PeoriaNEXT Innovation Center, the organization that brought you Firefly Energy, has incubated another start-up company that can’t start up without taxpayer-supplied venture capital. It’s called Intellihot, and fortunately for Peoria taxpayers, it’s getting its combined $1,015,000 in direct lending and commercial loan guarantees from the taxpayers of Galesburg.
The Galesburg City Council unanimously approved a $675,000 loan (at 3% for 10 years) plus a guarantee they would cover 20% of a $1.7 million bank loan (that works out to $340,000). The editors of the Galesburg Register-Mail are also unanimous in their approval of the council’s action. It’s not hard to see why. Intellihot promises to “create 45 jobs paying $25 an hour [in the next two years] and plans to develop a 30,000 square feet facility in the Sustainable Business Center, which is located in old Carhartt building on West Main. The company hopes to employ 144 workers here within four years.”
Intellihot is a company started by two former Caterpillar engineers. So why are they planning to manufacture their tankless water heaters in Galesburg instead of Peoria? According to Paul Gordon’s column on Sunday:
There is a facility already available in Galesburg that will be a sustainable and green incubator for manufacturing products. […]
“Finances, of course, were a very important factor, as was the skills of Galesburg workers. But having the sustainable, green manufacturing incubator ready was key because we have some time lines we have to meet. We have to get some things done to move this forward or someone else will,” [Sridhar Deivasigamani, president of the company] said.
What is this “green incubator” that Galesburg has? The Galesburg newspaper explains:
The [former Carhartt] building offers 80,000 square feet of manufacturing/warehouse space, as well as 8,000 square feet of offices. According to a news release from the [Sustainable Business Center], “Incubation services will be offered to new, green businesses at below market lease rates. Services will include receptionist, copy, fax and conference room. Staff will be available to help draft business plans and to mentor and work with new businesses.”
Carhartt is a Michigan-based manufacturer of “premium workwear” that closed its distribution center in Galesburg last August. However, instead of selling the building and abandoning Galesburg altogether, Carhartt’s majority owners (Mark and Gretchen Garth) donated the building to their family foundation, HumanLinks, and have been turning it into the Sustainable Business Center. WQAD reported in June: “Using green technology, it hopes to eventually replace some 200 jobs that were lost here.”
Bottom line, Intellihot is getting “below-market lease rates” on their manufacturing space and over $1 million in financial backing from Galesburg, and that’s why they’re going to build their product there instead of Peoria.
I wish Intellihot and the taxpayers of Galesburg the best of luck. Peoria’s foray into venture capital for another PeoriaNEXT start-up company didn’t work out so well. Perhaps Galesburg will fare better. Still, I miss the good old days when entrepreneurs used exclusively private financing to start up new companies instead of relying on public tax dollars.