President Obama is facing fresh criticism for engaging in “crony capitalism” that rewards high-profile supporters with federal dollars. The story extends well beyond Solyndra to a string of other green energy firms.
Recent coverage has shed light on Obama’s connections to two individuals specifically: Steve Westly and John Doerr. The latter is a partner at Kleiner Perkins Caufield & Byers, a Silicon Valley venture capital firm whose portfolio includes 16 recipients of federal money under the Obama administration.
“Doerr is helping to create the biggest new market the world has seen since the dawn of the oil industry – and asking for taxpayer dollars to do it,” Conde Nast Portfolio’s Russ Mitchell wrote in 2007.
Two years later, the San Francisco Chronicle reported that Doerr saw hope of a revived green energy industry under Obama. He “has been meeting with Obama's transition team and leaders in Congress to urge them to use the new economic stimulus package to modernize the electric grid and offer new incentives to help clean energy startups get off the ground.” And that is just what they did, to the benefit of numerous KPCB investments. Doerr, meanwhile, sat on the president’s Economic Recovery Advisory Board, advising the administration on how to spend stimulus dollars.
Westly, who bundled between $700,000 and $1 million for Obama’s two campaigns and sits on an Energy Department advisory board, also unabashedly mixes politics and business. His venture capital firm, the Westly Group, saw federal green energy dollars steered to at least four companies in its portfolio.
“Government is not always bad and especially for something that is going to affect your business, you should be involved with it,” Westly reportedly told Marc Tarpenning, founder of Westly Group investment Tesla Motors. “He encouraged us to think about Washington,” Tarpenning said.
While Westly and Doerr are high-profile examples of what can fairly be termed “venture corporatists” – VC executives who see government support as integral to a successful investment strategy – other examples have received little scrutiny, even as the presidential campaign has focused more attention on “crony capitalism.”
Westly was heavily involved in the Solyndra loan guarantee, even exchanging emails with top administration officials about the company. But other venture corporatists were involved in the Solyndra saga as well.
Rockport Capital Partners
David Prend’s Rockport Capital Partners owned a 7.5% stake in Solyndra. Like Westly, Prend exchanged emails with Department of Energy officials about Solyndra – specifically, “how to get the word out” about the company – as well as “another Rockport portfolio company,” according to the Washington Post. Prend sits on an advisory board for DOE’s National Renewable Energy Laboratory and chairs another DOE panel advising the Department on solar energy.
Rockport general partner Chuck McDermott also advises the National Renewable Energy Laboratory as part of its Venture Capital Advisory Committee. “During his 12 years of senior level energy and environmental policy work in Washington, DC,” boasts McDermott’s company bio, “Chuck established strong administrative and strategic relationships that have put him at the forefront of cleantech policy deliberations today.”
Rockport-backed Solyndra cooled national enthusiasm for green energy “investment.” So in May, Obama visited an Iowa wind energy facility to call for more federal spending on green energy. The company that hosted him, TPI Composites, received $9 million in stimulus tax credits in 2010. A year before, TPI raised $26 million in capital from investors that included the VC firm Element Partners. Six Element investments, including TPI, have received federal support under Obama.
Element’s most prominent political connections come by way of two of its operating partners: former Pennsylvania governor and Democratic National Committee chairman Ed Rendell, and Kathleen McGinty, who was appointed by Rendell as secretary of the Pennsylvania Department of Environmental Protection.
McGinty, who the Pittsburgh Post-Gazette describes as a “protégé of Al Gore,” formerly served as chair of the White House Council on Environmental Quality, founding director of the White House Office on Environmental Policy, and a senior environmental adviser to Gore. White House visitor logs show she visited Nancy Sutley, the current chair of the Council on Environmental Quality, in 2010 to discuss the National Environmental Policy Act.
Vantagepoint Capital Partners
BrightSource energy, a high-profile recipient of stimulus “investment,” has received significant attention due to the connections it enjoyed through former Commerce Secretary John Bryson, who was the chairman of the company’s board. But BrightSource also had significant connections through one of its top investors: VC firm Vantagepoint Capital Partners.
Vantagepoint Principle Sanjay Wagle headed “Clean Tech for Obama” during the 2008 campaign, the first outside group to meet with Obama’s transition team after the election. In March 2009, Wagle left Vantagepoint for the Energy Department, where he was a renewable energy grants adviser for the stimulus package, and later the associate director for commercialization at DOE’s Advanced Research Projects Agency – Energy.
Vantagepoint also enjoyed the political pull of venture partner and senior adviser Robert F. Kennedy Jr. and board member Steve Dolezalek. Dolezalek, who also sits on the Center for American Progress’s Clean Tech Council, was personally in contact with DOE official Jonathan Silver regarding a stimulus loan for BrightSource’s Ivanpah solar project. BrightSource was one of four Vantagepoint investments to receive federal backing under Obama.
SolarReserve, which got a $737 million loan guarantee under the stimulus, had investors with connections both to the Energy Department and to the president himself. One of its financiers, VC firm Good Energies, employed David Sandalow as a senior adviser until he left for DOE to be Secretary Steven Chu’s “principal adviser on energy policy,” the words of congressional investigators.
SolarReserve also enjoyed the backing of Citi Alternatives. The fund’s former managing director, Michael Froman, is a college friend of Obama, helped him break into the New York City fundraising circuit during the 2008 campaign, sat on his transition team, and now serves as a deputy assistant to the president.
During the campaign, Froman “had a long list of New York finance friends who would be willing to part with some cash for the right cause,” the Washington Post reported. “Froman helped to get Obama in the door, and even persuaded certain financiers, who had strong ties in the community, to support Obama.” Froman himself bundled at least $200,000 for the president.
White House Chief of Staff Jack Lew is the former COO at Citi Alternatives, which also invested in stimulus beneficiary Solar City.
Silver Lake and DBL Investors
Solar City enjoyed backing from two other notable VC firms: Silver Lake Kraftwerk and DBL Investors. The former is owned by Soros Fund Management. Before joining Silver Lake in 2011 as a partner, Cathy Zoi served as Acting Under Secretary for Energy and Assistant Secretary for Energy Efficiency and Renewable Energy. While at DOE, Zoi’s husband’s company got $584,000 in stimulus tax credits.
DBL Investors, whose portfolio boasts four federally-backed companies including Solar City, enjoys the influence of Managing Partner Nancy Pfund, a charter member of the National Advisory Council for Environmental Policy and Technology, which advises the Environmental Protection Agency, and Partner Seth Miller, who, according to his bio, has “work[ed] on environmental policy issues for the White House and the United States Senate.”
One needn’t allege a “political payoff” to root out the impetus for venture corporatism. In fact, the senior vice president for Westly-backed company Amyris summed up the political nature of green energy investment quite well:
We found that Steve [Westly] is very helpful and insightful in understanding the political landscape, especially from the energy side. Because of his past in D.C., he has been able to get some introductions. Once he introduces us, it’s our job to actually do the work and show whoever he has introduced us to the value we can bring.
But firms that don’t enjoy such political backing don’t get those introductions. Clean tech companies that enjoy political connections benefit from the very fundamental advantage of being noticed by the officials that control Washington’s green energy purse strings. Serving in government with those officials or donating money to the people who appoint them can open doors unavailable to run-of-the-mill businesses.
In short, companies backed by Westly – and Doerr, Froman, McGinty, Wagle, and other venture corporatists – enjoy a highly lucrative leg up on the competition: administration officials willing to take their calls.