Clean Tech’s 2010 Exit Strategies: Disagreeing With the Financial Times

Amidst the global recession and discussions surrounding the capital intense nature of most clean tech companies and the question of viable exit strategies for the venture capitalists that invest in them, the IPO market will continue to be dry.

The broader IPO market has been relatively dry since the start of 2008, with relatively few listings compared to previous years (~25/year vs averages from 1980s to 2005 of around 400/year).

While Sarbanes-Oxley is partially to blame for the dearth of US based IPO’s the fact is the public’s faith in and funds for the markets have been squeezed, and I feel that it might be more than wishful thinking that 2010 will be a robust year for Wall Street based IPOs of any sort, particularly clean tech investments.

Unfortunately for the existing stable of Silicon Valley boutique investment banks and marketeers, raising capital from the public for capital intense clean energy companies won’t be like it was for Google and Oracle, or for that matter like 2010 internet hopefuls LinkedIn and Facebook, (which despite overtures to the contrary are likely to cave under increasing pressures to take their exciting brands to the public market to assuage weary and tired limited partners (LPs) that don’t see a comparably interesting industry exit).

Loss making, but tremendously sexy, A123 Systems and tech-safe, and capital-lite, EnerNoc are the two notable recent clean tech IPOs. Their success coupled with the inherent difficulty in waking up a timid debt market are likely to be indicative of two camps of clean tech companies seeking IPOs in the future.

I disagree with this week’s Financial Times article Silicon Valley turns its Gaze to Wall Street that suggests 2010 will be a good year for “greentech” IPOs. Clearly capital intense clean energy companies are going to have to find expansion capital from sources beyond the government, and given the debt market’s jitters and increased restrictions, companies may try to promote the buzz surrounding clean tech to public equity investors.

BrightSource Energy and possibly Solyndra not withstanding, I propose that a more prevalent source of expansion capital will come from trade sales to traditional energy players that will use their balance sheets to capitalize on depressed debt rates to blend start-up IP with established industry relationships and expertise.

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