VOL I, ISSUE 2, Spring 1996
Ohio is once again in a position to garner another first in the evolution of flight with the manufacturing of a new all composite, single engine, business jet. This new turbo fan airplane is the dream of seasoned entrepreneur, Bill Northrup. NCIC is pleased to have approved a $500,000 investment in this early stage project and believes it will assist Paragon in raising the additional capital needed.
Northrup, the owner of a twin engine Cessna 340, is a native New Yorker who found the assets of Wright Patterson AFB, Ohio State University, Wright Technology Network, NASA Lewis Research Center, NCIC, and North American Aeronautical Consultants to be appealing enough to set up the initial design and FAA approved prototype construction facility in Ohio.
This is a multiple phase project that will require funding in excess of $20 million. "We're in early, in hopes of helping to attract additional investors and partners," according to Frank Winslow, the Executive Director of the National Center for Industrial Competitiveness.
Although there is significant risk, possibly no other project that NCIC has reviewed better represents the purpose of this organization. Utilizing state-of-the-art technologies, in new designs, that support the advancement of the aerospace industry and the continued commercial application of services offered through the Department of Defense, and, more specifically, the laboratories at Wright Patterson Air Force Base.
Northrup has assembled a strong team of aerospace designers and technicians. This management team is in constant contact with the Federal Aviation Administration (FAA) in order to expedite the design and certification approval process. It is estimated that the first commercially sold Spirit will roll off the assembly line in early 1999.
The Spirit will be powered by a 1900 pound thrust Williams-Rolls FJ44 engine. The maximum cruise speed is estimated to be 402 knots giving it a range of 1,000 nautical miles at an altitude of 36,000 feet. The plane will be 100% composite construction and have two cockpit seats and four cabin seats.
Paragon continues to work with its strategic partners in designing the Spirit and planning for the manufacturing of the final product. They are still looking for additional investors. NCIC will be happy to discuss this project with anyone interested, and make arrangements for representatives of Paragon and potential investors to meet. Please call NCIC at (937) 253-1777 to set up an appointment.
During this past year we have approved investments in 13 companies totaling $2 million. Our goal for 1996 is to invest an additional $3 million by year end. Most of the investments were made in early stage technology-based companies with six of the nine investments in start-up ventures. A listing of our investments as well as profiles of these companies will be featured in future newsletters.
This investments niche, beyond the R&D stage, but prior to the size and growth potential that would interest established venture capital funds, has been identified as "The Entrepreneurial Capital Gap" by the National Census of Early-Stage Capital Financing published by the University of New Mexico. This Capital Gap exists because the cost of due diligence exceeds the expected returns and the venture capital industry has been shifting its investment practices to larger and fewer investments as well as later stage financing.
The biennial national survey of early-stage venture funds reports in the 1995 census, that the typical early-stage investment by a public fund was $385,000, and these early-stage venture funds average 5-10 investments per year. According to this report, a serious capital gap exists. Entrepreneurs commonly can finance as much as $100,000 from savings or family and friends, and institutional investors may step in when entrepreneurs want $1 million or more. It's the gap between the $100,000 and $1 million that's still unfilled and is the investment niche targeted by NCIC.
In targeting this investment niche we have structured a flexible investment policy, that while it provides returns to NCIC commensurate with the financial risk involved, it allows flexible repayment and often leverages other funding from individuals or institutions. Stimulating the formation of of new ventures that utilize technology to create new products, services, and processes is a very risky business. With our concentration on start-up and early-stage companies, we would expect a 25% or more failed investment rate. Our repayment terms reflect this realism.
NCIC does not compete with banks or other lending institutions but collaborates with these other funding resources, enabling a total financing package to be tailored to the needs of all parties. Most NCIC investments have some combination of debt and equity with repayment based on loans with deferral of interest and or principle plus royalties on sale, and warrants. This allows emerging businesses to get started before repayment is due while allowing NCIC to benefit in future successes through the use of convertible debt or warrants.
In selected cases, for more established companies, short term loans can be made to assist in plant or equipment financing or new business expansions.
An equally important service offered by NCIC, in addition to financial support, is the technical, business, financial, and marketing support provided by a variety of service providers both public and private. NCIC works closely with the Small Business Development Centers, Manufacturing Extension Centers, Edison Centers, Wright Technology Network, as well as individual consultants to assist businesses to grow and become profitable.
Despite the continued growth in venture capital and record levels of initial public offerings of companies backed by venture capitalists there continues to be an "Entrepreneurial Capital Gap" especially in the Great Lakes region. NCIC will continue to focus on this very under served but important investment niche.
Construction of the $15 million facility will begin in 1997. Operational management for the center will be provided by the University of Dayton Research Institute (UDRI). The Miami Valley Economic Development Coalition is responsible for the coordination of this effort.
Additional information on the center may be obtained by calling Ron Wine at (937) 222-4422.
Back to the home page