Against the Tide

(Photo/Google Images)

You can’t push an incoming wave back into the sea.  No matter what you do, it’s going to come crashing down upon the sand. 

The same may be said of business ventures which, for whatever reason, are about to hit the beaches of the bankruptcy courts.  This applies whether a company is in the field of solar energy or in any other emerging market where competition is tough and the future uncertain.

The rate of failure among start-ups, especially among those in new, cutting edge industries is very high – often 60% or greater within the first four years.  One study that employed Census Bureau data shows that only 29% of new businesses which started in 1992 were still operating in 2002.

That is why, in the United States, the traditional source of funds for unproven start-ups has been venture capitalists, not the Federal Government.  

Venture capital firms usually spread their risk among a diverse group of young emerging companies and perform a high degree of analysis on a fledgling enterprise, its founders and its markets.  Their due diligence is pristine.

 Venture capitalists carefully invest their own and other investors money in the hope of high returns that may come from just a few companies in a wide stable of investment positions. 

Those are the reasons why the Obama Administration was so basically wrong in placing a failed $535,000,000 bet on Solyndra, an unprofitable, California high-tech company in the solar energy field. 

The Administration can’t wish a company into success, any more than it can push an incoming wave back into the ocean.  The Feds are simply not equipped to make the right business decision.

Evergreen Solar Panels (Photo/Google Images)

Another example:  Yesterday, The Boston Globe reported that Evergreen Solar “has been appointed by a U.S. Bankruptcy Court to auction Evergreen Solar Inc.’s $425 million plant in Devens (a former military base in Central Massachusetts) and other assets.”

The Commonwealth of Massachusetts “gave the Marlborough (MA) based green energy firm $21 million in direct grants and millions more in tax incentives and other benefits to build the Massachusetts plant in exchange for a promise to add jobs.”

The plant has since been shut down and 800 workers have been laid off.

When AR&D ( American Research and Development) – once  known as the ‘granddaddy’ of venture capital firms – invested in Digital Equipment Corp. in the early years of the computer business, it did so with no U. S. Government assistance. DEC never took a dime in federal grants.  

That’s the way it was, and that’s the way it should be.