Purse strings are loosening, new bets are being placed, and cautious optimism has caught on in the green technology sector.
With oil prices up sharply and the U.S. economy steady, the emerging green technology industry is seen moving back to a growth path from a sheer survival track, with factories being built, funds moving to research and some high-profile young firms mulling initial public offerings of shares.
Venture capitalists, investment bankers and company executives say 2010 will be marked by some of the more mature start-ups testing public enthusiasm for companies that have big growth potential, but little profit.
Experts see energy efficiency and green lighting technology gaining more attention in 2010. Next year should also mark the launch of electric or plug-in hybrid vehicles from giant global auto makers such as Nissan Motor Co Ltd and General Motors Co, and expansion by smaller players like Tesla Motors.
Next year should be a pretty good year for public markets, said Bryce Lee, managing director at Credit Suisse and co-head of the bank's alternative energy group. We will see a fair amount of IPOs.
Lee, speaking at a recent industry conference, predicted that smart grid networking company Silver Spring Networks is one of the companies most likely to go public.
Silver Spring, which has a revenue run rate of over $100 million this year, has said it is considering an IPO but has not publicly detailed any timeline.
Silicon Valley-based electric carmaker Tesla is also preparing to go public, sources have told Reuters.
Silicon Valley had seen funding for green companies dry up in the aftermath of the collapse of Lehman Brothers last year, but sentiment has changed.
I am very optimistic as we leave 2009 and enter 2010, said Tom Baruch, founder of San Francisco-based CMEA Capital. We will see a lot of money coming into this space.
The low-carbon economy will absolutely be the predominant theme in our economy going forward, he added. It's going to drive growth.
As long as oil prices keep going up, we are going to see more and more replacement of fossil fuel, Baruch said.
'BRING ME YOUR BUSINESS PLANS'
CMEA Capital was one of the few venture funds brave enough to test the public market this year with the IPO of lithium-ion battery maker A123 System Inc. It had a smash-hit debut, as the shares soared 50 percent on their first day.
Baruch foresees more IPOs next year, which would fire up people's enthusiasm in investment in the green space.
Companies involved in green technology -- including everything from renewable energy, electric vehicles and energy storage to better power transmission -- saw funding shrink earlier this year as oil prices tumbled and the U.S. economy slumped.
Companies with capital-heavy technologies really felt the pinch. Project financing and debt capital all but dried up.
The last year has been incredibly difficult and sets a pretty low bar, said Jennifer Fonstad, a managing director at venture fund Draper Fisher Jurvetson.
With so little funding available, the year also saw the U.S. government play the unlikely role of venture capitalist.
Aggressive stimulus from the U.S. Department of Energy, which has pledged nearly $100 billion to back a wide variety of green technology, helped prevent the sector's collapse.
Now, Silicon Valley is back in the game.
We see a bunch of new opportunities that are well priced, Fonstad said, adding that her firm plans to invest broadly in the sector.
The Westly Group, another green venture capital firm that recently closed a $130 million fund, is soliciting business plans, and founder Steve Westly believes the green sector could propel a boom in the United States.
This is a big, big industry, he said. These things are here to stay.
Westly, a former California state controller and eBay Inc executive, is especially bullish on smart grid firms.
Bring me your business plans, he told an industry gathering last week. We are ready to start funding.
(Reporting by Poornima Gupta, editing by Gerald E. McCormick)