Invest in HerdBoys - Connecting Farming Communities

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Summary

HerdBoys offers innovative agricultural buying and marketing solutions to farmers and agricultural input suppliers throughout South Africa. HerdBoys is committed to Connecting Farming Communities through a range of products and services which include;

  • Online Price Quotes through AgriQuotes.co.za which is an easy to use agricultural input buying platform for farmers, and a powerful marketing and selling channel for agricultural input suppliers, their reps and agents.
  • Agri Networking through the AGRI360 network; a powerful agri-business network designed to 'Connect Farming Communities'.
  • Marketing and sales solutions for agri businesses that are looking for an outsourced sales force who will promote their products and services, as well as an agri platform on which to advertise and engage with the farming community.

Business savvy investors who can help us get to our R25 Million "Series B" valuation in 15 months time, will potentially realise a 127% Return on Investment over the same period.

Project Highlights

  • Agriculture is a crucial sector and a key driver for growth in most economies.
  • Food security, food sustainability and self-sufficiency are high on the world's agenda.
  • Lean, agile business with flexible cost structure.
  • Revenue producing with over R27m revenue projected for the 12 months - July 2014 to June 2015.
  • Demonstrated commitment from co-founders to the business through the investment of over R6 million to date.
  • Unique concept focused on a niche market.
  • Unique and innovative software with an extremely user friendly interface, allowing buyers to request pricing on farming inputs and suppliers to submit estimates.
  • Delivered via the internet; unencumbered by physical inventory, logistical or warehousing issues.
  • Highly knowledgeable workforce with a combined wide skill set spanning both the agricultural and corporate sectors.
  • Well positioned to roll out nationally and internationally.

Products/Services

The Problem

Agriculture remains a key driving force for economic development in the Southern Africa Development Community (SADC)– a region in which most inhabitants rely on agriculture directly or indirectly as their main source of livelihood. It remains the primary source of subsistence, employment and income for 61%, or 142 million of the region’s total population of 232 million. Agriculture accounts for close to 8% of the region’s gross domestic product (GDP).

Despite the importance of the sector in SADC’s economy, agricultural growth rates have been both low and highly variable across the region, averaging only 2.6% per annum in the last decade. Of the numerous explanations for the sector’s poor performance the most significant are insufficient investment in agriculture, poor access to agricultural inputs (especially fertilisers and improved seed) and to markets, and low levels of technology development and dissemination.

This situation calls for strengthening and transforming agriculture in the region so that it stimulates much needed economic growth and contributes measurably to poverty reduction. Increasing food production will help ensure that food prices remain low creating a conducive environment for the development of a broader commercial economy.

In South Africa, the number of commercial farms has declined dramatically from 100 000 about 16 years ago to only 36 000 today. Over the next decade profitability of South Africa’s farmers is predicted to decrease to a point which will make agriculture unsustainable for all but the largest farming operations.

Two of the biggest challenges farmers face are rising input costs and an agricultural industry that is extremely well organised with just a few companies dominating the market in each link of the food chain.

The Solution

Over the past 3 years, HerdBoys has been committed to helping farmers manage their farming input costs in South Africa. In 2013, we developed AgriQuotes which is an easy to use, marketplace that lets farmers request price quotes from many different agricultural input suppliers. It’s also a powerful sales and marketing channel for agri-input suppliers, their reps and agents.

The AgriQuotes addresses the transactional side but as we all know, buyer and supplier relationships are the lifeblood of farming. Suppliers reps and agents meet face to face with their clients and prospects on a regular basis to provide advice about their products and build relationships.

Agri360.co.za was developed to enhance these relationships and to provide a geographically unrestricted, networking environment for buyers and suppliers. Agri360.co.za is a new LinkedIN type Agri-business network. It's a place where agricultural suppliers are encouraged to promote their products, share their industry knowledge and expertise and manage their online reputations. It's also a place where farmers engage and chat with agricultural suppliers and their peers.

Agri360.co.za works hand in hand with the AgriQuotes. Farmers who request pricing on the AgriQuotes system are able to interact further with prospective agri-suppliers on Agri360.co.za, finding out more about them and their products before doing business.

It's all about Connecting Farming Communities in a more efficient way, bringing buyers and sellers together where there are equal benefits for both sides.

We are really excited about the plans we have for the growth of HerdBoys and what this will mean for farming in South Africa, and the region as a whole.

Business Model

HerdBoys employs a disruptive business model that we believe is going to change the way agricultural inputs are bought and sold across the globe.

Value Creation: HerdBoys solves the massive problem of rising agri-input costs. Very few farmers have any real say about what they are paid for their produce or what they have to pay for their farming inputs. They lack market power and are financially squeezed from all sides. The reason for this is that most of the worlds agricultural industries are unusually concentrated and extremely well organised with just a few companies dominating the market in each link of the food chain. Farmers on the other hand are not as well organised, especially when it comes to agri-input procurement. HerdBoys offers farmers an innovative agricultural e-procurement solution that creates liquidity, transparency and fairness in the agri-input marketplace so that farmers can make more informed buying decisions, stay in business and ensure food security.

Value Delivery: HerdBoys execution of marketing, sales, operations and customer service is efficient, effective and scalable due to the fact that all these functions are delivered primarily via the Internet. Customer relationships are nurtured both on and offline through HerdBoys affiliates on the ground and via our online community, Agri360.co.za. Investment in human resources, agri-business network and partnerships all contribute to the delivery of our value proposition.

Value Capture: HerdBoys competative advantage is that it has been positioned as a buying group and not a selling group. Revenue is driven by annual subscriptions creating an annuity based income stream. With a relatively short sales cycle, prospects are efficiently converted into paying customers. This is driven by a substantial budget allocation for marketing, advertising and lead generation. HerdBoys expenditure is also flexible and can be adjusted to optimise sustainable growth and profit margins. Future product offerings expand this revenue model which lends itself to multiple revenue sources that leverage all the core components of the business. All HerdBoys business functions have been crafted from the ground up, allowing for scalability into other countries and territories.

Planned use of Funds

The "Series A" investment of R5 Million is projected to generate R27 Million revenue over the next 12 months which will be ploughed back into HerdBoys with a primary focus of establishing a national footprint and increasing subscriptions. Increasing capacity and broadening our reach will provide a substantial step up in our ability to accelerate growth. This will facilitate a substantial valuation uplift ahead of our "Series B" fund raising in October 2015.

Business savvy investors who can help us get to our R25 Million "Series B" valuation in 15 months time, will potentially realise a 127% Return on Investment over the same period.

Company Highlights and Timeline

Past

  • January 2011 - Established HerdBoys Marketing (PTY) Ltd.
  • March 2011 - Launched a Groupon type group buying platform to Kwazulu Natal farmers which captured the attention of several national agri-input suppliers who used the platform.
  • June 2011 - Launched Agri360.co.za, a LinkedIn type agri-business network where farmers and suppliers engage with each other in an online networked environment.
  • October 2011 - March 2012: Successfully proposed and implemented a 6 month market penetration and brand awareness campaign for the launch of the VW Amarok brand to our farmer members.
  • April 2012 - Established HerdBoys as a buying group of buying groups to facilitate the pooling of volumes and the responsible driving of a healthy balance of power between buyers and sellers.
  • July 2012 - Signed a 12 month supply agreement with Sasol Nitro to distribute LAN based fertilisers nationally and moved close on 1000 tons of product over a 3 month period.
  • December 2012 - Re-designed the HerdBoys Business Model which culminated in the development of AgriQuotes.
  • September 2013 - Launched the HerdBoys Affiliate Program, a powerful sales force of agents on the ground. To date, over 100 individuals nationwide have joined the program.
  • November 2013 - Launched the HerdBoys Online Trading System, a world first online agri-procurement solution for farmers and a powerful sales and marketing channel for agricultural input suppliers, their reps and agents.
  • January 2014 - February 2014: Successful pilot roll out of AgriQuotes with an upfront 80% adoption rate in every region visited.
  • February 2014 - Activation of 4 major regions across Kwazulu Natal - i.e The Midlands and Northern, Central and Southern Berg regions.
  • March 2014: HerdBoys contact base grows to more than 15 000 farmers and suppliers across the country.
  • April 2014: Launched "Series A" investment campaign to raise funds to take us through to "Series B" venture capital funding in October 2015.

Future

  • January 2015 - Launch of the HerdBoys Input Cost Monitor.
  • June 2015 - HerdBoys contact base projected to grow to more than 21 000 farmers and suppliers across the country. 6463 HerdBoys Online Trading System subscribers and over 600 HerdBoys Input Cost Monitor subscribers secured generating R27 million revenue.
  • October 2015 - "Series B" fund raising target: R10 Million to fund international expansion.
  • January 2016 - HerdBoys launches in the United Kingdom, the first of many offshore markets.
 Ross Phipson, Managing Director Seasoned Information technology and e-Marketing expert with 8 years of experience in the financial markets and investment management industries. Expertise extends across the entire IT spectrum from the design, development and implementation of online content management solutions and e-Marketing strategies, to the implementation and support of enterprise scale software in tightly regulated banking environments. Extremely passionate about digital, in particular online marketing and lead generation. Focused on Customer Relationship and Project management. Strong manager of people and the development of business, marketing and strategic plans. Ambitious, business savvy, team player with strong communication, customer service, presentation and administrative skills. Out-of-the-box creative thinker. White boy who speaks Zulu fluently and relates well to individuals at all levels and from all cultural backgrounds.
 
image Michelle Phipson, General Manager Entrepreneurial bootstrapper. MavHERick. Innovator. Back seat sociologist. Closet painter. Nocturnal gardener. Experience includes raising large scale funding for start-up and ongoing projects, often exceeding budgets. Establishing a successful bespoke mosaicing business which was ranked in the top 3 most sought after studios in Johannesburg. Prior to that, involved with diffusing volatile situations for the SAPS and facilitating group and individual counselling sessions as a trauma counsellor. Specialises in Negotiation, Client Relationship Management, Client Retention Strategy, Contract Management, Competitive Positioning, Project Coordination, Product Design and Development, Corporate Social Investment, Public Private Partnerships, Marketing, Strategy. Interested in social media. Inspired by Richard Branson style marketing and a huge fan of Black River F.C. Proficient in building mutually beneficial partnerships. Naturally takes on a leadership role in any working environment. Enjoys collaborating with others to develop optimal ways of achieving results.
 
image Dominique Morgan, Head: Customer Services A people's person who enjoys interacting with clients and being of assistance. Very customer focused while also possessing excellent administrative capabilities. Well integrated personality, level headed with a great sense of humour. A keen learner with an eye for detail, always ready to help and jump in wherever needed at whatever stage. Innovative and out of the box in the way of thinking and does not tend to stick to the tried and tested. A calculated risk taker with a hunger to learn more. Loves the challenge of tackling new projects and the refreshing perspective learning new things brings with it. Extremely proficient with online/computer systems and able to pick up on new ones very quickly. A hard worker with a strong sense of commitment, and will go above and beyond to get the job done right no matter what.




 

How Convertible Notes Work

One of the most common methods used to invest in early stage start-ups is something called a convertible note. A convertible note is a loan that converts into equity after the company has a bit more operating history under its belt and there is more information available to establish a fair price.

Investment Details

Company Name: HerdBoys Marketing (PTY) Ltd.
Entity: Private Company (South Africa)
Offering Type: Convertible Note
20% Discount
R11 million valuation cap
8% Interest Rate
15 Month Duration
* See below for more info. about Convertible Notes
Minimum Target This Round:  R5 000 000
Maximum Target This Round:  R6 000 000
Minimum Investment:  R1 000 000
Open Date: April 2, 2014
Close Date: July 2, 2014

Why use a convertible note?

Convertible notes are often used for seed rounds (the first investment money taken by a start-up) or "Series A" finding rounds because they delay the difficult task of deciding how much the company is worth to a later point in time when it is easier to do so. How much would you say that 2 software engineers and a prototype is worth? How would that change if there was an MBA on the team? By investing through a convertible note, these decisions can be delayed until a company has a track record of users or customers that make it clearer what a fair price should be.

How does a convertible note work?

When you invest through a convertible note the start-up receives the money right away, but the number of shares you are entitled to is determined during its next round of financing, or "Series B". At that point the company will have some operating history that more experienced angel investors or venture capitalists can review in order to determine a fair price. Once the "Series B" investors have determined a price, your loan converts into shares at a discount to the "Series B" price to reward you for the additional risk you took on by investing early.

The amount of equity that a note converts into depends on the price of the B round plus 2 key components of the note.

  • Discount Rate: The discount rate establishes how much you will be compensated for the additional risk you take on by investing in a company before the "Series B" investors. For example, if you invest using a note with a 20% discount rate, and the B round investors wind up investing at a price of R1/share, your note will convert into equity at R0.80/share and you will receive 25% more shares for the same price.
  • Valuation Cap: The valuation cap is another way to reward seed stage or "Series A" investors for taking on additional risk. The valuation cap sets the maximum price that your loan will convert into equity. To translate that into a share price, you divide the valuation cap by the "Series B" valuation. Let's say you invest in a start-up using a note with a R3 million cap. If the "Series B" investors decide that the company is worth R6 million rand and pay R1/share, your note will convert into equity AS IF the price had actually been R3 million. By dividing R6 million by R3 million we get an effective price R.50/share. That means that you will get twice as many shares as the "Series B" investors for the same price.

How the discount rate and valuation cap interact?

Convertible notes generally convert using the discount rate OR the valuation cap, whichever gives the investor a better price. Let's say the note has a R3 million cap with a 20% discount and the company receives a R6 million "Series B" valuation at R1 a share. In this case using the discount rate would yield a price of R1*.8 = R.80 a share, and using the valuation cap yields a price of R3 million / R6 million or R.50 a share. R.50 is a better price so we use the valuation cap. If the "Series B" valuation had only been R3.5 million at R1 a share using the discount rate still gives us a price of R.80, but using the valuation cap gives us a price of R3 million / R3.5 million or R.86. In this case R.80 is a better price so we use the discount rate. It is important to note that the discount rate and valuation cap do not both apply, only the method which results in the best price for the investor.

Two more important components of convertible notes

  • Interest Rate: Convertible notes are technically loans so they also carry an interest rate. Unlike traditional loans however this interest is paid in additional shares upon conversion of the note instead of cash. Let’s say you invest R1,000 in a start-up through a convertible note with a 5% interest rate. If they receive a "Series B" investment one year later, you would have accrued R50 worth of interest and would be entitled to R1,050 worth of shares at the appropriate conversion rate.
  • Maturity Date: The note’s maturity date determines when the note is due, and the entrepreneur needs to repay it. If a start-up is unable to raise a "Series B", or is profitable enough to make it unnecessary, the convertible note will convert into a set number of shares. This will generally be the same as if the startup had secured a "Series B" investment at the maturity date. For example, let's say you invest R2000 in a start-up with a 24 month maturity date, a 20% discount, a R4 million valuation cap, and a 5% interest rate. Assuming shares are worth R1, after 24 months your note would convert into: R2000*1.2 = or R2,400 after the discount, plus 5% interest for 2 years = R100 so a total of R2500 worth of stock.

How do I know if the deal is fair?

It is hard to determine if convertible note terms are fair when you do not have much investing experience. Ideally an experienced investor will already have invested in the company and set the terms. If not, you should look at start-ups with similar teams and traction, and see if the start-up you are evaluating has similar terms.

 

Dear Investor,

Great news on the HerdBoys front is that we have successfully completed the start-up phase of the HerdBoys Online Trading System. The online agri-procurement platform is now fully developed and operating in a live environment with about one hundred paying agri-input buyers and suppliers across the country.

I'm also proud to introduce Agri360.co.za, a new LinkedIN type Agri-business network designed to enhance buyer and supplier relationships in a powerful networking environment that is designed to Connect Farming Communities.

HerdBoys has got to where it is today with over R 6 million worth of investment and we are now looking to secure first stage or "Series A" investment funding that will:

  • Provide a substantial step up in our capacity to accelerate growth and deliver ground breaking returns to all our stakeholders and;
  • To take HerdBoys through to "Series B" funding in 15 months time that will enable international growth and expansion.

We believe that HerdBoys is on the verge of revolutionising the way farming inputs are bought and sold and we’re really excited about what this means for farming across the globe.

The bottom line... If you are a business savvy investor who can help us get to our R25 Million "Series B" valuation in 15 months time, join us on a ride of a lifetime with a potential 127% return on your investment over the same period.

We're in the process of putting together our dream team of game changers and thought leaders who are committed to improving efficiencies within the agricultural industry, both in South Africa and abroad. If you are interested in finding out more, then we need to talk.

This is a unique opportunity for anyone who is looking to invest in a physically unencumbered, geographically unconstrained, agri-internet business that is fresh and innovative with a high ROI potential.

If you have any questions about this investment opportunity, please don't hesitate to contact me personally using my details below.

Regards Ross

Ross Phipson
HerdBoys | Managing Director
 
Phone - 082 927 4911
Website - www.HerdBoys.co.za
Email - This email address is being protected from spambots. You need JavaScript enabled to view it.

Contact Us

HerdBoys Marketing (PTY) Ltd.
PO Box 247
Mooi River, Kwazulu Natal 3300, South Africa
 
This email address is being protected from spambots. You need JavaScript enabled to view it.
 

+27 (061) 379-2578
HerdBoys Corporate Website
HerdBoys Online Trading System (HOTS) Website
Agri360 Agri- Business Network
HerdBoys Facebook Page
HerdBoys YouTube Channel
HerdBoys on LinkedIn
Twitter: HerdBoysSA

Funding Round Summary

Convertible Note

OFFERING TYPE

R5 000 000

INVESTMENT TARGET
Click on the "INVESTMENT DETAILS" tab for more info.

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