Cleantech Partly to Blame for the Lack of Venture-Backed IPOs
Looks like venture capitalists’ attempts to “go green” mean there are fewer venture-backed IPOs out there. Not a single venture-backed company went public in the second quarter of this year, says the New York Times this weekend, citing data from the National Venture Capital Association. And the article says that the fact that venture firms have increasingly invested in cleantech companies, which take longer to mature and reach the public markets, is partly to blame.
. . . the pipeline for public offerings has dried up in part because of the considerable shift in the industry’s interest in the last three years into “green” technologies, which was taking time to bear fruit.
Two things are possible in this scenario. First, those expected cleantech IPOs are just not gonna come. The venture investing model could prove to not be as compatible with industries like energy and transportation, as it has been for infotech. Or more cleantech IPOs are on their way, but, as the article suggests, the companies are taking longer to mature.
Either way, the finding is not something that is going to encourage more venture firms to get into cleantech investing. As venture watcher (and one of our favorite blog reads) Paul Kedrosky says to the New York Times: “There is no venture industry if there is no I.P.O. market.”
there is an IPO market for clean tech, sure its limited right now to the companies at the top of the supply chain (silicon refiners and solar panel manufacturers) although as clean technology becomes mainstream (which is at least another 5 years into the future) the public will start seeing an robust pipeline of companies maturing into IPOs. Just give it time, its still early, clean tech needs time to develop just like another technology.
Wow, interesting way to interpret the data in Kedrosky’s article… two points:
1. CleanTech represents less than 10% of VC investment.
2. Given the 7-10 year typical IPO horizon from initial VC investment, the recent Clean Tech “boom” could hardly be held to task for the dearth of IPO exits.
What was the investment de jour 5 years ago, where the exits should now be happening?
I’d be curious to look at VC backed solar vs. VC backed Web2.0 on the IPO market.
I’d say the point of the article is this: internet IPO’s aren’t happening anymore, and VC’s need new markets to invest. No news there.
Rob, Like I said in the post, the cleantech claim is only “partly to blame”. But the Times article does refer to the long maturity of alternative energy startups several times as a reason for a lack of venture-backed IPOs.
That still doesn’t explain why 90% of VC non-clean tech investments can’t access the IPO market. Your headline is misleading.
Point taken. I tweaked the headline.
Come on, more positive spin on the article please!! I would have thought it would seem blatantly obvious that clean tech companies take longer to get to market, they are based on physics and require actual hardware development and manufacturing capacity before they can launch product, unlike the torrent of Internet ad plays the VC industry has been backing for years that are almost 100% software code based ventures and can start-up on any generic web server! Cleantech requires abit more time and investment to develop but the global transition from fossil fuels to electric vehicles, for example, could potentially dwarf the PC boom by a factor of 10x. (based on average PC price $3k, average EV car price $30k) with potential sales of over 2 Billion EVs globally in the next 10-20 years.
[...] Cleantech Partly to Blame for the Lack of Venture-Backed IPOs: Is CleanTech killing the venture-based IPO? Some analysts are wondering if the striking dearth of IPOs last quarter bodes ill for the venture capital world’s fascination with green tech. No venture-backed companies went public in the second quarter. An article in the weekend’s New York Times speculates that clean technologies may simply be taking longer to mature than market sectors traditionally exploited by venture firms. If that’s the case, today’s IPO bust could swing to a boom as dozens of young companies emerge from the development pipeline in 3 to 5 years. (Earth2Tech) [...]
[...] The myths being thrown around about cleantech venture capital perhaps reached a new height of silliness this weekend, with a NYT article which suggested that cleantech venture capital is responsible for the lack of VC-backed IPOs in the last quarter (also mentioned in this Earth2Tech post). [...]
[...] Fehrenbacher No Comments Posted July 2nd, 2008 at 7:47 am in Big Green While last quarter, not a single venture-backed company hit the public markets, today’s IPO of energy-efficient water desalination company Energy Recovery could be a sign [...]
[...] compared to the fourth quarter of 2007, and was also down from the same quarter a year earlier. And not a single venture-backed company went public in the second quarter of this year, according to the National Venture Capital [...]
[...] The myths being thrown around about cleantech venture capital perhaps reached a new height of silliness this weekend, with a NYT article which suggested that cleantech venture capital is responsible for the lack of VC-backed IPOs in the last quarter (also mentioned in this Earth2Tech post). [...]
[...] same space. Much of that has to do with an ever increasing amount of money being funneled into certain attractive sectors, as well as the length from investment to IPO taking longer and longer. Possibly related posts: [...]