Deal Memo – Boxabl (July 2021)

NameBoxabl
AboutDeveloping mass production building systems
HeadquarterLas Vegas, Nevada
Raise DescriptionSeries A-1 Crowdfunding
Security TypePreferred Shares
Current Round SizeUS$3,930,000
Pre-Money Valuation US$226,249,347
Current Price per ShareUS$0.71
Previous Raise DateDec 2, 2020
Previous Raise ValuationUS$44,172,225
Crowdfund PlatformStartEngine
Existing InvestorsFounders’ capital
Equity Crowdfunding
Key CompetitorsBlokable
Connect Homes
Factory OS
Entekra
Blu Homes
Autovol
Related WebinarsInterview with Boxabl and Casita Demo

The Startup Investigator Scorecard

Characteristics of Good Problems:20/ 3066.7%
Characteristics of Ideal Solution:21/ 3070.0%
Traction to Date:15/ 2075.0%
Business Model Defensibility:13/ 2065.0%
Chracteristics of Founding Team:22/ 3562.9%
Total Overall Score:91/ 13567.4%
Overall Scorecard
Peter Thiel 7 Questions (Product):23/ 3565.7%
Berkus Method (Risk):16/ 2564.0%
Supplementary Scorecard

TL;DR

Boxabl is a mass production building system developer based in Las Vegas, Nevada. They design modular units that is constructed in a manufacturing facility, folded and transported on a standard truck to a site for final assembly. Their first product is a 375 ft module known as the Casita which can folds up to a shippable dimension and unfolds to a complete house upon arrival on site. The product is targeted at the accessory dwelling unit (ADU) market which is growing rapidly in the US, especially in California.

What is the Problem?

The most common residential construction method currently is the stick framing method. This method involves laborer building home one at a time by hand using simple tools. It is a slow, expensive and labor-intensive process. According to the Associated General Contractors of America, 81% of construction firms have reported difficulty in filling salaried craft positions. Despite the labor issues, demand for residential housing is still growing. The US Census Bureau reported 22.5% year-on-year growth in building permits in 2020. Changes in zoning laws designed to increase housing density are also allowing people in the US, especially in California to build accessory dwelling units (ADUs) for use and rent. This is a growing market that Boxabl will use to enter the market.1

What is the Solution?

Boxabl is developing factory finished room module system that can be stacked and arranged onsite, and that provides the majority of the building envelope and functions. This allows builders to dramatically reduce build time and costs while increasing quality and features. The first prototype developed is a 20ft by 20ft room module that can be folded down to 8.5ft wide for shipping. When folded, it is able to fit into standard shipping dimensions, meeting highway, sea and rail transportation requirements. Typical unit can be assembled in a day. The unit comes fully furnished, and is designed to easily link up with onsite power supply, water and waste system.

Each unit is designed for mass production and hence uses minimal number of components in the manufacturing process. The Casita is built with laminated panel technology instead of standard stick frame construction. This means that each wall panel consists of fewer individual components. The components can also be processed using off the shelf computer numerical control (CNC) equipment, providing a degree of automation from the start. Most of the proprietary designs of the product is protected by a comprehensive patent strategy, owned by Built IP LLC, which is owned by Paolo Tiramani.

Strong Pre-Order Sales and Marketing Coverage

The most encouraging point of the Boxabl product is its sales traction to date. It has only built 3 prototypes to date, with 2 units housed as demo within the manufacturing facility and 1 unit shipped to a high profile secret customer.2 However, it has received 2 purchase orders from ADS Inc. to deliver 156 homes for the federal government by Oct 2021. This order is worth $9.2m and will be paid in stages. It has also received over 20,000 reservations for the Casitas and 10% of the reservations include deposits paid. This alone is worth a potential sales of $100m. It is currently building a 170,000 sqft production facility that has the capacity to produce 3,000 Casitas annually by 2022. Volkswagen Group’s Porsche Consulting Inc will be helping with the design and implementation of the new facility.

Product Design and System is Protected by 17+ Patents

The proprietary product design and construction system is protected by a comprehensive patent strategy.3 However, the patents are not owned by Boxabl. They are owned by Built IP LLC, which is owned by Paolo Tiramani. What does it mean? It means the biggest intangible asset that Boxabl owns is not the IP of the technology/design but the relationship or investment Paolo has in Boxabl. This also means that the technology licensing business for international expansion might not benefit Boxabl if the licensing revenue goes straight to Built IP LLC. This is an important point to watch out as it may limit the potential of Boxabl to increase value through international expansion.

Summary

Boxabl is solving a big problem with an existing solution concept i.e. modular pre-fab construction but with better design and system aimed at solving the pain points of existing modular pre-fab construction approach. There are a lot of competition out there in this space but Boxabl’s unique approach is able to set itself apart clearly for customers to realize its difference and value proposition. This comes down to its focus on customer-centric design when developing its product. The team have unique experiences and skillsets that will ensure proper execution of its plan, albeit the lack of construction experience within the team. It’s valuation of $226m seems high for a pre-revenue company, but considering its traction, the valuation might be justified.

One thing to consider is the fact that the patents are not owned by Boxabl, but Built IP LLC. This together with Boxabl’s plan to use a partner factory model for international expansion could mean that a majority of the licensing revenue could go to the Built IP LLC instead of Boxabl.

1 https://www.buildinganadu.com/adu-blog/california-adu-charts
2 https://nypost.com/2021/07/05/elon-musk-is-living-in-a-prefab-tiny-house-worth-only-50k/
3 Paolo has years of experience in innovation and patent management with 500 Group Inc.

Thanks for reading. Feel free to let us know what you think about the company and crowdfunding campaign in the comment box below! 🙂

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The Startup Investigator

1 Comment

  1. ongsterr says:

    For investors outside of the US, please note that investing in Start Engine will incur a flat fee of $30 on top of the 2% processing fee.

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