(As appeared in Forbes.)
When looking at companies pursuing RegA+, no one is playing a short game, and the long game is planned out. The best launches appeal to current and future investors because they demonstrate not just a sound financial case, but a compelling business case.
Here is a look at how Alkane Truck Company, an alternative-fuel truck company, has nailed down some key elements as they prepare to launch a crowdfunding effort on StartEngine.
How do you know you are unique in your space?
When you seek to play in an established market like commercial trucking, it takes people with industry depth to understand the challenges of developing a channel and spot a new market or industry break-through.
According to Bob Smith, the CEO of Alkane Truck Company, no one has brought a new commercial truck to market in 47 years. Alkane hopes to change that in the buzz-heavy alternative fuel vehicle space. Imagine a Class 7 truck (think beverage and propane trucks) fueled on liquid propane or CNG. Alkane imagined it, did the R&D with a key partner, handled their DOT and EPA certifications and is ready to launch…provided the crowdfunding campaign goes well.
How good is your business idea and business case?
Smith and his team knew that with tax incentives encouraging alternative fuel trucks—credits of $20k a vehicle in some states—and a desire industry-wide (make that nationwide) to be less oil dependent, there had to be a promising market. There is certainly no shortage of truck demand as sales hit an 8-year high in 2014, according to FleetOwner.
As someone who has not spent half my life listening to Click and Clack, there were things I did not know about the trevails of maintaining Class 7 trucks. Many interested in new alternative-fuel commercial trucks are scared off by the assumed cost premium. Smith encourages owners to consider the ‘loaded cost’ of the vehicle—the cost of purchase, the cost to maintain and the cost to fuel the vehicle over the long haul. And speaking of long haul, there is also a Class 8 truck that runs on propane or natural gas that is in final testing.
In building their business case for the cost offsets of their trucks, something that should be very important to an individual or institutional investor, Smith highlights:
- The tax credit on purchasing alternative fuel trucks likely offsets the price premium of the vehicle—$20k in some states—according to the Alternative Fuels Data Center.
- The U.S. Department of Energy is providing additional incentives to encourage the use of liquid propane and natural gas; in some places putting free fueling facilities.
- If you’re a Class 8 fleet company owner, your fuel costs could vary greatly from state to state. Moving to alternative fuel can help you negotiate fuel for fleet-wide savings.
- Propane is an abundant source of fuel in the U.S. If you deliver propane, you can transition over and use your own fuel.
How does this help you tell a compelling investor story? When market incentives and market demand are with you, the wind is at your back.
Who is your R&D partner…and will it help your investment buzz?
If automotive specifications and alternative fuel trend lines aren’t enough to start some crowdfunding buzz, there is always the R&D partner. Alkane’s engineering firm is Triad Services Group from Madison Heights, Michigan who designed the DeLorean and is the manufacturer of the limousines that carry the President of the United States. According to Smith, Triad Service Group’s president, Dave Bjerke, has been a critical partner in the development of an innovative, cost-effective vehicle.
How do these details help with the investor story? A tested proven engineering partner lowers the speculative nature of the launch. And it increases the likelihood that the firm can credibly scale as demand increases.
Are you continuing to innovate while preparing to launch?
While Alkane’s launch is focused on Class 7 and 8 trucking, they are also hoping to address a highly-niche specialty market. Alkane’s newest concept is an alternative-fuel, military-style vehicle for on or off-road that they call the Dominator. It will sell new for $25,000 less than you can pick up a 15 year-old Hummer H-1. And since H-1’s got between 6 and 14 miles to the gallon, the Dominator’s promised fuel economy on propane or CNG is going to be a major selling feature.
How does this help with your investor story? If investors aren’t interested in B2B offerings, they may get excited about a consumer, hobbyist market. And, an investor that is hesitant currently may want to keep you on their radar for your next launch.
What business do you want to be in…and is it cost effective to scale?
Do you want to build, buy or assemble? Alkane is clear they do not want to use financing to build manufacturing capability. They have sourced key parts from strategic suppliers, including the chassis from China. Still, they point out that 70% of the parts are produced in the US and they plan to open an assembly facility in Summerville, South Carolina that could create up to 300 jobs.
Assembling can help your investor story because the money can more immediately be brought to fruition (vehicle delivery in weeks and months instead of years). And many investors are interested in American parts, American assembly and American jobs.
How long can you bootstrap growth before receiving your first round?
The management team at Alkane is made up of seasoned trucking industry veterans, who are well on in their careers (I didn’t say they were old!)—with their own seed capital in the bank. Smith came out of retirement to launch the company, recruiting friends of friends with deep industry credibility, and even his own daughter as the SEO ‘wizard.’ Not every business that sees a unique market opportunity has the backing to self-fund through R&D, certifications and early supplier negotiations. 5 years is a long time to self-fund and something many 20-somethings may not be able to do.
How did they handle the mechanics of crowdfunding?
Alkane Trucking is working with StartEngine and also has support from a variety of professionals. They have their own securities attorney, David Cooper with Taylor English, and Washington, DC-based attorney, Robert Shapiro who focuses on compliance with the EPA and DOT. As mentioned earlier, it’s not cheap—even if you’re bootstrapping—to enter mature markets that have significant compliance and regulatory requirements.
If you are considering crowdfunding, or any investment strategy, check yourself against the fundamentals in this article:
- Are you unique and how can you prove it? Are you the first…or the first in a long time?
- How good is your business idea and business case? Have you supported your idea with financials on cost per unit, annual volume of units, a reasonable percentage of units in your addressable market, cost to maintain, cost to fuel/operate, costs to replace, etc.
- Are regulations encouraging or discouraging adoption of what you plan to do? Are their cost incentives or penalties for what you do?
- Do you have a noteworthy strategic partner?
- Do you continue to innovate and can you use that momentum to get a second wind with investors?
- What business model are you creating? Products, services, manufacturing, staff augmentation? Have you gotten expert advice on the costs of scaling?
- How long can you bootstrap growth?
- Have you found experts to help you manage fundraising and navigate the market particulars to avoid costly mistakes?
Are you ready?