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Fisker automotive, the maker of high-end hybrids, is on bankruptcy watch. It’s laid off most employees, hired Chapter 11 lawyers, and may make a decision this week.
So here’s the rub: Fisker is not just risking investors’ money, it’s received taxpayer loans, too. And if the company goes under, you can bet Washington D.C. is a lot less forgiving of failure than Silicon Valley.
Fisker owes the energy department nearly $200 million dollars. The point of the loan was to lure private investors. Think of it as East Coast money attracting West Coast money. Thing is, the two coasts have vastly different stomachs for failure.
“The entrepreneur’s motto is fail big and fail fast,” says Navigant Research analyst Sam Jaffe. “And the government’s motto is never ever fail, or else we’re out of our jobs. That’s two very different mindsets.”
He says the West Coast mindset is, let’s try it. A $100,000 car, with a cool design.
Indeed, it’s struggled with production problems, a dodgy battery supplier, and a fire during testing. This stuff happens.
Joseph Lassiter at Harvard Business School says start-up investors realize most ventures fail. Quietly. That’s why it’s called “private” equity.
“And that equity tends to be quite private,” Lassiter says. “They don’t announce successes until they’re quite proven. And the failures are kept quiet.”
Except in Fisker’s case, money is on the line.
So bring on the D.C. politicians, to pounce on the Fisker “mistake” by the Obama administration.
This of course follows the failure of taxpayer-backed Solyndra.
“A few year ago, in terms of the political environment, it probably made good sense to get the economy going, to support clean technology,” says Daniel Sperling of the transportation institute at the University of California-Davis. “Right now, in Washington that appetite has been greatly suppressed.”
Suppressed, even though one loan recipient, Tesla, is thriving. Even though a free-market Republican president started this program.
The two coasts keep growing apart. Recently, automotive entrepreneurs spoke to federal auditors. They said negative publicity makes the energy department more risk averse.
So do regional differences affect how you view failure? Our Facebook fans weighed in:
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