Last week at the Wall Street Journal’s ECO:nomics conference, famed venture capitalist Vinod Khosla said one of the things he was worried about was that too many companies “under the green banner,” would go public and “set up a set of expectations,” and “miss them.” In other words, he’s worried that some greentech firms going public in 2010 will not be successful and will sour the market.
It’s a real possibility. The financials of some of the greentech firms aiming for IPOs in 2010, like electric car maker Tesla, bicycle tech developer Fallbrook Technologies, and biocatalyst developer Codexis, aren’t exactly strong.
Tesla has had net losses in each quarter since its inception and has a deficit of $236.4 million. Fallbrook has never been profitable, and reports net losses of more than $11.72 million for the first nine months of 2009. Codexis has seen major net losses for each of the last four years: $18.7 million in the calendar year 2006, $39.0 million in 2007, $45.1 million in 2008, and $15.1 million for the first nine months of 2009 (an accumulated deficit of $154.4 million).
There will be some successful greentech IPOs this year. Silver Spring Networks is expected to file an S-1 in mid-2010 and have a market valuation of $3 billion. Last year the smart grid network maker predicted it would be profitable in the third quarter of 2009 and was expecting revenues of $200 million sometime in 2010.
But if a series of companies, labeled greentech, have particularly poor IPOs then investors could become wary of the whole sector. In the same way that lithium ion battery maker A123Systems inspired greentech companies to hit the public markets behind their successful IPO, a really weak IPO from, say, Tesla, could affect the market for the other firms behind it.
One of the problems is the label itself. As Khosla put it there’s too many companies with poor financials looking at IPOs “under the green banner.” But many of these companies only have a toe in greentech efforts. Biofuels is only one market that Codexis sells into, (contrary to how it’s been portrayed) and the biocatalysts it creates can apply to the pharmaceutical industry, too. Fallbrook is just starting to try to parlay its business of providing continuously variable transmission tech for bicycles to the nascent electric vehicle and small wind turbine market.
Fallbrook, Codexis and Tesla have such wildly different business models and products, that it’s hard to even make comparisons between them. But that’s the problem — investors will make the green connection and weak IPOs could effect the entire spectrum. The real question is if there’s a run of poor IPOs from these firms, how will it affect an IPO from a profitable and revenue-generating company like Silver Spring Networks?
For related articles on GigaOM Pro (subscription required):
Image courtesy of jtyerse’s photostream Flickr Creative Commons.