The solar energy startup Solyndra announced it has suspended operations and plans to file for bankruptcy next week, only three years after being valued at more than $1 billion.

The Chapter 11 filing will make Solyndra the third U.S. solar company to seek bankruptcy protection in the last month. Evergreen Solar Inc. declared bankruptcy two weeks ago, while SepctraWatt Inc. followed suit four days later.

Solyndra's fall is especially unnerving given that it was one of the most well-funded start-ups on record, according to The Wall Street Journal's blog Venture Wire, meaning its venture capitalist backers are likely to lose a sizable chunk of their $1.1 billion investment.

The loss is expected to be so significant that a new term, the Solyndra Effect, has been dubbed by industry insiders to describe uncomfortable feeling the limited partners of venture funds that backed Solyndra are experiencing right now. Venture Wire reports that such big losses can make fundraising difficult for venture capitalists, especially in a questionable economic environment where many are struggling to raise funds.

Solyndra's downfall may leave an especially bitter taste in the mouths of some investors since many were encouraged to stand by the company even when it looked like its fortunes were beginning to fall. In March, the U.S. Department of Energy, which gave Solyndra a $535 million loan in 2009, reportedly pressured multiple venture firms to stick with the company.

At least three of Solyndra's major backers - such as Madrone Capital, RockPort Capital and the George Kaiser Family Foundation - reinvested at that point.

The company has reportedly drawn down $527 million of the $535 million loan guaranteed by the Department of Energy. It is unclear as to which debt holders will be paid back first, according to multiple reports, which said the case will likely be sort out in a bankruptcy court.

In a statement, Solyndra said it could no longer compete with bigger overseas rivals and said all of its 1,100 employees are being laid off immediately.

 While the statement said the company will likely try to sell its assets, it is unclear whether they will have interested buyers considering specialized equipment used to make their solar panels - which were constructed for commercial rooftops -  are not in high demand, Venture Wire reports.

Solyndra was the first company to receive a loan guarantee under an advance clean energy program created in 2005. While the company had raised about $600 million and was valued at more than $1 billion at the height of the market in 2008, it began to lose momentum shortly afterward. By 2010, investors were contemplating whether they should raise new equity valued at just $200 million to $250 million.

The company had revenue of $140 million in 2010 and had planned to produce 300 megawatts of solar panels this year.

Concerns about the solar industry caused shares for solar companies to slump on Thursday, according to The Associated Press. Shares for Trina Solar Ltd., Hanwha SolarOne Co. and Yingli Green Energy Holding Co. fell more than 6 percent, while First Solar was down 3 percent, Suntech Power Holdings Co. fell 4.8 percent and Canadian Solar Inc. shed 4.9 percent.