Always innovation. Inversores :: Investors &  VCs

Always innovation


Fecha Miércoles, diciembre 18 @ 18:51:26
Tema Inversores :: Investors & VCs


Try to imagine a business in which innovation is not a good thing, but a trapdoor to hell. Aviation, please step forward. Since WWII only Learjet and Robinson have succeeded as major new U.S. players, and the latter makes helicopters, not airplanes. Howard Hughes, that old daredevil, said it best: If you want to make a small fortune in airplanes, start with a big fortune.

This is why I love Vern Raburn of Eclipse Aviation. Aware of the industry's awful startup record, he proceeds anyway. This guy follows his heart. He carts his cojones in a wheelbarrow.
Raburn wants to build a pocket jet that cuts through the sky at 408mph and seats five passengers. Raburn says he can sell his jet, the Eclipse 500 (available early 2004, if all goes right) for under $900,000 and turn a profit. Context is needed here. The cheapest certified jet on the market today is Cessna's slightly larger Citation CJ1. This screamer also seats five passengers and goes 440mph, but it sells for $3.6 million--four times the cost of an Eclipse 500. Think of a brand-new Mercedes S600 for ... $29,000. A Big Mac for ... 50 cents. That gives you an idea of what Eclipse is attempting.

Skeptics abound. The inventor Dean Kamen of Segway fame, a jet owner and pilot himself, was an early doubter that Eclipse's original beer-keg-size 80-pound twin engines would pack sufficient power."I don't see how [the plane] can climb if one engine fails," Kamen told me in October. Turns out he was right.

History likes to sanitize innovation. It edits out all the haunting doubts, the midnight sweats. It bowdlerizes the day-to-day humiliations borne by every entrepreneur, such as raising money and overcoming goof-ups. Eclipse has made remarkable progress since I wrote about it 31 months ago. But Raburn's startup has also taken its lumps, one of them--the engine--huge.

Two Steps Forward, One Back

Curious about an update, a friend and I flew our dinky single-propeller airplane to Eclipse headquarters in Albuquerque in late November to catch up. We rolled up to Eclipse feeling like Charles Lindbergh and Antoine de Saint-Exupéry, ready to meet the new Howard Hughes.

The new Hughes stands about 5 foot 7 and wears thick glasses. With his clothes and his pallor Vern Raburn looks like a Seattle software nebbish, which he once was. In fact, one big weapon Raburn brings to Eclipse is his connection to software billionaires such as Bill Gates and Paul Allen. These friendships have allowed Raburn to raise $238 million thus far. Access to capital is not a risk factor for Eclipse. The big risks are these: a new jet engine borrowed from the military that failed its early tests, and a heretofore nonexistent market for tiny air taxis.

• Big Risk Factor No. 1: The failed engine is the EJ22, made by Williams International. The technology works fine in the Navy's cruise missile, but for Eclipse has proven problematic--not enough thrust and too delicate to withstand stresses such as bird strikes. The prototype Eclipse 500 that was flown in Albuquerque in August was grounded. Sure enough, five days after our visit Eclipse announced it had dumped the EJ22 and severed its ties with Williams. The best guess in aviation circles is that the Eclipse 500 will need engines that are heavier and more robust--250 pounds, not 80. This will cut the jet's range from 1,300 nautical miles to 1,000 and push up operating costs from 56 cents per mile to 75 cents. Raburn insists that interest in the Eclipse 500 is so high that other enginemakers (possibly GE, Honeywell and Pratt & Whitney--Raburn won't say) are vying for the Eclipse order.

• Big Risk Factor No. 2: How many orders will that turn out to be? Raburn sees a booming market for air taxis--microjets, on call, ready to fly business travelers out of America's 5,000 smaller airports for a price equal to a full-fare coach ticket on United Airlines. Want to fly from Palo Alto to Santa Monica? Your options are limited and costly. You'd need your own jet or charter. But tomorrow, if Raburn is right, you'll call up a (relatively) cheap air taxi. Raburn claims three nascent air taxi services have ordered more than 2,000 Eclipse jets.

Thousands of pocket jets! Can Eclipse handle that kind of volume? I think so. A tour of Eclipse's factory floor in Albuquerque is a journey deep into the 21st century. There, an Eclipse 500 can be assembled in 9 days--that's 12 fewer than it took to assemble my Cessna Skylane. Eclipse has yanked out about a thousand labor hours per jet with a process called friction-stir welding. This cuts out the need for rivets--along with Rosie's labor.

In one respect Raburn is like any other innovator you've ever met and Eclipse like any other startup--big dreams, gritty reality. Innovation, you see, is never an immaculate conception. It's always messy, bloody and hard-fought.
Rich Karlgaard
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