SellMyLivestock/Graindex

Idea

Introduction

Our marketplaces facilitate trade in agricultural commodities - principally livestock and grain.

We have now brought the complementary brands of Graindex (www.graindex.com) and Sell My Livestock (www.sellmylivestock.co.uk) together under Hectare Agritech Limited ("Hectare"). An investment in Hectare will be an investment in both businesses.

Graindex allows individual farmers to sell grain and other combinable crops direct from their farm to some of the world's biggest merchants, via a simple, transparent and competitive mechanism. SellMyLivestock is putting the £5bn annual trade in UK farm livestock online. Farmers and livestock marketeers are reaching a nationwide audience with a single listing - think of it as like RightMove, but for cattle and sheep.

Traditional routes to market for farmers are fragmented, expensive and lack transparency. Livestock tends to be transported to outdated and inefficient auction markets typically charging 4.8% commission plus costs, while most of the UK's £4bn grain is traded over the phone.

Most farmers know this needs to change. With depressed commodity prices they are looking for better ways of trading, and we are providing the answer.

Convertible Key Terms

They key terms that apply to the Hectare convertible are as follows:
• Valuation cap - £3.5m

• Discount - conversion at a 20% discount to the valuation set by a Trigger Event.

• Conversion is triggered by ("Trigger Events"):

o An Equity Fundraise – defined as the Company raising investment capital of at least £500,000 from one transaction or a series of transactions, in exchange for the issue of Ordinary Shares. The Seedrs fund raise does not count as a transaction;

o A Change of Control of the company (transfer of more than 50% of the share capital); or

o An IPO – being a listing of the company’s shares on a recognised stock market or secondary market.

• If conversion has not been triggered by the longstop date (12 months from the date of the convertible) shares will be issued on the longstop date at a valuation based on the lower of (i) a pre-money company valuation of £2m; or (ii) the price for any share issued after the date of the convertible agreement. The convertible would also convert to equity at this price in the event of winding up or liquidation of the company.

• At conversion, the investment agreement governing an Equity Fundraise (in particular) shall contain the standard Seedrs investor protections including pre-emption rights, tag & drag rights and information rights.

Intended impact

Our marketplaces for grain and livestock are already established as one of the UK's largest, with nearly 6,000 farmers registered, and have traded millions of pounds worth of commodities in the last 12 months.

With fixed price and auction listings (think Ebay) farmers are getting a competitive and transparent marketplace with none of the expense and bio-security or animal welfare concerns which traditional, bricks and mortar livestock markets present. With this system animals are moved from farm to farm, not from farm to market to farm.

A leading national livestock marketing business has taken paid for space on SellMyLivestock (think eBay shop). When it comes to Graindex - most of the industry's biggest names are already onboard. Multi-national grain merchants like Glencore and Nidera were early adopters.

Furthermore, our payment system, FarmPay (think PayPal, are you getting the message?) removes the credit risk of transacting with unknown third parties; one of the main reasons why intermediaries have been so often used.

Our systems significantly reduce transaction costs, increase competition and bring transparency to these high value markets, that have so far been largely untouched by the online revolution.

Substantial accomplishments to date

Since December 2015 new livestock listings have gone up four fold and site visits have trebled. Individual transaction values have exceeded £100,000 for cereals and £50,000 for livestock.

With almost 6,000 registered users and with nearly 30,000 social media followers we believe we have developed an unassailable market lead. We see no competitors.

We successfully raised £150,00 for Sell My Livestock via Seedrs in November 2015:
https://www.seedrs.com/sell-my-livestock

As we promised, our leadership team has been strengthened with the recruitment of a Commercial Director from one of the country's biggest processor/retailer groups (Wm Morrison Supermarkets PLC), and is now chaired by the former CEO of Drivers Jonas. Our Advisory Board spans the industry, and includes a recent UK Minister of Agriculture.

We have also enjoyed press coverage in the following:

Monetisation strategy

SellMyLivestock operates a "freemium" model commonly found in disruptive marketplaces. A basic listing is free, however a range of paid upgrades such as featured listings, social media boosting, premium membership and reservation fees are now being integrated.

Additionally a range of products, such as online 'shops' and dedicated sales portals, have been introduced. For example, a livestock marketing business can build its reputation with SML buyers using a dedicated and branded space or 'shop' within the site, for which it pays a monthly fee. This is similar to the way estate agents or car dealerships reach new customers using Rightmove or Autotrader.

Graindex will generate income from commission earned on every tonne sold. We anticipate this revenue stream to commence in late 2016. Its overheads are low which is reflected in low commission rates.

Without any serious marketing effort trading volumes are already significant. The last 6 months has seen over £3m posted on the site. The platform is less than a year old and has not yet operated through the UK harvest season (August-October) when we expect volumes to peak.

FarmPay can be used to secure payments between any two participants using either marketplace. It also generates an important commission-based revenue stream.

Price and trade flow data are also significant to market participants and a model is being built to monetise this.

Use of proceeds

We'll be launching a major funding round in early 2017. This small convertible round gives our early investors and supporters in SellMyLivestock an opportunity to have a stake in the larger business and bigger opportunities Hectare offers.

Our primary focus until then will be on accelerating and expanding our marketing effort. We've already seen new listings and traffic increase rapidly, but we need to continue this rapid growth to consolidate market dominance.

We'll also continue to develop new products such as an app for Graindex, to match the app we successfully launched for SellMyLivestock.

And we'll continue to develop and grow our revenue streams as users increasingly appreciate the value we add.