Federal grants helped candidate prosper, but he wants spending cuts

Libertarian Andrew Hunt touts a free-market philosophy and an anti-establishment bent against government spending in his quest to become Georgia’s next governor. At the same time, his nanotechnology company received millions of dollars in federal research grants that kept it afloat and ultimately made it profitable.

Federal records show Hunt’s technology firms have received almost $38 million over the past 20 years, support that’s helped his businesses get a crucial foothold in a cutthroat industry. One federal report said a lucrative Hunt startup would not have survived without government support.

The revelation worried some supporters, who had to reconcile his federal backing with his promise to decrease government spending and encourage a more accessible economy. Such concerns are justifiable, said Doug Craig, the chairman of the Libertarian Party of Georgia.

“If we take our lumps on it, we probably deserve it,” Craig said. “If someone calls us hypocritical for doing business with the government, I don’t think that’s unfair.”

Hunt is running on his business acumen, favoring a limited government that doesn’t pick winners and losers. He disagrees with federal handouts for monolithic companies who he says use lobbyists to curry political favor.

But the millions his company received were different, Hunt said, because they came from a federal program that was peer-reviewed and did not allow lobbying.

“It’s not an earmark to a company. It’s not pork,” Hunt said. “Engineers and scientists sit on a panel and decide who gets the award or not.”

‘Would not be in business’

Last fall, the 53-year-old Hunt stepped down as CEO and president of nGimat to prepare for his gubernatorial run. While he is a long-shot contender against incumbent Republican Gov. Nathan Deal and Democrat Jason Carter, the Libertarian can force a runoff if he deprives either of the other candidates a majority vote.

Hunt founded nGimat as a specialty adhesive manufacturer in 1993. In the next two decades, the company received 144 grant awards for $37.9 million from the Small Business Innovation Research Program, a federal investment incubator housed in the Department of Energy.

A series of military grants aimed at “putting electromagnetic material on memory devices inside Star Wars weaponry” initially funded Hunt’s venture, according to a Forbes article published in April 2000.

The small operation became profitable in 1995, a year after it received its first SBIR award. A review of the program by the National Research Council in 2000 said the company would not have survived without federal grants.

“The company would not be in business,” the review said. “Hunt did try to find venture funding, but it was simply not available.”

Research and technology companies such as Hunt’s typically struggle to find contract work early on, which is why many turn to federal research contracts.

“Especially in the field that we are in, it’s fairly cutting edge,” said nGimat President Ganesh Venugopal, a former employee of Hunt’s. “It’s usually the Department of Energy or Defense who are looking for technologies like that.”

Past nGimat awards were used to develop highly technical manufacturing products, from advanced magnet insulators to laser hosts. Current SBIR-related projects with nGimat include a $1 million grant to produce electric motor coatings and a $743,000 deal to make ceramic-coated heat exchangers, according to GrantIQ’s online research tool SBIRSource.com.

Hunt said the company has gradually relied less on the government programs, which are designed to take small businesses from the research stage to commercialization. NGimat has about 15 employees and won the Tibbets Award in 1998 for being one of the better SBIR programs at converting new technology into sellable products.

In 2010, Hunt opened a small lab in Lexington, Ky., after receiving $550,000 in tax incentive benefits and up to $60,000 in recouped sales and use taxes, according to a press release from the Kentucky Cabinet for Economic Development.

“We expect to bring in not just the federal dollars,” Hunt said in a 2010 speech before Kentucky leaders, including Gov. Steve Beshear. “More than half of our revenues are industrial-based, product-based-type revenues.”

‘Could be a problem’

Whether voters think Hunt’s business dealings represent a critical departure from his limited government pitch depends on what they consider to be a small business and how they view his competition.

Compared with the billion-dollar bailouts of major automakers and banks in recent years, $38 million might seem like chump change. Then again, that type of budget — even extended through 20 years — would greatly surpass that of many small businesses.

“If he wants to be the image of free-market principles, he’ll certainly have to apply that to his own business,” said Christopher Wall, a Libertarian and professional firefighter who lives in Sugar Hill. “That could be a problem for him as a candidate.”

Hunt has described himself as a “practical Libertarian.” That image might allow him to toe the line on some stances while still keeping voters such as Wall.

“The question would be, to what extent do those grants give him an edge over the competition?” Wall said. “If it’s a niche market that only he serves, there’s no problem with that. But if the government is giving him a leg up over others, that’s problematic.”

Georgia Tea Party board member Jerry Kotyuk said government money does pose a challenge for fiscally conservative candidates who run businesses and have to “play within the rules.”

“I personally would not want to be going after a lot of federal grants,” Kotyuk said. “We need to change how things are done so people aren’t tempted to take that money.”