Tesla Motors announced it would build its $5 billion battery factory, or "gigafactory", in Reno, Nevada rather than in Texas. This was a disappointment to Texas officials who had hoped the factory and its estimated 6,500 jobs would come to their state. Industry experts said that Nevada had several advantages that made it difficult for Texas locations like Hutto to compete, such as proximity to Tesla's California assembly plant, no corporate income tax, and lower shipping costs for the heavy battery packs due to rail access. While Texas offered incentives between $800-900 million, Nevada's incentives of up to $1.3 billion helped it secure the deal.
1. F2 AUSTIN AMERICAN-STATESMAN | SUNDAY, SEPTEMBER 7, 2014
Page 2 CMYK
TESLA MISS
Texas loses out on
Tesla factory to Ne-
vada: Dashing Texas’
hopes, electric vehicle
maker Tesla Motors said
last week that its $5 bil-
lion “gigafactory” battery
plant will be built in Ne-
vada, bringing with it an
estimated 6,500 jobs.
Industry experts said
that Nevada simply had too
many positives going for it
for Texas to overcome.
The factory has been a
source of enormous com-
petition between Neva-
da and other states — in-
cluding Texas — which
jumped at the chance
to land thousands of
good-paying jobs. To seal
the deal, Nevada Gov. Bri-
an Sandoval is requesting
legislative approval of in-
centives of up to $1.3 bil-
lion to seal the deal.
Texas had put togeth-
er an incentives offer
for Tesla worth between
$800 million and $900
million, Joey Grisham,
president of the Hutto
Economic Development
Corp., told the Ameri-
can-Statesman.
Tesla wants the $5 bil-
lion factory to supply
cheaper batteries for
its Model 3 electric car,
which is set to go on sale
in 2017. States lined up to
land the project. Despite
Nevada’s frontrunner sta-
tus, Tesla officials indicat-
ed that sites in Texas, Cal-
ifornia, Arizona and New
Mexico were also in the
running for the 10-million
square-foot facility.
“The gigafactory is an
important step in advanc-
ing the cause of sustain-
able transportation and
will enable the mass pro-
duction of compelling
electric vehicles for de-
cades to come,” Tesla
CEO Elon Musk said.
The news was met with
disappointment in Texas,
where a number of cities
vied for the factory.
“I think the stars lined
up for northern Neva-
da on this project,” said
John Boyd, a New Jer-
sey-based site consultant
who predicted that Neva-
da would land the facto-
ry. “There were just sev-
eral compelling advan-
tages that it would have
been difficult for San An-
tonio or the Dallas area to
compete with.”
Among those, he said,
are the Nevada area’s “tri-
fecta” of green power
sources – wind, solar and
geothermal, which is huge-
ly important for Musk.
Reno also enjoys direct
rail access to Tesla’s assem-
bly plant in Fremont, Ca-
lif., plus Nevada has no cor-
porate income tax and is a
right-to-work state, Boyd
said. The battery packs
that will be produced from
the plant weigh close to
1,000 pounds each, so
shipping costs were also a
factor, Boyd said.
“It wasn’t a deal-killer
for Texas, but it was an is-
sue, in terms of transpor-
tation costs,” he said.
Among the contend-
ers for the site were a
1,200-acre site in Hut-
to and Taylor. Tesla in-
formed officials there on
Wednesday that the auto-
maker had chosen Neva-
da, said Dave Porter, se-
nior vice president for
economic development
at the Greater Austin
Chamber of Commerce.
Tesla made several vis-
its to the Hutto-Taylor
site, which Porter called
“the most pursued site by
Tesla” besides Reno.
“We were runner-up to
probably one of the most
publicized industrial
projects,” Porter said.
Porter and Grisham,
president of the Hutto
Economic Development
Corp., both said Nevada’s
proximity to California
ultimately helped that
state win out.
“There is a big cost dif-
ference in shipping large
battery packs on rail from
Reno versus Central Tex-
as,” Grisham said.
Adriana Cruz, presi-
dent of the Greater San
Marcos Partnership,
called Tesla’s decision “a
disapointment for all of
Central Texas” but held
out some hope that more
than one plant could be
planned.
POWER PLAN
ERCOT says state’s
power grid reserves
look good for fall, win-
ter: The state’s primary
electricity grid is expect-
ed to have sufficient elec-
tricity to deal with peak
demands this fall and win-
ter, officials with the Elec-
tric Reliability Council of
Texas said last week.
ERCOT has more than
75,500 megawatts of gen-
eration to deal with an
anticipated peak demand
of 48,700 megawatts.
As much as 9,000 mega-
watts could be off-line
for maintenance and un-
planned outages typical-
ly range from 3,400 to
7,000 megawatts.
Even with those reduc-
tions, ERCOT expects to
have reserves from 2,600
to 14,000 megawatts, de-
pending on the weather.
“It appears we are like-
ly to see a cooler fall sea-
son overall,” ERCOT me-
teorologist Chris Cole-
man said. “We also are
seeing strong indications
of normal rainfall or even
wetter than normal in
some areas.”
ERCOT’s grid serves
three-fourths of the state,
including Austin, Dallas,
Houston and South Tex-
as. Across that expanse,
milder weather in parts
of the state lessens ER-
COT’s overall demand for
electricity.
During the historical-
ly hot and dry summer
of 2011, ERCOT narrowly
avoided rolling blackouts.
That close call prompt-
ed a lengthy and vigorous
debate at the Public Util-
ity Commission wheth-
er low wholesale electric-
ity prices are threatening
the state’s future electric-
ity supplies.
The utility commission
raised the caps on whole-
sale electricity prices
during times of scarcity,
but declined to revamp
the deregulated market
as some owners of power
plants encouraged.
TOP LOCAL BUSINESS STORIES OF THE WEEK
Tesla Motors, Elon Musk’s electric vehicle company, will not
be creating a battery plant in Texas. Industry experts said
that the Reno, Nevada, location chosen by Tesla had too
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management tools. I am
proud to say that, one
way or another, it has
been in continuous op-
eration ever since. Back
then, I worried that it was
late to the party.
But let’s explore that 1
billion websites figure a
little further. With a glob-
al population of 7 billion
human beings, we have a
website for about every
seven people on the plan-
et. And since only 3 bil-
lion people have access
to the Internet, a more
meaningful figure is one
website for every three
people.
Here’s a way to grasp
the growth of the Web:
Compare it to the growth
of the human population.
According to estimates
on the Census Bureau
website, it took human
beings about 240 years
to grow tenfold from 700
million to the current 7
billion. It took 1,750 years
to grow tenfold from 70
million to 700 million.
These are rough fig-
ures, of course. The actu-
al estimate is that the hu-
man population was 50
million in 1000 B.C. and
100 million in 500 B.C. So
I’ve just picked 750 B.C.
as the midpoint for hav-
ing about 70 million hu-
mans.
It is also estimated
that the number of hu-
man beings was a mere
7 million in 4000 B.C.,
some 6,014 years ago,
give or take a few cen-
turies. Meanwhile, the
number of websites grew
by the same factor —
times 1,000 — in only 17
years.
Can we make too much
of these figures? You
bet. But I think everyone
would agree that the use
of the World Wide Web is
still young. It’s also pret-
ty easy to see how some-
one involved with the
Web over the last 17 years
might feel, well, a bit pre-
historic.
Scott Burns is a nationally
syndicated columnist who
has been writing about
personal finance since 1977.
Send questions to scott@
scottburns.com.
Burns
continued from F1
ing companies make pub-
lic any information and
correspondence between
it and potential investors.
Sharing that informa-
tion through the online
crowdfunding portal will
allow groups of investors
to collaborate and aggre-
gate their expertise and
interest.
“It’s not by any means
foolproof,” Morgan said.
“But the best thing you
can do is get a lot of in-
formation out there” and
give investors “more re-
sources to protect them-
selves and evaluate the
nature of the offering.”
Crowdfunding propo-
nents have pointed to the
“wisdom of the crowd” as
one of the key benefits of
the approach — a consen-
sus that could help less-
wealthy and less-savvy in-
vestors avoid shaky com-
panies and scams.
Both federal and state
rules require companies
to post financial and oth-
er corporate information.
Portals can then layer fo-
rums, investor reviews
and other resources to
help investors share re-
sources and opinions.
“If an investor takes the
time to look at a deal and
makes an opinion on it
and can somehow trans-
mit that knowledge to fel-
low investors, they can col-
lectively compile due dil-
igence,” said Judd Hollas,
CEO of EquityNet, one of
the country’s largest equi-
ty crowdfunding portals.
EquityNet shares some
similarities with crowd-
funding sites that allow
companies to raise mon-
ey in exchange for prod-
ucts or other types of re-
wards. The difference is
EquityNet and other eq-
uity crowdfunding por-
tals facilitate actual in-
vestments, with investors
receiving an ownership
stake for their money.
Currently, that’s avail-
able only to accredited
investors — essentially,
individuals with at least
$1 million in net wealth
or at least $200,000 in
annual net income. The
SEC’s rules would open
those portals to investors
of all stripes.
In the meantime, the
state’s rules will allow
Texas businesses to use
equity crowdfunding to
raise money from Texas
residents. And given the
size of the state, that pos-
sibility already has sever-
al groups working to pre-
pare portals.
R.C. Rondero de Mosi-
er and Nathan Roach, at-
torneys at the Ram Law
Firm in Austin and San
Antonio, have assembled
a team and plan to launch
one such website once
the rules are approved.
On the whole, both attor-
neys like the rules, Ron-
dero de Mosier said, and
they like that the Texas
board, unlike its counter-
parts in many states, has
the authority to adjust
and enhance the rules on
the fly.
The two attorneys
hope to see one such
tweak. The current pro-
posal sets a $1 million an-
nual cap on fundraising
by a company. That cap
might be too restrictive
for many firms, Rondero
de Mosier said.
“It’s going to do a good
job with smaller compa-
nies,” he said, “but some
of the companies that are
really built to last might
need a larger cash infu-
sion.”
Others took issue with
the state’s cap on the
number of fundraising
efforts a company can
make each year. As direc-
tor of the Texas Entre-
preneur Network, Hall
Martin often advises ear-
ly-stage startups to do
multiple, smaller rounds
of fundraising. That
would be more difficult
under the current Texas
proposal.
But even if that doesn’t
change, Martin said, the
rules will help close a
funding gap for startups
in Austin and throughout
the state.
In the 1990s, he said,
companies often asked
for millions of dollars to
build and launch a web-
site. Back then, an e-com-
merce site needed its
own server farm, a host
of coders and all the sup-
porting infrastructure.
Venture capital firms
were the go-to source for
that kind of funding.
By the 2000s, the
cost of launching a start-
up had plummeted, and
that early-stage deal flow
started to shift to net-
works of angel inves-
tors. But those networks
grew increasingly formal
as more deals came their
way, and the floor on
their deals rose.
So today, when a cou-
ple of coders can band
together and launch an
iPhone app with just
$50,000, their fundrais-
ing needs don’t even
make the radar of most
venture capital firms and
angel networks.
“It’s evolving down-
ward,” Martin said. “The
’90s belonged to VCs.
The 2000s belonged to
the angels. And from
here on it belongs to
crowdfunding.”
The Texas Entrepre-
neur Network currently
has about 30 to 40 deals
in its program, he said,
and most of them are
planning to do a crowd-
funding deal at some
point along the way.
That’s the sort of busi-
ness acceleration Con-
gress imagined when it
passed the JOBS Act, and
it’s what Morgan and
the Texas State Securi-
ties Board hopes to foster
with the intrastate rules.
“What you’re after is
capital formation, not
just capital raising — com-
panies and communities
all benefiting from a com-
pany’s growth and jobs
creation,” Morgan said.
“This is not a one-size-
fits-all for all businesses,”
he said. “Any particular-
ized issue related to cer-
tain offerings, we’ll take a
close look at. If we need to
make adjustments, we can
do that, and we’re very in-
terested in doing that.”
Contact Dan Zehr
at 512-445-3797.
Funding
continued from F1
rales is still with McDon-
ald’s, something she, like
German Ustariz, said was
inconceivable when she
first submitted a job ap-
plication. The couple’s
support is a key reason
she’s stuck around, Mo-
rales said.
“We have a really close
relationship,” she said.
“They’re always here for
me. I’ve learned so much
from them.”
Of course, many His-
panic business own-
ers in Central Texas op-
erate at a smaller level.
Among those is Daniel Ol-
iveira, who is working to
build his own multi-loca-
tion burger business, Cow
Bells, from the ground up.
Oliveira opened Cow
Bells, a food trailer,
about two-and-a-half
years ago at 1620 E. Riv-
erside Drive, after spend-
ing more than a decade
working at Player’s, a
restaurant near the Uni-
versity of Texas campus
operated by members of
the Oliveira family. He
started when he was 15,
hoping to save enough
money to buy a car.
“I worked my way up
the ladder while I was go-
ing to school,” he said.
“Right before I gradu-
ated, I noticed the food
trailer business in Aus-
tin was exploding and I
thought, ‘Hey, I want to
get in on that.’”
With his family’s sup-
port, plans for Cow Bells
came together. His moth-
er has played a role in
the business, keeping the
books, doing much of the
grocery shopping and
helping him prepare for
catering gigs, which Ol-
iveira said have quadru-
pled in recent months.
“I’m very proud of
what we’ve been able to
achieve,” he said, “and
I can’t wait till we’re at a
point where we can ex-
pand.”
Starting a business from
scratch isn’t for the faint
of heart, Oliveira said, es-
pecially on your own.
“There’s so much pres-
sure, so much weight on
your shoulders,” he said.
“It’s your business and
you’re thinking over and
over that you’ve got to find
a way to make it work.”
To help relieve some
of that pressure and pre-
vent unexpected surpris-
es that can seriously in-
jure — or even kill — up-
start businesses, a num-
ber of Central Texas orga-
nizations offer a variety
of services to entrepre-
neurs, often at little or no
expense.
In addition to the sup-
port the Greater Aus-
tin Hispanic Chamber of
Commerce provides, the
MexNet Alliance offers a
variety of classes offering
pointers on everything
from marketing to opera-
tions to dealing with the
government on issues
such as incorporating
and paying taxes.
“We teach everything
business owners need
to know,” said Elias Her-
mida, MexNet Alliance’s
vice president. “We un-
derstand and address the
cultural differences out
there. Doing business in
the U.S. isn’t the same
as doing business else-
where.”
MexNet Alliance has
graduated about 500 stu-
dents from its courses
over the past five years,
according to Hermida, in-
cluding representatives
from restaurants, con-
tractors and cleaning
companies.
“Austin is so entrepre-
neurial,” he said. “People
here really want to start
a business. They feel the
environment is right for
that.”
Contact Gary Dinges at 512-
912-5987.
Twitter: @gdinges
Hispanic
continued from F1
Delmy and German Ustariz greet Robert Ross (right), who recently renovated the Capital
Plaza McDonald’s into a state-of-the-art fast food restaurant. The Ustarizes have been
named Hispanic business owners of the year by the Greater Austin Hispanic Chamber of
Commerce. RALPH BARRERA/ AMERICAN-STATESMAN
‘German and
Delmy perfectly
represent
the American
Dream. ... We
couldn’t think
of better role
models.’
Mark Madrid,
CEO, Greater Austin
Hispanic Chamber of
Commerce
Hall Martin
says the
current
decade is
all about
crowd-
funding.