Amyris Biotechnologies, a developer of a process to make biofuels using engineered microbes, said Wednesday it has closed part of its $70 million second round of funding.

DAG Ventures is leading the round, joined by existing backers, Khosla Ventures, Kleiner Perkins Caufield & Byers, and TPG Ventures, the company said.

The Emeryville, California-based company has closed more than half of the expected $70 million and expects to complete the round by the end of the year, according to Ena Cratsenburg, VP of Business Development. If completed, the round would bring Amyris’ total funding to $90 million.

The funding will be used to commercialize and scale up production of the startup’s hydrocarbon biofuels, with the aim of bringing biodiesel to the market in 2010, Ms. Cratsenburg said.

The company is also working to develop a low-cost production process for a hydrocarbon gasoline substitute, or blended fuel, and a hydrocarbon bio-jet fuel.

Amyris inserts genes from several different organisms into microbes, altering their metabolic pathways and enabling them to produce useful compounds, according to the company’s web site. They do so through a fermentation process using sugar as a feedstock, according to the company.

Altering the metabolic pathways “allows us to take feedstocks and produce whatever molecules we want to produce that’s within the class of compounds that can be made through our engineered pathways …including hydrocarbon-based molecules that we think would make great transportation fuels,  ” Ms. Cratsenburg said.

Hydrocarbon biofuels are distinct from ethanol, which is alcohol-based. Amyris said its biofuels could be used in regular engines, are compatible with the existing fuel distribution infrastructure, and could be made in retrofitted ethanol plants.

The technology, which is still in the laboratory, is based on a microbe-based fermentation process Amyris is developing to more cheaply manufacture artemisinin, an anti-malarial compound.

Its partners in that endeavor are University of California, Berkeley and the Institute for OneWorld Health, a San Francisco-based non-profit drug company that landed a $42.6 million grant from the Bill & Melinda Gates Foundation in 2004.