To pilot the tinyFarm concept and its business model, modgarden is raising funds through a convertible note. This raise sees a valuation cap of $9.5 million with notes converted at a respectable discount rate of 20%. This valuation is reasonable when compared to other startups currently seeking funds through online equity. The 20% discount rate and 5% interest rate for this round are very attractive terms for investors. The only downside is that a $9.5 million cap is not justified by the company’s revenue, since modgarden is still pre-revenue at this time. Balancing all these factors, modgarden’s price score is its highest across all five metrics.

Organic crop farming in the US is a growing industry. In 2016, organic sales reached $6.2 billion, 56% of which were organic crops. Even as overall prices of agricultural goods decline, organic produce tends to see a higher price tag for higher revenue. The market is seeing a respectable CAGR of 6.3%. However, modgarden will only be targeting a small portion of this market. The company will sidestep the main portion of the organic crop market — large scale farming operations — by selling growing modules to individual consumers. The steady growth of the organic crops market bodes well for modgarden, though, as it shows continuous consumer interest in organic produce. Thus, the market score for modgarden is middle of the road.

modgarden’s concept is led by a diverse team with relevant credentials. Company founder and CEO Aamar Khwaja is the force behind modgarden’s tinyFarm. Khwaja holds a BBA in marketing from NYU and has conducted postgraduate studies at UPenn. Khwaja spent years in finance, rising to a vice president role at JPMorgan Chase and then having a stint as senior program manager for Bank of America. He later set up Zenmark Limited to invest in green equity ventures and co-founded Elimay Supplements — a pharmaceutical branch dedicated to providing natural pain relief to pets, particularly dogs. While Khwaja has strong finance and investment knowledge, he has limited experience with setting up and scaling a direct-to-consumer (D2C) business model.

Advisor Alan Tratner is a former professor of environment and energy with a history in the sustainability movement. Tratner was part of the team that established the first Earth Day, and over the years, his work culminated in a 2012 induction into the International Green Industries Hall of Fame. He is the chairman of the Environmental Education Group, which participated in the first International United Nations Conference on the Human Environment in Sweden. He is fully dedicated to combating all manner of social challenges, like war and drugs. Tratner’s presence as an advisor for modgarden could prove quite useful on the development and marketing side.

The modgarden team is filled out by COO Siddarth (Sid) Apaya, CMO Hope Paterson, and Chief Horticulture Officer (CHO) James McMillen. Apaya has spent around 20 years with big brand companies like Nestle and The J. M. Smucker Company in various marketing and managerial roles. Currently he is a partner at Elements Ventures Accelerator — a startup accelerator focused on plant-based consumables and goods — as well as an independent contractor offering strategy and business transformation advice. Paterson brings a work record focused on providing healthy food and food education. She was the Director of Engagement for eight years at Real Food for Real Kids, a catering company focused on providing healthy meals to child care organizations. Most recently, Paterson has worked as a culture coach for businesses that need brand development help. McMillen has more than 25 years of experience in landscaping, giving him ample knowledge of plant growth and tending. He is also a listic health and wellness coach and the co-author of Ignite Your Life for Men.

The modgarden team is well-rounded, with members bringing marketing, horticulture, strategy, and entrepreneurship experience to the company. Founder Khwaja does not bring the industry expertise that many investors might look for, but he has done a good job of filling his skill gaps with the greater team. Overall, modgarden scores above average for the team metric.

Despite its indisputably unique concept of modular small farms, modgarden’s product is not unprecedented. Organic grocery stores, like Amazon acquisition Whole Foods, are already enormous and dominant players in this space, accounting for the majority of organic food sales. Indoor gardening itself is a highly contested market with many small players, the most prominent being aeroponics farming company AeroFarms.

modgarden is planting its flag with one patent and some patents pending as well as some defensibility in the form of its proprietary soil mixes. While the product has yet to be proven of superior quality to existing options, the concept of modular interior growth systems that employ a subscription model is particularly unique and sets the startup apart from other offerings. Thus, modgarden scores well in the differentiators metric.

As a startup in the pre-revenue stage, there’s not much to evaluate in terms of modgarden’s performance. As of this writing, it has secured no users, prior funding, or partnerships with other businesses. Despite several years of operation, the company has generated essentially no traction. modgarden’s price score is its lowest across all five metrics as a result.

Risk associated with an investment in modgarden is high. This rating is driven primarily by the product still being in the prototype stage. The time that is required for the company to scale production — and consequent sales and distribution — leads to additional variables that could negatively impact potential returns. Furthermore, for a pre-revenue company, a valuation cap of $9.5 million is steep. On the flip side, the founders appear to be fully dedicated and the product poses little legal risk. Much work will need to be done, however, to bring the product to market. Until this is accomplished, sales and distribution plans cannot be prioritized.

Using AI-bolstered, modular units to grow food is a neat idea, but it may not be enough to generate returns for investors. Without a proven market fit for homegrown organic food, the upside potential for modgarden is particularly limited. It’s unclear at this point how many consumers will be interested in growing their own organic food at home, especially given the propagation of meal preparation and delivery services. While modgarden’s product is unique, the company has yet to turn its product into revenue. This leaves investors unable to fully assess modgarden’s operations and potential.

While it seems unlikely that tinyFarm could present a serious form of self-sustaining interior growing for consumers, it could provide something just as valuable to sustainability-minded consumers: enablement of a particular lifestyle. The product could appeal strongly to environmentally and health conscious consumers who do not have the ability to create outdoor gardens. If modgarden can appeal to this audience and prove its product-market fit, the company could secure an ample niche for itself. The team is well-qualified, with a diverse set of skills, and the investment terms for this round are relatively attractive for investors.

modgarden is bringing organic, pesticide-free farming to cramped urban apartments with its patent-protected tinyFarm. Its tinyFarm modules can be compactly stacked and rotated for different growing conditions. The tinyFarm uses AI to provide ideal growing conditions for every environment, and proprietary soil modules are provided through a subscription model. Through these innovations, tinyFarms provide higher root absorption to grow high-quality greens free of pesticides and concerns about GMOs.

While the team employs some relevant advisors, the CEO’s lack of a prior exit and an absence of any existing market fit raises doubts as to modgarden’s upside potential for investors. The product itself is patent-protected but has yet to generate any revenue. The business still hasn’t demonstrated any proper traction in its years of operation. Nonetheless, once tinyFarms are on the market for consumers, they could see a role as a lifestyle-enabler for green-minded urban dwellers. Therefore, modgarden has been rated a Neutral Deal.

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Analysis written by Benjamin Potts.