Alan Salzman, co-founder of VantagePoint Capital Partners, has two words of advice for investors trying to make money on their cleantech investments in a difficult year: be patient and embrace the enemy.
Salzman, who gave his outlook for the cleantech market for 2012 and beyond during a talk at the SolarTech conference in San Jose on Thursday, said that three of his portfolio companies have filed to go public during a time when the IPO market is dim. BrightSource Energy, which builds large solar power plants, filed its S-1 last April; green chemical-developer Genomatica filed for an IPO last August; and biofuel developer Mascoma did the same but in September.
“We are really waiting for an attitude change,” Salzman said, adding, “It’s not changing any time soon.”
Speculation that the IPO market might be tanking for cleantech IPOs began to swirl last summer when the stock markets began to crumble as the U.S. credit rating fell and the sovereign debt crisis took hold in Europe. Just before that, the investor community saw some successful cleantech IPOs, including the exits of Tesla Motors(s TSLA) and several biofuel companies. Salzman said Tesla was a big success story for his investment firm.
But shares of many public companies, from solar to biofuel, have plummeted over the past year. The Solyndra bankruptcy last September has poisoned political discussions, as some lawmakers, notably Republicans, now use the solar panel maker’s struggles to attack President Obama’s clean power policy and funding decisions. The debates over the government’s role in supporting technology development by private companies have come at a time when the cleantech industry is still in its infancy and relies on government subsidies to grow.
That reliance also means the upcoming election for the presidency and seats in Congress could have a major impact on cleantech development and investments. Salzman believes Congress will remain as divided between the two parties as it is now. He prefers Obama over any of the Republican candidates, and he received applause from the audience at SolarTech when he quipped, “I personally have trouble with the idea that we have somebody running for the highest office who doesn’t even know science.”
But there are forces beyond politics that still make cleantech a good investment category, he said. Even though the fossil fuel industry overall remains an opponent to the cleantech industry, there’s been growing interest by some oil and natural gas firms to investigate and invest in technologies that deliver a smaller carbon footprint. What this means for startups is that they should work harder to line up investment and other business opportunities with these industry giants. That has certainly been an important strategy for VantagePoint’s portfolio companies, Salzman said.
The strategy is certainly something that is being pursued actively by one VantagePoint-backed startup, MiaSole, a thin-film solar manufacturer who earlier this week announced it had raised $55 million in equity. The company needs the money to boost its sales staff and keep churning out solar panels, but it won’t be able to grow much if it doesn’t line up one or more partners who can provide money and market experience.
“Embracing incumbents and finding the enlightened ones is essential (for startups) to scale,” said Salzman.