IPO flood or not?

Risk aversion to investing in cleantech is starting to change and improve, but we’re not about to see a wave of IPOs in the sector anytime soon.

Or at least that was the consensus today from venture capital and private equity folks at the Renewable Energy Finance Forum-West conference in San Francisco. And while the primarily Silicon Valley-based panel had opinions that differed at times, they all agreed they have one thing in common: Their names are hard to pronounce.

Ajit Nazre, a partner with Kleiner Perkins Caufield & Byers, said he knows investors that want to invest in the sector regardless of whether it’s profitable, which is a new trend. But he cautioned that the public market “floodgates are not about to open.”

 The cleantech public market isn't flooding, but a half dozen IPOs could be
on the horizon in the next 12 months.

For companies such as advanced battery maker A123Systems, which went public on the Nasdaq Stock Market last week, it has taken raising more than $300 million in equity, plus massive U.S. Department of Energy (DOE) funding for it to see the light at the end of the tunnel, Nazre said (see A123Systems up and climbing after Nasdaq debut).

“Two months ago, there was no light at the end of the tunnel,” he said.

Stephen Dolezalek, head of the cleantech group and managing director with VantagePoint Venture Partners, suggested there’s only going to be a half dozen companies able to go public in the next year (see Back on track? Cleantech VC deals continue global growth). He said it will be interesting to see how much money they need from the DOE.

Dolezalek said some investors think the stimulus funding is the second coming, while others think it’s not going to lead to cost competitiveness.

Neil Auerbach, a managing partner with Hudson Clean Energy Partners, said IPOs are not the end goal.

“Our job is not to hit the public markets. Our job is to get our money back,” he said.

Ravi Viswananthan, a partner with New Enterprise Associates, said it’s critical for cleantech entrepreneurs to get creative by developing corporate or strategic partnerships with companies that have the big balance sheets. Examples include ExxonMobil teaming up with Synthetic Genomics, and Daimler with Tesla Motors (see ExxonMobil devotes $600M to algal biofuel project with Synthetic Genomics and Daimler takes 10-percent stake in Tesla Motors).

He also said one key to success is just being patient.

“A very good year could be just survival,” he said.