The Optimism of Success, the Risk of Failure
In order to gain a better perspective of the Solyndra as a cautionary tale, let?s go back half a decade to its beginning. ?The year was 2005. ?We were still in the midst of the housing bubble. ?Home sales and prices were rising, and the economy was just as vibrant. ?There was also much optimism in clean tech, with many venture capital firms backing start ups in the field.
Solyndra was one of those start ups. ?Over subsequent years, venture capital firms such as CMEA Capital, George Kaiser Family Foundation, Madrone Capital, Redpoint Ventures, RockPort Capital, U.S. Venture Partners and Virgin Green Fund invested over $1 billion in Solyndra. ?The venture firms were investing in Solyndra?s potential for growth, as the company still had yet to prove itself on the market.
Ideally the investment would turn out to be successful as there are still high hopes for the clean energy revolution. There were high hopes that Solyndra would be a true success story.
By the same token, failure and loss of investment money is always a risk for any business, clean tech start ups included. ?No one can readily predict the future with 100% certainty. ?But anyone can take their best educated guess. ?As the old adage goes, it?s better to fail fast, learn, and regroup, rather than fail miserably later.
Economic Stimulus or Postponing Failure?
In 2009, Solyndra reached $100 million in annual revenues, still a long way to pay back it?s investors. ?At the same time, the company still needed money to stay afloat, and received a $535 million Department of Energy loan guarantee. ?This was a loan guarantee at a time when other venture firms did not see Solyndra still holding the same promise. ?It was hoped that this would create 1,000 U.S. jobs as part of an economic stimulus.
Come 2011, ?Solyndra is closing its fabs, laying of workers, and going into bankruptcy. ?Half a billion dollars of tax-payer money never saw fruit. ?A billion dollars of venture capital money is gone. ?The attempt to stimulate the economy for long-term growth ended up in just postponing failure.
Now imagine if Solyndra had been left on it?s own in 2009, with no federal subsidies. ?It would have had to work with what it had to stay a float, or fail faster. ?At the very least, the taxpayers could have been saved the burden of an unpaid loan.
Lessons for the Future
Is this to say that solar photo-voltaic companies are doomed? ?No. ?If we look worldwide, the competition is thriving. ?Prices for solar photo-voltaic have come down significantly. ?The only problem for Solyndra is that it could not compete on terms with competition.
Is this to say that private venture capital should stop investing in clean tech start ups? ?No. ?On the contrary, this trial and success or failure process is how the market works. ?Start ups are a risky business with a high failure rate. ?Venture capital money is well aware of the risk.
Is this to say that the U.S. Federal Government should stop investing in clean tech start ups? ?Yes. ?The government is growing ever more in debt. ?It can?t even keep a balanced budget. ?It cannot afford to take the risks that private venture capital can. ?And that is the real lesson here.
Source: http://www.triplepundit.com/2011/09/solyndra-bankruptcy-economic-sustainable-business-lessons/
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