Startup Scandals in Silicon Valley

Two scandals have broken in Silicon Valley recently that cast doubt on the ability of government agencies, such as CORFO in Chile and the National Renewable Energy Laboratories in the USA, to identify and nurture emerging industries.

In the first, Sam Liccardo, a city councilman in San Jose, California, exposed a report on the results of their 4 business incubators, similar to Start-Up Chile, during the last 17 years. The report was suppressed because it tarnishes the reputation of the highly touted incubators, which were emulated all over the world by politicians hoping to emulate the success of Silicon Valley. The city invested $30m in the incubators, intending to generate tax revenue and jobs in San Jose, but only a few companies remain in business and most have left San Jose.

According to San Jose Inside:

Liccardo’s memo says it is important to note that about 80 percent of the $515 million positive economic impact was “attributable to a single company, Callidus Software, as of the date of the 2009 report.” Several months later, Callidus relocated from San Jose to Pleasanton.

Taking Callidus out of the equation, the incubators created only 150 jobs in San Jose over a 15-year period, according to Liccardo’s memo. He adds: “It appears unclear whether some or all of those 150 employees are the same people employed at the firms prior to their incubator tenure.”

Massive Government Solar Panel Maker Crashes and Burns
The second scandal is the waste of $535m by President Obama and his gang in the federal government in Solyndra, a Silicon Valley solar panel manufacturer that went bankrupt a week ago. The investment was a low interest loan that failed to reflect the high likelihood of failure, part of a $40b program in alternative energy, and as the government receives no equity from any of the borrowers, the failure can’t be overcome by other successes. On the contrary, more failures may come soon, as the price of solar panels has fallen 42% during the last year. According to a San Francisco newspaper:

Solyndra offered a unique product – tube-shaped solar modules that could absorb sunlight from any angle. But the company, created in 2005, found itself undercut by low-priced panels churned out by new factories in China, built with substantial backing by the Chinese government. Other U.S. solar-panel companies face the same pressure. Solyndra was the third domestic solar company to announce bankruptcy last month, joining Evergreen Solar and SpectraWatt.

“The U.S. solar panel industry is in horrible shape, and that’s likely to continue as long as China continues to flood the market,” said Severin Borenstein, director of the University of California Energy Institute in Berkeley. “At the current (price) levels, most U.S. companies can’t survive.”

So, the government of the USA is losing money because the Chinese government has more money to burn. The Chinese once were “communist” and the USA was the “capitalist” leader, but have converged to become similar countries.

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