Cleantech company seeking capital as of February 25, 2011
$430 billion worth of plastics are produced each year. Traditionally, plastics are made from crude oil and natural gas, unstable and increasingly expensive feedstocks. The plastics industry is just beginning to convert to bioplastics (plant-based plastics) as sustainable alternatives to these petroleum-based plastics (see http://tinyurl.com/yct3nad). In R&D for over 4 1/2 years, Solegear Bioplastics appears to have unlocked unique technologies allowing bioplastics to access performance levels and applications previously thought not possible. The company is currently in the early commercialization stage of its development and preparing for its initial growth.
Executive summary of company's business:
The $430 billion global plastics industry has grown to become the largest manufacturing materials industry in the world on the back of cheap and abundant crude oil. Today, we know that this feedstock is becoming increasingly finite, increasingly risky to use and poses health risks that we are just becoming aware of.
Solegear manufactures proprietary bioplastics under the brand names Polysole and Traverse, and expects to sell directly to customers from manufacturing/distribution locations. This plan calls for the use of contract manufacturing partners and in-house manufacturing, a standard model used in the plastics industry. The CapEx required to install each in-house manufacturing facility is less than $800k, with potential annual revenues in the $6 million range, has a payback period of 8 months and increases gross margins by 15 points. These facilities are modular and can be installed in logistically advantageous locations.
Customers see value in working with the company's materials on several fronts: firstly, Solegear materials can provide superior strength and ease of processing. Secondly, Solegear materials are offered at comparable prices to petroleum-based plastics, and in some cases, will be cheaper on a per-pellet basis. Thirdly, customers are intended to save money by using 25% less energy to process Solegear materials. Lastly, Solegear materials are turnkey and don't require any re-tooling or special configurations at the customer's processing location - they are plug and play, the company claims.
The company intends to take a staged approach to building out commercial opportunities, first focusing on consumer durables including markets such as children's toys, durable food and cosmetics packaging and personal care products. Solegear is currently engaged in commercializing projects with mid to large sized customers in these markets, which would produce several million dollars' worth of revenues for the company.
Competitors:
Cereplast, Metabolix, NatureWorks
Differentiation vs. competitors:
Solegear says it is able to achieve higher performance levels with its materials, from a strength and ease of processing standpoint. The company is also expecting to soon deliver increased performance on thermal stability. This increased performance is delivered with clearly defined sustainability advantages to support customer marketing programs. Solegear claims it has trials underway with medium to large sized companies in its target markets and is expecting to deliver these added values to customers at pricing that is expected to be equal or cheaper to its competitors.
Key team members:
Toby Reid, Founder & CEO, has a background in marketing and finance and has worked in the financial industry in securities trading and sales (RBC Dominion Securities), as well as in sales and investor relations for a publicly listed cleantech issuer (Naturally Advanced Technologies). Reid is an ambitious and motivated entrepreneur, coming from family of agricultural entrepreneurs. He has won several awards for the development of Solegear, and was most recently nominated for the 2011 National Manning Innovation Award for his work in the field of bioplastics. Brian Gusko, CFO, formally joined Solegear after several years on the Company's board of advisors. Brian is a CFA candiadate, with an MBA in finance from the University of Calgary. Brian has a strong track record of financial management and governance for private and publicly-traded companies, where he has held positions of Investor Relations, CFO and Director. Brian joined Solegear early in 2011 as part of the company's corporate planning for the next stage of its development. Dr. Christo Stamboulides, R&D Manager, has been working on the Solegear project for over 3 years. As a formally trained chemical engineer, Christo has a background specializing in polymer engineering and rheology characterization. Christo is also an advisor to the Canadian Olympic Committee with a specialty in developing high-performance ski bases for the Canadian Alpine Team. Solegear is also planning to add to the team with a Chief Technology Officer and a VP Business Development. These are the final additions to be made to the team as part of the company's planning for the next stage of its development. Both these positions are expected to be filled in the coming weeks, and the company is in discussions with several candidates at this point.
Existing investors and capitalization details:
Solegear has been supported by investment from the founder, friends & family and angel investors ($400k). In addition, the company has received $75k R&D grant funding from the Canadian NRC's Industrial Research Assistance Program (IRAP) as well as prize money from new business competitions ($115k).
Capital sought & use of proceeds:
Solegear is in the process of seeking $1,000,000 of commercialization financing from Angel and Private sources, expected to close at the end of March 2011. These funds are expected to go towards raw materials purchases (40-50%), business development activities (20-25%), patents and certifications (20%), equipment and facilities (10-15%) and general overhead (5%). The company expects to then raise its first round of institutional funds (Series A) in the summer of 2011 in the range of $5-8 million.
Characteristics of ideal investors:
Angel, super angel and angel or PE funds that invest in early stage businesses in the chemicals and/or manufacturing space. Experience within the plastics industry is an asset. Series A investors could be VCs with experience in the biopolymers space and/or plastics companies looking for highly profitable businesses to partner with to give them exposure, or increased success, in the bioplastics space.
307 - 2386 East Mall
Vancouver,
BC V6T 1Z3Canada
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