May 17, 2000 08:59 AM ET

By Mary Ann Tawasha, dbusiness.com

May 17, HOUSTON (dbusiness.com) -- As fossil fuel prices rise and federal legislation requires companies to use a larger percentage of renewable energy sources in production, a group of entrepreneurs believes the timing is right for WoodFuel.com.

The Houston-based site was formed in April by members of the wood fuel industry to streamline a very fragmented market, according to Scott Mactier, one of eight private investors who put an undisclosed amount in the new venture.

Many of the investors have been in the wood fuel industry for years and determined there is a need for the type of centralized system the site intends to establish, he told dbusiness.com.

Mactier said the site signed up 28 new accounts in April with no significant advertising. The site ramped up in the first part of May, and he noted the company signed up an additional 20 accounts during the first eight days of the month. Their goal is to create 52 new accounts a month.

"We're basically still in the information gathering stage at this point," he said. "But we are transitioning into the transaction stage this month."

The company now is advertising in industry-specific magazines such as Pulp & Paper and Renewable Energy World.

The suppliers will range from municipalities and utilities to landscapers. Users will be sawmills, particle board makers or anyone with a capacity for processing wood as fuel.

"Suppliers may not have a ready source to dispose of the fuel," Mactier said.

The site will help link them with customers and form alliances with transportation companies to deliver the commodity.

They'll also be buying the wood fuel product and selling it to users, so they'll make money on the spread. They're looking for material with high BTUs, low moisture content and low contaminant levels. The site will provide access to equipment financing and industry news, as well.

WoodFuel.com figures it can be a vital exchange as fossil fuel prices rise and federal legislation requires companies to use a larger percentage of renewable energy sources in production.

The Forest Product Journal notes that U.S. wood energy makes up about 3 percent of total energy consumption, Mactier said.

Richard Vloski, associate professor of forest products marketing at Louisiana State University, said his extensive research on e-business in the forest products industry has revealed no site quite like WoodFuel.com.

"It's a unique niche," he told dbusiness.com. "It's staggering how many marketplaces dedicated to wood that are out there. But this is the only I know of in the particular niche of byproducts."

WoodFuel.com recently signed on Novus Systems Inc., the former parent company of Houston's Novus Wood Group, one of the largest suppliers of biomass wood fuel and related products in Texas.

Billy Holt, who's in charge of e-commerce planning and development for the new site, said Woodfuel.com will work to reduce companies' time and expenses and enhance the efficiencies of the industry.

"There are too many sources for wood fuel suppliers," he noted. "We'll deal with 12 or 13 suppliers, and the buyer just deals with us."

Besides helping to consolidate suppliers, the site also has environmental benefits. LSU's Vloski noted: "An environmental benefit can be gained from utilizing wood waste as fuel and helping companies get rid of their byproducts. It's a good business model."

WoodFuel's founding team is hoping investors will agree. "We're evaluating fundraising now," Mactier said. "Before we really talk to venture capitalists or future corporate partners, we want to have a little more substance. We're looking to close a first round by the end of August."

COMPANY: WoodFuel.com

INDUSTRY: Forest products and renewable energy

PRODUCT/SERVICE: E-commerce company that links buyers and suppliers of raw wood materials online; also forms alliances with equipment and transportation customers to provide a virtual pipeline of wood fuel products.

YEAR FOUNDED: April 2000

MANAGEMENT: Eight working partners, also private investors, have not yet formalized a corporate structure.

OUTSIDE INVESTORS: Novus Systems Inc.

EMPLOYEES: 8

FISCAL YEAR REVENUES: Not available

STRATEGIC PARTNERS: Novus. EnFORM Technology is a technology partner. Company plans to announce more in coming months.

CUSTOMERS: Paper mills, saw mills or any entity that uses woodfuel as a source or as an alternative source to fossil fuels.

COMPETITORS: Ewood.com is mainly a lumber and forest products site -- an online auction site for lumber and by-products. PaperExchange.com is focused just on the pulp and paper industry.

STRATEGY: To use existing technology to consolidate the fragmented wood fuel business and provide a central information source to benefit suppliers, buyers and equipment providers in the industry.

WHAT KEEPS THEM AWAKE AT NIGHT: "Execution is the big key," Mactier said. "Providing this supply in a timely manner to the buyers with a high level of confidence that the quality is there. Putting that together at a national level is a pretty awesome undertaking. It's one thing to get a site up there but to execute and make it come to life...we've got a lot of work to do."

CONTACT: WoodFuel.com, 12621 Featherwood, Suite 380, Houston, TX 77034. Tel: 281.484.0052. Fax: 281.922.1474. www.woodfuel.com

Mary Ann Tawasha covers Houston for dbusiness.com.