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So I've got this 89 page long business plan, full of hard data (information backed by reputable sources, all internet, thus readers are able to easily check the sources). Fully capital+start-up=ready to go. It's for a large commercial farming start-up. $21.1 million dollars faze anyone?

That's actually the problem in this case...the high startup cost. Most VC's don't know anything about agriculture, nor have any interest in investing in it. The ones that do can't fund the high start-up cost to help me breach the barrier to entry, and aren't willing to work with other VC's to raise the amount. Small farms fail...so it's not really fiscally sound to ask for less and buy a smaller farm. In fact, only 45% of small farms ever turn a profit. Commercial farms however tend to be very successful and are basically licenses to print money for their owners.

The start-up has an estimated first year profit of 5-7 million dollars. So the proposal isn't without it's merits. It's obviously a high cost-high reward-low risk venture...but still, theres very few VC's who will even read my proposal.

Any ideas?

Hi there, I think you realized by now that VCs won’t touch your offering, simply because a) they typically invest only in businesses and technologies where they have significant in-house experience and b) because in all likelihood your proposal won’t support a lucrative exit like an IPO. It simply doesn’t match their investment criteria.

 

The second obstacle is, like you pointed out yourself, your capital requirements of $21.2 million. I’m not aware of any development stage company that raised close to that amount in their first round.

 

Unless you’re able to enter into a strategic partnership or joint venture with an established player in the agriculture business, I think trying to raise this amount in the institutional sector will be unrealistic and most likely a waste of time.

 

If you’re undeterred to pursue this opportunity, you may want to look into doing a private placement or Regulation D Offering. There is a free article available on our website that introduces this financing vehicle and details the process. This article is available at http://publications.fastventures.com/article/private-placements-or-regulation-d-offerings---what-is-myth-what-is-reality

 

You may also want to take a look at our white paper on how to reach high-net-worth individuals with your private placement or Regulation D Offering, which is available at http://publications.fastventures.com/reaching-high-net-worth-individuals-with-your-private-placement

 

The fact that you already completed a detailed business plan is certainly a great starting point, but besides a fundamental understanding of your business you will also need to understand how capital markets function to turn your project into a reality.

 

If you’re interested in discussing your project in greater detail, please feel free to send me a PM and I’ll see what I can do to give you a few more pointers.

 

I hope this helps.

 

 

Mark

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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
http://www.Publications.FastVentures.com

I agree, I would probably take it a step further and say reg d is out for that much cash for that type of venture unless you hit the lottery on finding the right minded high net worth indviduals.  I know entrepreneurs often find ways to get deals done that everyone tells them is impossible, but I would try to enter with a much lower cost - demonstrate success for a few years - build equity - then pitch your economies of scale argument to raise more capital.  For the most part, startups are excluded from economies of scale consideration.  The balancing act is raising enough to drive the business to comfortable profitability, as you already pointed out - small farms dont make much money - but I know you can get enough capital to drive you to success for far less than 21m.  If nobody is going to change your mind about it, perhaps you could get the community behind you and go straight to IPO.  Ben & Jerry's did a Vermont only public offering when they were a few years old straight to the public (and there customers) to raise the cash they needed.  Good Luck!

Startup Help

 

Put together a slide deck with notes and explain your plan in a 5 minute read. Use your current plan as back-up to answer any questions investors may ask. I know that there is a move towards commodities and farm land. Jim Rogers has invested significantly in Brazilian agriculture. That's a man who knows his stuff

Because you are dealing with commodities the high start-up cost may not be that much of a factor. You are in a different boat to a tech start-up. The Regulation D offering outlined above seems to be a good consideration.