Crowd funding arrived at just the right moment for Jeff Golfman, a Winnipeg entrepreneur who wants to revolutionize the North American paper industry.
Golfman is using the relatively new practice of selling small amounts of equity to many investors, usually through the internet, to try to raise $5 million for his company, which manufactures paper from wheat straw.
Golfman is one of three partners in Prairie Paper Ventures, formerly Prairie Pulp & Paper, along with former Manitoba finance minister Clayton Manness and actor Woody Harrelson.
In co-operation with the Toronto investment banking firm Optimize Capital Markets, Golfman discovered that crowd funding is a great fit for his business.
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“Overall, we have been able to raise more capital, quicker, and while maintaining more ownership of our company,” Golfman said in an email.
“We have had much success in a short period of time with Optimize, which is very different than our experience with the traditional routes of fundraising.”
Following years of experimentation and testing, Golfman and his partners have developed a process for turning wheat straw into high quality paper.
Golfman and Manness have long promoted the idea of building North America’s first commercial scale straw paper plant, possibly in Manitoba, at an estimated cost of $500 million to $1 billion.
However, before that happens, Golfman said they need $5 million in capital to expand the business.
Prairie Paper now manufactures its paper at a mill in northern India and buys wheat straw from farms within 100 kilometre of the plant.
During a January presentation to potential crowd funders in Toronto, Harrelson said the company uses 80 percent wheat straw and 20 percent tree fibre certified by the Forest Stewardship Council (FSC).
“It’s always been a big concern of mine that paper comes from the forest,” said Harrelson, an environmental advocate and supporter of hemp, in a recorded video presentation.
“Now, it’s back to the farm.”
The Staples chain agreed in 2012 to become the exclusive distributor of the wheat straw paper, which is branded Step Forward Paper.
Prairie Paper has also signed an exclusive deal with Unisource to distribute its paper, and Golfman said a long list of clients, including Hollywood studios and a Canadian telecommunications company, are now using Step Forward Paper.
He said sales are growing because North Americans prefer environmentally friendly products, provided price and quality are comparable to conventional options.
“Every day that goes by we keep on getting more orders coming our way,” he said.
“Research has shown if people have an eco-product and a regular product and everything else is equal… nine times out of 10 people will take the eco-option.”
Golfman estimated that Prairie Paper sold $1 million worth of paper last year.
If it can raise $5 million through crowd funding, Golfman and his partners will use the capital to expand their operations and hire staff, including customer service representatives and supply chain managers.
“Through this five million raise, we believe we can build our revenues up to $25 million over the next few years.”
Matthew McGrath, president of Optimize Capital Markets, said participants in the $5 million Initial Crowdfunding Offering would receive equity in Prairie Paper.
“It’s a 20 percent equity offering in the company,” he said.
Prairie Paper has also applied for patents on its technology.
“Our patents (recently) went from pending status to patent allowable status,” Golfman said.
“Which means our patents are moments away from being officially approved.”
He said the company is focused on increasing demand for wheat straw paper, which means they won’t make a decision on a dedicated North American mill for several years.
Following his presentation in Toronto, an audience member asked why Prairie Paper wants and needs a plant in North America.
Golfman said it’s expensive to ship paper from India, and a highly automated plant in Canada could compete with low cost overseas labour.
“We can actually be a lot cheaper if it’s local. We’re paying $200 a tonne to ship it over back into the North America market,” he said.
“And the straw is actually more plentiful here.”
