To address the issue of high organic carbon costs in heterotrophic cultivation of microalgae, we evaluated the hypotheses by employing microalgae as a biorefinery for proteins and advanced biofuels after cultivation on volatile fatty acids (VFAs) instead of pure glucose. To prevent the inhibitory effect of VFAs on lipid synthesis, strains capable of tolerating high levels of VFAs were selected. Growth and lipid synthesis by two freshwater microalgae, Auxenochlorella protothecoides and Chlorella sorokiniana, was optimized at different VFA concentrations. Maximum biomass and lipid content in A. protothecoides (10.66 g/L, 33.93%) and C. sorokiniana (7.98 g/L, 39.80%) were obtained by replacing glucose with 30 g/L acetate at C/N 60. The generated lipids were compliant with existing standards for biodiesel. Moreover, when grown on acetate, both microalgae contained the complete range of essential and non-essential amino acids. Finally, single-source commercial VFAs were replaced with VFAs mixture after acidogenic fermentation of waste lignocellulosic biomass from brewers’ spent grain. The mixture allowed successful mixotrophic and heterotrophic cultivation of both microalgae, demonstrating feasibility of this low-cost carbon source in fuel-grade biodiesel production.