Solyndra Goes From Solar Poster Child to Cautionary Tale

Solyndra was hailed by President Barack Obama as a poster child for the new, clean economy in May of 2010.

Just a little over a year later, the San Francisco Bay area company has announced plans to seek bankruptcy protection. And now it’s something else—a big loss for the venture capital community, an embarrassment for Obama, and a harbinger that the solar industry will have to become more efficient.

The company announced Wednesday it would seek bankruptcy protection, which will likely see a filing next week. It ended production and laid off more than 1,000 workers.

Solyndra was the first company to land a $535 million loan guarantee from the Department of Energy under the federal stimulus program, and Obama pointed to it as an example of how clean energy could create jobs.

Now, House Energy and Commerce Committee Chairman Fred Upton and Oversight and Investigations Subcommittee Chairman Cliff Stearns are calling on the administration to fork over documents related to that loan.

"It is clear Solyndra was a dubious investment," they said in a joint statement quoted by UPI. The company "is just the latest casualty of the Obama administration's failed stimulus."

Obama, meanwhile, is now forced to defend his entire stance on clean energy and issued a statement through his spokesman Eric Schulz to that effect. “While we are disappointed by this particular outcome, we continue to believe the clean-energy jobs race is one that America can, must, and will win,” the statement read, according to Bloomberg.

Meanwhile, private investors are waiting to see just how much they’ve lost in the Solyndra debacle.

Katie Fehrenbacher, writing at GigaOM, points out that Solyndra’s failure could end up being the biggest loss in history for venture capitalists, depending upon how much they can recoup from sales of the company’s assets.

VCs had bet about $1.1 billion on Solyndra since its 2005 founding, as well as drawing down $527 million of the $535 million federal loan guarantee.

Even with that guarantee, though, Solyndra could mark the biggest-ever hit VCs have taken in an equity investment, writes Fehrenbacher:

Solyndra’s VC and private capital investors include Madrone Capital, RockPort Capital, the George Kaiser Family Foundation, CMEA Capital, Redpoint Ventures, U.S. Venture Partners, and Virgin Green Fund. While Solyndra could still sell its assets for some amount of money, not many solar execs and VCs I’ve talked to think the assets are worth all that much.

The slow slide of the solar firm toward bankruptcy has introduced something called “the Solyndra effect,” to the venture capital vocabulary, and VCs aren't the only ones feeling the pain, as Lindsay Riddle points out at the San Francisco Business Times.

Riddle makes the argument that the company's model of manufacturing solar panels isn’t going to be the way to make it in the industry. Rather, companies are going to have to innovate and learn how to do things better, faster, and cheaper. As she writes:

Arno Harris, CEO of Recurrent Energy, said Solyndra’s end offers lessons, but doesn’t spell the end for the industry.

“It’s important to get the lessons right, and I think there’s a real risk we take away the wrong lessons and think the solar industry is in trouble and all solar policy is flawed when really what happened to Solyndra reflects the challenges of a commercial technology in a market that is improving costs so quickly.”

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Kent Bernhard Jr. is News Editor of Portfolio.com