funding, angel-investorsI have a product I want to make. However, one commodity needed to make the product is rare in the part of the world I am in. On the other side, it is possible to produce it. I need money to get started, though.
So, the question I have is, how should I try to get started?
I already have a plan on how to market the product I want to make; I have business plan for several years. However, the fact that the commodity is too expensive to import is stopping me from starting to produce it in small scale. What should I do?
TL; DR: Seek an investor after you get soft purchase orders.
Based on your description, the only asset you will be able to achieve that an investor will be able to look at and see there is a real business here are purchase orders.
Given the fact that you don’t yet have access to the commodity it will be difficult to obtain contractually committed (hard) P.O.s. But it is possible to draft a non-binding letter-of-intent with prospective customers that states they would be willing to purchase X-quantity at Y-price over a period of D-years. If you could get some signed non-binding purchase orders, you will have something to take to a prospective investor.
Better yet, if you could make the P.O.s self-enforcing. I.e., they convert to hard P.O.s after certain production milestones are met. That’s even better.
Knowing and wanting to make the product is only part of the battle. Can you make it profitably? Business plans rarely go to plan - they are still useful as it allows you to consider potential risks - but your business plan can’t foresee the commodity that you need doubling or tripling in demand for example or government or state regulations changing and going against your favour.
Have you checked why the commodity that is sought after is so expensive? Are there huge import taxes applied to it? Are there environmental concerns leading to restricted usage or limited availability?
You could approach prospective customers/clients - give them a shareholding in exchange for their investment. Your investment is your time and expertise. Realise that nothing comes for free - your experience will count for lots - if you’ve never done anything remotely like this before, expect many will be very suspect of your ability to succeed and demand a lot in return - this could be in the shape of oversight (meaning they approve all purchasing and possibly have a seat on your board of directors) and/or a larger shareholding than you might otherwise hope for.
Best of luck!
All content is licensed under CC BY-SA 3.0.