Trends bode well for clean tech IPOs this year.

• Author: Goldhaber, Nat
• Position: Technology

Over the years, venture capitalists have invested in clean technology and renewable energy with the expectation that returns will take a long time. The VCs were right.

Development of technologies such as solar cell manufacturing, utility-scale renewable energy projects and genetically engineered algae for bio-fuels do indeed have great promise. But they require great patience.

Yet, with the naturally long return cycle of these companies and the down economy of the last few years, patience has started to wear thin. The vigil for the elusive clean tech initial public offerings seems to have been interminable.

Fortunately, the wait may be coming to an end. Given the success and reasonable resilience of the few 2010 IPOs--such as Tesla Motors Corp.--the stock market appears ready to embrace new clean technology and green technology IPOs.

Clean technology has become serious business, not a fad. Today, new clean tech companies are appropriately valued for initial and follow-on venture capital investments. Not only are many of these clean tech companies appropriately valued, they are based on mature, superior business models. All of this works in favor of a robust and sustainable clean tech IPO market.

The only caveat is the health of the economy. If the business malaise of 2009 returns, all bets are off. If the economy and the stock market continue to improve as they have in the last couple of quarters, however, clean technology investors could be richly rewarded for their patience through public enthusiasm for clean technology and renewable energy.

The globally strengthening economy has propelled an increasing demand for conventional energy, causing prices to rise sharply. A market-driven "oil tax" caused by increased demand will result in rising prices that may well offset some of the benefits of economic stimulus measures.

Still, many economists believe the economy will grow 3.5 percent in 2011, perhaps more, which would make it the best year since 2007. If these economic improvements manifest, they will be sparked by the extended personal income tax cuts, new cuts to business payroll taxes, the Federal Reserve's quantitative easing program and emboldened consumers.

An improving economy and stock market almost always portend a stronger IPO market, and clean tech companies are the leading IPO candidates. Several relatively established players already have annual revenues exceeding $25 million.

Factors Favor Clean Tech IPOs

Additional factors...