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Summary:

Silicon Valley’s so-called undertaker, Sherwood Partners, which specializes in shutting down startups, sees a major fallout coming for cleantech, according to an interview with PeHub. If the IPO window has really slammed shut for much of 2011, that prediction could come true.

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Silicon Valley’s so-called undertaker, Sherwood Partners, which specializes in shutting down startups, sees a major fallout coming for certain tech sectors, including cleantech, according to an interview with PeHub. Sherwood Partners’ co-founder Marty Pichinson tells reporter Connie Loizos that the firm is already starting to close down cleantech startups and is expecting to see a sharp upswing in firms to shut down between the second and fourth quarters of next year.

Cleantech companies that were funded back in 2007 or before are now starting to reach maturity in the minds of their investors, who want to push the companies for exits — M&A or IPO — or want to cut their losses. Kleiner Perkins’ Partner Ray Lane told us last month he expects six to eight IPOs from the firm’s portfolio companies within the next two years. But a significant portion of the rest of the 70 greentech companies in Kleiner’s portfolio will probably quietly be wound down in a variety of ways at some point over the next several years.

Now that the IPO window for cleantech firms seems to have been (temporarily or long term?) slammed shut, thanks to the stock market sell-off, some of the anticipated IPO exits in 2011 could be in trouble. This could contribute to Sherwood’s anticipated “major fallout.”

A bunch of these companies could be startups that have promising technology but that weren’t able to raise enough funding to get them to large-scale production — the so-called valley of death of funding. These types of companies, which need a lot of funding, were common in venture capitalists’ early investments in cleantech, back in 2007 or so.

I’ve already been seeing some companies that seemed promising a few years ago start to move into that cold-freeze mode, where they haven’t officially closed but are quietly floating in that direction. Electric vehicle company Aptera was recently reported to be returning deposits for its customers.

Beyond individual cleantech companies shutting down, it’s apparent that some large firms that had launched energy-focused divisions have closed those projects after rethinking them. Just last week Cisco said it is getting out of the building and home energy management space, and Google and Microsoft are closing down their web energy tools.

The silver lining in all of this is that the intellectual property and valuable assets of these companies and projects will be on sale, so the good stuff will live on in more successful competitors. Companies that are doing well, and have money to spend, will find the graveyard to be more like a shopping center.

Image courtesy of DominusVobiscum

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  1. Jerry Collins Sunday, August 14, 2011

    There are two things to comment on here….the first is the shortsightedness of our system. I understand investors wanting returns, but the instant gratification syndrome doesn’t allow companies to come into their own over time. Second, what an opportunity to look at what didn’t give that instant gratification they need and do better….with cheaply obtained assets!

  2. Read out my new blogs ……..at…. itechbee

  3. Unlike other high tech mega-markets, cleantech is tightly coupled to political engagement, influence, cultural history, and particularly climate change. Climate change leads directly to personal morality and our view of the future. For a deep dive on this see “Why Cleantech Should Join The Fight Against Tar Sands” on Joe Romm’s Climate Progress site. The lead author of this op-ed is Bill McKibben, author of “Eaarth,” the voice of climate activism in North America.

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