"We want to invest at a discount to where we anticipate the public company is going to be, and that target is generally 50%," explains Tim Keating, founder of Keating Capital Inc., creator of a fund for individual investors that makes pre-IPO investments in innovative, high-growth private companies that are well on their way to becoming public. You might think Keating would be backing the new wave of social media companies destined for public debuts, such as Facebook Inc. and Zynga Inc. But, says Keating in this video with The Deal Pipeline, "In the case of the social media companies, we didn't see evidence of that discount. Our view is relative to where these valuations are; these companies either have to grow substantially in revenue profitability, or the valuations are going to come down." A far more promising sector for Keating's investment strategy is alternative energy. One cleantech company in the portfolio has already gone public, paying off for the firm's investors. Keating invested in renewable oil company Solazyme Inc. in July 2010, participating in the Series D financing at a price of $8.86 per share. In the company's IPO this May, Solazyme raised $227 million at $18 per share and has generally traded a few dollars above that since. "We're looking at slightly north of 100% returns," says Keating. "So far so good." For more on Solazyme, see "Greener horizons" on The Deal Pipeline. - Mary Kathleen Flynn