(upbeat music) - Welcome to "At Issue," I'm H. Wayne Wilson.

Thank you for joining us.

This time, the conversation will revolve around entrepreneurship.

It's a word we toss around, sometimes casually, but there's a lot involved in going from the idea phase to final production.

We're going to be talking about that with leaders of organizations that help entrepreneurs.

And we also have an entrepreneur in the studio to discuss how her company is taking a long time to get up and going.

Chris Setti is here.

Chris has been on the show many times, usually in the role of the Executive Director of the Greater Peoria Economic Development Council, but you're also the interim Executive Director at Distillery Labs.

Welcome to the show.

- [Chris] Thank you.

- And we'll talk about Distillery Labs in just a moment.

Also with us is Mike Stubbs.

Mike is with Peoria NEXT Innovation Center, where he is the director.

Thank you for joining us.

- Thank you.

- [H. Wayne] Caroline LaHood is here.

Caroline is Director of Operations for, is it 3D ColorForge or is it just ColorForge?

- Just ColorForge.

- [H. Wayne] Just ColorForge, but 3D is involved in this.

- [Caroline] We're using 3D printing.

- And we'll talk about that in a moment.

And also with us, Kip McCoy.

Kip is with OSF HealthCare, where he is the Vice President of Innovation Studio.

You're going to learn about all these organizations in the next half hour and how we can help entrepreneurs in Central Illinois.

And I think maybe for the audience's benefit, maybe the 30-second version of your organizations.

We'll start with you, Chris.

- Sure, well, I'll talk about Distillery Labs then, 'cause Distillery Labs will be a center of innovation and business incubation in downtown Peoria.

We've been working at this for a while and we're really excited.

It'll be about 40,000 square foot facility that has everything from coworking space to makerspace, some 3D printing tools that'll be there, but really a center of activity around the entrepreneurial ecosystem.

So lots of great programming and really hoping to not only help people figure out their ideas, but to really launch businesses.

- And it's relatively new.

It's just getting its feet on the ground.

- Well, yeah, I mean, we've been working at it almost as long as Caroline feels like she's been working on ColorForge.

'Cause some things take time.

But the good news is that we'll be starting construction here in August.

We'll be starting some demolition of the building, interior demolition of the building.

It's at 201 Southwest Adams.

And we'll be open within eight or nine months after that.

But we've been doing programming ever since the gBETA Business Accelerator Program and other things.

- And we'll talk about gBETA.

We're gonna use terms that I haven't heard.

Let's turn to Peoria NEXT Innovation Center.

That's under the Bradley umbrella?

- Yeah, so Peoria NEXT is operated and financed by Bradley University.

It's a business incubator.

It was built 15 years ago.

And so we have research laboratories that startups and entrepreneurs can use to then help them scale and grow.

The idea is we provide below-market rates for those startups to have space to really figure out their idea and get that idea going.

And then once they get to a scale, then graduating out into the community.

- So Chris, this is not a competition between the two.

- No, and I think, Mike, earlier when we were talking before, talked about it like a spectrum.

So we are Distillery Labs, well, first of all, and what Peoria NEXT offers is a really unique opportunity, especially around wet labs and research labs, where Distillery Labs probably a little more agnostic when it comes to wet sorts of businesses.

And we purposely aren't building wet labs within Distillery Labs that if we get companies that eventually need that, they'll move into Peoria NEXT.

Peoria NEXT has some spaces that aren't wet labs as well, that are really, we think of as graduation spaces of people who will come through Distillery labs.

'Cause Distillery Labs isn't going to be designed to house companies, they're more to house individuals or very small companies.

And then the idea is to graduate them into Peoria NEXT where they'll refine their business and then eventually graduate out of there.

- So how does Innovation Studio at OSF HealthCare fit into all of this?

- Yeah, well, what we're doing, about two-and-a-half years old for being part of OSF, we are looking at and launching new companies that are licensing technology that OSF has developed either individually or jointly with some of our university partners, with the University of Illinois system, Bradley, and most recently ISU.

So what we're looking to do is start companies, license technologies that can be utilized by local entrepreneurs who are interested in using those.

And then they could be housed, they would use programming that Distillery Labs has utilized, not only the space at both, but some of the other support services that are offered for new businesses.

- I wanna talk about some of the challenges that face organizations that are starting up.

But first, I thought we'd use ColorForge as an example, and then if the three of you could input into how you might help a company like ColorForge, because you're almost nine years into your idea.

- Yeah, I would say nine years into our technology.

The company's newer, and all of these men here have been huge helps already.

ColorForge is the beauty industry's technology partner for reimagining cosmetics.

So we're able to unlock volume production and sustainable production of bespoke products.

And we do that through 3D printing.

We have a patented form of 3D printing called binder jet manufacturing and we're able to produce an agile supply chain, bespoke products, green packaging to really transform how the beauty industry is currently manufactured.

- So the 3D printer makes the cosmetic and the biodegradable container?

- Yeah, so that's what makes us really unique, our patented process.

Traditionally, cosmetics are compacted into a metal, hard to recycle metal pan.

So our process instead prints a biodegradable structure around each cosmetic and it's made out of earth minerals, so it's completely biodegradable.

Just toss it when you're done.

So it's a very sustainable process.

- So it was 2014 that, and I always use the term you were doodling on a napkin.

- Yes.

My husband John, John LaHood, is the founder and he patented the technology.

And I love our origin story, as I've said before.

He had the idea, he actually saw binder jetting in a sugar process.

They were printing sugar into sculptures.

And so he thought, "Why can't we do that with makeup?"

He has seven sisters, so he's always around makeup.

So he looked on eBay and he found a 25-year-old 3D printer, 'cause 3D printing has been around for a long time, just the patents began to expire around 2014, making that technology more accessible.

So we drove down to Tennessee and we bought this random printer on a farm, hauled it back, and we spent many years just in our basement developing and patenting the technology.

So yes, we've been going for nine years, but the company has really been ramping up for the last couple.

- Has she turned to you and said, and John, and said, "We've got this great idea, we think"?

- Yeah, so in addition to the Director of the Peoria NEXT Innovation Center, I'm also the Director of Technology Commercialization at the Turner Center at Bradley, which houses the Illinois Small Business Development Center.

So I do no-cost business consulting for people who have questions on how do I protect my idea from an intellectual property perspective, what's the patenting process, how do I know if it's a novel idea?

What are ways in which I can get help from one way or the other?

So in addition to providing the space at Peoria NEXT and what we have, so hopefully when they're at that stage of doing more R&D and have more machines here, they can provide space of her company or others like it.

But in addition to that, even without being a tenant at Peoria NEXT, we provide no-cost services for people that have those questions.

So I have an idea, how do I make a company off of that idea?

How do I protect that idea, how do I monetize that idea?

And so happy to sit down with people in the Peoria area, which is what I do the other half of my time, other than being the Director at Peoria NEXT.

- Chris, the word monetize came up.

Capital is critical.

We can look to Natural Fiber Welding.

Luke Haverhal's a fantastic chemist and came up with this great idea.

How old is NFW?

- I think they're probably seven or eight years now.

And it probably, that's maybe when it emerged.

I'm sure it was an idea maybe even long before that.

- And the problem is is that they really are, and may I use the term profitable yet, they're making some money.

- They have revenue, I don't know that they have profit yet.

Because they're still a startup.

And they're building their capital and their workforce.

- So with that as an example, how does a ColorForge or any company, Endotronix, you name it, come up with capital?

And we'll talk about capital through OSF in a moment, but where do they turn to?

Because you haven't sold a product yet.

- Sure, yeah, so a lot of people start with their own investment and then looking at friends and family to figure out who are people that are just really starting at that very early stage where it's just completely relationship based and huge amount of risk, from if we look at Natural Fiber Welding, you can go through accelerators that help you look at how do I apply for federal grant funding?

And so there's things called SBIR grants that allow you to get $250,000 from the federal government or other grants like that to then start up to, okay, I can do more research, can refine my product, get it ready to go.

Then what they're looking at is venture capital funding.

So we're helpful in Peoria in the fact that we have the Central Illinois Angels, which is an Angel Investment Network.

So Angel in the way that they invest really early on in early companies that are high risk.

So not that it's not an investment, but it's like if you need to find somebody that you're at this depth where you need more capital because you aren't making revenue, you aren't making those sales, that's where they come in and invest and help you kind of stay afloat.

- And maybe Kip can help us with that Central Illinois Angels.

- Yeah, I a couple of jobs ago was in an economic development position and help put together what's now Central Illinois Angels.

The group has just over 40 members presently, has invested around $20 million in about 30 different companies since it started in about 2009, 2010.

So yeah, they are looking at some of the earlier stages of companies, not quite the idea stage, doodling on the napkin, quite that early, but when you get a little bit of traction and a little bit of positivity from customers or customer feedback, that's where that group may come in.

And it's not millions and millions of dollars.

Usually, Angel groups are investing hundreds of thousands, tens of thousands of dollars into companies early on to kind of get them them to the point where they would be able to access venture capital, which would then be millions of dollars that would be coming in, depending on the needs of that company.

- Chris, let's say on the issue of capital, Peoria doesn't have a fund, per se.

- No.

- It's not like a San Jose or a Boise, Idaho.

- Right, and I don't know if San Jose has a fund.

What San Jose has is a bunch of people who understand what risk is and what reward is when it comes to the startup community.

It's called the flywheel, and how does the flywheel get spinning?

And once the flywheel gets spinning, it just keeps spinning.

And in San Jose, they've had so many startups, and a lot have failed, but a lot have succeeded, and so there's a lot of people who have exited their own startups and then are, because they recognized how much money maybe they made in their own startup, they're willing to plow it back in.

So I think that's where one of the areas that our region needs to improve upon is access to capital.

And we have a great organization like the Angels, but there's a stage between the friends and family stage and the Angels stage, there's a gap, and it's often called seed funding.

And this is where you're really investing in really just ideas, but you're not Caroline's mother or her father-in-law or best friend.

You are somebody who just has some money that they want to invest.

Usually smaller pockets, 20,000, 50,000.

And so some communities have developed their own seed funds.

Sometimes it's a community foundation.

Sometimes it's just a wealthy person that recognizes that.

And so that's one of the areas that I think our collective efforts around entrepreneurialism, but we're talking about scalable startups here, companies that might take eight or nine years to get to revenue and maybe more years than that to profitability.

And I think by exposing our community to more opportunity, more innovation, by having showcases and being able to celebrate a company like ColorForge or something a little further down the road like Natural Fiber Welding gets the people who have the ability to invest at this level to think, "There are things happening here that are worth investing."

There are not a lot of national seed funds.

They tend to be local because they are people who both recognize the opportunity to make money.

You don't go into investing in a seed round to lose it, but you also recognize that you place lots of small bets and hope a couple of them pay off.

But they tend to be more local because you might have the additional motivation as an investor to want to help a local company.

- But Mike, the state of Illinois has a matching program... - The state of Illinois has a billion dollars from the Treasurer's Office, it's a fund of funds.

So it funds other venture capital firms that then fund companies.

And so we don't have a specific independent venture capital firm in Peoria, and so that's one thing that becomes a little more difficult.

But as Caroline has experienced, the networks that we have to get people and entrepreneurs here to talk to other funds in different areas is strong.

And so we are able to get funding for those entrepreneurs.

It would just be easier at a seed fund perspective, as Chris was saying, if from a hyperlocal perspective in that very early stage we had our own independent fund.

And so to the extent we do that, there are organizations that then will assist or match those funds that are raised.

It's just the process of getting that type of company, if you will, created in the area and getting the support from the community of what that looks like and how to actually get it going.

- And I think it's difficult for the public sector to do this, in many ways.

Because it's taxpayer dollars and you're betting taxpayer dollars, often, on startups.

And so it may be unpalatable politically or amongst the citizenry.

There are communities that have done this, and the state treasurers, that's an investment strategy.

They're not just investing money in just because they're good guys.

They wanna make money.

But the city of Peoria just recently announced a grant opportunity.

It's not a seed fund, but it almost operates in some ways as a seed fund, up to $25,000 for technology-based startups who wanna locate in Peoria.

And you can get higher priority in certain parts of downtown or up if you go into Peoria NEXT Innovation Center, and that's $25,000 to help you pay for rent and some other startup costs.

It's what's called non-dilutive, meaning you're not giving away a portion of your company, a portion of equity.

So it's the start of, and for the city of Peoria, it's important because they're looking to attract companies to the region and they recognize there's an economic benefit beyond the grant of having companies locate here into Peoria.

- And I don't mean to interrupt- - [Chris] No, you're fine.

- I wanna make sure that we, OSF HEalthCare has a... - A fund.

- A fund, but it's restricted in some ways.

- Yes, so we have OSF Ventures, which is on a third fund, a total of $250 million that we're managing, assets under management, but it's off of the balance sheet of OSF.

So it doesn't have limited partners, it doesn't have outside investors that are part of that.

And we're investing in what's called Series A or later.

So it's companies that are more well established and have had a decent amount of de-risking happened early on.

And it's also a very strategic fund where it's really about the benefit to OSF HealthCare and the strategies that we're employing to help our patients and our caregivers as opposed to a place-based fund where you're looking more about that investment in local companies.

Not that we wouldn't invest in local companies, but... - Let me turn to Mike, because everyone wants to know, well, entrepreneurship, you haven't made a thing yet at ColorForge.

- No.

- Nine years and you haven't made a thing.

And that's not bad, that's typical.

But Mike, how do you measure success?

Because, I mean, the little I know about ColorForge, it seems like this might be something that will go.

Natural Fiber Welding, that's something that's going to go.

How successful are we, because we know there's failures.

- Yeah, we've had a tremendous amount of success in Peoria from a startup perspective.

And so we should be proud of what the ecosystem has been able to produce.

Because Peoria NEXT is 15 years old, you're able to actually see those long games start to play out.

We talked about Natural Fiber Welding, you had mentioned Endotronix.

Endotronix is a company that does an implantable heart device for people susceptible to heart failure.

They've done over 600 heart implants in actual patients, including some in Peoria from OSF that were implanted.

And they are going very well in a clinical trial.

We've had companies like Intellihot that creates commercial tankless water heaters.

They did the water heaters for the 49'ers' NFL stadium.

And now they've got contracts with Hilton and Hyatt and Marriott to do water heaters in hotels across the world.

We have companies like Veloxity Labs that's now located here that originally started with two people, I think they're at 20 now and are growing rapidly at Peoria NEXT.

And so what are ways in which we can keep those types of biotech companies that are doing bioanalysis at a scale here?

And so one way to look at it is jobs.

Those companies at Peoria NEXT have created over 1,200 jobs, they've raised over $439 million in equity and grant funding, including 39 million from federal grants and non-dilutive funding.

So we've shown that you can actually bring money into Peoria from these companies that are growing from here.

- I wanna follow up on that, that same line of thinking, with Kip, because those are good numbers.

But the importance here is wealth generation.

I mean, that's where we're really focused on.

- Yeah, that's really what, as Chris was mentioning earlier, I think he used the term flywheel, it's really when you invest in these companies and the companies become successful and ultimately they have an exit, so they either go public or sell to another larger corporation, there is a multiple on the dollars that were invested.

And then that goes back to those original investors, those Angel investors, the founders of the company.

And then you'll see those dollars reinvested in additional startups because you've created this newfound wealth and people get more comfortable with that investment and being able to invest in those companies.

So you start to see, as Chris mentioned, San Jose and the Silicon Valley and the places that we, Boston, that we know, they've had that success going for a number of years.

And it's really that wealth generation that helps continue and keep those things going for the local startups.

- If I might just add one thing, successes are great.

Failures are okay, too.

And I think we have to, as Midwesterners, I think we have to understand.

The idea is to fail forward, fail fast and fail forward.

So entrepreneurialism and being an innovator is about constantly failing until you get it right.

But it takes a bit of risk tolerance on the part of investors to understand that.

And I think that we have to be okay with the, not everything, and that's why our seed funds are important, is that they understand that you're placing lots of small bets, but that many of them will emerge from that and be ready for follow on funding.

- I'm sure ColorForge is not planning on failing.

At least that's not the plan.

- [Caroline] No, it's not the plan.

- [H. Wayne] But I want to know what challenges you faced in trying to get to that production aspect.

- Yeah, so many, it's a very deep tech.

We have to do a lot of development.

At times we had to wait for the technology to almost catch up to our idea.

Especially with additive manufacturing, the landscape is changing rapidly.

We had to go build our platform at University of Liverpool with a six print channel because we tried to work with a number of additive manufacturing companies on existing platforms and it couldn't handle our process.

So lots of little failures.

We always say, "You get a win and you'll get a loss."

You'll have people who don't believe in you.

We don't come from traditional backgrounds in additive manufacturing or cosmetics.

So there's a lot of naysayers.

But I think you have to be a little bit crazy to be an entrepreneur, and we've got a lot of that.

- Caroline has just admitted that she's crazy.

- [Caroline] Just a little bit.

- But the intent, and you mentioned going to Liverpool, because that's where the technology was, et cetera.

You plan on being in Central Illinois when it comes to production time.

- Yes, of course.

My husband and I are both born and raised Peoria.

We know the value, we wanna raise our family here and build up our business here.

Peoria's always been a manufacturing town, and now you have a new wave of it.

Industrial Revolution 4.0 is part of additive manufacturing.

- Let me turn to Mike, and maybe Chris can add to this, but how do you keep entrepreneurial companies in Central Illinois, somewhere in Galesburg, Bloomington, Peoria, Morton?

- I think we have good examples of that with AutonomouStuff.

They were purchased by Hexagon, they're still located here.

Precision Planting is in the area.

Natural Fiber Welding's still here.

VirtuSense graduated out and was here.

It's really coordinating as a group.

And the GPDC does a great job with that of how do we actually get people to feel like a family, are supported here from a funding perspective, but we can help you find locations, we can help you find workforce.

And those are really the things of what are ways in which we can reduce the risk that those startups see while they're scaling and see that ahead of time.

So you can have those questions and conversations before they have to continue to reach out where they feel like maybe they're not getting the same support that they they should going through it.

- Chris, is this a question of if a startup company sees successes in Peoria with, "They stayed in Peoria, we saw that happen, we might as well do this."

- I think that's a good point.

I think the fact that Natural Fiber Welding, which for a while may have thought, "Well, we're not gonna be able to scale this company here," the fact that they are able to scale the company here, I think, is a signal to other companies both.

And I will say, we talk about entrepreneurship and innovation a lot when it comes to kind of growing our own, the LaHoods of the world.

I think that we could be the type of place that actually imports innovators and entrepreneurs as well.

And I think the work that OSF and Bradley and GPDC have done is to build an ecosystem.

And I know that word almost has become a cliche, but it's to surround our entrepreneurs with support.

I think there's still a gap when it comes to the financial capital, but there's no gap when it comes to the support.

And I think Caroline would hopefully echo that.

When our innovators say they've got an issue, there are people who are ready to jump in, both Mike and I, Andrew Ngui, the folks at gBETA who work under the Distillery Labs, that are plugged in not only here locally with a network of people but internationally to make those connections.

- And with that, we'd like to talk about a lot of other things, including how you take some ideas from USDA Lab, et cetera, and create something for jobs here in Peoria.

But we'll save that for the next conversation on "At Issue."

Let me say thank you to Chris Setti, who is interim Executive Director at Distillery Labs, and to Caroline LaHood, who is Director of Operations at ColorForge.

And to Mike Stubbs and to Kip McCoy.

Kip is at OSF and Mike is at Peoria NEXT.

Thank you all for the conversation.

We'll be back next time with a discussion.

We're going to talk about OSF HealthCare again next time, but this time it's about the need for healthcare at home.

OSF HealthCare has a method to provide quality healthcare, hospital-level healthcare, at your home.

On the next "At Issue."

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