Organic Fertilizer and Biofuel Manufacturer
A research scientist with more than 30 years’ experience as an agronomist and horticulturist at well-known companies as Ortho and Chevron, developed a proprietary process for the manufacture of organic fertilizers, pesticides and insecticides. For nearly six years, he and two partners worked to establish and finance a commercially viable production facility to manufacture these unique products. Despite some initial success, the group was unable to source the capital required to scale their initial demonstration facility.
Their challenges included:
- A lack of financial capital to invest in plant expansion and other capital expenditure needs, working capital, and sales and marketing.
- An inconsistent supply of the raw materials and inputs needed to manufacture the product, on a consistent basis, in quantities sufficient to meet the demands of their largest retail client (a nation-wide home improvement and gardening chain).
- An inexperienced management team that lacked the expertise necessary to build and scale a successful manufacturing operation.
- A production facility that was ill-equipped to manufacture large quantities of product and could not be expanded or scaled to increase capacity.
- Limited access to international markets.
FinanceNorth was originally engaged to assist with the acquisition of investment capital and provide the partnership with the management experience and expertise needed to build the company.
Within the first several weeks of our engagement, FinanceNorth undertook an assessment of the market opportunity and financial capital required to build the company and proposed an alternative transaction. Several of our principals, with the financial support of FinanceNorth, would shortly thereafter acquire the intellectual property from the inventor / founders for $1.0 million, establish a new company in which the inventor was provided a 24.5% equity share and a minimum 5-year employment contract, and then proceeded to capitalize and build a new company from the ground up. This new company secured the necessary financing, signed a 5-year guaranteed supply agreement for raw materials, established a new production facility nearly 20 times larger than the demonstration plant, and two years later, established a second production facility in an international market
Case Study Summary:
|The Company||The Challenges|
|A six-year-old company with proprietary IP for the manufacture of organic and natural fertilizer, insecticide, and herbicide products.
An existing production facility capable of producing no more than 180K to 210K gallons of product per year, with an estimated annual domestic demand of more than 22.0 million gallons (less than 0.8% of yearly U.S fertilizer usage).
|A lack of sufficient working capital and financing needed to expand existing production facilities.
Inexperienced management team with little or no financial, operational, or business growth expertise.
Lack of consistent supply of raw materials.
No corporate development or growth strategy.
Limited access to and understanding of international markets.
|FinanceNorth’s Role||The Outcomes|
|Initial role established to assist current management team with development and implementation of growth strategy and financing to build capacity and develop new markets.
To provide or arrange financing and assemble a new management team to oversee the expansion of the company.
Financed the acquisition of existing IP and assets and transitioned to successful operating company.
|Intellectual property purchased from inventor for $1.0 million, 24.5% of equity in new company and 5-year employment contract.New company established and financed.
New (larger) manufacturing facility, capable of producing 6.0 million gallons per year, established in a neighboring State.
5-year raw materials supply contract signed.
Contract manufacturing agreement signed with foreign company to supply product for int’l markets.
Product distribution channels established in Australia, China, Brazil, Mexico, and India.
Experienced management team recruited and installed to continue the implementation of the company’s growth strategy.