The City of Fort Worth finalized an economic incentive package deal with Linear Labs in June that provided a nearly $70 million Research and Development (R&D) grant for the innovative, electric-motor company. This package represented the first use of this R&D tax credit by the City of Fort Worth, a tax credit that is believed to be the first-of-its-kind in the country. But, what is it exactly and why is it important? Here are a few more details on this groundbreaking incentive for investment in innovation in Fort Worth.
What is Linear Labs and what makes them special?
Founded in 2014 by the father and son team of Fred and Brad Hunstable, Linear Labs is “a smart electric motor company” that has developed an electric motor known as the Hunstable Electric Turbine (HET), capable of producing up to three times as much torque as any other electric motor. It is produced using 30% less copper, with no need for a gear system, which greatly reduces the cost and size of the motor. Basically, Linear Labs has created a more efficient, more powerful, more cost-effective motor that has the potential to take over the market. Electric motors are in everything from scooters to HVAC
units to trains, and Linear Labs plans to break into all of those
markets. Here’s a modern example of the potential this company has to transform this market. Think about what the iPhone did to the cell phone market. Apple offered a new innovative product that was head and shoulders above all other competition, and then they watched as it took over the market, and now it seems like everyone has an iPhone. Linear Labs-HET could be the iPhone of the motor market.
What are the details of this grant program?
Fort Worth has offered up a 15-year incentive plan that gives grants on 25% of R&D costs in the first 10 years of the deal, with a max grant amount of $68.9 million, which would require Linear Labs to invest a minimum of $614 million on R&D, along with an additional $4 million to outfit and upgrade the existing facility to house both production and R&D manufacturing within the first 3 years.
Why would Fort Worth spend so much on R&D incentives?
Starting new companies leads to positive economic development and all that comes with
that -- in a word, jobs. Starting new companies typically requires innovation. The only way to innovate is to create something new. The best way to create something new is to either A) discover or develop a new product or process or B) combine two or more previously unrelated products or processes. Both of these options require research and development, which leads to positive economic development. Governments and businesses alike know this, and they invest enormous amounts of money in R&D efforts, in the hope that this R&D will eventually turn into a successful, for-profit company. Essentially, Fort Worth is betting big on Linear Labs’ success, hoping that they will continue to provide innovative products that will change Fort Worth’s entire economic fabric by bringing in technical researchers, high-wage jobs, large manufacturing operations, and all the economic development that comes with such improvements. The bigger bet though, is something much more ambitious. The city is making a bold move to push Fort Worth to transition from a petroleum-based economy to an electric one. If this proposal passes, Fort Worth could be well on its way to going from ‘stuck in the past’ to ‘excelling in the future’ through the process known as electrification.
What is electrification and why is it important?
The dictionary definition of electrification is: “the conversion of a machine or system to the use of electrical power.” In this case, the ‘system’ is rather large- the entire city of Fort Worth. Brad Hunstable, co-founder and CEO of Linear Labs, and Fort Worth share a grand vision: to make Fort Worth a startup hub focused on electrification. Back in February, Hunstable stated, “Fort Worth is in a unique position to be the centerpiece globally of new electrification. I want to build the next Siemens or GE right here in Fort Worth.” With Linear Labs leading the charge, Fort Worth could establish itself as a prime destination to start a company in the electrification vertical. What’s more, Fort Worth could be the electric city of America, fully committing to an all-electric economy, a green environment, and a sustainable future.
So what’s the big deal?
Fort Worth has proposed an R&D incentive deal to Linear Labs worth nearly $70 million in total grants, in the hopes that it can help Linear Labs thrive, and in the process, help the greater Fort Worth economy by investing in innovative research and development that will attract more and more game-changing companies and talent to Cowtown. This incentive deal is extremely unique in its structure and is considered to be the first-of- its- kind, proving that Fort Worth is serious about backing entrepreneurship by getting creative with its financing. This deal also opens the door for similarly structured future deals that can bring in the next wave of companies. Linear Labs estimates it will add 3,000 highly-skilled jobs such as electrical engineers, robotics specialists, and programmers by 2030. These kinds of jobs will inadvertently seep into the culture and job environment of Fort Worth and bring in even more, creating an influx of talent and innovation.
For too long, Fort Worth has remained on the bench as cities all around them, in size and geography, embrace entrepreneurship. Now is the time to get up and get in the game, because we just signed a superstar. It only takes one revolutionary idea or person or business that totally changes the outlook for the future. Linear Labs is that one.
Check out the Innovate Fort Worth Podcast where Brad Hunstable tells us how a father-son project and an old timey windmill eventually turned into what Linear Labs is today.