Due Diligence For

CROWDFUNDING

Alkane Truck Company

By February 12, 2017Due Diligence

Company Overview –

Alkane Truck Company is an American assembler of trucks and off-road vehicles powered by LPG and CNG.
*Souce: Crunchbase

Company Investment
Name: Alkane Truck Company Minimum Raise: $25K
CEO: Robert Smith Maximum Raise: $1M
Company Founded: 2012 Structure of Raise: Common Stock
Location: Myrtle Beach, SC Valuation: $7.6M pre-money valuation
Crowdfunding Portal: Start Engine Minimum Investment: $247
Crowdfunding Link: https://www.startengine.com/startup/alkane  
Website: http://alkanetruckcompany.com/  

Review Overview

Positives Risks and Reservations
Alternative fuels are growing Huge amount of short-term debt, mainly from the CEO
Assembly model lowers infrastructure cost As an assembler, very little intellectual property
Seems to have found a niche Alternative fuel infrastructure is underdeveloped
Class B shares, no voting rights

Problem

North America has seen an increase in the use of alternative fuel vehicles over the past decade. Well-known vehicle manufacturers have overhead requirements that make it unfeasible to produce alternative fuel vehicles for the relatively small market segment. A second problem is the carbon emissions being produced by diesel-powered trucks that rely on foreign oil.

Solution

Current:
The Alkane Truck Company’s goal is to produce a line of clean-burning, alternative-fueled trucks and use domestically-produced, cost-effective fuels such as propane and CNG. They will be an assembler of trucks instead of a manufacturer to eliminate the debt burden that comes along with purchasing equipment needed to manufacture.

Long Term:
Their future plans are to begin production of the Dominator in 2017 and launch an extended range electric prototype of the Dominator by 2020. They also plan to develop a Class 8 and Class 7 truck and pursue production of pickup trucks.

Business Model

Alkane truck company has partnered with dealerships throughout the United States and Canada to sell their trucks. Over the next three years, they will have three different vehicles available on the market. The Dominator retails for $87,500. Their goal is to sell 3,00 trucks a year through their dealership network.

Traction

  • Signed agreements with 100 well-established dealership locations nationwide to sell & service the trucks
  • Foton-Daimler signed Alkane Truck Company as exclusive AOS for USA
  • Agrale of Brazil signed Alkane Truck Company as exclusive AOS for North America
  • Sold a production lot of class 7 trucks
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

  Robert Smith III Miguel Pena Sandro Stedile Ricardo Takeo Kuwabara
Position: CEO Operations Manager General Manager Chief Engineer
Ownership Percent: 98.86% N/A N/A N/A

Summary:
The management team seems to be on par with what this company needs. There is quite a bit of import experience, which is a strength. My one reservation is the amount of control the CEO has.

Market Analysis

Industry:
Automotive; with each Alkane truck representing a “one-of-a-kind” vehicle, it will also represent a new category so there is no direct comparison to market categories of existing vehicles.

TAM (Total Addressable Market):
Alkane will target less than 1% of the total market share of medium and heavy-duty truck sales.
*Souce: Portal Page

Industry Opinion:
I think there is a tremendous amount of potential for growth in the alternative fuels market, but it is up against a big, tough auto industry. For alternative fueled vehicles to grow, the infrastructure for alternative fueling needs to expand. It also relies heavily on incentives from the government, which are very uncertain at the moment.

Competition

Main Competitors

Market Cap Revenue
Ford $49.85B $149.56B (2015)
Chevrolet, GMC (GM)

$54.17B

$152.36B (2015)

Toyota

$169.82B

$252.71B (2016)

Nissan $38.66B N/A
Honda $55.23B $129.91B (2016)
Hino $5.87B $1.75T (2016)
Kenworth, Peterbilt (Paccar) $23.92B $18.67B  (2015)
Volvo, Mack $26.32B $312.51B (2015)
Western Star, Freightliner (Daimler Trucks) $72.37B $149.47 (2015)
International $2.26B $8.11B (2016)

Company Financials

Revenue Last Fiscal Year: $221,160 (2015)

Previous Funds Raised:

  • $2,013,845, Promissory Note, November 10, 2016
  • $400,000, Common Stock, June 8, 2016
    *Source: Offering Details Document

Use of Funds

  • Production
  • Marketing
  • Salaries & General Admin
  • Working Capital
  • Professional Fees
  • Intellectual Property

Exit Opportunities

There is the potential for a large automaker to purchase the company, but I see that as highly unlikely. Since they are an assembler, rather than a manufacturer, there seems to be a lack of proprietary intellectual property to acquire.

Expert Opinion Summary

I really like the idea of alternative-fuel vehicles and there seems to be an incredible amount of room for growth in the US Market. If the cost per mile of alternative fuels can stay less than that of gasoline engines, there is a tremendous opportunity—although the infrastructure for alternative fueling needs to scale in order for this to really catch on.

There are a few points that the investor needs to consider while evaluating this company. There is an over $2 million in short-term debt, primarily financed from the CEO. This could be an issue if he would like to draw money out of the company, creating a real financial squeeze and hurting the investors. Another point is the equity offering. The class B shares have no voting power and almost all of the voting power belongs to the CEO. This does not make an investor-friendly situation. Finally, it seems like the minimum requirement is extremely low, especially for what they need to do to get this product to market. If they met the goal of $25,000, there is very little they would be able to do with that amount of capital.

 AngelList: https://angel.co/alkane-truck-company
Crunchbase: https://www.crunchbase.com/organization/alkane-truck-company#/entity

Disclaimer

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Sam Labine

Sam Labine

Sam has spent time as a private equity analyst and in business development, gaining expertise in due diligence and startup growth. Currently, he is working on his second company in the medical space and also splits time as a Startup Weekend and TEDx organizer.
Sam Labine

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