The danger of politicians backing high risk startups

Aptera1

Bloomberg is reporting that Republican Representative Darrell Issa — whose committee has been investigating a Solyndra/Obama connection and the Department of Energy loan guarantee program — once sought to help now-struggling electric car maker Aptera score a DOE loan. Aptera recently started returning the deposits of customers who had stuck around for months of delays to buy its inaugural electric car, and Aptera never received one of the DOE loans.

If Aptera had received a DOE loan, it would have been a worse bet than Solyndra, for sure. In light of the Bloomberg scoop, I’m resurfacing the bulk of a story I wrote earlier this month on “The danger of politicians linking with high risk startups”:

Solyndra’s high-profile flameout is getting an unusual amount of attention, not only because of the massive size of the funds lost, but because President Obama visited the factory in the Spring of 2010. Politicians Vice President Joe Biden, Energy Secretary Steven Chu and then California Governor Arnold Schwarzenegger also visited the ground breaking of the factory in late 2009. When politicians go out of their way to praise and support a company, turns out the public doesn’t like it when the company fails.

But Solyndra is by no means the only greentech startup or tech startup that has become a darling of politicians. The move of both politicians in office, and former legislators out of office, to attend ceremonies at plants, join companies’ boards, and align themselves with hot startups is very common. It’s actually become almost expected for retired politicians to act as advisors to startups, and use their political connections to aid the innovations that they favor. Venture firm Kleiner Perkins has Al Gore and Colin Powell for that, and Khosla Ventures has Tony Blair.

However, politicians in office and out of office, need to be very mindful of how risky the startup is that they are connecting with. To note: the majority of startups fail, and linking with a company that doesn’t succeed isn’t all that bad. It’s just linking with a startup that spectacularly flames out and wastes public funds that could be very dangerous and could sink a promising private sector career, or lead to a failed re-election bid.

We’ve written about this before, back when Representatives John Carter of Texas and Mark Schauer of Michigan, lent their support to the highly-controversial energy storage company EEStor. I’m not sure why any politicians would take such a risk. Back then California Governor Arnold Schwarzenegger also hailed solar thermal startup Ausra as “one of the best companies in the world,” very shortly before the startup laid off staff and was forced to dramatically scale back its ambitions (it was later bought).

Former politicians that have joined boards of somewhat risky startups include Condoleezza Rice, which linked with both Khosla’s biofuel company KiOR and Tom Siebel’s carbon software startup C3. Colin Powell is on the board of high profile fuel cell maker Bloom Energy. At the same time, far less risky tech companies like Facebook and Google have been the venues for Presidential events.

I’m not advocating that politicians don’t embrace and support tech and greentech companies. Avoiding all risky and unproven technologies, would mean simply preserving the status quo — not an appealing option when it comes to energy sources, technology and climate change. But politicians need to do their home work and tread carefully when it comes to the more high risk companies. In an environment when most startups fail, but are naturally trying to put their best face forward, it’s on burden of the politicians to know what they’re getting into.

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