ComSpace quickly rehires half of those laid off in financial jam
Steve Fulford, with the help of an “angel,” has navigated ComSpace past a financial reef.
Known for its digital channel, multicarrier architecture two-way radio technology that places eight communications channels into a 25kHz bandwidth, ComSpace was ready for its third round of funding in the amount of $30 million, and the money did not materialize.
Fulford, president of the Coppell, TX, company, said that closing on the financing was contingent on raising all of the money, but only $14 million of the $30 million could be secured from the company’s current and new investors.
“Our board of directors said that it believed in what we are doing,” Fulford said, referring to the company’s technology and 20 patents. “The directors didn’t want to run at a high burn rate and have to declare bankruptcy, so I said ‘let’s have an orderly slowdown of the company while we straighten out the financing.’”
To slow the burn rate, which refers to the rate at which available funds are spent, Fulford said he laid off 40 employees out of 84 in the beginning of September. When funds still couldn’t be found, the board ordered more cuts, and Fulford let another 30 people go, reducing staffing to about 12.
“But there was never a question of whether the company would shut down,” Fulford said.
The ComSpace board received a proposal from other investors who were interested in purchasing the technology and continuing as another organization. But Fulford said his management team and board of directors decided that wasn’t the direction in which they wanted to go.
Instead, Fulford was able to secure from an “angel” investor a multimillion-dollar cash infusion for the company. He immediately rehired back 30 engineers and other staff.
“An ‘angel’ investor is someone who doesn’t make a habit of investing in businesses or companies, but who, for a short period, will invest to get a much larger return by selling or owning stock or some other consideration. Most of the time, an angel investor would prefer to remain anonymous. Ours is a businessman in the Dallas-Ft. Worth area who is well off, and he is doing this for an investment purpose. He is someone who knows some people who work here. He knew what we were doing and wanted to help us out,” Fulford said.
ComSpace has returned to an employment level of 45 to 50, including about 80% staffing of its engineering department and fewer in marketing, sales, production and administration. “Right-sizing is what you call it,” Fulford said.
Fulford said that he sent letters to ComSpace customers at the times of both layoffs and assured them that there was no danger of the company shutting down.
“It’s a question of us repositioning and going forward,” he said. “We were afraid that we would run out of money and our creditors and the banks would own the DCMA technology and our patents. We wanted to make sure that didn’t happen. So while we had cash in the bank, we made this decision to slow down.”
