SPRINGDALE : Grants, credits bring Duralor as park’s tenant
Posted on Sunday, December 30, 2007
SPRINGDALE — A producer of a high-performance coating material for metal-cutting tools will arrive next month at Springdale Technology Park.
Duralor, which comes to Springdale with a patent on its process for bonding cubic boron nitride to machine parts and cutting tools, is a spinoff of Fayetteville-based NanoMech.
Springdale deal-makers worked hard to bring Duralor to town, said Perry Webb, president of the Springdale Chamber of Commerce.
“We have talked to them about being the anchor tenant at the Springdale Technology Park,” he said. “We know Duralor, and we’ve been involved with Duralor. We hope it will be a Springdale business in the near future, and we’re doing all we can to make it happen.” The city’s 34-acre technology park at the corner of Monitor Road and Emma Avenue in east Springdale is equipped with streets, utilities and fiber-optic cable. Duralor will be its first tenant.
The company was alluded to frequently — never by name — at CityFuture II, a planning summit in October at the Lodge at Mount Magazine. Webb and others kept the identity of Duralor secret while financing and development plans were completed.
A formal announcement introducing Duralor to Springdale is expected sometime in January, Webb said.
Duralor is expected to receive a grant through the Arkansas Science and Technology Authority, as well as tax credits offered by the Arkansas Economic Development Commission. The funding is crucial for startup technology companies, said Calvin Goforth, a shareholder in NanoMech and Duralor.
The company also received an undisclosed amount of seed money from private Springdale investors.
Duralor, which hopes to compete in the global, $ 20 billion market for metal-cutting tools, will initially use the Springdale location as a research-and-development center and home office, Goforth said. Production will be outsourced until sales justify adding a production facility.
Goforth is president of Virtual Incubation Co., a technology venture development company based in Fayetteville. NANOMECH CREATED TUFFTEK At CityFuture II, a Springdale planning conference that happens once every five years, civic leaders chose job growth in the knowledge and technology field as their top long-range priority.
Duralor’s product — a rugged coating patented as Tuff-Tek — can cut through highalloy steels, hardened steels, chilled cast iron and super alloys. TuffTek purportedly can extend the life of a cutting tool by 300 percent.
Created at the molecular level by nanotechnology, the product was researched and developed by scientists at Nano-Mech. Though not as hard as diamond, TuffTek has greater thermal stability in regard to iron. The coating is made of particles 1, 000 to 10, 000 times smaller than the thickness of a human hair.
“It’s certainly a milestone,” Goforth said. “We’ve been working at this for several years to be able to go into production and sales.” Duralor, at least in part, is the product of a tax-credit program for technology-based industries approved in 2003 by the Arkansas Legislature.
The Consolidated Incentive Act, which encompasses tax credits on construction, payroll, and research and development, provides state money to technology-based companies that don’t yet have a product ready for the market.
Tim McFarland, founding chairman of Accelerate Arkansas, a statewide network of volunteers that lobbied for the tax breaks, said research and entrepreneurship in nanotechnology is critically important for the state’s future.
The tax credits — needed most when research companies are operating at a loss — provide startups with cash for payroll, equipment, patent costs and rent on office and research space.
“We have to be willing to get involved in early stage development of product innovation,” McFarland said. An emphasis needs to be placed on intellectual property and information — something that hasn’t happened too often in the state’s past. “I was surprised at how little entrepreneurial deals were out there,” McFarland said, referring to what he learned during economic development summits in 2002. “There wasn’t enough activity. Arkansas was always ranked poorly in the high-tech sector.” MILKEN SURVEY In 2004, Accelerate Arkansas asked the Milken Institute, a California-based think tank that studies the U. S. economy, to undertake a survey of Arkansas.
Milken found out where Arkansas stood, and it wasn’t good. According to Milken’s estimates, Arkansas ranked 42 nd nationally in risk capital and entrepreneurial infrastructure, 46 th in human capital investment and 48 th in the size of its technology and science workforce.
The ultimate goal is to grow and nurture the next Microsoft.
“Eventually we’ll have a gazelle — a break-out company,” McFarland said. “We haven’t had that yet.” To be eligible for researchand-development incentives, a business must be less than five years old, have an annual payroll between $ 100, 000 and $ 1 million, show proof of an equity investment of at least $ 400, 000, and pay an hourly wage equal to 150 percent of the lower figure of either the state or county average hourly wage.
There are 17 businesses receiving the benefit, and 14 of them are in Northwest Arkansas. Ten are at the Arkansas Research and Technology Park, a public-private complex in south Fayetteville devoted to the development of advanced technologies like the high-performance coating developed by NanoMech. The Fayetteville park, under the leadership of Phillip Stafford, is managed by the University of Arkansas Technology Development Foundation.
To date, the companies using the tax breaks have $ 48 million in investments, support 191 fulland part-time jobs, pay an average hourly wage of $ 31. 14, and have received more than $ 2. 6 million in tax credits, according to the state Economic Development Commission.
Those figures are from 2005 to the present. The commission does not release tax information on individual businesses.
Though the legislation creating the incentives was passed in 2003, the program didn’t start until 2005 because the program was being fine-tuned, said Tom Chilton, director of technology development at the Economic Development Commission.
“The boom year was really in 2006,” he said.
Of the 17 companies receiving the tax breaks, eight entered the program in 2006. Companies range in focus from Arkansas Power Electronics International, which manufactures compact, high-temperature semiconductors, to SFC Fluidics, which produces microfluidic pumps.
Finding people qualified to work as researchers for such companies isn’t easy.
“Getting the labor force is a real challenge for us,” Chilton said, referring to the state’s small population and its historical focus on agriculture and manufacturing, not nanotechnology and bioengineering.
“It’s a culture change,” he said.
Goforth, who holds a doctorate in mechanical engineering from Stanford University in Palo Alto, Calif., co-founded Virtual Incubation in 2000. In exchange for an equity share, Virtual Incubation helps technology startups reach the market.
Virtual Incubation has equity in 11 companies with licensed technology, and its goal is to guide those companies to the market.
“We’d like to have 20 companies,” said Goforth. “Three or four leaving per year and three or four coming on.” Goforth said it would be difficult to develop technology startups without federal research grants and the tax breaks offered by the state.
“It would be a lot slower and lot harder,” Goforth said. “The tax break offers a greater chance of success and in greater numbers.” Companies such as the ones administered by Goforth can qualify for three tax incentives: a credit equal to 33 percent of qualified expenditures for research and development, a 10 percent credit on total payroll, and a refund on sales and use taxes paid on the purchase of building materials and equipment.
The 33 percent credit on research and development can be sold for cash. The money can be used for equipment and supplies, personnel and rent on facilities. More importantly, the tax break helps startups meet the expense of obtaining technology patents.
“A starter company is losing money, not making money,” Goforth said. “The research and development tax credit for getting these companies launched is the best thing Arkansas ever could have done.”
FEEDBACK:
Something to say about this topic? Submit a Letter to the Editor online
