Transcript: Nightly Business Report- July 4, 2016

NBR-ThumANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

welcome to this holiday edition of NIGHTLY BUSINESS REPORT.  I`m Sue
Herera.  Tyler Mathisen is off tonight.

Here at NBR, we talk a lot about entrepreneurs and those who risk it all to
follow their dreams.  The challenges are real but so are the rewards.  It
all starts with that one bright idea and from there, it can turn into a $1
million business.

So, tonight, on this Independence Day, we celebrate the entrepreneurial
spirit and independence from your boss.

It all begins with a vision, a vision to create something new, but
sometimes that bright idea can come trying to make something that`s been
around forever better or simpler.  Tonight, we bring you the stories of two
entrepreneurs, one who was changing the way kids are coached and the other
who are changing baking.

And that`s where we begin.


HERERA:  Adam Leonti is one of a handful of U.S. chefs using his own
freshly milled flour.  Like flour he used to use in Italy in 2010.

ADAM LEONTI, BROOKLYN BREAD LAB FOUNDER:  It then dawned on me why I like
the flavor of the pasta in Italy more where I was working, because it was
fresh wheat.

HERERA:  He converted to fresh flour at a Philadelphia restaurant before
moving to Brooklyn last year to become executive chef at the still under
construction Williamsburg Hotel.  The hotel`s baked goods will come from
his Brooklyn bread lab which opened in December.  He sells out of $7 loaves
of bread, pizzas and pastries in about an hour, three days a week.  His
flour sells for about 5 bucks a pound.

Using only his flour, a little salt, water, and homemade yeast starter,
Leonti concocts crusty, crunchy, airy loaves of deliciousness.

LEONTI:  You can tell it`s baked, it`s hollow.

HERERA:  The hunt for flavor led Leonti to the Bread Lab at Washington
State University.  He worked with scientists studying ways to use locally
sourced grains.

Flour comes from grain, like wheat berries, which are seeds.  The fiber-
rich outer bran later is stripped away by modern milling.  The middle
layer, the endosperm, is used to make most of the cheaper, shelf-stable
white flour that we`re used to.  But that layer is missing key nutrients
like the protein and minerals found in the inner layer or the germ.  The
oils from the germ are separated as well because they can spoil.

Leonti`s fresh, locally sourced flour combines all three.

LEONTI:  All the oil makes a clump of like snow.

HERERA:  He convinced his new bosses to buy a $25,000, 3.5-ton stone
grinding mill.  There are only 150 like it in the United States.

LEONTI:  Like if this doesn`t work out, we can move it right into the
hotel, no big deal.  So, there wasn`t a huge risk.

HERERA:  Since December, Leonti and his lone employee, best friend Jeff
Keselowski, has also offered classes, teaching home bakers, restaurant
owners, and chefs about the idiosyncrasies of baking with fresh flour.

KEITH COHEN, ORWASHERS OWNER:  I haven`t heard anything that anybody would
argue that using freshly milled flour is great.

HERERA:  Keith Cohen took over legendary New York bread maker Orwashers in
2007.  He`s about to open a second location on Manhattan`s West Side.
Cohen buys local flour to make about 25 percent of his products, but he
sees challenges for someone hoping to cook up a business based on baking
and milling.

COHEN:  You have to be able to get the baking down.  It`s very different
than a retail operation because you`re responsible for delivering the
product and receivables, so you become more of a manufacturer/trucking

HERERA:  For now, Brooklyn Bread Lab is taking baby steps.  Though Leonti
admits he`s in talks to partner with Whole Foods, which is opening a store
near the hotel, folding in the possibility of making some real dough.

LEONTI:  You can eat bread and be healthy.  If it was made with fresh flour
and you were eating it every day, you`d feel a whole hell of a lot better,
which is — I mean, that`s the goal of everything.


HERERA:  Football is a team sport.  But Shalik Billups (ph) is working one
on one with Coach (NYSE:COH) Kevon Watkins.  It`s the kind of attention
Watkins says he never got when he played in high school, and while he was
in the U.S. Marine Corps.

UNIDENTIFIED MALE:  Nothing like this was ever even thought of.

HERERA:  Individual coaching is nothing new.  Watkins has been doing it for
about ten years.  But now he says finding customers, collecting reviews,
and maintaining his business is much simpler.

Thanks to a website, CoachUp, the site vets and ranks 15,000 coaches in
individual and team sports across the country.

Jordan Fliegel came up with the idea for the site back in 2011.

JORDAN FLIEGEL, FOUNDER:  If you want a tutor, if you want to improve your
SAT score, you get a tutor.  In sports, they learn how to play the sport,
how to really learn it.  We don`t do that in academics.  We don`t do it in
anything else, why do we think it would work in sports?

HERERA:  Fliegel`s sport was basketball.  He never heard of working on a
team sport with an individual coach before he tried it during his high
school years.

FLIEGEL:  I was very at best mediocre high school player.

HERERA:  Mediocre that is until a camp counselor Greg Christoph (ph) helped
Fliegel develop into a high school and small college star.  He even played
professionally in Israel for two years.  But Fliegel said the coaching he
received didn`t just change his game, it changed his life.

FLIEGEL:  That led to direct improvement for me academically.  You know, if
I really applied myself, I can figure out anything.  I can figure out how
to become a better athlete, I can figure out how to become a better
student.  And I can learn to really write a paper.  I can learn how to
build a startup.

HERERA:  Fliegel began to do some coaching himself while he was in college.
Later, after a broken foot and business school ended his playing days, he
kept on coaching easing the transition into the next stage of his life.

FLIEGEL:  I created my own website.  I can pay a website designer to do
that, every time I wanted to update it I had to pay that designer to do it.
I wanted to collect reviews.  I just wanted to work with kids and I wanted
the rest to care itself.

HERERA:  Fliegel says CoachUp provides a platform to deal with the business
of coaching, so coaches can focus on what they do best.

FLIEGEL:  We provide insurance, we provide payment processing, we provide
customer support.  I mean, for our coaches, we`re they`re marketing
department, their technology department, their personal assistant, web site
host, there`s no great solution for me.  So, I decided to build it.

HERERA:  Most of those services are outsourced from CoachUp`s Boston
office, home to 30 full-time employees.  The model has attracted investment
money from world champion athletes.  Like Julian Edelman of the NFL`s New
England Patriots, and Steph Curry of the NBA`s Golden State Warriors.  Each
has benefited from working with individual coaches.

UNIDENTIFIED MALE:  Bring it back, bring it back.  There you go.

HERERA:  For most players, though, the next level isn`t a world
championship.  Shalik Billups is just hoping to make his high school team.
But with a little help from Coach (NYSE:COH) Watkins, he may have a better
chance to bring his “A” game to wherever he decides to go.


KEVON WATKINS, FOOTBALL COACH:  Everything we found on the football field
can apply to everyday life.  The biggest thing for me is hard work.  You
know, you have to work hard in order to make yourself better.

That`s what I`m talking about.


HERERA:  Fliegel is no longer involved in CoachUp`s day-to-day operations
but he is still on the board and he is currently writing a book about
coaching and leadership.

Still ahead, the stories of three entrepreneurs and how they made their


HERERA:  It`s the American dream.  You go out on your own and with blood,
sweat and tears build a successful business.  Tonight, three entrepreneurs
tell us how they made their millions from a sushi chef to a man who turned
up the heat on hot sauce.

But we begin tonight with the story of one entrepreneur who turned a sponge
into a multi-million dollar enterprise.

Tyler Mathisen has all three of their stories.


Krause isn`t easy.

A lot of inventers are serial inventors.  And that description fits you,

AARON KRAUSE, SCRUB DADDY FOUNDER:  Absolutely, I`ve been inventing
products and ideas since I was probably 10 years old.

MATHISEN:  His most successful brain child, the perpetually happy, scrappy,
Scrub Daddy sponge.

AARON KRAUSE:  This is not an overnight success by any means.

MATHISEN:  The original business was a car washing and car detailing

AARON KRAUSE:  I like to tell everyone, I learned everything about business
in the detailing business.

MATHISEN:  It was a business he started right after college back in 1993.
Not exactly the career path his parents, both of them doctors, had

AARON KRAUSE:  I started this process of inventing all these new
improvements and new types of buffing and polishing pads.

MATHISEN:  And in 2008 about 14 years after specializing in automotive foam
products, 3M (NYSE:MMM), having noticed the upstart competitor, offered him
a deal he couldn`t refuse.

AARON KRAUSE:  We were bought out by a $28 billion a year company.

MATHISEN:  The terms of the acquisition weren`t disclosed but one of the
patented products 3M (NYSE:MMM) definitely didn`t want was this tough as
nails sponge Krause initially designed to clean mechanics` hands.

AARON KRAUSE:  We took the product, we made about 100 of them, we put them
in a box, I labeled it “junk,” scrap, put it in the back of the factory,
and that`s where it`s at — from 2008 until 2011.

MATHISEN:  And what got it off the shelf?

AARON KRAUSE:  I got to credit my wife.

to come out here and clean the lawn furniture.

AARON KRAUSE:  I was looking at it, what am I going to use that`s not going
to scratch the paint off of this?  Got those old sponges, I`ll have a use
for them, I`ll use them, I`ll throw them out.

MATHISEN:  So, he grabbed one of the rock-hard plastic scrubbers and
plunged it into a bucket of warm, soapy water.

AARON KRAUSE:  And it went —

MATHISEN: Softened?

AARON KRAUSE:  Totally soft.  I said, what`s that?  The thing`s ruined.
It`s not going to scrub at all.  I took it out, it worked a little bit.

But as I was scrubbing, the temperature outside was changing, getting
harder and harder.

MATHISEN:  It was at that moment he realized the foam actually changed
texture — soft in warm water, hard in cold, which made it perfect for
cleaning just about anything

AARON KRAUSE:  I looked at it and I said, oh my God, we missed the entire

MATHISEN:  An epiphany for a sponge that Krause is still excited to show

Oh, man.

AARON KRAUSE:  Isn`t it amazing?

STEPHANIE KRAUSE:  He started giving it out to friends and family to test.

AARON KRAUSE:  Now, it`s going to be great for scrubbing all your pots.

STEPHANIE KRAUSE:  Everybody came back with great results.

MATHISEN:  Get out of my way, I want to do this.

Not everyone was this enthusiastic at first but a shot on QVC and a trip to
the “Shark Tank” in 2012 stirred up interest.

AARON KRAUSE:  The retailers started calling us.  Bed, Bath, and Beyond.
Walmart.  Home Depot (NYSE:HD).  They all started calling us.

MATHISEN:  Until then, Krause says he`d only sold $100,000 worth of
sponges.  Now, he estimates total retail sales have hit $100 million.

What do mom and dad say now?

AARON KRAUSE:  At this point, I`m the only one in my family that has
patents and I think that they`re finally pretty proud.

MATHISEN:  Dave Hirschkop might act crazy, but it`s just one of the wacky
ways he promotes his insanely hot.

UNIDENTIFIED MALE:  Wow, I can tell it`s going to be hot.  That`s more than

MATHISEN:  Hot sauce.

like, that`s insane.  That`s crazy.  You`ve got to be nuts to make that or
eat it.

If you don`t swallow it, it never gets bad.

MATHISEN:  From this blistering base he`s built an award-winning, multi-
million dollar specialty food brand, Dave`s Gourmet.

HIRSCHKOP:  That`s warm.

I`m so glad it happened.  I feel very lucky.

MATHISEN:  His luck began in the early 1990s when he decided literally to
follow his gut.

HIRSCHKOP:  California had a lot of taquerias.  The East Coast really

MATHISEN:  So, with the help of $35,000 from family and friends, he opened
a place called Burrito Madness in College Park, Maryland.

Dave`s biggest complaint?

HIRSCHKOP:  We had a lot of drunks coming in to the taqueria.

MATHISEN:  To teach them a lesson, Dave started spiking their food with
homemade hot sauce.

HIRSCHKOP:  Chilies are great because you`re going to hurt somebody without
injuring them.


HIRSCHKOP:  So it hurts and then 20 minutes they`re happy as a clam and
laughing about the experience.

MATHISEN:  He found success in extracts made from the inside of the pepper.

HIRSCHKOP:  Just amazing.  Then you could make the sauce taste all sorts of
ways.  And with super heat.  Like a different paradigm for making hot

MATHISEN: Next, he spent about $5,000 on bottling, airfare, and a
straitjacket and went blazing into the 1993 National Fiery Food Show with
his first extract-based product, “Insanity Sauce.”

HIRSCHKOP:  The heat was so much greater than what they had already
experienced.  People were floored.  And a couple people were literally,
literally floored.  The promoter of the show banned us which in the end
became a good thing.  We got a lot of publicity out of it.

Heard of Dave`s Insanity Sauce?

UNIDENTIFIED MALE:  Yes.  You`re Dave?



HIRSCHKOP:  We`d have stores selling 50 cases a week of sauce, which is

MATHISEN:  It was enough to make Dave sell the restaurant and move to
California, but not enough to quit his day job.

HIRSCHKOP:  I did the hot sauce as a hobby on the side.  But it just got to
be too big.

MATHISEN:  In less than a year he`d hired a small staff and was selling
sauces full-time.

Sales spiked the first four years, reaching roughly $2 million in revenue
in 1996, then slowed to a simmer.

So, in 2001, he started pumping out premium pasta sauces under the Dave`s
Gourmet label.  By 2009, the company was increasing sales and winning

HIRSCHKOP:  There were several reasons why we started to diversify over
time.  We`d just get bored.  We like the new and innovative.  That`s our

UNIDENTIFIED MALE:  Take it down a bit, it would be better.

MATHISEN:  All this tinkering has annual sales fired up to about $7 million
and Hirschkop says he`s got more heat up his straitjacketed sleeves.

HIRSCHKOP:  Big hot sauce companies, they could buy us between lunch and
dinner.  But I think what we`re doing is important still, because we`re
stretching the limit.


MATHISEN:  Charlotte, North Carolina, miles from the sea, is not exactly
the place you`d expect to find a sushi empire.  That`s exactly what you
will find inside this 46,000 square foot warehouse.  It`s the home of
Hissho Sushi, a dynamic food service and distribution company that manages
884 locations in 39 states and the District of Columbia.

UNIDENTIFIED FEMALE:  Don`t forget your napkin, soy sauce —

MATHISEN:  The big fish in the operation, Philip Maung, the founder and CEO
of Hissho Sushi.

PHILIP MAUNG, HISSHO SUSHI, FOUNDER & CEO:  People say I`m a workaholic.
But I don`t feel like it`s work.

MATHISEN:  Whatever he`s doing, he`s got Hissho on a roll.

MAUNG:  I like it.  Spicy.

MATHISEN:  Bursting with 372 employees and more than 360 franchisees across
the country, most immigrants like Maung himself.

MAUNG:  When I came here, I had no one to help me out.  So I decided to
help out the newly immigrant.

So, how`s the training go?

MATHISEN:  Before putting them behind a counter, Maung makes sure his
managers and sushi chefs to-be learn the subtleties of perfect preparation.

MAUNG:  Practice more, you will get it.

MATHISEN:  It`s the type of specialized training he never received as a
young boy, living in a country shattered by war.

MAUNG:  I was born and raised in Burma.  They treated us like a second

MATHISEN:  So he set sights on more fertile ground.

MAUNG:  I decided I like to come here and look for the American dream.

MATHISEN:  In 1989, at the age of 22, his parents staked him to an airline
ticket to Los Angeles, with only $13 in his pocket and a wealth of
ambition.  He stayed with a friend, worked overnights at a gas station, and
then became a real estate agent.

Before landing a job with a sushi distribution company in the 1990s.  He
learned the business from the inside out and after just one year, Maung and
his wife moved east.  They borrowed $100,000 from family and friends and
took cash advances on credit cards to start their own sushi business
headquartered in their home.

MAUNG:  We started office here, and with one computer and one tiny printer
about a year before we get into the office.

MATHISEN:  They partnered with local retail locations to offer fresh food
daily to grocers and cafes.  Then in 2002, their first big break.  A
partnership with Minnesota-based supermarket chain Lund Food Holdings.
Together, they placed sushi kiosks in 21 locations.

Three years later, Hissho was able to move into its headquarters, with a
freezer that holds up to $1 million worth of frozen product that`s shipped
across the country every single day.

It`s also the home of Hissho University, the exclusive training ground for
the company`s managers, chefs, and franchisees.

UNIDENTIFIED FEMALE:  Train your chefs to use only one ounce of rice —

MATHISEN:  After finishing the program, the company partners with trained
chefs and places them in locations across the country and splits the profit
three ways — the chef or franchisee, the retail landlord, and Hissho

MAUNG:  Which one the most popular?

UNIDENTIFIED FEMALE:  They really love this one.

MATHISEN:  The formula seems to be working big-time.  Company revenues were
close to $100 million in 2015.

MAUNG:  That`s the most beautiful sushi I`ve ever seen.

MATHISEN:  Philip Maung, Burmese immigrant turned sushi magnate, has
clearly learned the lesson of American business.

MAUNG:  Listen to the customer, do whatever it takes to make the customer


HERERA:  Hissho Sushi kiosks can be found in specialty supermarkets,
hospitals, airports and universities.  About 80 percent of the employees
are immigrants, and the company says that they are all in the U.S.

Coming up, why startups are popping up across the nation in the unlikeliest
of places.


HERERA:  Here`s a look at what the to watch for for the rest of this week
and it`s a big one for jobs.  But first, on Wednesday, we get a look at the
minutes from the Federal Reserve`s last meeting.  Investors always look for
clues about the possible future for interest rates.  Thursday weekly
jobless claims, but that`s just the appetizer for Friday`s main course, the
June jobs report, and that`s what to watch for this week.

Startups are taking the nation by storm and hubs for these burgeoning
companies are popping up in the unlikeliest of places.  Kate Rogers
(NYSE:ROG) takes us to two, one looking to become a new Silicon Valley for
Southern (NYSE:SO) California and the other helping to reinvent the


every step that I take right now?


ROGERS:  While devices from tablets to cell phones improve constantly, the
thing can`t be for their battery life, something 25-year-old Hahna
Alexander and her startup SolePower are out to change.

HAHNA ALEXANDER, SOLEPOWER CO-FOUNDER & CEO:  We make energy harvesting in
soles, for charging portable electronics like cell phones, radios, GPS
while you walk.

ROGERS:  SolePower has raised half a million and is being tested by the
U.S. Army.

But Alexander isn`t alone in her desire for change.  Other startups
designed to solve some of the world`s big problems are doing so not from
Silicon Valley or alley but Pittsburgh.  The city, once a booming steel
town, turned around post-industrial collapse but never lost its spirit of
innovation.  Pittsburgh is already home to offices for Google
(NASDAQ:GOOG), Apple (NASDAQ:AAPL), and most recently Uber.  But in the
past decade, its startup scene bolstered by tech company has taken hold.

The Iron City is also one of the most affordable places to live and work in
America.  That`s part of the reason why the Kaufman Foundation has ranked
it a top ten metro for established mainstream business activity with more
than 1,100 small businesses for every 100,000 resident in the area.

Innovation Works, a nonprofit with two nationally ranked accelerator
programs, have invested $65 million since 1999 in 300 local companies.
They`ve gone on to raise more than $1 billion.  More broadly in the past
two years, Pittsburgh tech companies have raised nearly $500 million in
V.C. funding.

that come to us for help, and that number has literally gone up over 400
percent or five-fold increase just in the last eight years.  So, a lot of

ROGERS:  One of those startups was launched by native Ian Rosenberger who
started his company, thread in 2010.  They take recycled plastics from
Haiti and Honduras and turn them into sustainable fabric.  The company`s
raised $2.8 million and has a deal with Timberland (NYSE:TBL).

IAN ROSENBERGER, THREAD FOUNDER & CEO:  We could have started a business
anywhere in the world and we chose Pittsburgh.  We care about who we are as
a city.  We care about our uncles and dads and grandfathers lost their jobs
in the mills in the `70s and `80s.  In the ashes of that an incredible
ecosystem of businesses that are starting that means something.

ROGERS:  While Silicon Valley may grab headlines for its billion-dollar
startup scene, in southern California, San Diego has emerged as a powerful
alternative for technology ventures.  It`s what made Jeff Winkler want to
cultivate and keep local talent in the area.

Winkler wanted his business, Origin Code Academy, in September 2015, after
realizing there was only one other coding school in the area.  He wants his
students to get jobs.  So, he goes out and talks to the big employers like
Microsoft (NASDAQ:MSFT) and Qualcomm (NASDAQ:QCOM) to see what they want
from entry-level coders, then tailors his curriculum to fit.

JEFF WINKLER, ORIGIN CODE ACADEMY FOUNDER:  When we had conversations with
employers and heard how frustrate they were because they couldn`t find
talent in San Diego, because it was all leaving for the bay area, that was
really when we decided we had to be here.

ROGERS:  The school costs $12,000 for 12 weeks and so far has a 100 percent
job placement rate.

Nearby at the cyber incubator, startups like Daniel Magy`s Citadel Drone
Defense Systems are working on cyber security, robotics and more.  Magy`s
company have a drone hacking and takedown technology.  He says the place to
be is San Diego, thanks to its military and defense background, as well as
the quality and affordability of local talent.

DANIEL MAGY, CITADEL DRONE DEFENSE SYSTEM:  It is one of the only places in
the country where you have cheap, affordable talent that is as good as you
can find in Silicon Valley, right?  My team is made of three PhDs and
former defense contractors.

ROGERS:  Entrepreneurs are realizing there`s no need to jet off to the Bay
Area.  In fact, San Diego is ranked a top ten startup metro the past two
years, according to the Coffman foundation, and venture capital money is
flowing in at its highest level since 2007.  Last year, $1.28 billion was
invested in San Diego startups, according to the National Venture Capital

The San Diego Regional Chamber of Commerce says there are 27 incubator in
the city with about 400 startups launching in the metro annually.

Flash and Melani Gordon relied on a local incubator The Vine when launching
their startup Tap Hunter in 2012.  The industry tool builds on San Diego`s
world-class craft beer industry, helping bar and restaurant owners
automatically update their inventory on social, web menus, and displays.

So what would you guys suggest?

And their app helps beer lovers find local businesses serving their
favorite drinks.

MELANI GORDON, TAPHUNTER CEO:  It`s local and quality.  So a lot of the
movement around farm to table and quality ingredients, most Americans live
within walking distance of a craft brewer or distiller that are making
great quality product and I think that resonates.

ROGERS:  And while San Diego`s craft brewing industry served as
inspiration, Tap Hunter proves the power of a good idea can grow beyond its
home base.  The company now operates across the U.S. and around the world
in 20 countries.

For NIGHTLY BUSINESS REPORT in San Diego, I`m Kate Rogers (NYSE:ROG).

GORDON:  Cheers.


HERERA:  And thank you for watching this special holiday edition of NIGHTLY
BUSINESS REPORT.  Happy 4th.  I`m Sue Herera.

Thanks for joining us.  Have a great evening, and we will see you right
here tomorrow.


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