Randy Frost, President/CEO of Solara Fund Inc and Solara Club Inc
- Divorced from but still friends with Linda; father to Ryan, 38, Justin, 33, and Braden, 25
- University of Alberta
- Career Highlights:
- 35 years as a self-employed entrepreneur
Randy Frost has always admired the achievements of Canada’s technology industry leaders. Now, through his latest entrepreneurial venture, he is working with some of the country’s most promising tech companies, presenting compelling investment opportunities to his network of investors.
With a view of one of the country’s high-tech hubs in Edmonton, Frost founded Solara Club Inc. with the goal of providing young, innovative technology companies with a platform for raising capital, while giving Canadians a far more intriguing and potentially lucrative way to invest through their tax-free savings accounts (TFSA).
Solara does not pool funds nor make the decision where the money is allocated, Frost explains at www.SolaraClub.com. “All decisions are self-directed by the investor. Each investor is always in complete control of the direction of the placement of their own money.”
Solara Club member investments enable the technology firms to commercialize products and/or services and boost the economy via the purchase of materiel, payment of wages and acquisition of operational services. Solara Club then pays a Fractal Income or Royalty, from the company’s gross revenue, to those who invested in that business.
The Solara Club business model is unique in that the only charge to investors is the membership fee to join Solara. Members then review Solara Club’s due diligence on high-tech opportunities and invest in companies they feel comfortable with, as they see fit.
Chartered accountant Joe Batty sees logic in Solara Club’s attitude toward tax-free savings accounts: “Maybe we should change our opinions about what our TFSA goals should be,” Batty said. “Maybe we should think of this money as our ‘risk’ fund and use it for moderate risk investments. Remember, if the risk works, the reward is tax free.”
Frost is quick to point out that there is no guaranteed return in connection with Solara Club’s Solara Fund, but noted that he and his team’s rigorous due-diligence process is designed to mitigate risk as much as possible.
1. Where did you grow up?
I was born in Edmonton and went to school and university here as well. The city has changed dramatically from the sleepy little burg that it was back in 1965, when it got its first skyscraper, to the thriving centre that it is today. Its new downtown arena is being built and there is $3 billion-plus of ancillary building going on in downtown Edmonton, due almost exclusively to that arena. A tip of the hat goes to Daryl Katz, owner of the Oilers, an exemplary entrepreneur.
2. Did you have entrepreneurial instincts from an early age?
For absolutely as far back as I can remember. I have very vivid memories from my childhood, of going to sleep dreaming of developing all sorts of businesses, typically of operations that I had been exposed to. A lot of dreams about building a huge trucking company because the uncle of the kid that I played with across the street owned a trucking company, so that is what I dreamed about.
3. Does this entrepreneurial thing run in your family?
It does. Two of my three siblings have had their own businesses and my sister created an enormously successful physiotherapy clinic, which she envisioned, designed, negotiated the lease for, did the construction management, arranged all the financing, selected and arranged the fixtures and furniture for, and then ran impeccably for 25 years. She is very good at entrepreneuring
4. What is your background in business?
After university, I was involved in only a couple of jobs in which I was employed by a company . . . before the entrepreneurial bug led me into working for myself, initially in construction, developing interior systems companies and evolving into development of properties for sale, lease or developing an operational business. I was always looking for opportunities, typically where others simply couldn’t see them. I conceptualized, designed, financed, furnished and fixtured the operation, plus created operational plans for the management of the businesses I was creating. It laid a very good background for what I am doing now with Solara.
5. How will your expertise and experience assist you with Solara?
Solara is a macrocosm of what I have done my whole life. To be able to look at an opportunity and see all the potential that it has, not simply what has been presented in a business plan or technical dissertation, is enormously helpful when trying to ascertain what technologies to acquire and which to pass on. Being able to discern flaws in a strategy or a technology is at least as important as the ability to see advantages. Being prepared to get up from the negotiating table because you see a gremlin or two lurking in the woodwork, is essential to keeping the company making money, and not spending it to fix a mistake.
6. Do you have any heroes in business that you try to emulate?
Ray Kroc was the developer of the McDonald’s system. He bought it from the McDonald brothers in the early 1960s and turned it into what it became. He and his minority partner Harry Sonneborn employed two brilliant strategies to expand McDonald’s. Kroc was relentless in his pursuit of quality, cleanliness and uniformity among the franchisee operations, but it was Sonneborn’s exceptional real estate strategy that provided the financial impetus to fuel McDonald’s stratospheric growth. Kroc often said, if his franchisees were making money, he was making money. Solara operates in the same manner; if our investors are making money, Solara is making money. As a matter of fact, our slogan “Invest for yourself, not by yourself,” is homage to a similar McDonald’s slogan.
7. So how did you come up with the idea for Solara?
I have always found that one of the most difficult components to building a business is the financing of it. It takes time, it is expensive, it is tedious and often difficult to arrange for the people that you do get interested in investing, to be at the same place at the same time. It struck me that having a pool of people who were interested in investing (willing investors), but who had no need to go to an investment meeting whatsoever, let alone at the same time and place, was exactly what entrepreneurial companies seeking funding needed. The Internet provides a perfect conduit for a vehicle such as Solara, where those who had an interest had signed up to be provided access to the opportunities that Solara was in the process of acquiring. No muss, no fuss, no cajoling – if you want to participate, great! If not, that’s cool, too. No pressure from Solara, they invest only when and if they’re comfortable
8. Is it safe to invest in Solara?
Solara is a company that specializes in acquiring, capitalizing and operating innovative new technology companies. Solara endeavours through its rigorous due-diligence process to ensure that both the technology and the underlying business model supporting the technology’s commercialization are sound. However, the very act of taking a new company from the completed development stage of its technology and fully commercializing it has inherent risks. The risks are mitigated sufficiently in most cases, to warrant the description of Solara’s investments as moderate risk. The question then becomes, is the escalated forecast amount of return of several times the current rates achieved through institutional, tax sheltered investment, worth the moderate elevation in risk of a Solara investment?
9. What kind of return can someone expect from a Solara investment?
That will ultimately depend upon the Solara investment (which subsidiary Solara company) in which you invest. But each Solara investment is designed to always pay those who invested in it, first. Solara uses fractal income to pay its investors.
The fractal income will be derived from a percentage of the gross revenue of the subsidiary and distributed on a pro-rata basis amongst the holders of the shares entitled to the fractal income. Fractal income is collected from the gross revenue of the subsidiary’s income, before any other expenses are paid. It is held in a separate account from the company’s operating funds and paid quarterly from that account to the shareholders of the subsidiary.
If 1,000 Solara members each bought a $5,000 security unit consisting of 1,000 shares, paying fractal income, that would raise $5,000,000 for the acquisition and commercialization of a new subsidiary company. If the Sub Co, when launched, produced gross revenue of $1,000,000 a month ($12 million per year), each member investor would receive $600/year in fractal income, paid quarterly. The $600 in fractal income provides a 12% annualized return on investment on the original $5,000 invested by the member. That is five to seven times higher ROI than the average GIC-deposited, TFSA account would pay. (**NB – Please be advised that Solara is making no claim that each or any subsidiary will gross $12 million in any year’s sales. That figure is used as an example of what could be considered an acceptable amount for a business of this nature.)
Additionally, there is an equity component to each Solara investment, plus participation in dividends of the company as a whole, should they be declared by the board of directors.
10. Who runs Solara and what are their backgrounds?
The principal shareholders of Solara are veteran business people, each with exceptional backgrounds in the creation, marketing, financing and operations of private and public corporations. Their primary skills and experience include reporting and dealing with security regulators in the public arena. Solara’s principals have unique skill sets in the use, description and revitalization of intellectual property, within the financial reporting processes of securities law. Solara also has expertise in bridge financing, arranging of long-term debt and equity financing. A brief description of the Solara principals is contained within the Solara business plan on the investment page of Solara Fund Inc., within the Members Only area of the Solaraclub.com website.
11. Can an investor really invest from their TFSA and not pay taxes on the money they get as a return?
Yes. Canadians have been able to invest in a tax-free savings account since 2009. The premise behind these accounts is to stimulate the economy by affording Canadians an opportunity to invest in somewhat higher risk ventures and offset the risk by not paying any tax on the returns received within the account. With the additional risk, should come additional benefit (higher returns) and with that would come the additional benefit of paying no tax when withdrawing from the account.
The current practice of most Canadian investors – placing their TFSA funds in GICs with institutional financial companies – is diametrically opposed to the intent of the TFSA program. While there is virtually no risk to this type of investment, there is also certainly no stimulation of the economy as a whole, nor of the technology sector specifically and the returns to investors, are virtually non-existent.
12. How is it that Solara can afford not to charge it’s investors fees?
During the acquisition process for technologies, Solara acquires a direct ownership interest in each new Solara subsidiary. Solara receives an operational stipend from each subsidiary (paid after Solara investors are paid) as well. Solara does well enough for itself, without taking from those who ultimately are paying the freight – our members. Solara’s approach is that we will make money only if our member investors are making money.
13. Why does someone have to pay a membership fee?
The reason is quite simple. The membership fee performs a couple of functions. Solara derives sufficient revenue from the membership fees to pay for the operation of the Solara club.com site and pay the wages of support staff required for its operation. Second, and this may seem rather blunt, but it is to assist in keeping out those who would simply become members for the sole reason of causing problems.
14. If a person invests in a Solara project, how are they assured that Solara won’t run off with the money?
At the end of the day, there really isn’t much of a guarantee to stop that in any company. But, if you analyze our company, the way we have set up the capitalization process, the fact
that at every step of the way, Solara ensures that it adheres to securities legislation in every province in Canada, it is a lot more work and a lot more risk than a scam would justify. Besides, if Solara does a good job of executing its business plan, there is substantially more money in that endeavour, than in the very shortsighted and criminal misappropriation of funds.
15. How does Solara select technology companies in which to invest?
The principals of Solara have a network of business contacts that is exceptional at feeding back to Solara, leads on technologies that are stymied in the commercialization process. Additionally, the Solara site has a technology portal throughwhich people can submit, in full confidentiality, information on their technology plays. Solara has access to a great many TechCos seeking capitalization.
16. How much use is the Solara due-diligence process in picking winners and losers?
Very little, actually. What it does is verify the veracity of the technology and determine if the underlying business model will support the infrastructure and expenses inherent in the commercialization and operation of the company, in order to provide sufficient revenue to turn a long-term profit. It is then the responsibility of those running Solara, utilizing their experience and business acumen, to pick the winners and losers. The principals of Solara have an exemplary record of doing that.
17. Does Solara have anyone who has experience in this type of acquisition?
All of the Solara principals have extensive background in this type of business. However, Solara’s chief operating officer has a background where for almost 20 years, he ran acquisitions and turnarounds, exclusively within a public company. His record of success was exceptional. Each of the
other Solara executives has experience in virtually every facet of the operation of businesses.
18. Are there any opportunities in which to invest currently?
Solara itself is the first opportunity available. We have an investment available in the company itself, where members may buy up to 10,000 shares of Solara Fund Inc. in increments of $2,500. These funds will be used to capitalize Solara Fund, providing the capital to expand the company and seek new technology opportunities. In order to participate in this, or any other investment opportunity in the future, the investor must become a member of Solara Club to gain access to the Members Only area of the site. All investments will be offered exclusively to club members, and no one who is not a member and logged in to the site will have access to the proprietary information provided to members. The standard membership fees are $85 USD annually or $300 for a lifetime membership. At the moment, though, we are offering a lifetime membership for just a $14.95 U.S. service fee.
19. When will there be other investment opportunities?
Typically, it will take six to 12 months for revenue to start when we acquire a technology, sometimes less and sometimes more. That will always be clearly delineated in the documentation provided in the due-diligence file for the opportunity. The due-diligence process has an indeterminate timeframe, dependent upon the opportunity and the tech involved. That process will take three to six months, so the next opportunity will probably be early in 2016.
20. How do I get more information?
Go to SolaraClub.com and read the information available on the website. It is pretty easy reading, but it does require that you read the info. At the end of the day, this is about investing your hard-earned money. Of course, it makes sense to research any investment that you are contemplating.