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Mon January 23, 2012
How A Start-Up Incubator Is Racing Against The Clock To Create Jobs
After launching 11 eco-friendly companies across the state, the University of New Hampshire's Green Launching Pad (GLP) is racing to spend the last of its stimulus funding. For the past two years, GLP has used federal stimulus money to offer grants and support to up-and-coming green companies. The idea is, as the companies expand, more well-paying, environmentally-friendly jobs will take root in the state.
The feds will turn off the stimulus funding spigot by the end of April. And that means that GLP has less than four months to spend the remaining money on growing New Hampshire's small green economy.
Racing Against The Stimulus Deadline
And this is where the narrative of the Green Launching Pad changes. For the past two rounds (designated GLP 1.0 and 2.0), the focus has been on pumping money into promising start-ups, focusing on reducing emissions and energy efficiency, conservation, and renewables.
While no GLP companies have shuttered since getting funds, the measures of their success have varied widely. Some have already established themselves as up-and-coming players in the marketplace, while others are still finding their feet. And this broad variation has made determining the success of the Green Launching Pad as a job creator a difficult endeavor.
"We focused on companies that had a very specific proposal to use environmentally-friendly materials, or recycled materials, and at the same time have a quick impact on the state," Venkatachalam said. "The only difference is the earlier two rounds of companies had [more] time. They had six months to about nine months to spend the funding they received and also to take their ideas to the marketplace. Whereas in this round, it's more of an accelerated round, because of the time squeeze we have."
Ultimately, three companies made the cut to split $176,200 in grant funding this round: LDI Corporation, a Portsmouth-based upholstery manufacturer; Earthtec, a clothing maker from Portsmouth, and RAS-Tech, LLC*, Brentwood-based asphalt sealant firm.
One of Green Launching Pad's biggest boosters over the past couple of years has been Governor John Lynch. At a news conference announcing the latest round of grant winners, Lynch tied the GLP initiative to New Hampshire's slow movement toward economic recovery.
"Our first priority, really, continues to be doing what we can to create jobs and help our businesses grow here in New Hampshire," Lynch said. "And while New Hampshire continues to lead the way out of the recession, we still must remain vigilant, and get people back to work. Our unemployment rate dropped again last month. Our unemployment rate is 40 percent below the national average, which is good, but we still have lots of people who are looking for work. And we need to do everything we can to get people back to work."
Counting Up The Jobs So Far
For its part, the Green Launching Pad has gotten $1.5 million in federal funds through the state's Office of Energy and Planning. That money has helped GLP provide marketing and technical support to winning companies, and fund the initial grant awards. As the stimulus spending clock runs down, the program is giving additional funds to earlier winning companies that have shown promise.
Averaging the cost-per-job on the micro scale of GLP companies is tricky business. Until this latest round of funding, the focus was on promising new start-ups. Those might employ a handful of people, or even just one person. Take the case of Holase, a GLP company that sells portable, solar/battery-powered traffic lights (which we covered in a previous post). Founder and CEO Evan Bontemps was struggling to fund the firm out-of-pocket. After getting $60,000 in a previous round of GLP funding Bontemps said at this week's news conference,
"We've been able to stay alive. And last year, when we received the Green Launching Pad award, that was the domino that tipped to get us where we are today. Having said that, we're blessed that we've received a purchase order from the state of New Hampshire," Bontemps said.
Bontemps has also traveled to Haiti to advise the Haitian government on using the company's solar-powered traffic signals. "They'll never need to touch the electrical grid whatsoever. Because that's a nation where they actually have rolling blackouts," he said.
The money, Bontemps said, has helped him to be able to fill purchase orders for early customers, and to begin building buzz about Holase. And it's clearly made a big difference for a firm that just months ago was barely treading water.
As for jobs, "With the Green Launching Pad funds, we were able to hire multiple interns to help us do our product marketing and sales efforts," Bontemps announced.
So Holase is a promising start-up, but not a job creator. At least, not yet.
Enertrac, a smart metering company which won GLP funding in the first round, however, may be a different story. Executive Vice President Patrick Mansfield touted his company's (unspecified) growth at the news conference, "We didn't get a lot of money, but we did get a lot of support from a lot of areas within the university and through GLP to help us do market research, to do website design, to do data analytics on our process and procedures," Mansfield said.
"And we continue to get that today, two years later, as if we had just won it yesterday. The result of this is, we went from, when we started with the GLP thing, 200 or 300 of these things installed. We got the money from GLP one, we had maybe 800 installed. As of June of this past year, we had 1,200 installed. We ended the year with 24,000 installed , 150,000 on order. We have now more openings for new employees than we have employees in the company."
Is The Job Growth Worth The Cost?
While Green Launching Pad's helped nurture some promising start-ups, the job creation aspect of the project's been a bit elusive. That's one of the startling things about the focus of the latest round of grants: It's less about incubating intriguing eco-friendly start-ups, and more about working with more established companies to produce tangible results–in the form of jobs.
One of the companies GLP believed could deliver jobs in the short-term was Portsmouth-based clothing manufacturer Earthtec. CFO Michele Drenzek told StateImpact that, right now, the company relies on manufacturing companies across the United States and in China to keep up with customer demand. "We're certainly going to do the most that we can to bring as much [manufacturing work] as we can back to New Hampshire," Drenzek said.
And that's where the Green Launching Pad grant comes in. Right now, Drenzek said Earthtec employs four or five people on-site in Portsmouth to manufacture high-price or quick turnaround orders. But expanding operations, "It takes a lot of capital. It also takes a lot of machinery and we didn't have the capabilities of doing that [at first]. In the first three years of our business, we were trying to grow our brand as sustainable as possible, and now we're there," Drenzek said. "So now we're in a position to work on the other pieces of our business, which would be our manufacturing...We'll never be able to bring everything in-house, I do not think. But what we're trying to do is at least the pieces that we can do in the United States, we'll try to bring back here."
Earthtec's $59,700 award from the Green Launching Pad will help Earthtec invest in the machinery and other manufacturing infrastructure to create more jobs in Portsmouth. As for the number of jobs created, Drenzek said, "I think we're basically going to be looking to hire eight to ten people, and that will take care of the manufacturing piece, which will include sewing and cutting. And with that, we will be able to begin the process of manufacturing, and actually end with our shipping department and do the entire process there at 140 West Road [in Portsmouth]."
Averaged out, that means each new job making clothes at Earthtec cost the federal government roughly $5,970.
So we're not talking big-time growth, but it's also not a bad deal, when you put it into a national context.
One of the criticisms that's dogged stimulus-funded job creation programs is how much each job costs. The last summer, the conservative Weekly Standard made waves when it analyzed a report released by White House economists and reported the average cost per stimulus-created job was $278,000. For its part, the White House objected that dividing the stimulus cost by the number of jobs created wasn't sound methodology.
But the figure has gotten a fair amount of attention from the mainstream media as well.
So compared to that, spending $59,700 on Earthtec to help the company buy the equipment that will allow it to bring 10 jobs to the Seacoast is a steal.
But taken in total, it's hard to estimate how many jobs the $1.5 million of GLP federal funding actually created–or has the potential to create.
When StateImpact asked Governor Lynch to respond to criticism that the cost per stimulus-created job is too high, he responded,
"It always takes time for these entrepreneurial companies to gel. It doesn't matter what the company is, what their products are, what market sector it is they're in. As a business person, I'm well aware of that. So it takes a number of years before the companies really get on their feet and they grow. And I am convinced that out of the number of companies that have been acknowledged as Green Launching Pad companies, and given the accompanying awards, that a number of them will, in fact, take off."
Whether the federal government feels the same way remains to be seen. GLP Project Director Venkatachalam told StateImpact that the program's already reaching out to private firms for help keeping the start-up incubator going. And once the stimulus money dries up in April, Venkatachalam says the program will pursue a series of competitive grants from the Commerce Department and the Energy Department.
*We could not find a corporate website for RAS-Tech, LLC