CEO of a local startup says New Mexico is stingy with incentives
Aerospace Composite Structures is exactly the type of business New Mexico’s economic development leaders say they want to attract.
It’s a clean industry, using a new process developed with the help of Sandia National Laboratories to make lightweight, durable air cargo containers.
It employs 12 people at good wages in its Albuquerque office and hopes to eventually employ several hundred.
Yet its CEO says he’s frustrated by a lack of support in New Mexico for the startup company and is considering moving out of state.
“This is a beautiful place to live, but the economic environment is terrible, especially for startup companies,” said Bob Bushman, CEO of Aerospace Composite Structures LLC.
“We felt from the beginning the state didn’t lift a finger to support or help us in our developmental and growth stages,” he said. “We became extremely frustrated with the lack of backing.”
He says other states have begun wooing his company with offers of free rent and financial backing to move before he begins manufacturing. Links to Sandia Labs and the fact that all 12 employees of the company are from Albuquerque have made him hesitant to leave, he said.
The state
State Economic Development Secretary Rick Homans is reorganizing his agency to focus on helping existing and new companies such as Bushman’s.
Still, sometimes there are difficulties, especially with startups.
After being shuttled around several Economic Development Department employees who weren’t particularly helpful, Bushman said, he finally connected with Fabian Trujillo.
Over several months, Trujillo made calls, tried to set up some meetings and interviews with bankers and investment firms. No deals were worked out.
“They are a hard company to be bankable because they are a startup on the front end of their cycle,” Trujillo said. “Most banks like to see more history.”
Trujillo, however, was able to get Bushman and his company introduced to the state in-plant training program, which provides money to companies for employee training. The company on Monday was awarded $111,891 to fund initial training for 17 new manufacturing jobs, which will pay on average of $13.87 an hour.
The product
The company’s air cargo container won Federal Aviation Administration approval in March 2002.
The containers, developed with help from Sandia Labs, are made of a lightweight thermoplastic. They are much lighter, more durable and easier to repair than the standard aluminum containers used in the industry, the company said.
The company, started in 1999, received $4.5 million from British investors. Later those investors persuaded a company called Innobox to invest. Bushman was chairman of Innobox. He agreed to step in as CEO of Aerospace Composite Structures last year to get FAA approval for the containers and to bring the product to market. Bushman is known in the aviation industry for developing air cargo logistics for United Parcel Service.
For almost a year, Bushman tried to persuade local bankers, venture capitalists funded by the state, and the state Economic Development Department that the product was a worthwhile investment.
Instead, after no success in the state, he took the company public on the London Stock Exchange in March under the symbol Aerobox. The move netted several million dollars.
Investments
Dennis Burt with Burt & Nagel CPAs LLC in Albuquerque helped with the public offering. “Tough as this process is, it’s no more difficult than trying to keep my client’s business in New Mexico,” Burt said in a recent letter to the Albuquerque Journal.
Bushman said it is particularly ironic that venture capital companies with offices in and funding from the state invest most of their money outside New Mexico.
“A couple of the firms we interviewed with said they had better investment opportunities out of the state where they could get better returns. That really frosted us,” Bushman said.
Burt said in his letter to the Journal, “Without the ability to raise investment capital, no tax changes, however progressive, will create the environment to allow business to grow.”
Homans acknowledged that the venture capital firms that receive state funds invest most of the money outside the state.
He said legislation passed this year changed the rules on how the state Investment Council can invest money. It is now allowed to put more money into alternative investments like startup technology firms, venture capital funds and even Hollywood film projects, and it can directly invest in some companies.
The council manages the state’s permanent endowment funds — the Land Grant Permanent Fund and the Severance Tax Permanent Fund. The funds produced almost half a billion dollars during the last fiscal year.
Bushman said the state did try to help in January when it introduced him to Trujillo and has promised more support recently.
Homans last week said he will work with Bushman in seeking additional financing from local banks.
Bushman said he expects to hire up to 35 people in the company’s next phase, by the end of this year.
Aerospace Composite Structures already is looking at automotive and modular building applications for the thermoplastic material used in the containers. New uses could open more markets.
“We have access to financing outside the state, but it doesn’t end the resentment and frustration that our investors and supporters have felt (about) the state, which could have helped us out when we really needed it,” Bushman said.
Help for Eclipse
Bushman was especially resentful of the attention and help the state gave to Eclipse Aviation when it came to New Mexico in 2000.
“We are a lot less risky than Eclipse,” he said.
Eclipse Aviation is developing a low-cost private business jet it hopes will revolutionize the air industry. It plans a 2,000- employee factory in Albuquerque.
The state passed special legislation that exempted Eclipse from gross receipts tax and immediately offered job training money, investment tax credits and industrial revenue bonds. The city promised to add infrastructure to Double Eagle II airport and made more than 40,000 square feet of space available at the Albuquerque International Sunport.
Eclipse remains optimistic despite setbacks last year, including having to find a new engine after it decided the original engine was not powerful enough.
As for Bushman, “We haven’t decided New Mexico is the place for us. It’s traumatic to have to move, but we are in a growth stage and need to know we will have support of the community when we need expansion money. I don’t see that here.”
Bushman hopes that will change.
“The proof is in the pudding,” he said. “We will see what happens over the next few months.”
