Hempitecture is raising capital via a SAFE at a valuation cap of $22.5 million and a 20% discount rate. The company had revenue of $627,762 in 2020 and only had $192,115 in assets. In 2021, Hempitecture claims it generated around $1.2 million in revenue. Using this 2021 reported revenue, the company has an 18x revenue-to-valuation multiple. That multiple is high compared to industry averages, and Hempitecture’s assets are too low to justify this valuation. Therefore, Hempitecture’s current deal is overpriced.

Hempitecture operates in the building thermal insulation market. Insulation is critical to reduce the energy consumption and carbon footprint of buildings. The global building thermal insulation market was worth a rather small $28.9 billion in 2020. It’s projected to grow at a slow annual rate of 4.4% to reach $40.2 billion in 2028. Hempitecture is only operating in the United States, which reduces its market potential. The insulation market is stable, well-established, and fragmented. Its growth mostly follows the growth of new constructions and renovations. The market slowed down in 2020, and it might now be affected by the current high prices of building materials, which could restrain the development of new housing and office projects.

Hempitecture’s hemp insulation solution, HempWool, is an alternative to mineral insulations like fiberglass, which is harmful to people and the environment. The company’s main potential relies on its disruption of the industry and acquiring market shares from health- and environmentally-conscious consumers. This strategy seems more likely to work thanks to the Biden administration’s push for decarbonization and climate change mitigation. The Department of Energy sees hemp as a tool to reduce and capture carbon emissions. In fact, hemp is widely used for building construction in France, a country with similar insulation needs as the United States. The success of hemp in France demonstrates that Hempitecture has the potential to disrupt the US insulation market.

Today, Hempitecture is the only company offering both hemp insulation and hempcrete in the United States. While it has few direct competitors, the market is nascent, and customer education will be key to its success. Indeed, both the insulation and the hemp markets are highly regulated. Hemp production in the United States was forbidden in 1937, and it was only federally reauthorized in 2018. As a result hemp production is only starting in the US, and the industry is not developed. Most farmers are not producing hemp for hempcrete or hemp insulation material yet. 

Furthermore, every state imposes several regulations on building insulations that are likely dependent on specific climates within the United States. HempWool’s resistance to fire needs to be improved, and the founders are working with the University of Idaho to upgrade the product. Because the American supply chain of hemp is not developed yet, Hempitecture sources materials from abroad, waiting to build its own manufacturing facility and source hemp from local producers. Until that happens, HempWool is at least twice more expensive than fiberglass. That high cost might restrain its market share growth, especially at a time where the price of other building materials are constantly increasing. 

Overall, Hempitecture’s main potential is its innovation. The US insulation market is well-established and somewhat small, and its disruption is uncertain. It is not ensured that Hempitecture will acquire the market shares necessary to reach a stable profitability.

Matthew “Mattie” Mead is the founder and CEO of Hempitecture. He holds a bachelor’s in architectural studies and environmental studies from Hobart and William Smith Colleges. He founded Hempitecture out of college, after several internships in sustainability and clean energy. During the two first years of the company, Mead worked as a builder for Class Five Enterprises, a residential and commercial construction company in Idaho. This experience helped him understand the challenges of using hemp on construction projects, and he was invited for a TEDx talk in 2016. In January 2022, he founded Plant Fiber Technologies. The company will be manufacturing hemp fiber for Hempitecture, but Mead also wants to use the factory’s potential to provide business-to-business fiber manufacturing services and expand revenue sources. 

In 2018, Tommy Gibbons joined Hempitecture as a co-founder and COO. Gibbons met Mead in high school but initially took a different career path. He holds a bachelor’s from the School of Public Policy and International Affairs at Princeton University and started his career as an analyst for Golman Sachs. Before joining Hempitecture, he worked for the startup Piper and oversaw its growth. These business experiences are an asset to help him scale Hempitecture. As a COO, he received a fellowship from Innovation Crossroads, funded by the United States Department of Energy. He also was selected to take part in the IMPEL+ tech-to-market program in Berkeley Labs. These selections provide Gibbons with a specialized network, governmental support, and advantageous knowledge to succeed with Hempitecture.

In 2020, Mead and Gibbons were featured in Forbes’ “30 under 30: Manufacturing & Industry” list. Hempitecture is a public benefit corporation, highlighting the founders’ engagement in building a sustainable startup. However, the team is noticeably small, with a total of four members. A small team is appropriate for a young company like Hempitecture, but as the company moves into manufacturing, it will need to add employees on site and hire more marketing employees to grow awareness of its products.

Overall, the Hempitecture founders have complementary skills and a sense of mission that will be key to attracting talents to grow their team.

Hempitecture offers two construction materials made out of hemp: HempWool and hempcrete. Hempcrete is an eco-friendly alternative to concrete made with hemp, water, and lime. While the manufacture of concrete produces 8% of the world’s carbon dioxide, hempcrete helps store carbon. Hempcrete is more fragile than concrete and cannot be used for building foundations, but it is a better insulator and can fill floors and walls. Hempcrete is more expensive than concrete, and there are few competitors in the United States. Hempitecture’s best advantage over its competitors comes from its calculator tool. This tool allows consumers to estimate their needs and use hempcrete without the help of external parties such as architects. But even if hempcrete is generating 40% of Hempitecture’s revenue, the company’s main potential comes from its insulation product, HempWool.

HempWool is an insulation material made out of 90% hemp fiber and 10% polyester binder. It is an environmentally friendly alternative to mineral insulations, including fiberglass, foam, and cellulose. Currently, HempWool is more difficult to obtain and more expensive than traditional mineral insulation. Depending on the thickness and the insulation capacity of hemp insulation pallets, HempWool is sold between $1.10 and $2.50 per square foot (sqft), which is 2x to 3x more expensive than traditional insulation solutions. According to Hempitecture CEO Matthew “Mattie” Mead most homeowners using HempWool spend between $2,500 and $10,000 in hemp insulation for their construction projects. The additional cost of using HempWool represents only a few thousands extra dollars in housing construction budgets, a relatively low increase as houses cost on average $300,000 to build in the United States. Furthermore, hemp insulation is more efficient in regulating heat and humidity in houses than mineral-based insulation solutions. Therefore, using hemp insulation reduces the cost of heating and cooling a house and is financially advantageous for customers in the long run.

Hemp insulation is also safer and more environmentally friendly than many alternative materials. Most insulation solutions come from mineral materials such as oil and are not renewable. Their extraction pollutes the environment, and they cannot be easily recycled or disposed of. They also last around 30 years and need replacement, while hemp insulation is effective for at least a lifetime. The hemp used for insulation is a strong and fast-growing plant that doesn’t require chemicals to be grown and needs only a little amount of water. Not only does the production of hemp fiber mats emit less greenhouse gasses than conventional insulation, the hemp stores carbon and helps in fighting climate change.

Despite its advantages, there are few hemp insulation companies in the US. Hempitecture is the only American company currently specializing in both hemp insulation and hempcrete. It gives Hempitecture a visibility advantage and support from the US Department of Energy, but it adds the risk of not finding a product-market fit and not being able to reach profitability after scaling. Indeed, Kentucky-based Sunstrand attempted to produce insulation materials based out of hemp in 2014, but the company filed for bankruptcy in 2020. Sunstrand had less than $50,000 in assets but more than $10 million in debts. Sunstrand was the first mover in the US and opened the national market. It suffered from a lack of awareness about hemp building materials and legislation. Indeed, hemp cultivation has only been federally authorized in the United States since 2018. As a result, Hempitecture benefits from a new market opening and little competition. Hempitecture is making efforts to educate building professionals through contractor training workshops.

The closest competitor to Hempitecture is Western Fiber, a small company in Oklahoma. It offers multiple hemp products, including WallCote, an alternative insulation solution made of hemp. The product differs from HempWool, as it is not an easy-to-use hemp insulation pallet but a sprayed hemp insulation solution. As the only other American company in this business, Western Fiber is more like an encouraging sign of a market demand than a threat for Hempitecture.

In Quebec, Canada, MEM Vegetal produces an insulation panel based out of hemp called Block NaturHemp. MEM Vegetal sells its 3.5-inch panels at$1.13 per sqft and its 8-inch panel at $1.73 per sqft. The company sells mostly in Canada and on the east coast of the United States, but additional international shipping costs makes the product less competitive. Similarly to Hempitecture’s founder, MEM Vegetal’s founder prefers to focus on local production and distribution. 

Overall, Hempitecture’s products are strongly differentiated, and the company has little competition within the US. If it can market its products to consumers less familiar with hemp and increase demand, it could make a promising investment opportunity.

Hempitecture’s revenue doubled from $625,000 in 2020 to more than $1.2 million in 2021. Hempitecture also achieved profitability in 2020. However, Hempitecture is planning on building its own manufacturing facility after this raise, and the company’s expenses will likely increase for some time as a result. These scaling costs will likely make the company lose money again. Still, the company’s profitability in 2020 demonstrates its potential to be financially stable. So far, Hempitecture has been bootstrapped and has reimbursed its only $17,000 loan. 

As of today, Hempitecture is dependent on French and Canadian hemp producers and manufacturers – such as Natural Fibre Technologies – to sell its products. This dependency makes Hempitecture beholden to foreign economies and increases the costs of its products. The company is working to change this reality. Hempitecture is raising capital to build its own manufacturing facility and therefore lower its costs, cut transportation carbon emissions, and expand its customer outreach. It will also use the facility to generate additional revenue through enterprise sales with the founder’s other company, Plant Fiber Technologies.

Spurring the company’s growth, Hempitecture co-founder Tommy Gibbons participated in two programs supported by the US Department of Energy and the Building Technologies Office. He was selected to participate in IMPEL+ 2021 cohort, an accelerator for low-carbon building companies hosted at Berkeley Labs. He also received a two-year Innovation Crossroad fellowship (supported by Oak Ridge National Laboratory) to develop the production of hemp in the Tennessee region. Additionally, Hempitecture received an Idaho Global Entrepreneurial Mission Program award from the University of Idaho to further develop its product and fully meet the United States insulation standards. 

Overall, Hempitecture’s financial and operational performance has been strong. The company achieved profitability last year and is pursuing the ability to produce and manufacture its products locally rather than relying on outsourcing. It has little debt, and its support from various accelerators and sustainability programs is a definite advantage. There are many positive signs for Hempitecture from a financial standpoint.

Hempitecture is a risky investment at this stage. This risk is mainly due to the high regulation of hemp plantations and the low number of hemp producers selling on the insulation market. The production of hemp, a form of cannabis containing a low concentration of psychoactive compounds, was only federally legalized in the United States in 2018. Therefore, the plant was only previously cultivated in states with cannabis-friendly legislation, and farmers have not widely adopted its production for building material. A Kentucky-based company, Sunstrand, attempted to produce and sell hemp insulation materials. It filed for bankruptcy in 2020 due to low market traction and binding regulations. The market might still grow slowly, as companies using hemp need to incentivize farmers to produce the plant for its strong fiber. Additionally, the regulations and standards surrounding insulation and the overall building material market are another layer of risk. All of these factors might slow down Hempitecture’s growth.

Hempitecture is also a risky investment due its deal terms. The company is currently overvalued and still needs to increase its revenue by building a manufacturing facility, nationalizing its supply chain, and growing its customer channel. Therefore, as the SAFE note will convert in a future round, investors cannot be sure it will convert at the current valuation of $22.5 million. 

Overall, Hempitecture is a high-risk investment, and investors need to understand the company’s challenges before investing. 

Hempitecture’s current round is overvalued, with an 18x revenue-to-valuation multiple. The team only has four members, including the two founders. Such a limited team may make future scaling difficult – especially given that the company will need to educate consumers about its product. The company operates in the US insulation market, which is rather small and has well-established competitors. Due to market and regulation obstacles, hemp building materials have only been allowed on the market since 2018, so architects, building professionals, and homeowners are used to working with mineral insulation solutions. Therefore, Hempitecture needs to convert consumers into new clients and eventually acquire market shares. But as the recent regulations on hemp have prevented farmers from federally producing the plant for building material purposes, it might take time to develop sufficient national production.

Additionally, Hempitecture’s product is still in development. While its hempcrete is fully developed and the company distributes hemp insulation produced abroad, the company’s own technique to produce HempWool is still being developed to meet every standard on insulation.

Overall, the company is a high-risk investment. It’s unclear if Hempitecture will be able to successfully navigate the complexities of its target market and of bringing its entire supply chain to the US.

Hempitecture benefits from the experience of its founders and their complementary skills. Founder and CEO Matthew “Mattie” Mead has been working on the project since 2013. He has demonstrated scrappiness in working as a builder for a construction company to test the use of hemp and better understand the challenges of building professionals. COO Tommy Gibbons has startup experience and has been accepted into two programs supported by the Department of Energy to develop Hempitecture’s product. These programs will provide the founders with a strong network and expert feedback. They have also connected with relevant advisors and benefited from the experience of Sunstrand’s founders, a company that tried to develop hemp for building materials in the US a few years ago but recently filed for bankruptcy.

Hempitecture is  the only company in the United States selling both hempcrete and HempWool. It plans to be the first producer of HempWool in the United States and will build its manufacturing facility after the current raise. Its strategy to develop through equity financing instead of debt helps ensure the company’s financial stability and lowers its risk. Hempitecture has seen healthy revenue growth in the last couple of years, and it benefits from the government’s push toward the development of carbon-neutral building solutions. Like MEM Vegetal in Canada, HempWool has potential to grow and reach profitability despite being in a well-established market.

Hempitecture is the only active company in the United States distributing hemp insulation panels and one of the few producing hemp concrete. Hempitecture’s products are safer, longer-lasting, and more environmentally friendly alternatives to common mineral insulation products.

An investment in Hempitecture is risky, and the company’s success uncertain. But investing at this stage offers an opportunity to invest early in the development of hemp insulation in the United States. If the company successfully closes this raise and builds its manufacturing facility, its valuation could soar. And if it overcomes the barrier of educating building professionals, it is positioned to become a leader in the transition to a carbon-neutral building industry.

However, Hempitecture is hoping to disrupt the well-established and slowly growing US insulation market. While the company’s products have major advantages over traditional mineral insulation, they are more expensive and mostly unknown by building professionals due to a federal ban that lasted until 2018. Hempitecture will need to educate consumers in order to increase demand for its products. The company’s current valuation is also rather high, considering its current assets. Altogether, Hempitecture’s current raise has been rated a Neutral Deal.

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Analysis written by Léa Bouhelier-Gautreau, February 25, 2022.