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Rocket firm Valley Tech Systems gets $1.5M to expand

Awardee Story Rocket firm Valley Tech Systems gets $1.5M to expand
Date: Oct 11, 2013
Author: Mark Anderson
Source: bizjournals ( click here to go to the source)

Valley Tech Systems hopes to do R&D in Sacramento for the military

Valley Tech Systems Inc. started seven years ago as a propulsion technology company. Now, with an infusion of $1.5 million, the Sacramento company is branching into research and development for the military.

A new president, Michael O'Brien, was brought in over the summer to restructure and expand the company into design technology. O'Brien for a decade was leader of the Advanced Projects Group for defense contractor Northrop Grumman's Information Systems division.

For most of its seven years, the company focused on rocket propulsion and steering control systems for the military. In that capacity, it was a qualified small business. Most federal contracts require larger companies to contract a percentage of their work with small businesses.

Valley Tech has done some technical propulsion work with rocket motor maker Aerojet Rocketdyne in Rancho Cordova, but most of its clients have been defense companies based in Maryland and Virginia.

But the rocket business doesn't appear to have much growth potential, O'Brien said. So the company has raised $1.5 million to expand.

Valley Tech Systems seeks to use off-the-shelf commercial chips and hardware and then develop custom software for Department of Defense applications, O'Brien said.

The new money is equity funding from investors whom O'Brien declined to identify. Valley Tech is a private company and does not disclose revenue or earnings figures. The funding was made public by the company in a required disclosure statement filed with the Securities and Exchange Commission late in September.

In work outside of propulsion, Valley Tech will continue to operate as a qualified small business with larger companies, and it will also seek out small contracts on its own, he said.

O'Brien doesn't anticipate the slowing growth of defense spending to be a problem, rather, he said, it is an opportunity for agile companies.

The larger contractors are locked into long-term planning, which allows room for smaller companies that can move quickly, he said.

"We benefit from being a smaller, more agile business," he said.

Valley Tech System's rocket business moved this year from Folsom to Reno, where it is easier for that particular business to operate, said Russ Carlson, former president. He's now in charge of the propulsion group in Reno.

Nevada laws are less restrictive on material storage and experimentation, O'Brien said.

The propulsion division has 10 people. The company has 25 employees in total.

In Sacramento, Valley Tech engineers are doing research and development contract work, O'Brien said.

While he is trying to expand the company, the goal isn't to create a company with rapid growth as a potential takeover target or as an initial public offering candidate.

"This is a long-term growth plan and not a quick turn. We want to create an environment where engineers want to work," he said.

O'Brien founded Advanced Countermeasure Systems Inc. in Sacramento in the early 1990s, eventually selling it to Sparks, Nev.-based defense contractor Sierra Nevada Corp. in 1998. Advanced Countermeasure developed electronic warfare systems for training and evaluation.

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