Fallbrook Technologies, the San Diego-based maker of gearless transmissions, is closing down its headquarters office and relocating to Texas.
Fallbrook already had most of its 150 employees working in Cedar Park, Texas, a suburb of Austin, and is simply consolidating its administrative operations there, said Chief Executive Officer Bill Klehm.
“The integration of our legal, financial, marketing, manufacturing, and engineering was critical for us,” Klehm said. The move affects about 20 people involved in those functions, he said.
Beyond consolidating operations, the company was also won over by Texas’ business-friendly and lower-tax environment.
‘An Easy Place to Be’
“The way Texas has organized itself around growing businesses, it makes it a very easy place to be, and I sure can’t say that about California,” Klehm said.
He noted that the local government provided some incentives a few years ago, and that the state’s taxes are much lower.
“California offers enormous benefits, and I love living there,” he said. “Texas is hot, and isn’t as attractive from a lifestyle standpoint, but from an economic standpoint, it’s no decision.”
Founded in 2000, Fallbrook spent much of its existence designing and developing a new type of transmission that would make machines more efficient and less costly to operate. The basic design borrowed from concepts first invented by Leonardo da Vinci in the 15th century.
Fallbrook’s first products called continuous variable transmissions were made for bicycles, and named in Leonardo’s honor as NuVinci. More recently the company shifted to designing the transmission for vehicles and other applications.
In September, Fallbrook entered into licensing contracts with two large Midwest manufacturers, Dana Holding Corp. and Allison Transmission. Dana, based in Ohio, is among the largest makers of drivetrains for vehicles and has annual sales of more than $7 billion. Allison, based in Indiana, is one of the world’s largest makers of automatic transmissions for medium and heavy-duty commercial vehicles and did $2.1 billion in sales last year.
To keep pace with Fallbrook’s increased contracts, it hired some 15 new employees last year, mainly engineers. About 35 percent of its staff is engineers, Klehm said.
Last year the company’s revenue shot up to $43.5 million, up from $8.7 million in 2011, he said.
“The good news is that we have more business than we can possibly handle,” Klehm said.
The bad news, obviously, is yet another fledging enterprise born here moves out, taking with it dozens of workers, most of whom are skilled and higher paid.
Not a Trend
Duane Roth, chief executive officer for Connect, the San Diego nonprofit that assists technology startups, said the Fallbrook Technologies relocation wasn’t a trend.
“These decisions are made on an individual basis and a circumstance basis, and not based on a trend,” Roth said.
“The way I view this is that the generation of ideas is more prolific in California than anyplace on Earth and that’s not going to change.”
But Roth conceded things in this state need changing. “Do I wish the business climate was more competitive? Yes.
“As for regulations and taxes, we need to do a better job in mitigation, but we’ll never make it as low as Texas,” he said.
Over the years, Fallbrook raised about $115 million in venture and angel investment, and has more than 500 patents. In 2010, the company filed documents to conduct an initial public offering, intending to raise $50 million. But the following year, it pulled back from that plan, without stating the reasons.