September 19, 2011
President Obama’s has been hit with a one-two punch in recent weeks with two scandals that both involve risky tech startups, politics, money and the question of how to create innovation around national infrastructure, one for energy and the other for communications. While I covered solar maker Solyndra’s bankruptcy, which took down with it an over $500 million government loan,Stacey Higginbotham has been writingabout wireless network company LightSquared’s plans and emerging political story.
Here’s where I see these two narratives connecting in various places, and some potential lessons from these two scandals:
1). The political climate: Both Solyndra and LightSquared faced hearings from Republican committees last week, looking to investigate whether the White House stepped in and helped garner these companies federal support — for Solyndra that was the awarding of a $535 million loan, and for LightSquared it was both a conditional waiver from the FCC for its spectrum plans, and the potential interference from the White House of the testimony of an influential General. LightSquared is now the subject of House Armed Services Committee hearings, and Solyndra is fodder for the House Energy and Commerce Committee hearings.
As the Guardian put it: “One of the consequences of Republicans winning control of the House of Representatives was always going to be embarrassing probes by congressional committees. Now the results are starting to come out.” Cronyism is the new term of the month, and Republican Presidential candidate Michelle Bachmann even started using it about Obama in her speeches.
2). Technology risk: Solyndra and LightSquared were born out of “big ideas,” that delivered innovative, though high-risk, technology. Solyndra has already proven to be a bust — the risks took over — so I’ll start with it. Solyndra’s business plan focused on making solar panels without using silicon (the material that traditional solar panels use), with the idea that the price of silicon would go up. Instead, silicon prices went down and it couldn’t compete with traditional solar panel makers. Solyndra’s other innovation was based around building a panel out of a series of tubes that cost more to produce, but the company thought would be cheaper to install, and thus would have lower overall costs. That never proved out in the market place because the company’s high manufacturing costs led it to run out of money before that thesis could be proven/tested over time.
LightSquared hasn’t yet become a disaster, but it’s ambitions are so large that Stacey thinks it could be building a castle made of sand. The company aims to create a combined satellite and terrestrial network that could provide a competitive wireless broadband alternative to the nation. LightSquared’s tech risks come from the interference its spectrum causes with GPS signals, as well as the massive amount of funding it needs and overall questions about the viability of a wholesale business model involving 4G…