Megan McArdle is continuing to investigate Solyndra. Don’t miss her latest, which includes some well-informed comments from investor “Circleglider”. Who must be right because he agrees with me!
(…) Green technology occupies a special niche here in Silicon Valley. Yes, some VCs invest in green deals. But most don’t. This is because these deals are not viewed as being able to stand on their own merits – for any of them to succeed, market distortions are required, typically in the form of government subsidies, tax credits, mandates, regulations or funding guarantees. This means that green deals are basically political deals – whether or not your deal works depends entirely upon what happens in Sacramento or Washington. So VCs who do invest in green deals are comfortable with these distortions, and factor them into their investment decisions.
Solyndra appears to be the result of a combination of many of these factors: certain investors were comfortable with the political aspects of the deal, they were institutionally predisposed to assume the Company was an on-going concern, and very large sums were available for investment. As a class, it appears that the total exposure of VC firms in Solyndra was around $150M (data from Solyndra’s S-1 filing with the SEC). Private equity firms, however, appear to have sunk nearly $650M into Solyndra.
Megan concludes with this:
More to the point, cleantech has in fact received billions and billions in both front end and back end subsidies. A billion doesn’t seem to be enough. This makes one wonder if any sum will be.
This is a very informative – read the whole analysis.