Thursday, June 18, 2015

Taking Flight

In March of last year I brought you the story about a company called Hybrid Air Vehicles, and their attempt to produce a lighter-than-air/lifting body hybrid aircraft, along the same lines as the legendary Aereon 26 which was first flown in 1970. At the time, I noted that the original hybrid designs had failed to generate any interest due mainly to the opposition from people who build heavier-than-air vehicles and the relatively low cost of aviation fuel at the time. When something is unfamiliar in form and function, faces massive political opposition, and does not provide an offsetting advantage, it is difficult for it to make headway in a free market economy. At least two of those things appear to be changing now, however…

There’s a CNN story on-line this week that describes a new offering from Lockheed-Martin in partnership with a company calling itself Hybrid Enterprises: a lighter-than-air lifting-body airship. The article is non-technical in nature, but the LMH1 airship is said to have a payload of twenty tons or so, a range of 1,400 nautical miles, and a top speed of around 60 knots, which would make it about the same size as one of the medium-sized Aereon designs from the 1960s. More importantly, Lockheed-Martin is claiming that the LMH1 will have a payload in the twenty-ton range, which puts it in the same class with the company’s famous C-130 cargo aircraft. Granted that the LMH1 is significantly larger (300+ feet long to 97 feet for the C-130) and only has about 20% of the top speed, it should in theory be significantly cheaper to operate than its conventional equivalent, and require significantly less room to take off or land…

So far the company isn’t reporting any interest from military customers, but that could change if they are successful in selling these aircraft to civilian users. Their current marketing appears to be geared more towards customers who need to transport large amounts of cargo to places that don’t have runways than anything else; they’ve already mentioned the utility this would have for oil exploration teams, who need to move a variety of survey and drilling equipment to places that don’t have roads or harbors, let alone airports. But it’s probably worth noting that military organizations also have a need to place equipment and build installations in places where there are neither roads nor harbors, and the ability to carry more weight at significantly lower cost than using helicopters for the same project has got to have a certain appeal…

Now, when I wrote the original piece I did note that the original company to try building and selling these craft, Aereon, was stymied in part by the inability to generate interest from either military or civilian customers. Why it didn’t occur to me to suggest that they partner with a company that already had established customer relationships on both the military and civilian markets escapes me, but why neither they nor Hybrid Air Vehicles thought of it before is probably a better question anyway. I don’t know if Lockheed-Martin is providing capital, technical support, production facilities, marketing, lobbying, or access to their existing customer base, but any one of those things could make the difference between being a start-up company with an unfamiliar technology and being part of a project involving an established aerospace company and defense contractor…

Lockheed-Martin is claiming that they will have the new aircraft ready to fly in three years, and might be selling them not long after that. It’s still a bit early yet to start speculating on whether the airship will really make a comeback, let alone whether there will be military versions, passenger versions, larger commercial versions that would replace cargo ships, or small versions that might be available for private ownership and general aviation. But if this article is accurate, the game has changed this time – and the production models are already on the way…

Tuesday, June 16, 2015

The Umpire Strikes Back

A rather unusual follow-up to our post of May 28 of this year appeared online this week; something which may provide a temporary answer to the question of whether anything can be done about fraudulent crowdfunding projects. My last post on this subject mentioned a company that had completed its crowdfunding offering, taken the money, at (at least so far) failed to produce any actual product. Unfortunately, the company insists that it is still working on the project, and will (eventually) make good on its commitments – as soon as it figures out how to do so, presumably. Most crowdfunding projects to date don’t have any specific deadlines by which the funded company has to pay off, since in many cases the company is trying to make a product that has never existed before, so until now the “we’re still working on it!” defense has worked well enough. That may be changing, however…

According to a story on the Gizmag website, the FTC has taken action against the entrepreneur behind a failed board game project that began with an offering on Kickstarter. You can also pick up the details from the Federal Trade Commission site if you’d like, but the basic facts of the case are that the man running the project, Erik Chevalier, got the $123,000 he was asking for to create a Monopoly-style board game and then failed to spend any of it on actually producing the game. Instead, the FTC claims that he spent the money on personal expenses and put some of the residue into an unrelated business project. Even the designer and artist who actually did the work on the prototype were never paid for their work…

For the moment the sanctions against Chevalier are limited to a civil judgement and an injunction against any misrepresentation of anything involving crowdfunding, since it still isn’t clear what criminal charge (if any) would apply to misappropriation of funds from a crowdfunding project. It’s not embezzlement in the usual sense, and I don’t think you could make fraud stick unless you could somehow prove that the defendant never intended to make or sell any products in the first place. It’s possible that this will result in some of the contributors getting at least some of their money back, assuming that Chevalier ever manages to pay off the judgement, but in the long run I think the more important aspect of this story may be the precedent it’s going to set…

Up until this point there really hasn’t been much anyone could do about shady crowdfunding projects. Leaving aside the aforementioned legal gray area, there’s also the issue that it really isn’t possible to pass a law against being an incompetent businessperson. When you invest money in any entrepreneurial project there is always some degree of risk, and that doesn’t change if the investment is spread among hundreds or thousands of participants instead of a single funding source. Every so often an idea just won’t fly – there’s actually an online database of examples, and it’s only a matter of time before Kickstarter and the other major sites start cross-referencing the failures to provide context for their offerings. Although I suppose somebody might start a service to do that, if they can arrange the funding…

How much impact the FTC and/or the Justice Department will be able to have on actual scammers hiding on crowdfunding sites remains to be seen, of course. Some people will gamble money on anything, and there is only so much that our government can do about criminals from outside the US who might be capitalizing on a still-evolving industry. But up until now it has generally seemed as though no one was keeping score, or even paying attention, to people online who might be taking advantage of the na├»ve, generous and gullible. If this story is any indication, however, things may be about to change…

Tuesday, June 9, 2015

Sweet

Some years ago in this space I brought you the story about Coca-Cola selling bottles made entirely out of ice on beaches in South America. At the time, I noted that the whole idea was a stunt, and not a very well-chosen one, either. While it is certainly interesting and memorable to have a product package that just melts when you are done with it, the actual ice bottles were problematic both because ice does not make a good, contaminant-free package, and because it’s much too expensive to keep your entire supply of product refrigerated at all times. Even worse, though, was the fact that in many of the countries where they tried this stunt, clean drinking water is hard to come by…

To be fair, the ice bottles were never really intended as anything more than a publicity stunt, and once it was pointed out the company that this was actually much worse for the environment than relatively clean and easily-recyclable glass would be, they abandoned the idea. But this week there’s word of a new type of Coke packaging that looks to be quite a different matter. If the story available off the Fortune website is correct, the new bottles are made from plastic derived from sugar cane…

I’m not enough of a chemist to understand (let alone explain) how you can make plastic out of plant matter, but the business implications of this article are staggering. Coke started experimenting with plant-based plastics back in 2009, and initially released a bottle that was 30% plant-based plastic later that year, but the new version does not use petroleum plastics at all, and the company claims that just over the last six years they have already saved the equivalent of over 36 million gallons of gasoline – and even more importantly, kept 315,000 metric tons of carbon dioxide out of the atmosphere…

It’s not clear from the article, or from the original source on CNN Money’s web page, how well the new packaging will hold up for other kinds of products, or if the process will be commercially viable for companies smaller than Coke. The company is apparently being a bit cagey about the process, but CNN reports that they are using sugar cane from Brazil and waste products left over from sugar cane refining operations in India to make the new plant-based plastic. This may require a global logistics base beyond the reach of some organizations, but any chemical company that can develop a similar process shouldn’t have any problem finding a wealth of customers who will want to order packaging in the new plastics. Assuming, of course, that the new material is actually as economical as Coca-Cola is claiming it is…

Now, one could reasonably ask why companies wouldn’t want to use a more environmentally friendly packaging material, even if it was slightly more expensive than conventional plastic. Surely the knowledge that you are helping to save the planet – and the positive public relations you can realize by doing so – would be worth the smaller profit margin. Unfortunately, this isn’t always the case, especially in industries that do not feature a large profit margin in the first place. When we consider this development from a business standpoint, it is important to remember that not only does Coke already have a massive international infrastructure to make the operation less complicated, and vast amounts of capital (and income) available to cover the expenses, they also have one of the highest profit margins in the world – two or three cents worth of water, sugar and flavoring that one can sell for $1 at McDonald's and $5 at a football game…

I don’t know if this is a game-changer, or something that will flame out and disappear as quickly as the ice bottles did. But if plant-based plastics turn out to be viable in both a financial and a manufacturing sense, then things are about to get interesting – and we’d all probably be well advised to start paying more attention to agribusiness…