This week, the experts at the University of Maryland’s Dingman Center for Entrepreneurship help a start-up owner find his path to an investment. –Dan Beyers.
Andy Musliner is the father of three boys, now nearly grown. His youngest son, in particular, was a car fanatic, dressing up as a truck driver for Halloween three straight years and asking Santa for only a big box of cars. Musliner was always looking for ways to give his sons a way to play imaginatively with their cars so he started putting masking tape down on the floor to create roads – which, Musliner says, “isn’t such a good idea.” Trouble was, he couldn’t find an actual toy product that accomplished the same thing. That set him on a quest to create PlayTape and his Crofton, Md. company, InRoad Toys.
Musliner, founder and chief executive of InRoad Toys
“For 100 years, kids have been playing with toy cars, but they’ve been missing one important ingredient: the roads to drive them on. That’s what we created. InRoad Toys makes the award-winning product line called PlayTape. It is as simple as it sounds. It is the fastest and easiest way to create roads and railroad tracks for playing with toy cars and trains. It’s a low-tech adhesive tape that sticks to any flat service, printed to look like a road or train track. You lay it down to create a playscape anywhere you want – floors, tables, walls, windows – then easily peel it up without any residue and recycle it when play is finished.
“There are $6 billion worth of toy vehicles sold every year, so there is a substantial demand for toy roads. Last year’s challenge was figuring out how to produce our PlayTape here in the United States. Fortunately, we have solved that problem and have a good supply chain. Our biggest challenge right now is dealing with very rapid growth and the need for more capital to support it. We were just at Toy Fair 2015 and in three days had requests for more PlayTape than we sold in the first six months of last year. We’re a bootstrapped company so the challenge is bringing in investors and bringing in money in order tPlsyTapeo meet demand and fund business growth. We are currently exploring angel investments.”
Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business
“You are heading down one pretty viable path, but understand that angel investors are more likely to invest in higher tech companies. That said, you do offer a tangible product—something investors can point to should they invest. That’s one of the reasons investors put their money in things like physical products and restaurants – to satisfy that cocktail party ‘fun’ part of investing.
“When you are pitching investors, focus on communicating what is behind your company beyond just a toy. You have already mitigated a significant amount of risk. You have contracts in hand. And the complicated supply chain that you have created, the barriers to entry you’ve already overcome, and the partnerships and relationships you have created would all be valuable to a potential acquirer.
“Also look for other ways to fund working capital. Explore less expensive options to raise capital instead of giving up equity. Look for bank loans at start-up friendly banks. Or consider ways for investors to get their money back rather than waiting for an exit, such as revenue payback options. Get creative. Because you ideally will be generating cash flow faster than a traditional tech company, talk with investors about other kinds of instruments for funding. Figure out what will give investors the incentive of a more immediate return on their investment while still keeping some sort of upside if you were to sell.”
“I know we are outside the typical angel deal, but hope the fact that we offer something so extraordinarily tangible really helps us. Toy industry leaders have a tendency to quickly swallow up successful brands, and I believe PlayTape’s uniqueness, broad appeal and relevance, and rapidly growing market success will make us attractive. That’s the ‘road’ we’re paving, so to speak. It is definitely an interesting avenue to pursue more creative funding instruments. We have that ability because we generate cash flow on an ongoing basis.”
Looking for some advice on a new business, or need help fixing an existing one? Capital Business and the experts at the University of Maryland’s Dingman Center for Entrepreneurship at the Robert H. Smith School of Business are ready to assist. Contact us at email@example.com.