Oil derived from algae could be the next trend in biotechnology, and a South San Francisco company is riding the wave with an $8.5 million contract from the Navy.

Solazyme Inc., a synthetic biofuel company founded in South City, feeds various types of biomass — sawdust or sugar cane — through different algae strands to get oil for energy or for food, according to Harrison Dillon, the company’s co-founder and chief technical officer.