The stock market may have dropped earlier this month, but the IPO machine cranks on.

Genomatica, which engineers microorganisms to produce industrial chemicals, has filed the preliminary paperwork for an initial public offering. Meanwhile, Ambient, which produces smart grid communication gear based around public communication standards like cellular, has filed to raise $57 million.

While both companies have interesting technologies, both do face very steep challenges. Genomatica, which comes from the bio corridor around the University of California, San Diego, has signed development deals with companies like Mitsubishi Chemical. To date, it has raised $84 million from Dow Chemical, VantagePoint Venture Partners and others. Expert science, good clients and well-connected strategic investors and VCs -- what could go wrong?

Developing bio-based chemicals and selling them in large volumes can take time. Genomatica pulled in just $726,000 in revenue last year -- or what a surgeon or a partner in a large law firm might rake in over the course of a year. The net loss for last year, meanwhile, exceeded $14 million.

Revenue came to $887,000 in 2009 and $2.4 million in 2008. For the first six months of 2011, revenue has rebounded to nearly $2 million, but the losses continue.

Prediction: Genomatica will get bought before it holds an IPO. The large chemical companies have all expressed interest in expanding their portfolios for biochemicals and alternative energy. DuPont bought Danisco, which makes industrial enzymes, and recently snapped up Innovalight forsolar Genomatica was one of the first companies to pursue genetically engineering E. coli to produce chemicals, and they seem to have a well-stocked intellectual property portfolio. However, as a startup, the company will never have the capital or girth to stand on its own in chemicals. The same circumstances explain why most biopharma companies get bought. 

Ambient, meanwhile, is more of a comeback story. It went public once before, got shuttled to the pink sheets, and is now returning. The company specializes in nodes for long-range communication based around well-known and well-understood IP protocols. It works with Verizon and Duke Energy. For years, the utility industry has debated whether utilities should own their own networks or leverage the existing networks. Some early smart grid deployments, such as PG&E's mesh network, are private, self-owned networks.

Duke, however, earlier this spring issued a white paper outlining how it will exploit cellular for its communications networks in Ohio and possibly elsewhere. (Katie Tweed broke the story earlier this year.)

“Duke has no desire to be in the communications business,” David Masters, manager of technology development at Duke, wrote. “We need to harness already-existing expertise and capabilities that the cellular networks provide in designing, building and maintaining the communications.”

In 2009, Ambient reported revenue of $2.1 million and a loss of $14.2 million but revenue of $28 million and a profit of $3.5 million on the strength of its Duke contracts. A green company that is profitable at the time it is raising public funds -- that might be a first. Chet Geschickter at GTM Research notes that Duke has rolled out 55,000 Ambient nodes.

So what's the problem? A pink sheet history gives many investors the willies. Additionally, Ambient, while it arguably has a lead now, sells equipment in a market dominated by standards. Large companies often win here. Yes, Cisco has floundered badly in building energy management and downgraded their smart grid efforts, but a market for standards-based grid equipment seems right up its alley. SmartSynch also wants this market. It will get crowded.