The Market Sorted, Solyndra Lost
|President Obama Visiting Solyndra, May 2010 (Solyndra)|
The sun has set on Solyndra. The solar panel manufacturer, once the darling of the US Department of Energy, which bestowed its blessings in the form of a $535 million loan guarantee, is shuttered.
Despite this guarantee, which some sources say was almost completely drawn down, and hundreds of millions of private capital from such stalwarts as Madrone Capital, RockPort Capital, the George Kaiser Family Foundation, CMEA Capital, Redpoint Ventures, US Venture Partners, and Virgin Green Fund, Solyndra has filed for bankruptcy and laid off over 1,000 workers.
A gleaming, spotless new factory, a revolutionary new type of solar panel, and a government handout was not enough to keep Solyndra alive. Neither was more capital infusion by some of the initial investors last spring.
Monday morning quarterbacks are second-guessing this investment in a company with an expensive new technology that was built on two big bets: that the commodity used to manufacturer its competition's solar panels – silicon -- would soar and stay high, and that their first-mover advantage in flat-roof installation would cover roofs all over the country with their technology.
Both bets were lost.
Silicon prices have fallen, which caused the price of traditional photovoltaic panels to fall. This was good for consumers, if not manufacturers, and it certainly wasn't good for a company like Solyndra with a more expensive technology solving a problem that had just gone away. Oh, and the other problem they were solving was also being met by cheaper solutions from competitors.
Over the years, I've talked to many investors who shy away from companies with big, new technology risks. Risks are risky. They can also be expensive – and the more cutting edge the technology, the more capital-intensive it can be. It's very hard to pick the winning horse in such a race.
Such bets are even harder to make if the technology has unique manufacturing requirements, raw materials, or R&D needs.
In the case of Solyndra, apparently, they had all three.
And some are questioning why the government took such a strong interest in backing this particular company. I'll leave that to the pundits
I'm not saying the government should have seen this perfect storm coming with a company like Solyndra. After all, the private investors don't seem to have seen it either.
But the skeptic in me can't help questioning whether the government should even be in the business of picking winners or anointing companies. Rather, shouldn't they just make it easier for the market to sort them out?
This, by the way, is exactly what happened with Solyndra.
The market sorted. It did its job. Solyndra lost. Its investors did too. That's their job. They make bets and lose more often than they win. But what a shame that taxpayers have to lose along with them.
There will be a lot of lessons learned from the Solyndra failure. I hope one of them – for government and entrepreneurs alike – is that government sticks to making the playing field open for business and getting out of the way.
That seems a lot better than throwing a lot of our tax money away on a horse race.
Scott Edward Anderson is currently global marketing director for cleantech at Ernst & Young. He is the founder of the popular blog, The Green Skeptic, and the VerdeStrategy consultancy. He has held management positions with Ashoka and The Nature Conservancy and is co-founder of the Cleantech Alliance Mid-Atlantic. An award-winning poet, Scott was a John Sawhill Conservation Leadership Fellow, ...
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