The danger of politicians linking with high risk startups

Solyndra's ground breaking ceremony in 2009

Now that solar maker Solyndra has revealed that it plans to file for bankruptcy, get ready to hear a whole lot of Republican finger pointing at Obama and the Department of Energy over the misspent funds all the way up to the next election. Solyndra was the recipient of over a half billion dollars in loans from the federal government.

Republican Energy Committee’s Republican chair, Rep. Fred Upton, who had spearheaded an investigation into Solyndra earlier this year, is already using politically-charged language like “We smelled a rat from the onset,” and “In this time of record debt such disregard for taxpayer dollars cannot be tolerated.” About 24-hours after Solyndra announced its bankruptcy plans, the Republican National Committee put together this anti-Obama video about Solyndra’s struggles:

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, and politicians like Vice President Joe Bide, Energy Secretary Steven Chu and then California Governor Arnold Schwarzenegger 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. On the other hand, 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.