Fledgling solar power companies looking to grow beyond their venture capital roots are increasingly catching the eye of deep-pocketed corporate investors.

For many start-ups, rounds of venture or private equity funding are thought of as stepping stones on the way to an initial public offering — the ultimate corporate symbol of having arrived.

But a tepid investor appetite for publicly traded clean energy companies has dampened enthusiasm for splashy IPOs, leaving solar companies looking elsewhere for the large sums of money they need to build factories, construct power plants or invest in improvements to their technology.

“Clean tech generally is going to require a lot of money to advance,” said Ted Roosevelt, chairman of Barclays Capital’s Clean Tech Initiative. “You compare that with telecoms or the Internet revolution, and those didn’t require very much money.”

Specifically, Roosevelt noted that Google Inc (GOOG.O) raised just $25 million in venture funding before going public.

Compare that with venture capital-backed BrightSource Energy Inc, which is building massive solar power plants in the California desert. Last week, Oakland, California-based BrightSource said it has raised more than $530 million in five rounds of fund-raising.

It is in these later rounds that the industry is increasingly seeing big corporations step in, as venture capital firms simply don’t have the resources to fund the large-scale manufacturing needed to commercialize a nascent solar technology, for instance.

“It’s pretty hopeless,” Sequoia Capital’s Michael Goguen said of companies looking to venture capitalists for second, third and fourth rounds of funding. “But a lot of the big energy companies are pretty interested.”

Most recently, French power equipment maker Alstom SA (ALSO.PA) became the second-largest shareholder in BrightSource. Including a $75 million investment announced last week, the company has thus far put $130 million into the Oakland, California-based start-up. The two also have a partnership to work together on solar thermal power plants in the Mediterranean and Africa.

BrightSource has also raised money from Chevron Corp (CVX.N) and BP Plc (BP.L), among other strategic investors.

In addition to helping raise cash, having a strategic investor or two can help pave the way for an eventual IPO, Roosevelt said.

“It enhances their credibility,” he said.

source: reuters

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