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Thursday, July 1, 2010

Cleantech Pioneers Absorb the Risks Long Before Enjoying the Profits

Eco chic auto maker Tesla Motors Inc. screeched off the line on Tuesday, it's debut as a publicly traded company.

This IPO had nearly everything going for it: it's in the ever-hopeful cleantech market; a cool, new "I have to have it" electric Roadster in its line up; a partnership with the world's largest auto maker; tons of support from VCs and industry execs who witnessed the first cleantech IPO in the U.S. since last September.  And a who's who investor group including Sergey BrinLarry Page and Elon Musk.

One has to like the seven-year-old company's chances for success.

On its first day of trading, Tesla's stock price soared even though global markets were tanking and even though the San Jose, Calif.-based company has yet to earn a dime (some analysts say the firm is years away from making any money).

Reminiscent of the dot-com IPOs of the late '90s, Tesla's stock price opened at $19 per share and jumped to more than $30 per share within the first 24 hours of trading.   Today, Tesla finished the trading day at $21.89 per share -- still above its offering price though well off the week's highs.

By some accounts, the Tesla IPO is breathing new hope into the cleantech sector, which is benefiting from the more than $2B (worldwide) that the VC community pumped into it in Q2 -- an investment level nearly 43% higher than the same quarter a year ago.  

Despite its status as hot area of venture funding, the cleantech market does have a few speeds bumps in the road ahead.

Take for example A123 Systems,  a Mass.-based maker of rechargeable lithium ion batteries for the electric car market.   A123 went public nearly a year ago, and like Tesla's IPO, the Massachusetts battery maker and its investors enjoyed an enviable start as a newly public company. 

A123 opened at $13.50 and soared to more than $20/share.

But today a share of A123 will cost you a smidgen over $9.  

The electric car market is still in its early stages.  I could count on one hand how many people I know even own a hybrid.  

For Tesla, A123 and other pioneers of the electric car segment and other cleantech areas, it will be several years -- at least -- before anyone can call these businesses successful.

But without the pioneering, albeit risky efforts from companies such as Tesla, A123 and others, the cleantech sector would be just another vaporware market.

Instead, we are seeing real products that solve real problems.

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