CHARtruce

EXPLORING THE ENVIRONMENTAL, SOCIAL AND ECONOMIC VALUE OF BIOCHAR ON BAINBRIDGE ISLAND

KELLY BETHKE . DOROTHY CLEGG . MOLLY MOORE . AMANDA THORNTON

ABSORBING TOXINS ONE ROOM AT A TIME

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TABLE OF CONTENTSTHE TEAM .....................................................................................................................................................

EXECUTIVE SUMMARY..................................................................................................................................

VISION AND PURPOSE..................................................................................................................................

BUSINESS MODEL CANVAS..........................................................................................................................

WHAT IS BIOCHAR?......................................................................................................................................

BYPRODUCTS.....................................................................................................................................

VALUE PROPOSITION....................................................................................................................................

DASHBOARD OF KEY PERFORMANCE INDICATORS..................................................................................

FINANCIAL ANALYSIS...................................................................................................................................

EXTERNAL ENVIRONMENT ............................................................................................................................

TARGET MARKETS...........................................................................................................................................

MARKET ANALYSIS..........................................................................................................................................

COMPETITOR ANALYSIS..................................................................................................................................

RISK ANALYSIS..................................................................................................................................................

IMPLEMENTATION ROADMAP.........................................................................................................................

CONCLUSION...................................................................................................................................................

EXHIBITS..............................................................................................................................................................

APPENDICES......................................................................................................................................................

ENDNOTES......................................................................................................................................................... ACKNOWLEDGEMENTS

We offer our deep appreciation to the array of individuals who shared their expertise, time, facilitates and talent with us. Art Donnelly founder of SeaChar who graciously volunteered his time and talent in the biochar workshop and the many phone calls. Drew Reynolds at Coyote Woodshop who spent an entire afternoon and many phone calls sharing his expertise in financial models and the hopes and dreams of Coyote Woodshop. Teri Bellamy spending countless hours in financials. Bert Loosmore in his gracious long phone conversations regarding energy production and ROI. Jeff Wallin co-founder of Biochar Foundation. Hannah Erickson founder of Carbon Roots International for the many connections. Marsha Willard and her expertise in Sustainable dashboard design, and presentation support. Shannon Welsh for her countless hours in helping construct our first prototype. Danae Moore for the creation of our logo, tag, and prototype sketches. And all the other support we have gained along the way in our biochar journey.

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VENTURE TEAM

Amanda Thornton - OPERATIONS LEAD

Amanda is passionate about operational efficiency and the collaborative nature of working in teams offering a wide range of skills in participatory approaches and applications. With an awareness and understanding of the ecosystem of the Pacific Northwest, she infuses her understanding of the dynamic nature of change in human systems as the operations lead of CHARtruce. With over seven years of small business operations management, Amanda has numerous connections to the local community she serves.

Kelly Bethke - SALES LEAD

Kelly has worked in start-up, dot.com, and large corporate environments. Her experience ranges across the areas of sales, marketing, research, strategy, business development and management. Over the past 15 years, Kelly has also been associated with many social and charitable organizations including Junior Achievement, The Ombeni Foundation Tanzania and Impact Austin. When not pursuing her MBA from BGI, she enjoys time with her family in Texas.

Molly Moore - FINANCIAL LEAD

A graduate of University of Redlands, Molly majored in Environmental Science. As Executive Director of Clubs and Organizations, Molly was responsible for the committee budget, keeping it current and in the black during her two years as Director. She was also Founder and President of Kappa Pi Zeta. Molly has held a number of internships, including Sustainability Division Intern at McKinstry Co., Volunteer Coordinator at Mountains to Sound Greenway Trust and now Recycling and Waste Prevention Intern at Seattle Public Utilities.

Dorothy Clegg - MARKETING STRATEGY LEAD

Dorothy has been calling Hawai‘i home for the past thirty years. She has acquired three undergraduate degrees and currently is working on her MBA in Sustainable Systems. Over the past 30 years she has been a pilot for Continental/United Airlines. More recently Dorothy is known for being an integral part of Hawai‘i becoming the first state in the nation to become single-use plastic bag free. Dorothy’s passion for sustainability and the triple bottom line concept run deep and achieving her MBA will be her stepping stone to furthering the momentum for Hawai‘i to become a sustainable island.

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EXECUTIVE SUMMARY

CHARtruce is inspired by the fact that toxic chemicals are increasingly found in consumer

products in the United States, leading to increased exposure to toxicity and adverse

human health effects. The average human body contains 232 toxic chemicals. A few of

the documented health impacts include cancer, endocrine and thyroid disease, obesity,

heart disease and infertility.1 Our team is committed to making positive changes in human

health; we are repositioning, redesigning, reframing and rethinking a future in which

exposure to harmful chemicals is eliminated.

Over the past ten weeks, we have researched the benefits of biochar. Historically, this

product has been used to improve soil quality and increase crop potential. Currently the

market for biochar is primarily as a soil amendment or alternative energy source and can be

seen in the climate-offset market. Our efforts exposed a market opportunity in the U.S. for

absorbing toxins to create a healthier indoor environment. Biochar is capable of absorbing

toxins with a 70 square foot radius (the approximate size of one room in the U.S.).2

Domestically, there is not yet an affordable and mainstream in-home toxin remover. We

intend to fill this space with a lower price point and attractive fabric exterior which will

appeal to our target audiences.

Our research took us back to the place we began this year-long project: Bainbridge Island,

Washington. There, we will partner with a local company, Coyote Woodshop to create our

CHARtruce product, while simultaneously contributing to a new emerging industry with many

potential triple bottom line benefits. The waste stream produced by the mill will become the

feedstock or source for our biochar raw materials. What once was expensive waste for our

partner will be placed in a gasification machine to produce biochar as well as energy. The

biochar will be placed in up cycled or organic fabrics, which will be sewn by fair wage

1 www.unacceptablelevels.com/ 2 http://mosonatural.com/

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employees for the sake of lowering household toxins. The harnessed energy will dry future

raw materials and provide heat and electricity as well. The effort to serve people, planet,

profit and our purpose are all fulfilled.

VISION AND PURPOSE

Our vision is to create a high quality, safe and cost efficient product that everyday

consumers can use in their home to create a safer, healthier space. Replacing chemical-

laden furniture and appliances can be challenging and cost prohibitive. We have

designed simple and affordable household air purification products that can be placed

anywhere indoors. The purpose of CHARtruce is to absorb odors and airborne chemicals

into the biochar, thus reducing the amount of chemical toxicity our customers are exposed

to in their home. The biochar for each of our products is created with what would

otherwise be waste in a landfill. Our business model closes the loop on locally produced

feedstock. End-of-life directions for our inserts result in placing the biochar in nearby yards

or gardens which enriches the soil health and sequesters CO2. CHARtruce improves plant

life, helps combat global climate change and creates an effective product our consumers

can enjoy with peace of mind.

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THE BUSINESS MODEL CANVAS

Figure 1: Business Model Canvas

Coyote Woodshop (Coyote) based on Bainbridge Island, Washington specializes in custom

furniture, salvage lumber and milling. In partnership with Coyote, our team has developed

a business model that will take advantage of the waste biomass that accumulates at their

wood mill. All their lumber is locally and sustainably harvested or salvaged from the urban

and suburban region. The surplus lumber and production remnants that are not used for

customer furniture currently are being stored on the 10-acre plot of land. This poses the

question of waste management and removal service in the most affordable and

environmentally responsible manner possible. Coyote is interested in finding alternative

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ways in which to remove unwanted lumber and waste. Our solution is to burn the material

with a gasification machine to convert their accumulated waste into biochar. Proven

benefits of biochar include: soil enhancement, renewable energy, permanent carbon

sequestration.3

WHAT IS BIOCHAR?

Biochar is a carbon-rich, charcoal material. It is biomass, which is thermally treated in the

absence of oxygen. This material is created in a process called pyrolysis, which breaks down

biomass by heating it to extremely high temperatures. Through this technique, carbon is

trapped in the biochar and is not released in the atmosphere. Biochar can be produced

from many different forms of feedstock, such as wood, food scraps and agricultural waste.

Traditionally, biochar was designed as an additive to soils, capable of sequestering carbon

from the environment and the soil in which it was placed. In our research, we distinguished

that soil improvements attributed to the addition of biochar included an increase of moisture

retention, improved air quality, increased buffering of soluble organic carbon and fostered

synergistic interactions with microbial populations. 4

Biochar can store carbon in the soil for hundreds, possibly thousands of years. Its primary

function is the amendment of soil. Additionally, according to International Biochar Initiative,

pyrolysis based biochar systems can potentially reduce one ton of CO2 per ton of biomass

used.5 Biochar scope is manifold. Although the term biochar is a recent adoption, it is

actually an ancient substance. Creation of this material has been in use for thousands of

years dating back to 450 BC through AD 950.6 Biochar has been primarily promoted as a

form of carbon storage but its benefits reach far beyond that scope. The book Biochar for

Environmental Management suggests, “There is a need for mass awareness of biochar,

including the pros and cons, among various stakeholders. The main challenges are the

3 www.climatefoundation.org 4 http://www.biochar-international.org/sites/default/files/All-Biochars--Version2--Oct2009.pdf 5 http://www.biochar-international.org/biochar 6 http://en.wikipedia.org/wiki/Biochar#CITEREFLehmann2007a

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availability of sustainable sources of biomass and the accessibility of efficient biomass-to-

biochar conversion technologies.”7

BYPRODUCTS (SYNGAS AND ENERGY)

During the production of biochar using a gasification machine, pyrolysis of biomass produces

two primary byproducts: syngas and heat (kWh and BTU’s). Both byproducts can be utilized

to operate the machine and to heat the facilities of operation. The syngas byproduct is a

mixture of hydrogen, carbon dioxide, carbon monoxide, and other forms of carbon.8 Under

the controlled production conditions using the gasification machine, the carbon in the

biomass feedstock is captured in the biochar and the byproducts. The biochar product will

retain 33% of the original feedstock in a porous charcoal substance, and the remaining 70%

of the biomass feedstock will be converted into bio-energy, a combination of BTU’s and kWh.

It must be noted that in addition to the pyrolysis process, the biomass must be completely dry

before it can be burned. Understanding our bioregion, the lumber used has water retention

capability of up to 70%. Therefore, the biomass must be dried in a kiln to decrease the water

retention to a low as 10% prior to the pyrolysis process. Coyote Woodshop currently operates

an Ebac 3000 dehumidification kiln that holds up to 3000 board feet of lumber for a duration

of four to six weeks cycle time.9 We have identified in our financial analysis that the amount

of energy created as a byproduct of running the gasification machine would cover the

operation costs of running the gasification machine and, in addition, generate a generous

revenue stream producing an additional 1270 kWh per day.

The second byproduct of our gasification machine is the production of heat, or BTU’s. For

the purposes of this paper, we have concluded that more time would be needed to

quantify the exact amount of heat required in order to dry all of the biomass needed to

meet our production demand. We have identified that we will produce enough heat to

7 http://www.css.cornell.edu/faculty/lehmann/publ/Lehmann%20and%20Joseph%202009%20Introduction%20to%20Biochar.pdf 8 http://en.wikipedia.org/wiki/Syngas 9 http://www.coyotewoodshop.com/coyote/milling-and-drying/

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cover our drying costs for the dehumidification kiln, but are unsure of the exact operation

costs for the kiln. Therefore, more time would be needed to calculate whether this could be

a potential revenue stream.

VALUE PROPOSITION

As part of our systems analysis over the past year, we reviewed studies detailing the

bioaccumulation of chemicals found in our environment and identified an increasing

number finding their way into soil, water, air and our homes. We found that 25% of the U.S.

Gross Domestic Product is impacted by the chemical industry and over 96% of

manufactured products are touched by the business of chemistry and yet less than 1.2% of

these chemicals have been in tested by the EPA for human or environmental safety.10 This

increase of chemicals in our environment has caused a resultant rise in human exposure to

high levels of toxins. From our systems analysis paper, we have identified key leverage

points in changing the system to be governmental regulation coupled with transparency

and accountability within the chemical industry. We recognize the delay that occurs with

regulation and see that we can play an immediate role in eliminating the toxins that

surround us. Hence, CHARtruce was born.

Our team is pursuing the use of biochar as a means to improve indoor air quality. Biochar

is much too multifaceted to be used solely as a soil amendment-- the uses for biochar offer

many more beneficial purposes, (reference slide from presentation) from acting as a

vehicle for storage of volatile nutrients, toxins absorber, insulation in homes, or a filter in a

sewage plants. Biochar has the potential to be one of the decade’s most exciting fields of

research.11 Our indoor air purifiers are incorporating an ancient technique that is now at

the cutting edge of innovation. We provide safe, simple, cost effective and healthy

products that offer our customers peace of mind.

10 Team Flame White Paper 11 http://www.ithaka-journal.net/55-anwendungen-von-pflanzenkohle?lang=en

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DASHBOARD OF KEY PERFORMANCE INDICATORS

Table 1: Sustainability Dashboard

Our business model dashboard identifies sustainability as a vital, strategic trend in our

operation. Our venture team has pinpointed a set of core indicators summarizing our

sustainability efforts (See Table 1). It should be noted that we consider this dashboard to be

an ongoing process, utilized as a vehicle to engage stakeholders. Key stakeholders include

our local community, suppliers and business partners, governmental agencies,

environmental action groups and ultimately, our future generations. It is our hope that our

dashboard will serve as a purposeful document detailing our mission and values, while

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offering key metrics that will help engage our stakeholders. It will also serve as a tool to keep

the CHARtruce purpose and progress against goals visible.

Table 2: Goal Progress

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FINANCIAL ANALYSIS

Following initial investment from 4 founders, CHARtruce plans a five-phase approach to our

revenue sources and sales. Details and assumptions are offered in our business modeling.

Phase 1: Samples. While we are waiting for our gasification machine and other equipment

to arrive, we begin making samples. Phase 1 includes purchasing 202 gallons of biochar

for $350, which is enough biochar to create 2,100 12oz pouches. Along with fabric, thread,

zippers, and sewing technicians, this biochar will be used to make sample products for

potential retail customers.

Phase 2: Product 1 (Pouches). Beginning mid-March, Phase 2 calls for manufacturing of our

first product (See Figure 2). Our first product is a fabric shape (pyramid, cube, and

rectangular prism) that is filled with biochar. The fabric is organic cotton and is reusable. At

this point we will have our equipment purchased, delivered, and set up. During March

and April we will produce 500 products. By May we will be producing 1,000 per month with

a growth rate of 2% per month (24% per year). In Year 1 we will produce 9,583 products,

by Year 5 we will be producing 30,998 products, and by Year 10 we will be producing

90,875 products (See Graph 1).

Figure 2: Product 1

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Phase 3: the Refill (Refills). This Phase begins six months after we start making our first

product, which is September of Year 1. Since our biochar fill lasts six months, we created a

refill for our product so that customers can reuse the outside fabric and replace the

biochar fill. We will start by producing 200 refills in September of Year 1. The refills will

increase at the same rate as the first product. In Year 1 we will produce 824 refills, by Year

5 we will be producing 8,088 refills, and by Year 10 we will be producing 23,707 refills (See

Graph 1).

Phase 4: the Wood Box (Boxes). This Phase begins at the start of Year 2. CHARtruce will be

partnering with Coyote Woodshop to create a simple wood box that will hold a 12oz bag

of biochar (See Figure 3). These will be made by Coyote staff using waste wood scraps

that are left over from furniture production or unused pieces of wood. We will start by

producing 200 boxes in quarter one of year two. The boxes will increase at the same rate

as the first product. In Year 2 we will produce 873 boxes, by Year 5 we will be producing

1,682 boxes, and by Year 10 we will be producing 4,927 boxes (See Graph 1).

Figure 3: The Wood Box

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Phase 5: Biochar by the Pound (Biochar (10 lbs. bag)). This Phase also begins at the start of

Year 2. Since Coyote Woodshop has an abundance of wood waste, we will have extra

feedstock and biochar each year. Twenty percent of the biochar we produce will be

donated to schools and other community centered non-profits. The remaining eighty

percent will be sold wholesale to farmers for $0.44 per pound to encourage use of biochar

in their fields over chemical fertilizers. We will start by producing 122 bags in Quarter 1 of

Year 2. In Year 2 we will produce 487 bags. From Year 3 to 10 we will produce 102 bags a

year (See Graph 1).

Graph 1: Units Produced Per Year

As shown in Graph 1, we are producing a large number of Pouches relative to our other

products. This is also reflected in our sales numbers. In Year 1, we are making $185,577.38

in sales, 98% of which is from Product 1. By Year 5, we are making $718,538.18, 85% of

which is Product 1, 7% Refills, 7% Boxes, and less than 1% Biochar by the bag. By Year 10,

we are making $2,106,260.74 from sales with the same percent composition as Year 5 (See

Graph 2).

$0

$50,000

$100,000

$150,000

1 2 3 4 5 6 7 8 9 10 Years

Units Produced Per Year

Pouches

Refills

Boxes

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Graph 2: Sales Per Year

MAJOR OPERATING EXPENSES AND CAPITAL SPENDING

Major operating expense will start in Year 1 with the purchase of a gasification machine of

$27,000, a serger for $2,000, sewing equipment (scissors, needles, etc.) for $2,500, a

commercial fabric-cutting machine for $2,800, two sewing machines at $1,800 each, and

office equipment for $20,000. In Year 2, we start purchasing more sewing equipment every

two years. In Year 3, we purchase a biochar Packing machine for $2,000. By Year 8 some

of our equipment (serger, commercial fabric-cutter, & sewing machines) needs to be

replaced so we see capital expenditures of $10,900 (including additional sewing

equipment). By Year 10, our biochar packaging machine needs to be replaced and

additional sewing equipment is purchased for $4,500. See table below.

Equipment Purchase Date Total Price ($)

Gasification machine Year 1 (March) 27,000.00

Serger Jan-14 & Year 8 4,000.00

-$300,000

$200,000

$700,000

$1,200,000

$1,700,000

$2,200,000

1 2 3 4 5 6 7 8 9 10 Years

Sales Per Year

Sales for Pouches

Sales for Refills

Sales for Boxes

Sales for Biochar (10 lbs. bag)

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Misc. sewing equipment Year 1 (January), Year 2 (Quarter

1), Year 4, Year 6, Year 8 & Year 10 15,000.00

Commercial fabric-

cutter Year 1 (January) & Year 8 5,600.00

Sewing machines Year 1 (January) & Year 8 7,200.00

Office equipment Year 1 (January) 20,000.00

Biochar packing

machine Year 3 & Year 10 2,000.00

Total Equipment

Purchase Year 1 – Year 10 82,800.00

FUNDING REQUIREMENTS AND PROJECTIONS

This business model is funded by the Char-truce team and founders. Each team member

contributes $40,000 for start-up costs. This gives us a total of $160,000 to finance the start-up

CHARtruce. We will use this money for our five phases and the expenses that are

associated with each. Based on projections from our five phases of start-up, we find the

break-even to be at 11,322 units of Product 1 and the associated refills (See Graph 3). This

break-even analysis was created using our year 1 fixed expenses of $153,672.78.

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Graph 3: Break Even

Based on this analysis, we project to see return on our initial investment in Year 4 (See

Graph 4). One reason this doesn’t occur until Year 4 is because we are hiring employees

at a living wage salary of $18.75 per hour. We want our employees to receive healthy

compensation for their work and are willing to push back our financial recovery in order to

achieve this.

Graph 4: Return on Initial Investment

$0

$50,000

$100,000

$150,000

$200,000

$250,000

# of Units

Break Even

Total Revenue

Total Costs

Total Fixed Costs

Total Variable Cost

-$200,000 -$150,000 -$100,000

-$50,000 $0

$50,000 $100,000 $150,000 $200,000 $250,000

0 1 2 3 4 5

Year

Return on Initial Investment

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EXTERNAL ENVIRONMENT

ECONOMY

At present biochar is a small but growing market entity. In essence, it allows us to take what

would be waste, from crops, mills, compost facilities, and

more, to create a product that will actually decrease

environmental toxins and odors as well as levels of CO2.

From an economics perspective, anyone currently paying

for waste removal that is appropriate feedstock for biochar

stands to gain. For example, a farmer can benefit in more

than one way. Biochar is inexpensive to make. Farmers

can sell the byproduct of their crop waste, creating a new

source of income. Alternately, they can disperse and bury

biochar within their soil to create a richer planting medium, which will result in nutrient dense

soil for the subsequent crops.

Both options result in an economic gain for farmers worldwide (decreased cost of waste

collection, sales from product or improved crop yield). In addition to financial benefits,

according to Johannes Lehmann at Cornell University , 12% of greenhouse gas emissions

worldwide could be absorbed by the appropriate creation and use of biochar.12

TARGET MARKETS

Our target markets areas include the health sector, family households and the hotel and spa

industry. People with health problems, allergies, and those focused on their wellbeing are

the primary targets related to general health. We see this target market as one that will

12 https://www.google.com/search?client=gmail&rls=gm&q=johannes%20lehmann%20cornell%20university%2012%25%20global#

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continue to increase considering the delay of health compromise from prior contact with

chemicals. Families, particularly parents, tend to want a safe environment for their child.

With greater awareness from media, NGO’s and improvements in regulation, this market will

continue to grow as well. The hotel and spa industry caters to clients who expect healthy

environments. CHARtruce allows this market the opportunity to provide visible evidence of

commitment to health along with possible custom or exclusive fabrics.

Our market channel will consist of online or brick and mortar sales in the beginning. As the

company matures and has a better understanding of the market, direct sales to large box

stores would be ideal. Just as other natural brands such as Method and Seventh Generation

have entered Target and Safeway, CHARtruce will be found as a mainstream offering with

broad audience appeal. This will require strategic marketing and excellent partnering

practices.

MARKET ANALYSIS

Regarding sales, a 2009 WSU study on biochar concluded that a good breakeven cost for

production was at $87 per metric ton. At that point in time, biochar was selling for

approximately $200/ton.13 This gives us some indication that the margins for biochar are

strong. Due to our unique marketing position, low overall COGS and lean production, we

are well above this anticipated sales margin.

As we have seen an increase in popularity and availability for earth-friendly products, the

market is favorable for new options. Based on one on-site market research exercise and two

Loopinion polls, our findings indicate level of knowledge for our customer base, level of

interest overall and approximate price points that would be optimal. We increased the price

by $5 based on follow up interviews we conducted with our target market

13 https://fortress.wa.gov/ecy/publications/publications/0907062.pdf

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MARKETING RESULTS

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Based in part on these results, the initial price of $24.99 will reflect quality and still allow for

sales success in the market. We anticipate our most frequent customer to be female. This

buyer will be interested in either improving air quality to help with allergies and chemical

sensitivities or removing toxins from the air for general health reasons. Our secondary market

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segment will be Green Backs, particularly parents, seeking a natural way to remove toxins

from their indoor living environment. Our third “dark horse” category would be to position

Char-Truce as an air-cleaning air freshener. This could draw a very large customer base.

According to a 2011 article, “Americans are expected to spend 1.72 billion dollars on air

fresheners this year”.14 There are long-standing and recent studies to support that biochar

functions as an odor neutralizer. Carbon has been used throughout the ages to absorb

odors. Due to the carbon rich nature of biochar it is a natural air freshener, moisture

balancer and soil enricher. 15 Washington and Oregon are currently working cooperatively

to solve large-scale odor concerns in areas such as paint factories, municipal waste and

compost and more. Tom Miles, a technical consultant for NW Biochar Working Group, stated

via email that WA Ecology at WSU Puyallup would do testing for this project.

The investor market is another supporting indicator that Char-Truce will be part of the healthy,

Green economy. “Proof comes from the MSCI KLD Social 400 Index (formerly the Domini

Social Index), which over the past 20 years has outperformed the S&P 500 on an actual and

a risk-adjusted basis”. (HBR The Big Idea: The Sustainable Economy by Yvon Chouinard, Jib

Ellison, and Rick Ridgeway) Based on this performance, Char-Truce is an environmentally

friendly company that stands to be equally, if not more, successful than its conventional

competitors.

There is a potential problem or unintended consequence with pursuing strictly economic

gains with biochar. If farmers plant crops based on what will burn best after harvest or start

to grow vast fields meant only for burning, we could run into a situation similar to that of corn

and soy. This could result in a large, quick boom of biochar in the market, a relatively quick

flood followed by a swift decline in value.

14 http://www.care2.com/greenliving/air-fresheners-easy-greening.html#ixzz2UsK25cYD 15 http://www.biocharnow.com/solutions/odor-control

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COMPETITOR ANALYSIS

Regarding competition, many associated entities are non-profit or work on the technical side.

International Biochar Initiative is a non-profit and doing great work particularly in R&D and

assistance in third world countries.16 Green Charcoal International has focused on design

and creation of equipment.17

16 http://www.biochar-international.org/ 17 http://www.green-charcoal.com/solution

INDUSTRY COMPETITORS

-Industrial scale purifiers

-HEPA air filters

NEW ENTRANTS - Business model is easy to replicate

-Overseas competition

-A large company entering the market that has established distrbution channel,

brand identity

SUPPLIERS

-Wood waste/feedstock

-Organic cotton

-Muslin, thread, zippers, etc.

SUBSTITUES -air fresheners

-scented candles

-baking soda

BUYERS/CONSUMERS

-Health conscious

-People with allergies

-People who want the best for their

family

-Hotels, spas

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CHARtruce is a for profit company which qualifies for B-Corp status after 6 months of the first

year (application results provided separately). While internationally there are companies

incorporating biochar into household items, we don’t see many domestic competitors.

Within the U.S. there are few companies selling biochar products for in-home use. None of

them are selling an air-cleaning product such as ours. A list of some international and

domestic suppliers and their products are as follows:

● Q Bedding (international: charcoal filled pillows, etc.)18

● Bambooya (international: air freshener, odor absorption, etc.) 19

● Green Yarn (domestic: cloth woven with biochar) 20

● Allerair (domestic: industrial scale air purifiers, etc.) 21

COMPETITIVE ADVANTAGE

Other than fabric and industrial size air filters, we have yet to find anyone who is

manufacturing or selling items specifically tailored for in-home use in the U.S. This places our

offering in a unique niche. While it does invite other established companies to quickly follow

suit, we would be the innovative front-runners. This means that we would need to work on

branding to ensure that association with these products links to our name. Also, being

mindful of strategic pricing will be important. More research of indirect competition can be

done to best position our offerings. One tactic for exposure could be to focus on the flame

retardant/lead/bishphenol-A sensitive groups. Our partnership with a relative NGO along

with providing education and as much awareness as possible via social media will lend

credibility and sense of urgency for our product. For now, we cannot find a non-toxic

product that is both mainstream and effective as an easy solution for the toxins in our homes.

18 http://www.qbedding.com/ 19 http://www.bambooya.com/activated-bamboo-charcoal-carbon.html 20 http://www.buyactivatedcharcoal.com/product/eco_fabric/gray_dash 21 http://www.buyactivatedcharcoal.com/product/S-6200

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We could corner this area of the market and hold competitive advantage. Considering how

many people buy air fresheners to mask the smell in their surroundings, we anticipate that

this same group will be instantly drawn to a product that will actually remove harmful toxins

as well as de-odorize. Given that we are the only company to offer a product similar in

aesthetic appeal to mainstream air fresheners, this gives us a substantial competitive edge.

RISK ANALYSIS

The SWOT analysis (pictured below) depicts the internal and external areas of strength and

possibilities as well as areas for improvement or key indicators to keep a close eye on.

Strengths First-mover advantage

Strong partnership with Coyote Woodshop/Jams Hawaii

American made 100% organic/non-toxic

Net Zero Operation that supplies power into the grid

Near Zero waste and toxins operations Easy of use

Weaknesses

Low level of biochar familiarity

Initially small operation which is limited in scalability

Initial low market share

Initial innadequate distribution

Opportunities Growing toxic-free market

Expanding demand for “green” products

Expected flame-retardant legislature in CA

Expected Market Penetration

Easy to duplicate model

Threats New entrants

Competitive market entrants with greater infrastructure and/

or funding Overseas competition

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RISK MITIGATION AND STRATEGIES

As a start-up with a new business model and an early entrant into a new market, there will

be both expected and unexpected risks and obstacles. We have identified assumptions

and some potential risks, and have outlined our mitigation strategy to address these. The

Team at CHARtruce has the knowledge and expertise to be flexible and reiterate in an ever-

changing business environment.

Assumptions Risks Mitigation

Consumers will want our

products

Consumers will not believe

that our products remove

toxins from their living

environment. Consumers are

not aware of the toxins in their

environment that are

affecting their health

Provide scientific data that

verifies biochar removes

toxins from the living

environments. Education

campaign bringing

awareness to the effects of

toxins by aligning with

national NGO’s.

CHARtruce has no

competition

This is an easy model to

replicate at a lower price

point if manufactured

overseas

Early entrant to market made

in the U.S. and a solid value

proposition. The demand for

U.S. made products is

growing. Listen to customer

feedback to ensure we are

providing a strong value

proposition

27

The venture team has a

variety of skills and a deep

passion to eradicate toxins

from the living environment

Deficient skills or expertise in

areas of the business. The

team being overloaded with

daily operations and not

being able to manage the

business as a whole

Bring in outside consultants to

review the mission and value

statements and aid in

realigning the team to

achieve their goals. Hire

qualified personnel to assist

the team in areas of

deficiency, so that the team

can focus on the overall

business

The government will pass

legislation limiting the amount

of toxins in products.

California will pass legislation

preventing the ease of flame

retardants in products

The Chemical Safety

Improvement Act will not be

updated during this session of

congress. California does not

pass new legislation

Take action and support all

parties that are actively

involved in changing the

chemical satiety

improvement act and parties

supporting California’s

legislation banning flame

retardants

There is a market for char-

truce and we will achieve

24% annual growth

Difficulties in reaching our

target markets.

We have budgeted between

5-15% of revenues for sales,

marketing, advertising, and

brand imagining. This allows

enough cash to hire

consultants if we are not

reaching our target sales.

28

Stakeholders: i.e. NGO’s,

naturopath and allergists will

endorse our products

NGO’s, naturopath and

allergists will not partner with

char-truce

Spend a vast amount of

quality time with the NGO’s,

naturopath and allergists

regarding education and

benefits of char-truce

Our initial investment is

enough to carry us through

the first few years

Insufficient start up investment

to run the business. Having to

secure additional funding

There are a few ways that we

can decrease initial output of

capital expenditures. We can

rent the sewing machines or

buy used equipment until our

revenues increase to a point

that we are in a positive cash

flow situation, then reassess

hiring new employees

We will be able to produce

the required bio-char needed

for the production of our

products.

Unable to produce enough

bio-char to cover our

products

There is a risk analysis in our

Excel data representing this

assumption of purchasing bio-

char wholesale. It shows us still

able to make a profit. We

also need to research other

wood mills on Bainbridge

island that can supply us with

additional waste to produce

the required bio-char.

29

Below, represents worse-case scenario if we are unable to produce all of our required bio-

char for production. Please note that we are not including our fourth revenue stream of

selling wholesale bulk bio-char as this assumes we are not producing enough bio-char.

Below is a sales projection analysis which plans for varied levels of market demand and

allows for a broader scope of possibility. There is a marked decrease in cash flows for Year 3.

This occurs as a result of hiring additional employees based upon our assumption of a 24%

annual sales increase. If we are not achieving sales projections by Year 3, we will reassess

the hiring plan in order to mitigate negative cash flow.

-$100,000

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

1 2 3 4 5 6 7 8 9 10 Year

Purchasing Biochar

Cash Flow purchasing 25% of biochar

Cash Flow purchasing 50% of biochar

Cash Flow w/purchasing 100% biochar

Cash Flow w/producing all biochar

30

IMPLEMENTATION ROADMAP

At startup, our team decided to go forward with redesigning biochar as an indoor air purifier.

Each partner has contributed $40,000 as startup capital. For the first three months of

operation we will be working out of each respective partner’s home while creating

distribution channels and confirming that there is sufficient demand for our product. During

this period, the team will be buying biochar at wholesale for our prototypes. We will be

manufacturing the shells at home with the expected production of 1000 items a month.

These prototypes will be used as samples and giveaways at trade shows and various brick

and mortar businesses on Bainbridge Island and the Seattle area. Each of the four founders

agrees to contribute the sweat equity necessary to make this effort possible.

CHARtruce formed a partnership with Jams Hawaii, an Oahu-based clothing manufacturer

which gave us over 1,000 yards of free material for our first year of operation. Jams had

discontinued the material earlier this year and was looking to find an alternative means of

disposal. We recognize that this fabric does not meet our sustainable metrics of 100% organic

-$200,000

$0

$200,000

$400,000

$600,000

$800,000

1 2 3 4 5 6 7 8 9 10

Year

Sales Projections

Original Projections

Decrease in Sales by 5%

Decrease in Sales by 10%

Decrease in Sales by 15%

Decrease in Sales by 20%

31

U.S. made cotton, however we are utilizing this material as an up cycle. This allows Jams to

make progress toward their efforts to reduce fabric waste.

CHARtruce has established a partnership with Coyote Woodshop on Bainbridge Island,

Washington. CHARtruce will be purchasing a gasification machine, which will turn the wood

waste produced from the mill into biochar while we will be supplying electricity to Coyote’s

new commercial facility. Our contract will stipulate that CHARtruce will purchase the

gasification machine for the price of land and building use. In addition to the cost of the

machine, CHARtruce will be responsible for all costs associated with maintenance of the

machine.

For more timeline details, please refer to the Sales tab of our financials.

CONCLUSION

Throughout the process of creating our business model, we interviewed many individuals

and experts relative to the biochar industry. We found that biochar has the ability to foster

plant growth, balance moisture, absorb odors and lower greenhouse gasses as well as

sequester toxins found in the ambient environment. In addition to having triple bottom line

potential plus purpose (aka quadruple bottom line), CHARtruce is a business plan that can

be realistically brought to life. As a business, CHARtruce launches an important innovation

of our time where instead of fear and despair we offer hope; instead of increasing

exposure to toxins we see a transformation; instead of waste we see raw materials, instead

of toxins we see healthy homes; instead of the bottom line we see the quadruple bottom

line.

We have truly enjoyed learning about this process. Researching a material that has been

used for centuries, adding creativity and design, and then building an appropriate financial

model have all been combined in an effort to reduce the toxic environments we live in.

32

According to Global Environmental Outlook, indoor air pollution kills 1.6 people every year. 22

No single person is exempt from the harmful effects of toxic chemical exposure. Our primary

purpose has been to decrease the negative impact toxins have on our bodies and

environment. In creating CHARtruce, we are reducing toxins one room at a time.

22 http://www.who.int/heli/risks/indoorair/indoorair/en/