A big fat zero

That’s the answer to the question:  “How many venture-backed IPOs are there going to be in the second quarter.” That’s a stat about all industries and sectors, not just cleantech.

But it definitely does affect cleantech nonetheless.  As we’ve talked about on this site for some time now, 2008 was supposed to be the year of big exits in cleantech, particularly in solar but also in other hot sectors.  But with only 5 VC-backed IPOs across all sectors in the first half of the year, it’s not looking like all of the backlogged IPO candidates are going to make it out the window whenever it finally re-opens.  There are a number of companies that have been burning through a significant amount of capital trying to ramp up production in advance of anticipated IPOs, but now they’re short of cash and the public markets aren’t available to replenish the coffers.

So it’s no surprise we’re seeing so many growth capital financings in cleantech.  I spoke recently with one fellow cleantech investor whose firm had led a recent big financing, into a revenue-stage cleantech company that’s been rumored for some time now to be gearing up for an IPO.  I asked him point-blank if the reason that financing opportunity had come up was because the IPO window was closed to the company, and to his credit, his one-word answer was “yes.”  So when you see big “venture capital” funding announcements this year, into companies that may have been otherwise expected to IPO, know that that’s going on.

The thing is, that’s not venture capital as classically defined.  To borrow a line from Seinfeld, “not that there’s anything wrong with that.”  Returns are returns.  But still, it’s certainly not the early-stage venture capital approach that most people associate with the asset class.

Nevertheless, as more cleantech venture firms raise big new funds and shift toward later stage, and as big new “growth stage” funds are raised, expect to see more of these types of financings.  Right now, it’s open hunting season for these funds as the IPO window is closed and many big-name cleantech startups need capital (and their founders may be looking to cash out a bit).  But when the IPO window opens back up, will these private financings have to compete with public markets for these kinds of cleantech investments?  Time will tell…

What’s interesting is to juxtapose these trends in the sector with what VentureWire reported today about a discussion among limited partners at Dow Jones’ recent LP Summit, on the topic of early-stage vs. later-stage venture capital.  According to the quoted LPs, they’re committed to investing in early-stage venture capital, seen as producing the best returns over time—even while “venture capital dollars have been flowing further downstream over the past few years.”  Specialization, they reported, is also correlated with strong returns.  So as many of the better-known specialists shift their focus a bit toward later-stage in cleantech venture capital, what is an LP to do?  Clearly the shifts in the cleantech venture capital sector are part of a larger shift across the venture capital category.

It wasn’t a column about cleantech at all, but for those with access to VentureWire, today’s write-up was worth checking out.

Deals from the past week:

• Make sure and check GTM’s Funding Roundup columns when they come out (one of the benefits of bringing this amateur-hour column over to GTM is getting to lean on such professional resources).

• Microposite, a low-energy manufacturer of external residential siding products, took in an undisclosed amount of financing from the Michigan 21st Century Investment Fund.

• Aspen Aerogels has taken in a $37mm Series B-1 round of financing, led by Arcapita Ventures, and including participation by existing investors Lehman Brothers Venture Partners, Reservoir Capital Group and Rockport Capital Partners.  The company’s products are being targeted at insulation applications.

• Fotech, a UK-based company with optical fiber-based technology for the detection of leaks in oil and gas pipelines (among other applications), has raised a GBP 6.5mm round of financing from Scottish Equity Partners, Energy Ventures     and Saudi Arabia-based Shoaibi Group.

• Residential solar financing play SunRun has raised a $12mm round of financing led by Foundation Capital.

• Foundation Capital also led a $20mm round of financing into Control4, a developer of a universal controller for all IT-based systems in the home, apparently including demand response applications.

• Cleantech investors in the news:  Speaking of LPs, this column on Business Week’s site points out that many university endowments aren’t investing in the same kinds of green technologies that their campus operations and students espouse…  And here’s more information on Todd S. Thomson’s $1B Carbon Opportunities Fund.

Other news and notes:  It’s impressive to see the intelligence agencies start lobbing in on the dangers of climate change...  Dan Primack on McCain’s battery prize proposal...  For those looking to invest in publicly-traded cleantech stocks, look elsewhere for your tips—here’s a good blurb with some recommendations…  A nice overview on watertech investing…  A nice overview on nanotech markets…  Cleantech—Bubble Schmubble...  Finally, Alberta smells better than Toronto!