VERBATIM
Uncut transcript of an interview with storied business consultant, J. P. Pierogiczikowski—affectionately known as Joe Perogi.
As told to John Jonelis
Joe Perogi—“Before we get started, I heard you’re writing a novel.”
John Jonelis—“Yes, The Gamemaker’s Father.”
Joe—“Well? What’s it about?”
John—“A machinist competes with his gifted son in verbal game of wits. The game turns into a duel that takes over their lives.”
Joe—“Okay, sounds interesting.”
John—“The publisher’s shooting for a December launch of the electronic version. Then we follow up with a hardbound. Videos, summary, reviews, and the first few pages at www.JohnJonelis.com
Joe—“Enough already.”
John—“You asked.”
Joe—“Not for the whole story. That crosses the line into what I call shameless self-promotion”
Editor’s Note—Joe Perogi strikes me as a bit of a curmudgeon. I wonder how he made all those companies so successful.
John—“Let’s get back to business. Tell me about the BNC meeting you attended.”
Joe—Yeah. I’ve been coming to these things ever since Len started BNC. I like the way he makes all these companies answer five basic questions. I can tell you from experience—these questions are the foundation for any business.”
John—“Can you give us the highlights of the event?”
Joe—“Sure, but most of them usually do. Answer all five, I mean. The guys in the crowd grill ‘em pretty hard. If the financials don’t add up, they say so up front.”
John—“Maybe just tell us what they do.”
Editor’s Note—For those who haven’t attended a BNC Venture Capital meeting, the questions are as follows:
- What’s the product or service?
- Why will customers buy it?
- Why is the management team qualified to execute the business plan?
- How does the company make money?
- How will the investor make money?
MILL CREEK LIFE SCIENCES
Judy Lundy – CEO www.millcreekls.com
Joe Perogi—“This group makes natural proteins to grow adult stem cells. They can grow proteins better, faster, with less risk. A million people walk around with damaged hearts in the US alone. This’ll be the first heart regeneration treatment on the market, and there’re a lot of other uses, like Lou Gehrig’s disease, kidneys, arthritis, diabetes, severe wounds. There’s something else that’s real special about it, but I’ll get to that in a minute.
John—“What’s your read on the industry?”
Joe—“The industry’s starved for new ideas like this. Stem cells from animal protein don’t cut it, with mad cow and human rejection. Then there’s the genetically engineered stuff, but it’s expensive and there’s problems with cell mutation. Fetal tissue is a dilemma. The concept of growing and harvesting babies like a crop is morally depraved. Some people are fine with it but I call it murder and so do a lot of other people.”
John—“I’m with you on that one.”
Joe—“Good. Mill Creek gets around all those problems. They already passed their Phase 2 study. Phase 3 is pending.”
Editor’s Note—Phase 1 proves safety. Phase 2 proves it works. Phase 3 validates Phase 2.
Joe—“One of the interesting things about the business is their supply of materials. They collect expired adult human platelets. The stuff is useless to hospitals after five days and they’re scrambling to get rid of it. Mill Creek picks it up on day six and makes everybody happy. It’s still good for their process and they cryofreeze it and build a nice stockpile. Frozen, it lasts two or three years. So think about it. Their supply is cheap waste material and right now, they get it almost free. They’re busy signing 5-year supply contracts.
“Their CEO has the credentials. Mayo, ISU, Novartis. She’s both a scientist and an MBA. Good combo. From the look of it, they rounded up a top management team. Tech licensed by Mayo, which is the normal way Mayo does R&D.”
Editor’s Note—The Mayo Clinic’s model is to research the technology, then license it for 17 years and stay on as a partner.
Joe—“Mill Creek’s first step is to monetize the heart application that Mayo is researching. They’ve already locked in two clients with others knocking at the door. Expected Y5 revenue—$52 mil. 5-year return about equal to a 183% annual interest rate.”
John—“That’s dazzling but let’s skip the financials. What’s the special item you were saving?”
Joe—“Oh, yeah. They can use the patient’s own cells to regenerate tissue. That speeds healing and there’s no rejection. I’m talking regeneration of the patient’s natural body tissue, and they can do it fast.”
John—“How was it received at the meeting?”
Joe–“Len always takes a vote at the end of the evening. It’s a device to make the event fun. I gave this company a nine out of ten. Lots of sevens and eights in the crowd. There’s an unwritten rule—if you vote seven or above, it means you’re interested in investing. This one looks like the real thing to me.”
CFC AIR CAR
Stephen Cook – President www.labicheaerospace.com
Editor’s Note—This company also presented at the Funding Feeding Frenzy the next day.
John—“Can you keep it short. Stick to the important points.”
Joe Perogi—“You want to hear this or what? CFC’s product is the FSC-1. FSC stands for ‘Flying Sports Car’ It’s a flying car with wings that fold into the body. Yeah, you heard me right. James Bond stuff. Fold-away wings gets around the main obstacle these things always faced in the past. The initial modal sells for $150K and they’re working to bring that down.”
John—“Still cheap for an airplane.”
Joe— “Steve Cook’s got seven years in Aerospace and plenty of connections. He met with Burt Rutan, Tim Draper, and Clayten Christianson. He’s got a list of amazing people involved, from NASA to Toyota and Mazda. His team includes a Ph.D, a CPA, an MBA. He’s doing a Round A funding.”
John—“As I recall, Henry Ford predicted this car in 1940. So far there’ve been a lot of duds.”
Joe—“Because of advanced technology, competition is heating up. Another company has a new 2-seater that does 120 mph in the air and is already FAA approved. That company has 250 hard orders for $250K each. Far as I’m concerned, that proves the concept. CFC’s got a better product for a lot less money. They plan to build theirs to hold five people. It’s supposed to do 150-225 mph in the air at 17 mpg with a 500-mile range.”
John—“IFR capable?”
Joe—“Yes.”
John—“That’s sounds like a nice plane.”
Joe—“It is. They use counter-rotating pusher props to make it safe and easy to fly. The video of it flying looks good. They use an airframe parachute to bring it safely to the ground if the engine fails. I like their plan to license the tech to Burt Rutan and work with him. He knows how to pull this off. Another huge thing to consider—as a car, it looks hot. Nothing brought to market in the past can say that.”
John—“You think they can deliver a car with sports car handling that has great flight characteristics? I’m an instrument rated pilot and I can tell you it’s a picky crowd.”
Joe—“Yeah, I can tell.”
John—“Can they get past Rutan’s famous ego?”
Joe—“Yet to be seen. So far, this is still a dream. No revenue at all for 5-7 years. It’ll be hard to fund with that profile, but I hope they make it a go. I think they need a good advisor to get them past the financing hurdle.”
John—“What’s that? A little shameless self-promotion? What chances do you give them?”
Joe—“In the voting, I gave ‘em a 6.”
HEATWAVE
John Dolphin www.heatwavesolar.com
Editor’s Note: This company presented at the Funding Feeding Frenzy the next day.
Joe—“This is an advanced solar heating technology called “The Harvestor” and it’s made in the US. Looks really slick, like a big window. It’s a self-contained unit that mounts anywhere. Easy installation. Put it on your south wall, hook up the fan, and it pumps hot air into your house. It doesn’t get much simpler than that. Each unit heats 1000 square feet and you can install as many as you want. They’ll probably market it through the home improvement outlets. Already talking to Menards.”
John—“What about nights and cloudy days? Does it store heat?”
Joe—“No and that’s their limitation as I see it. It works best in the mid-latitudes where they get a lot of sun. I’d like to see them add storage capacity. In the northern regions, people use electrically-heated ceramic space heaters that radiate for hours after you switch ‘em off. HeatWave needs something like that to broaden its customer base. But even as it stands, it’s a terrific add-on to conventional heating because it saves a lot of money on the days it operates.”
John—“Can you wrap up your comments?”
Joe—“I think it’s a killer product. It looks great on your house. In Minnesota you immediately get 25% back as a tax credit. It pays for itself in five years and lasts 20. The competitors offer products that are difficult to install and cost three times as much. The Harvester is their second heater. There’s no national player in the space, so it’s a market development play, meaning they need to create their own market for the product. But it sells for just 12K and that yields 45% margins. It’s patented. The company is entirely bootstrapped so far, so they’re expecting a 20x return to investors in three years. I gave them a 6. Does that wrap it up fast enough for you?”
John—Yeah. How did the voting come out at the end of the evening?
Joe—Mill Creek won decisively, followed by HeatWave and then CFC Air. Let me know when your book comes out.
John—Will do.
That’s the way Joe told it to me. Comments welcome.
John Jonelis
Find Chicago Venture Magazine at
www.ChicagoVentureMagazine.com Comments and re-posts are welcomed and encouraged. This is not investment advice – do your own due diligence. I cannot guarantee accuracy but I give you my best.
© 2011 John Jonelis – All Rights Reserved.
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