Branson, Khosla Back Biofuel Firm

"Through Virgin Fuels, we look for investments in companies, such as Gevo Inc., that will help to significantly reduce net greenhouse gas emissions, improve management of scare resources, and have a long-term positive impact on our society," Branson said in a press statement.

Branson has said that he hopes his fleet of commercial and private planes will one day run on biofuel.

Gevo CEO Patrick Gruber said he expects his company to eventually grow into the No. 1 biofuel company in the world. Currently, Gevo is focusing on the production of butanol, a biofuel that has a similar production process as ethanol but is more structurally similar to gasoline. This attribute allows it to run in some combustion engines without any mechanical modification.

With butanol there is no need to make exact fuel-to-additive mixtures like there is with ethanol. Butanol also has a higher energy content per unit than ethanol does, allowing butanol users to drive more miles on a gallon of fuel.

Perhaps most importantly, Butanol doesn't soak up water the way ethanol does. This means that butanol could travel through existing pipeline infrastructure, unlike ethanol, which must travel more expensively via truck or train.

The company has a long way to go until Gruber's dream of industrial-scale butanol production comes to fruition. Gevo still must prove that its technology works. According to Gruber, the next major step for Gevo is to build a pilot butanol plant.

Gruber says he doesn't know when this will happen. "I don't like boxing myself into outright costs or time-frames. All I can say is that we'll do it faster than anyone will expect."