- PNC is proud to support Business Forward, where community leaders discuss the issues confronting business in Central Illinois.

(dramatic music) - Welcome to Business Forward, I'm your host, Matt George.

Joining me tonight, Mike Stubbs.

Mike is a CPA and The Director of Peoria Next Innovation.

Welcome Mike.

- Thank you.

- So are you from around Peoria?

Are you from here?

- Yes, originally from Peoria.

- But you kind of took a step away, you're in Chicago and some other places, and then you came back.

Peoria brought you back.

- It brought me back.

Yeah, originally from Peoria, went through the Peoria public schools, graduated from Richwoods High School.

Went to University of Illinois, got a Master's in Accounting down there.

Started my career in Chicago at Deloitte in their forensics and dispute services.

So I was there for about five years and wanted to get into intellectual property.

So I left Deloitte and went to a company called FTI Consulting, and I was there in their intellectual property practice for eight and a half years.

So I was in Chicago for 10 years.

The last four years I was at FTI, I was in Bloomington, Illinois, and I took the AM track up and back on Tuesdays and Thursdays.

Worked remotely monday, wednesday, and friday, and then I got roles at Bradley.

So as you mentioned, the Director of the Peoria Next Innovation Center and then Director of Technology Commercialization at the Illinois Small Business Development Center at Bradley.

And so those brought me back to Peoria seven months ago.

- Yeah, we just had Dr. Steven (indistinct) on and many others, but we're glad to have you on, we're gonna get into the intellectual property piece soon, a lot of people have heard of Peoria Next, but a lot of people don't know what it is.

Why don't you tell us what it is?

- Sure, yeah, Peoria Next is kind of a hidden gem.

It's a business incubator.

And so the idea is that you provide startups or other businesses, a place to get in and provide all of the things that a startup needs at a rate that's below market rates that increase each year until about three or four years when you're at or above market to incentivize those businesses to then launch out into the community.

And so what we provide are spaces, conventional office space, 120 square feet is a normal conventional office space.

We also have larger office spaces of about 550 square feet.

And then we offer what are called wet labs, which are traditional laboratory that you would think from a biomedical perspective, those are 800 square feet.

They're the only wet labs that are commercially available for startups in a 90 mile radius.

So anybody who wants to do anything from a wet lab perspective, so that provides venting so hoods to do analysis that needs to vent out of the building as well as having water, able to update electrical to the needs and have natural gas access, so those sorts of things, provided and then also conference rooms.

So people can do group meetings and those sorts of things.

So overall it's really bringing an environment together to where we can support entrepreneurs in the same area, to also to provide sort of collisions between those companies to see what collaborations can happen.

- I never understood really, to be honest with you, what the incubator piece meant, because you do start off, you do want them to grow, so you're giving them an opportunity to grow.

And then once they grow, you want them to stay to stay in the community.

- Exactly - Is there a deal in there that makes them stay in the community or is that just kind of, we just hope you stay in the Community?

- You hope that they do.

And when they grow there, so for example, VirtuSense is a company that was at Peoria Next Innovation Center, grew at Peoria Next Innovation Center and graduated out into the community near Sterling Avenue now.

They started in one lab and grew and grew and grew until they actually had four of those labs.

And then when they graduate out, it all of a sudden has availability for people to move in.

But hopefully during that growth process, they kind of anchor themselves in the community with the people they hire the relationships they build, and the products and services, that they kind of have already started to develop here.

- Well, that makes sense, you said hidden gem.

How long has Peoria Next been around?

- It opened as a physical entity, August, 2007.

So we're gonna have our 15 year anniversary in August.

So we'll have an open house then and bring people in.

And if you haven't seen it, come on down.

- Is that one of your jobs, so to speak, or one of your duties of the job is to, to brand what you have because 15 years is a long time for people to say, hey, what do they do there?

- Yes, and that was one of the interesting things.

When I came to the job about seven months ago, nobody had really tracked that progress.

And so different entrepreneurs had seen what was capable at Peoria Next and really put it on themselves to make sure they got that location and operated there.

But nobody's been really telling the stories of the types of companies that have been there that have come up, that have really affected the community.

Just briefly, for example, we're at 50 different, we've gotten to 50 tenants total over that 15 year period, of those 50 tenants cumulatively, they've raised over 301 million dollars in equity.

Within that 301 million, 31 million is from federal grants and awards to do research in those labs that we had mentioned.

And so they've created numerous jobs in the area, as well as even they've hired over 120 Bradley full-time and interns.

And so in general, there's just been a great impact for the area, but those individual stories of the different companies that were there, as well as are currently there, hasn't been really talked about in the same way.

And so that's part of what I'm trynna do, is kind of build out a presence to be able to provide a platform to communicate those stories so Peoria can be a little less harsh on themselves.

And see kind of where they can cheer lead some of the great companies that are already here.

- Is that what the model path of progress is, is that what you're talking about?

You start here and then you go to the next phase and the next phase and so on?

- Exactly.

Yeah and that kind of ties in Bradley's relationship.

So Peoria Next Innovation Center is managed by Bradley.

And so one of those model paths is Natural Fiber Welding, which is doing great stuff in the community, right?

Dr. Luke Haverhals had the idea, he was trynna figure how do we commercial this?

And so the Turner Center at Bradley University and the Illinois Small Business Development Center there helped him enter into what's called Brave Launch, which is the business accelerator that we run there.

Through that they went into the NSF -I-Corps, which is the innovation core, which allowed them to get grant funding to then find space at Peoria Next.

They were there for over a year and a half.

They grew there and then graduated out in the community on Galena road originally.

And they've been expanding ever since.

In addition, when I talked about the collisions, Steve Zika was at Peoria Next Innovation Center with a company called Attollo, and that's where he had run into Dr. Luke Haverhals.

And so now Mr. Zika is The President and CEO or sorry.

The President of Natural Fiber Welding.

And so that relationship wouldn't have really occurred potentially had they not interacted in that same space where we're trying to really accelerate these types of businesses.

- Interesting, so I think the cool thing there too is everyone's staying local.

- Yes.

- And it drives so many pieces of our community, but a lot of people don't hear about it.

So I guess my question to you is, all of these interns that you're using with Bradley and they're coming in 120, you said you could use some of 'em as speech writers and storytellers, because there's a lot of stories here that need to be told.

- A hundred percent, yeah.

And so really it's just, accelerating that progress right.

And getting that sort of platform to be able to communicate that in the best way.

- We had Dr. Shane Needham on, he is a tenant now.

- Yes.

- Veloxity Labs.

He was on our show and we've gotten to be pretty good friends since, I mean, every time he comes back into town and I think one of the really interesting things, and I love this piece.

I love the piece where someone's in a different state, he's across the country.

And he says, you know what?

I've got plans.

I came to Peoria, I'm looking around, I love Galesburg.

And I love all of the access, the airports and the people, the restaurants.

And it's getting those people to have these great business ideas from all over the country to come.

And that is what Bradly can do is they can help facilitate not just Peoria Next, but Bradley can help facilitate and get these people into our region.

- A hundred percent.

And other ways to do that too, is collaborate with the Peoria Ag Lab.

They're doing great stuff there.

Just the medical district, all of these different areas in which we can collaborate with different ideas and talent.

That's already here to leverage and increase that result in the Peoria area.

So yeah, Dr. Shane Needham, when he came down, it was great, did a tour of the building with his business partner as well, Dr. Mitch Johnson.

And he just was like, oh, I get it now.

Once he's in, he sees what's there.

It was kind of a shock to him that it was available and ready to go.

It's just one of those things where it's like, once you know it's there and the rates that we charge and the cost of living and the location that it's in, and then the relationships that are in those areas of development are just great.

- It's funny because before we started talking, I was looking at the rates and then you mentioned the rates and I'm sitting going man, that is very, very affordable.

And now I get why.

But you're trynna build business, trynna build community and so on.

So when he came in and he had mentioned this to me, and I really didn't know what it meant.

We went out to breakfast one day and he said, yeah, I mean, we have this wet lab space and it's just hard to get, why is it hard to get wet lab space?

I don't even know what that means - Yeah, wet labs are rare in the sense that it costs a lot to build out.

And so for example, one of the things I talked about was the exhaust, but that section, the whole side of the building, that's wet labs at Peoria Next Innovation Center.

If you think about HVAC, the air comes in, gets filtered and cooled then goes directly out.

It doesn't get recirculated.

So create the chillers and all of the infrastructure that's required to do that is, is pretty substantial.

To build that out as a startup is cost prohibitive.

And so that's where the incubators come in is that you build that space in order to be able to be shared over multiple different companies that can come through over different years.

Allow them to scale and create a product that they have commercialized now that gives them that momentum and ability to get financing, to build their own space out in the community.

- Is there funding that comes from federal or state to have these types of facilities like Peoria Next?

Or is it just purely Bradley?

- Yeah, so originally in the building of the building, there is federal and state grant money that came through.

Caterpillar also donated money towards that initiatives, but now over operating funds, Bradley covers any sort of shortfall that doesn't come out through the use of lease rates.

- Wow, so Shane Needham comes in, Mitch come in, they take Veloxity Labs, they say we wanna start a business.

And right now they just bring in their stuff, set up shop and pay you rent, that's it.

- Yeah, we schedule all the different people that had to come in from that operation to change that wet lab, to be specific to what they needed.

We got electrical in, we got HVAC people in to help from an exhaust perspective, but it reduced that uptime and that expense by about eight or nine months, at least.

- He told me a year.

- Okay, at least a year.

- I mean he saved a year.

And if you think about what you can do in a year, especially in that type of business.

So how many tenants do you currently have?

- Currently we have 14.

- And how many can you have?

- It depends on how many units that takes.

But probably be about up to at this point at what we're currently at, probably about up to 25.

- I Think one of the interesting stats that I read was that job creation piece, 775 plus jobs.

That's pretty impressive.

- Yeah and that's with what I was able to find from public research of the companies through newspaper articles and magazine articles.

- You went old school.

- I just did the research.

I dug down and figured out what this is and then, added those up.

So that's a very baseline.

And now, including all of the staffing increases from previous companies, if you think about companies that have recently graduated Natural Fiber Welding and VirtuSense, for example (indistinct) like the amount of jobs that they're creating and expanding is significant.

- So realistically take those 14, they could have, let's say a combined hundred employees now let's say all 14, make it they're in the community.

It could be in the thousands potentially?

- Yeah.

- That's awesome.

- Very easily.

- That's awesome.

So the connection is, is there a connection to Bradley in general?

Not just the business school, the entrepreneurship program, all of those programs all feed into this?

Because if I was a student and I knew that this was right under my nose, I would sit here and go, wow, this is, this is unbelievable opportunity.

- Yeah it's really worth on getting more of those connections coming in.

We work a lot with the Career Center, Smith Career Center to make sure that those internships and full-time hires are coming through with the startups they are.

And then it's trying to figure out what other programming can we do?

And so I'm working with someone who has recently hired Dr. Jane Talkington at the Turner School.

To figure out kind of what does that look like along with Dr. Bill McDowell?

- Well, Bill was on the show and that's why I brought up that school because he's a sharp guy.

And I think you've got some good people there.

- Even this week I was on campus helping judge The Big Idea Competition, they had a showcase.

So that is the student venture competition of showing these different ideas and great companies that these students are coming up with.

And so hopefully some of those then graduate into like, yeah, let's create this company in Peoria, and base it out of Peoria Next Innovation Center.

- I was honored to be a judge last year with that.

And it's funny because I felt like I was on Shark Tank because at the end of it, I wanted to invest my own money in every one of those businesses.

Cause these kids are so smart, it's just pretty, pretty neat stuff.

- That's wonderful.

- You have so many titles.

I can't even keep it straight.

I'm gonna throw out another one.

You're also The Director of Technology commercialization.

What the heck does that mean?

- So it means anybody who has a product or a service they wanna create a company, I help them with that.

A lot of those questions come into intellectual property.

How do I protect my idea?

So in addition to actually commercializing it and selling it, how do I protect it?

Which are two kind of forces that work against each other.

I like to say the best way to keep your idea protected is don't tell anybody, but the worst way to actually commercialize your idea is don't tell anybody.

And so it's like trying to figure out - what's the middle?

- What's the middle ground?

Do patents make sense?

Should we keep it as a trade secret?

What kinda trademarks does my business need?

Are we looking at trademarking the business as a whole or different product lines?

And then going through kind of creating a business model around what the idea is in addition to that protection.

And so I sit down and do no cost consultation with anybody in the community regarding any of these questions.

- And so if you're starting up with a business, it'd be silly not to talk to you, really.

- Yeah, well, I would think that.

- Well, so how do you, I've always wondered this, how does one understand or come up with a valuation of what intellectual property even is or mean?

So if you have a product, how do you put a value on that?

- Sure, when I was at FTI Consulting, I worked eight and a half years.

Most of that work was valuing patterns and trademarks secrets, mainly in a litigation setting.

So if you have a patent somebody's infringing on it and you sue that company, who's infringing.

Each of those companies hire attorneys.

And those attorneys hire two different experts.

One is a technical expert to see what the patent covers and if it's infringed.

And the second expert is a financial expert to say, if it's infringed, how much is this patent actually worth?

And so through that process, it depends on whether the person who's infringing is causing you to lose sales.

Because if that patent covers a feature that your customers need, then had they not infringed, you would've made more sales, So you lost those profits of lost sales.

Even if you don't use your own patent, you lost the ability to receive royalties for that patent.

And so you would license it and receive royalties, just like rent.

And so through that, we do an analysis to see, what are comparable licenses going for?

Is it a percentage of sales?

Is it $10 per unit?

Going through all of that sort of analysis, but other things that kind of show the value of technology in a way which you gotta think about is if the patent covers this cup, but it really needs a curve in the handle a specific way, if you could make a square handle and it didn't infringe the patent and provided you the same opportunity, then the cost of design around is really the value of what you've created.

And so it really depends on industries, because if you think about designing around a patent, you have to change the product.

And if you're in a medical device industry, it means you have to go through FDA approval again, which is cost prohibitive.

And so really there's just different things to consider in a lot of different ways and different industries.

And so it's just kind of a long process to look through.

So it's not really a, a short answer, but that's kinda.

- I always think of restaurants, I always think of restaurants because there's a restaurant in Charleston, Illinois.

Burger King, and they were the first Burger King before Burger King actually came out.

They're the only place that's allowed to use the name Burger King.

- Interesting.

- And so I've always found that, that type of stuff just fascinating and interesting and, and so on.

So, all right.

So what you're talking about is patent litigation, right?

- Yeah Part of that.

One of the reasons why you get a patent is to exclude competitors.

If you get a patent and you're not planning on excluding competitors, then sometimes there's just not a lot of value to that patent.

So it depends on the industry that you're in.

- So take it like a, take the brand Advil and there's a hundred knockoffs now.

Is that because the patent expired?

- Yes, the formulation of that drug expired in which meant that generics can then come in, if you have a brand name drug, it means there's a patent on that actual formulation of the drug itself.

- So knowing that, let's just use that as an example, that expires in 2028, as an example, I would spend as in my wet lab the next six years, trying to figure out the exact formula, so when it expires I can go live with something.

Does that happen?

- Yeah, but actually it's easier than that because if it's a patent, it's public information.

So in order to get the patent, it becomes public information.

You just can't use it.

And so everybody knows how to make it.

They just have to wait until the patent expires.

- That's crazy, I always wondered how that was done.

- And sometimes they actually launch what's called at risk.

Where they actually know they're infringing and they challenge the validity of the patent to say, the US government screwed up in giving you that patent and either is invalid cause you didn't name all your inventors or it's invalid because it's already been created or it's invalid because it wasn't novel enough.

You would take this patent, this patent, put it together and you would receive what patent you got.

And so it goes up to the jury on whether actually that patent should have been official in the first place.

- So middle Illinois has been known, and I heard this, I just want to ask you your opinion, is known as really just a hot bed of patents.

Mossville, just different areas that, so Caterpillar was involved.

Is that, is that a true statement?

- Yes, especially with Caterpillar here.

I mean the amount of patents in intellectual property that comes out of this area per capita, also with the Ag lab is significant.

- So what else besides caterpillar and the Ag Lab would - OSF and Methodist and UE Comp and Bradley's got patents that come out of different researchers and any of the small businesses around that are creating different, innovative ideas.

They might be one or two patents rather than the hundreds or thousands, but it adds a up.

- That's crazy.

So again, I'm gonna say it, people need to get ahold of you if they're gonna start a business.

- I would love to talk to them - Because a lot of times when people and Bill McDowell, we had this conversation, a lot of times people will say I've got a great business idea.

And the first thing they think of is money.

But they're not thinking of a business plan or strategic plan, whatever you wanna call it, right?

- Exactly.

- If I had an idea and you were consulting me, what would you say to me, my steps in starting that business are?

- So it always starts out with really identifying the customer segment.

That you're gonna be attacking first or selling to first.

And you might try to say, well everybody will want my product.

But it's hard to sell to everyone.

So let's limit down very specifically and narrow to those first people that are definitely gonna be the first people that are gonna jump on and buy what you're selling.

And then once you've identified that, really identifying your value proposition of your product, how is it different?

Why do you actually satisfy what that customer segment needs?

Versus anything else that they have available to them right now, which includes just not buying anything.

And keeping status quo.

And so really thinking through all those paths and then what evidence do you actually have that what you have is novel and great, and people are gonna buy it.

Other than just you saying, no, I know it's great, everyone will buy it.

It's like, have you talked to people?

How many people have you talked to?

What kind of feedback have they given related to this idea?

In order to kind of build that understanding of a business model, even if just an idea of what you're gonna sell, to be able to communicate that.

And so really writing that down in a way, getting that really refined and then thinking about how your revenue streams are gonna come in, what kind of costs are you gonna have to do?

What kind of key activities are you gonna do in house versus have people hired to do outside of your company and really working through all that in order to get a better story and a pitch deck and a plan together to then approach for financing, if financing makes sense, there might be other ways in which you can finance it through applying for grants.

Or actually trying to sell stuff and find a different customer that wants to invest in the company that you're selling to them.

And so there's different ways to look at it, but really it's that starting with just making sure that it might be in your head, but how can you communicate it efficiently and the best way to people that you need to.

- I just go back to what you said about the students and forming these businesses because when they were presenting these business ideas, you honestly sat there and looked and said, every one of those ideas is legit.

And, I just have always thought it was funny.

I'll refer to Shark Tank again.

It just seems like everyone's got these great ideas, but for whatever reason, a lot of these ideas just can't take hold, so to speak.

- I agree and one thing that's interesting is I don't think Peoria is short on ideas.

And I also don't think Peoria is short on funding for ideas.

Peoria is short on having people that wanna operate those ideas.

We get a lot of people who come in and have a patent and an idea, but they don't wanna actually create the company around it.

They wanna find somebody else to do that.

But there's nobody coming into my office saying, hey, I don't have an idea, but I wanna create a company.

Do you have an idea that I could, borrow from somebody to create for my own company.

And so that's really trying to figure out, what's the way we can get a lot of this activity going with people just kind of interacting and talking and seeing what ideas are out there.

- Yeah, I mean really, because if you think about starting that business, there are people that do that wanna run a business that don't wanna work for, or wanna have equity in a business.

I wanna be a partner.

But my idea is really stink.

But I'll work 80 hours a week, that type of person.

So that's interesting.

Well, this is, this has been very enlightening and I wanna say Peoria Next, next time Dr. Needham's in town he was gonna take me in and gimme a tour.

And now I'm talking to you.

I think I'm gonna bring in a few friends and take a tour because I think this is what you said at the beginning.

True hidden gem in our region.

- A hundred percent.

And I'd be great to have you over there and introduce you to a lot of different companies that are doing great stuff.

- Well, Mike Stubbs, we appreciate it.

Thank you for coming on the show.

This was awesome, I'm Matt, George.

And this is another episode of Business Forward.

(dramatic music) - Thank you for tuning in to Business Forward, brought to you by PNC.

(dramatic music)