Opportunities for commercialisation range from licensing the technology right through to Green Biologics becoming a fuel producer in its own right. Dr Green has even trade-marked ‘an advanced transportation biofuel’ as Butafuel. Later this year, the company will be looking to raise an additional £4-£5 million to complete the commercialisation process, providing an interesting opportunity for investors. “It is more exciting that we are much closer to market now,” says Dr Green. “It felt like a long time getting things off the ground. The nice thing is that now we have a certain degree of momentum.”

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