Up and Down 17th Street: $93 million venture capital fuels Adam Aircraft

Published October 25, 2006 at midnight

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Only two U.S. businesses seeking venture capital over the summer received bigger checks than Arapahoe County-based Adam Aircraft.

The company, one of the players behind a new breed of small, low-cost jets, got an eye-catching $93 million. Cilion, an ethanol producer with a California address, attracted more than $200 million in the largest financing deal of the third quarter, while Limelight Networks, a telecom outfit in Arizona, reeled in $130 million, the latest MoneyTree survey shows.

The round of financing is a significant milestone for the company founded by Rick Adam in 1998. It follows the Federal Aviation Administration's approval of the company's A-500 plane last year, news that encouraged investors to get out their wallets.

"This is like biotech in the sense that there's a long development phase, where you're engineering, building and improving, and it's extremely highly regulated, and until the regulator gives you the imprimatur, you don't know if you'll be successful or not," Adam said in a telephone interview Tuesday.

Most of the funding will allow Adam Aircraft to switch its focus from designing jets to actually making significant numbers of them, Adam said. The company has been finishing 20 to 25 planes a year and now could crank out 200 jets annually, he estimated.

The good news for Colorado is that the expansion will generate "hundreds and hundreds of jobs" on top of the current work force of more than 600 people, Adam said. The staff already has doubled in the past 18 months as Adam Aircraft has hired loads of mechanics and other workers.

The bad news is that the state will not be the beneficiary of all those positions. In 2005, Adam Aircraft chose Ogden, Utah, for a new jet-manufacturing center, shunning its home state. That site's employment could go from 50 to 300 in the next couple of years.

But Adam noted that his company, whose base has remained in Colorado, also will add jobs across the three existing facilities in the state, delivering economic benefits here.

Adam said he has orders for 80 of his A-500 airplanes and 370 of the A-700 jets, valued together at $850 million. Adam Aircraft hopes the A-700 will get an OK from federal authorities in early 2007, he added. (Two rivals, Cessna and Eclipse, already have that approval, though Adam said there's plenty of room in the coming years for several competitors.)

The A-700 is part of the emerging class of "very light jets" that the companies say will serve as air taxis and satisfy other demands. The FAA predicts that 5,000 of those mini-jets will be operating within 10 years.

Part of the $93 million Adam Aircraft pulled in will be used to finish the development of the A-700, he said.

DCM, Mesirow Financial, W Capital Partners, D.E. Shaw and Acadia Woods Partners provided parts of the funding, joining Goldman Sachs and Hunt Growth Capital as investors in the company.

Rob Theis, DCM general partner, believes the new jets "have the ability to change the landscape of transportation" and said he was attracted by the fact that Adam Aircraft is building jets at one-third to one-quarter of the price of the cheapest planes on the market.

Adam, whose company has drawn nearly $200 million in venture capital to date, said it's premature to say much about the long-term plans for the business.

"These are very sophisticated big investors," Adam said, referring to Goldman Sachs and the others who see promise in the jet maker. "They invest because they expect a big return, but in terms of how they try to get that return, the options are wide open. We'll figure it out as the company gets more mature."

James Paton and David Milstead take turns writing Up and Down 17th Street. Contact Paton at patonj@RockyMountainNews.com or 303-954-2544.

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