High-Tech Dreams Take Firms on Divergent Paths

When work as a nuclear engineer became scarce in the United States in the aftermath of the 1986 Chernobyl nuclear power plant disaster, Rene LaForm Lopez decided to go into business for himself.

With his best friend, an electrical engineer, Lopez decided to go into the business of selling fish tacos.

Although he never opened a single one of his Mr. Mex dream restaurants, the idea of fish tacos did start Lopez on the road to entrepreneurship. Today, Lopez is president of Compa (short for compadres) Industries Inc., a 6-month-old, Anaheim-based electronics firm he says has “gotta start making money by next month or we’ll go under.”

J. Fernando Niebla, on the other hand, is president of Santa Ana-based Infotec Development Inc., a software development company with 400 employees in 15 offices nationwide, a firm that Niebla says should post $30 million in sales for fiscal 1987 and $50 million for the year after that. Niebla would not divulge his company’s income but said Infotec “has been profitable every year” since its founding in 1979.

Although Lopez and Niebla are at the two extremes of the minority business spectrum, they have more in common than is initially apparent.

Representative of New Breed

Niebla has leaped the hurdles Lopez now faces, and both are examples of the new breed of minority business owner: highly educated entrepreneurs who have eschewed the stereotypical mom-and-pop enterprise that most of their colleagues run in favor of chasing high-tech hopes.

Niebla’s is a “how-to” story on niche marketing, planning, luck and the shrewd exploitation of government assistance programs. Lopez’s tale has many of the same chapters, but success has been more elusive.

Lopez’s story started in 1986, 15 years into his career with Bechtel Power Corp. in Norwalk. Work in nuclear power plant construction was coming to a standstill, and Lopez, 43, did not like the looks of his future at Bechtel. Norbert J. Mendoza, 55, his compadre and soon-to-be partner, had been working in electronics for nearly 20 years and felt his career was at that go-nowhere plateau.

Given such circumstances, what are two engineers to do? The answer was easy: Scramble.

“Entrepreneurship starts,” Lopez intones commandment-like, “when you need to do something else.”

So the two men attended seminars and went to conventions, talked to Latino business experts and finally ended up at the Small Business Administration’s Business Development Center of Southern California. And they went armed with an idea.

First Came the Bad News

“We went to go see if we could open a chain of fast-food restaurants called Mr. Mex, selling fish tacos,” Lopez said. “In Ensenada, the kids go eat them, but they’re not around here.”

The bad news came first: The restaurant business is one of the most competitive small- or big-business fields and is littered with the corpses of failed food stands, they were told, so do something you know instead.

But it was quickly followed by the good news: You know electronics, they were told, a field with a need for minority entrepreneurs, so why sell tacos when you can assemble printed circuit boards and design electrical facilities?

Why, indeed, they thought, especially after learning of “government set-aside” programs designed to offer ethnic entrepreneurs a leg up in the business world. There’s the so-called Small Business Administration 8(a) program, through which minority businesses compete against each other alone for federal contracts. And the Department of Defense has a congressional mandate to set aside 5% of its contracts for qualified minority vendors.

Fueled with visions of government contracts, Lopez and Mendoza mortgaged their houses and raided their savings accounts.

When the dust cleared, the two had $205,000. They then loaned $150,000 to the corporation to cover start-up costs. The rest went into personal accounts to cover mortgage payments and other financial responsibilities.

That was January. By June, the fund was nearly dry, Lopez said. “We’re about down to $5,000. We’re good on financial statements because we have sold, but our problem is cash flow.”

Lack of Cash Flow

It is cash flow--or the lack of it--that can be the death knell to many a small business. Compa Industries, which assembles printed circuit boards and plans to branch out into electrical design, had hoped to get $110,000 in contracts in 1987, its first business year. The company was close to reaching the halfway point in June when a dilemma arose: Lopez and Mendoza had to cancel a $30,000 contract, one that was to represent more than half of their revenues to date.

“We had to stop doing work for one of our main customers because they weren’t paying,” Lopez said. “It was coming out of our own pockets. If we keep putting in (money) and stop getting out, that’s a bad thing.”

In addition, the government contracts just did not materialize, a fact that Lopez--like many ethnic entrepreneurs--blames on lots of supportive talk from the federal government and no commitment to nurturing minority vendors.

The company had planned to do 20% of its business with commercial firms and 80% with the government, but to date its business has been entirely commercial.

“We are having a hard time breaking into the government because the programs are not what the government says,” Lopez said.

At least one government study supports Lopez’s position: “Minority-owned firms had a smaller share of DOD awards than small firms in general . . . ,” said the 1986 edition of “The State of Small Business: A Report of the President.”

The struggle continues, and Lopez and Mendoza are far from giving up. They solicit bids, pay their bills and pray for contracts.

“We have been successful in making our overhead, but we’re just existing,” Lopez said.

Niebla started Santa Ana-based Infotec on much the same footing in 1979. There was the second mortgage on the house and the initial contract drought. The bank showed a “general reluctance to deal with us because we were minority and small,” Niebla said.

And when Niebla went stumping for bids “at the onset, there was disbelief that a Hispanic could be effectively involved in space activities,” he said. “It took a while to dispel that disbelief.”

Product Was Needed

But his credentials were impeccable, and his product was needed. Niebla’s resume boasts a bachelor’s degree in electrical engineering from the University of Arizona, a master’s degree in business administration from the University of Southern California and attendance at a host of executive development seminars at UCLA and Harvard. He has worked on the Apollo Saturn project and later headed Rockwell International’s engineering development laboratory in Seal Beach.

Niebla spent the early part of his career doing for others what he now does for himself, for Infotec’s particular niche is in the development of mission control centers for satellites.

“I had never really intended to form my own business,” Niebla said. “I was happy at Rockwell.” But while traveling for the aerospace giant, he realized the wealth of contract opportunities “that were just too small for Rockwell.”

And so Infotec was born.

Like Compa Industries and countless other small and minority-owned businesses, initial cash flow was a problem for Infotec. But unlike Compa, Infotec had a run of luck.

Niebla’s first contract was a $10,000 job for IBM doing systems analysis to upgrade the Air Force satellite control facility in Sunnyvale. Six months later, Infotec won an additional IBM contract, this time for $400,000.

Paths Diverge

“Fortunately I had some good customers who were conscientious and realized we had to maintain our cash flow,” Niebla said. “IBM, Rockwell, Ford Aerospace--they’d let us bill weekly, and they paid quickly.”

It is here that Niebla’s and Lopez’s paths diverge.

Compa Industries struggles on with a staff of five. “That’s all we can do now,” Lopez said. “We are bidding, and if I get a request for a bid, I’m happy.”

Infotec, in contrast, had $4 million worth of contracts by 1981, and today, it has $40 million--all in government-related contracts. It is working on the Strategic Defense Initiative, or “Star Wars” program, and relies heavily on SBA 8(a) contracts.

The company is currently No. 107 in the Hispanic Business magazine list of top 500 Latino businesses nationwide, and Niebla has set his sites on reaching $100 million in sales by 1990, which would probably put him somewhere near the top 20.

Industry experts say that it also puts him in a very exclusive strata of minority business owners--in Orange County and nationwide. It is a level that Lopez currently only dreams of, and one that Niebla fully appreciates.