O2 Treehouse

Early Stage

The treehouse revolution

Analytics

Raised to Date: Raised: $446,421

Aggregate Commitments $

Platform

StartEngine

Start Date

09/23/2020

Close Date

11/17/2021

Min. Goal

$10,000

Max. Goal

$1,070,000

Min. Investment

$100

Security Type

Equity - Common

Funding Type

RegCF

Series

Pre-Seed

Pre-Money Valuation

$9,500,000

Rolling Commitments $

Status

Active

Reporting Date

10/27/2021

Days Remaining

21

% of Min. Goal

4,464%

% of Max. Goal

42%

Likelihood of Max
unlikely
Avg. Daily Raise

$1,119

Momentum
cool
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Location

Alameda, California

Industry

Travel and Hospitality

Tech Sector

Non-Tech

Distribution Model

B2C

Margin

Medium

Capital Intensity

High

Business Type

Life Style

O2 Treehouse, with a pre-money valuation of $9.5 million, is raising funds on StartEngine. The company builds exciting treehouses that bring people back to nature in a beautiful way. It has a proprietary and proven building system that makes designing and constructing treehouses extremely efficient and modular. Dustin Feider founded O2 Treehouse in 2005. The current crowdfunding campaign has a minimum raise of $10,000 and a maximum raise of $250,000. The proceeds of the raise will be used to launch and establish the Treewalkers Hospitality brand for franchising the treehouse rentals business. O2 Treehouse has built over 85 treehouses and has been featured by many TV shows and design publications, including HGTV and NBC News.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$462,596

$244,457

COGS

$315,867

$236,116

Tax

$0

$0

 

 

Net Income

$68,764

$-26,357

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$16,576

$0

Accounts Receivable

$80,237

$1,678

Total Assets

$149,831

$20,646

Short-Term Debt

$24,450

$9,115

Long-Term Debt

$0

$0

Total Liabilities

$24,450

$9,115

Financials as of: 09/23/2020
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Ratings

Analyst Report

Summary

The KingsCrowd investment team wanted to provide research on O2 Treehouse although it was not selected as a Top Deal or Deal to Watch. If you have questions regarding our deal diligence or selection methodology, please reach out to hello@kingscrowd.com.

Analysis written by Daniel Jones.

Synopsis

Tourism is a major industry across the globe. In 2019, it accounted for $2.9 trillion in global GDP. 1.46 billion travel departures make up the whole of international travel. And this number is only slated to grow in the long run. Just because it will grow, though, does not mean that its underlying fundamentals will remain the same.

Today more than ever, tourists are shifting their attitudes. In particular, the movement has been toward experiences. This stands in juxtaposition to generic, mass-market offerings. In 2019, for instance, bookings for family-friendly experiences were up 204% compared to 2018’s figures. Cultural and themed offerings surged 65% year-over-year, and outdoor activities were up 56%. These trends, naturally, have been kind to a sizable subsegment of the market referred to as ecotourism— immersive experiences with a nature focus. The end goal is to provide individuals the novelty they crave.

One company intent on picking up on this trend is O2 Treehouse. Initially, O2 Treehouse was organized to build and sell customized treehouses. Since launching 16 years ago, it has been responsible for the construction of more than 85 treehouse structures across the planet. Some of these have been featured on major networks like HGTV and NBC News.

Each unit varies based on customer specifications. The typical price works out to about $30,000, while some can cost up to $250,000. Management prices the projects to achieve a 50% margin. Some of the units created by the firm have gone on to be rented out to customers looking for a novel travel experience. These units have an average occupancy rate of 70%. They also tend to rate highly in satisfaction, with average approval hitting 4.68 out of 5 stars.

Recognizing the opportunity that ecotourism provides, management is now embarking on a new phase of growth. As of September, they began constructing modular treehouses to serve as rental units. Their goal over the next 6 to 12 months is to construct five different locations. By 24 months, they hope to have completed 15 units. The goal, then, is to lease these treehouses out under the Treewalkers name. In the future, franchisees will be able to finance the construction of these units. In return, management hopes to charge a franchise fee and generate other related income.

Management intends to do this over a two-phase period. The first phase will involve the initial rollout of the 15 locations. These will be posted on Airbnb’s platform. During this period, management intends to collect no franchise fee as its main emphasis is growing its footprint. After they hit around 15 locations, they will begin actual franchise agreements with third parties. At that time, they will also roll out their own renting platform. Within 24 to 30 months, their target is to have 20 or more locations. Management has not disclosed how large their franchise fees will be. 

The current StartEngine raise has been rated a ‘Neutral’ opportunity by the KingsCrowd investment team.

Price

O2 Treehouse is raising capital through the issuance of common shares. These units are being priced at $5 apiece, but in order to participate, investors must contribute at least $100. The objective is to raise at least $10,000, but the firm’s ultimate goal is to raise $250,000. The price assigned to the business by management is awfully high, all things considered. Though the current financials only take into consideration the business’ building operations. This means that they don’t yet reflect any franchising activities. This creates a lot of uncertainty when you consider that management wants investors to accept a pre-money valuation of $9.5 million. 

Market

The impact associated with tourism on a global scale is significant. Though O2 Treehouse plays in the ecotourism niche, this is a large opportunity for the firm. According to one source, the market for ecotourism was worth $302.23 billion in 2019. By 2026, it should grow to reach $763.68 billion. That implies an annualized growth rate of 14%. A second source also pegged the market at $302.23 billion. But with an annualized growth rate of 6.2%, it believes the overall opportunity will be worth $519.35 billion by 2028.

It is worth mentioning that other sources differ in how large the market is for ecotourism today. One pegs the space at $554 billion in 2018. With an annualized growth rate of 10%, the opportunity could expand to $892 billion as soon as 2023. And a fourth source we found takes the stance that the market last year was worth just $295.65 billion. Its forecast is for the space to grow at a rate of 14.5% annually until reaching $508.58 billion in 2025. It’s highly probable that global disruptions caused by the COVID-19 pandemic could negatively affect the outlook of the market. But in the long run, it’s certain that growth will remain positive for the space and the niche in particular. 

Having said this, there is one issue that investors in O2 Treehouse need to be aware of.  Despite attractive growth prospects for the broader industry, it’s unlikely that a large segment of the market will actively desire the more rugged living that treehouses entail.  The fact that no significant data pertaining to this niche’s size seems to exist underscores unclear demand in this space.  

Team

The team at O2 Treehouse is quite extensive, but the management revolves around two key individuals. The primary person to focus on is its founder and majority shareholder, Dustin Feider. Feider also serves as the company’s CEO. Prior to starting O2 Treehouse, Feider worked as a Product Designer for Aosa, an eco-friendly print and design firm. That role gave him experience working for an eco-friendly business and involved marketing and prototyping efforts that could translate to value for O2 Treehouse.  His role before that was as a Construction Foreman for Bamboo DNA. While there, he traveled to Portugal to oversee two large installations for the 2010 Boom Music Festival. Prior to this, he worked as a Graphic Designer for Bauhaus Design, where he developed additional advertising and design experience. Finally, as a Consultant for Renewergy, he worked on the design of greenhouse algae culture systems.

The only other executive listed for O2 Treehouse is Heather Feider, the CFO and Operations Manager of the business. She possessed no significant relevant experience in this space prior to assuming the role. Her last work was as a Webmaster and Studio Coordinator at Suma Wellness Center. Prior to that, she worked as the Webmaster at Black Coffee and Waffle Bar. Other past experiences were of a similar nature, though she did hold the role of Project Consultant for The Creative Group.  

Differentiators

Although the ecotourism niche of the travel market is significant in size, the actual number of treehouse rental opportunities are unknown. One source, reviewing listings on Airbnb, found 32 destinations. But it’s unknown how many of these were built by O2 Treehouse for a client only for that client to make it available when they aren’t using it. In all, the market appears to be highly fragmented with no obvious leader. One definite player in the market is Hipcamp. Hipcamp offers treehouse bookings, but have not made that their core business model. The firm also provides RV opportunities and other niche experiences for its users. As such, it’s difficult to say that there are any key differentiators in the treehouse niche of the market, but when you zoom out, the picture is different. Compared to other alternative accommodations, O2 Treehouse is different. That degree of difference could prove attractive for participants seeking a novel experience.

Performance

Financially, the past two years have been pretty solid for O2 Treehouse. In 2019, the business generated $462,596 in net sales. This represents a nice increase over the $244,457 in sales just one year prior. Moving forward, the firm has $1.8 million worth of backlog planned. 40% of this is in the form of projects already undergoing construction, while the rest is classified as being in the design phase. In 2018, O2 Treehouse did manage to lose $26,357 for the year, but this was made up for in 2019 when net profit totaled $68,764. Operating cash flow has been fairly consistent. In 2018, the metric totaled $27,467. This shrank modestly to $20,237 in 2019.

Bearish Outlook

On the one hand, the concept that management is working on looks scary. The franchise model they’re raising money to embark on is largely untested. The economics of what kind of charge would be reasonable and profitable for the parties involved, and acceptable for end-users, are unknown. There are also significant risks involved. Examples include the prospect of forest fires in some parts of the world, occupied trees falling, and seasonal fluctuations that could make maintaining a high annual occupancy rate a challenge. Throw in the high valuation relative to the company’s success so far, and it’s hard to justify it as a strong prospect.  Add on top of this how small the niche in this space likely is, and it’s not clear the company has much runway in the long run.

 

Bullish Outlook

The bearish issues notwithstanding, there are some bullish considerations to be aware of. The company does have a long history of successfully building the structures it’s planning to build moving forward. Sales and profit trends over the past two years look encouraging, as does the company’s backlog. The firm’s owner is most definitely experienced and he has put together a sizable team. 

Executive Summary

Taking all things into consideration, our team felt that O2 Treehouse warranted a ‘Neutral’ rating. Traction for the company’s core business is demonstrated, and the firm has managed to become profitable on this front. But many issues abound. This new venture is essentially untested. Risks exist across the board. And the economics of the firm moving forward cannot be easily determined. Generally speaking, the franchise side of a business is high-margin in nature. But in a market that will be very seasonal and subject to an untold number of unforeseeable conditions, there’s just too much unknown to rate the company any higher. This is especially true when you consider the high valuation management is requesting.

 

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O2 Treehouse on StartEngine
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Platform: StartEngine
Security Type: Equity - Common
Valuation: $9,500,000

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