Codexis, Solyndra Seek Exit From "Valley of Death"

With the IPO documents Codexis filed Monday, there are now two prominent cleantech companies headed for the stock market. The other, Solyndra, makes thin-film solar panels with a unique tubed design and filed for its IPO two weeks ago; Codexis is a catalyst company working in biofuels, carbon capture and pharmaceuticals.

The filings place both companies in a fairly unique position. Both have left a number of their peers behind by successfully navigating the "Valley of Death," the middle period of funding between a company's early venture capital support and its later move to bank funding or trade on the public markets. Codexis has previously raised almost $150 million, and Solyndra about half a billion dollars.

Many fledgling renewable energy companies were worried that, without a major change in the investment markets, they might not have a future. There's still a bumpy path to traverse, but IPO prospects at least serve as a light at the end.

If IPO filings mean a real exit from the Valley, that is. In fact, despite their growth and high employee head counts, the two companies are still in a sense early-stage ventures. Solyndra's odd designs could prove a fatal flaw in competition with solar giants like First Solar; Codexis, meanwhile, is pinning its hopes on biofuels, which already lost investors billions when the ethanol and biodiesel industries crashed.

Codexis isn't even the company most had pegged for the next cleantech IPO -- Silver Spring Networks, a smart grid startup, was widely expected to be next. The difference between the two is that Silver Springs seems fairly assured of a bright future. Codexis, despite its connections with big companies like Royal Dutch Shell, is a riskier bet.

Earlier this year, battery maker A123 Systems held a successful IPO, but like Silver Spring, that company's market looks more welcoming. With neither Codexis or Solyndra anywhere close to turning a profit, there's no guarantee that investors will give them the same warm welcome -- a worry that led Codexis to withdraw its first IPO filing four months ago in August, 2008.

Rather than banking on strong prospects, tt could be that Codexis and Solyndra have been pushed to file by their previous investors, who may have decided they're not willing to fund any more risk themselves. Will the stock market be willing to pour in money where private investors were not?

Cleantech is often compared to the pharmaceutical industry, which requires heavy up-front investment for technology that may never return a profit. But renewable energy remains its own unique industry, and it remains to be seen how smoothly its adolescent period will progress.