In a throwback to the garage tinkering of his youth, Microsoft (NASDAQ:MSFT) founder Bill Gates is investing in a long-shot start-up that just might revolutionize an industry. Rather than spinning source code into software, however, this venture aims to turn algae into fuel.

Unlike a previous investment in the space -- an irksome ethanol player that's had its share of near-death experiences -- Gates' latest future-fuel foray is a privately held venture. Even though the company, Sapphire Energy, is operating in a yet-to-be-commercialized realm, there's still plenty of competition.

In the algae arena, we've seen Chevron (NYSE:CVX) team up with Solazyme to produce biodiesel, Boeing (NYSE:BA) pair up with Aquaflow in pursuit of jet fuel, and Honeywell (NYSE:HON) subsidiary UOP study the same.

Whereas many next-generation fuel companies either seek to produce ethanol or biodiesel, Sapphire is doing something quite distinct. While details on the technology are scarce, the firm has managed to produce a 91-octane green gasoline that is chemically equivalent to the petroleum-based fuel.

I've mentioned other companies pushing the synthetic frontier, but Sapphire may very well be the closest to commercialization. The firm's scientists are no mere algae amateurs. One headed up research at an outfit that's now partnered with BP (NYSE:BP) in its own biofuel endeavors, and another has worked with Biogen Idec (NASDAQ:BIIB) to turn algae into protein factories.

However promising its technology, at this stage, Sapphire Energy is still a science project being nurtured by private dollars. I'm getting ever more convinced that this is the proper place for pre-commercial cleantech development. I hope that Sapphire and the other green crude producers take a cue from the public-market flameouts in the solar space and elsewhere, and take their time with those inevitable IPOs.

Microsoft is an Inside Value selection. Biogen Idec is a Stock Advisor pick. Investigate any of our newsletters free for 30 days.

Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.