Terraformation

Growth Stage

Hyperscaling forest restoration to reverse climate change

Analytics

Raised to Date: Raised: $5,000,000

Aggregate Commitments $

Platform

Republic

Start Date

09/14/2021

Close Date

01/31/2022

Min. Goal

$25,000

Max. Goal

$5,000,000

Min. Investment

$50

Security Type

SAFE

Funding Type

RegCF

Series

Seed

Valuation Cap

$105,000,000

Discount Rate

0%

Rolling Commitments $

Status
Funded
Reporting Date

02/06/2022

Days Remaining
Funded
% of Min. Goal

20,000%

% of Max. Goal

100%

Likelihood of Max
Funded
Avg. Daily Raise

$35,971

Momentum
Funded
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Location

Waimea, Hawaii

Industry

Energy, Power, & Natural Resources

Tech Sector

Cleantech

Distribution Model

B2B

Margin

Low

Capital Intensity

High

Business Type

Growth

Terraformation, with a valuation of $105 million, is raising funds on Republic. The company is working towards forest restoration to reverse climate change. It is restoring some of the world’s rarest dry forest ecosystems and has built the world’s largest 100% solar-powered off-grid desalination system. Terraformation has already raised more than $10 million and has been featured in Fast Company, New Scientist, and The Guardian. Yishan Wong founded Terraformation in January 2020. The current crowdfunding campaign has a minimum target of $25,000 and a maximum target of $5,000,000. The campaign proceeds will be used for growth and expansion.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$17,211

$0

COGS

$17,211

$0

Tax

$0

$0

 

 

Net Income

$-2,217,634

$0

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$1,923,902

$0

Accounts Receivable

$0

$0

Total Assets

$2,051,345

$0

Short-Term Debt

$0

$0

Long-Term Debt

$0

$0

Total Liabilities

$0

$0

Financials as of: 09/14/2021
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Ratings KingsCrowd Startup Rating Methodology Article

Analyst Report Analyst Report Methodology Article

Synopsis

Carbon dioxide emissions account for roughly 76% greenhouse gases emitted by human activities. The demand for coal, oil, and natural gas is increasing as the economy recovers from the impacts of the COVID-19 pandemic. As a result, global energy-related carbon dioxide emissions are projected to grow by almost 5% — or 1500 metric tons — in 2021.

Carbon capture technology can combat carbon emissions and has been around for decades, but its usage and popularity remain stagnant. Carbon capture technology is simply too expensive for companies to adopt in their factories and warehouses. In addition, there is currently no carbon tax for many countries, including the US. Therefore, companies are not incentivized to implement carbon capture technology that increases their expenses. For those reasons, it is more economically efficient to capture carbon using a safe, cost-effective, and easily scalable method — planting more trees. 

Terraformation aims to plant 3 billion acres of trees around the globe to reverse climate change. The company’s solution focuses on forestry’s five pain points — freshwater shortages, inadequate seed supplies, inefficient workflows, lack of on-the-ground technical expertise, and insufficient financing. It is developing a comprehensive, multi-step system to address these pain points. Highlights of Terraformation’s solution include creating localized seed banks, a training platform that can be used anywhere, increasing capital for forest restoration projects, and water desalination.Terraformation plans to generate revenue from organizations that conduct restoration projects globally and need training, tech, and financing to scale. These organizations include non-profits, family offices, and government agencies. 

Terraformation’s current Republic raise has been rated a Deal to Watch by the KingsCrowd investment team. 

Price

Terraformation’s current funding round has a valuation cap of $105 million. The company is raising capital via a SAFE with no discount. As of now, the company has yet to generate revenue. Terraformation’s current valuation cap is on the high side among pre-revenue companies in the online private market. While the company has a respectable idea, the current progress is not enough to justify the price tag. 

Market

Terraformation operates in the large forestry restoration market. With initiatives such as the Bonn Challenge and the Great Green Wall, countries around the world are committed to restoring approximately 700 million acres of land. At the rate of 30 trees per acre and the cost of $1.50 to $3 per tree, the total potential spending on planting 700 million acres — or 21 billion trees — is estimated to be $31 billion. This spending can be considered as Terraformation’s total addressable market at $31 billion, which is on the larger side of early stage companies in the online private market.   

The global forestry and logging market can be a good growth reference for the global forestry restoration market. In 2021, the global forestry and logging market was estimated to be growing 4.4% yearly. This slow growth rate is attributable to the restrictive containment measures and closure of commercial forestry activities. Looking forward, the global forestry restoration market has a high potential, as the United Nations is now implementing a 10-year plan for ecosystem restoration with more than 70 countries. Such plans bode well for Terraformation, though the company will likely not be the only player in this global market. However, the overall market potential for Terraformation is promising. 

Team

Terraformation founder and CEO Yishan Wong has extensive startup experience. At the beginning of his career, Wong worked as senior engineer manager at PayPal. He then joined Facebook as an early employee and became director of engineering before exiting the company. After a brief time at Square, Wong became the CEO of Reddit. Prior to founding Terraformation, he also founded Sunfire Offices, a co-working office space company where he still works today. His experience in the startup ecosystem helped the company raise valuable early funding rounds. However, he seems to lack forestry industry experience, which could affect his ability to lead Terraformation to success.

The remaining team consists of forestry industry experts. Chief Forestry Officer Jill Wagner has more than 25 years of forestry consultant experience. Seed banking specialists, carbon scientists, mathematicians, and project specialists form Terraformation’s research and development team. The other members’ industry experience provides a good balance with CEO Wong’s startup and leadership skills, resulting in a strong team.

Differentiators

Terraformation has a well-differentiated approach compared to current carbon removal solutions. One common carbon removal solution is Direct Air Capture with Carbon Storage (DACCS), which takes carbon dioxide straight from the atmosphere and either stores the gas or uses it in products. This method is costly and difficult to scale, in addition to demanding significant amounts of energy. There are also concerns on potential carbon dioxide leakage and possible water pollution. 

In contrast, Terraformation’s native forest ecosystem solution is easier to implement and scale. The company achieves its goal with five steps. First, Terraformation builds off-grid seed banks, or seed storage, that could store up to five million seeds. These banks give better access to seeds in remote areas and drastically increase scalability of tree plantations. Second, Terraformation is creating a platform to provide training so that local workers and experts can sustain forests after the initial planting occurs. Third, Terraformation designed a solar-powered desalination system that can create 34,000 gallons of freshwater every day. This system can address water shortage issues in many remote areas. Fourth, Terraformation developed a robust software solution, which comes as no surprise considering the founder’s background. This system will aid in increasing efficiency and managing complicated workflows. Last, unlike many restoration projects, Terraformation secured sufficient funding to carry out the first four steps. Sufficient funding increased Terraforamtion’s defensibility, as many competitors simply do not have the same capital capacity to reach the same scale. 

Performance

Terraformation is currently a pre-revenue company. Its trial restoration site in Hawaii proved that the system works even in degraded land. The company’s innovative solution attracted many notable investors, such as former Y Combinator president Sam Altman and AngelList co-founder Naval Ravikant. As a result, Terraformation has secured more than $35 million in prior funding in less than two years. Sufficient funding is critical for the company’s success, as the forestry operations require significant capital. In addition, several notable publications such as Forbes and TechCrunch featured Terraformation in their articles. However, while Terraformation’s target customers are clear, the company does not have a detailed roadmap for its revenue model. The ability to generate revenue and sustain long-term business could become a concern for investors.

Risks

Despite Terraformation’s potential, there are key risks that stand out. Terraformation is still at its infancy. There is a substantial time risk, as the company will likely require years to implement its global strategy. A stretched timeline may result in a weakened rate of return for investors. In addition, Terraformation encounters some team risk due to the lack of full dedication from the founder and his lack of forestry expertise. Furthermore, the company has some investment term risk, as it is offering a SAFE with no discount. These are not the most favorable terms for investors.  

Bearish Outlook

Since inception, Terraformation has incurred negative cash flow. While the losses are understandable at its early stage, it might take a while before the company becomes profitable. Long timeline to profitability could potentially make investors’ returns more volatile. In addition, the company’s go-to-market strategy requires mass land operations, which typically need approval from local authorities. Consequently, regulatory concerns can occur when the company is operating in different countries. Furthermore, Terraformation currently does not have a detailed revenue model that could sustain the company’s capital-intensive operations. Therefore, Terraformation could exhaust its funding rounds faster than expected.

Bullish Outlook

Terraformation is backed by notable angel investors such as Naval Ravikant and Sam Altman. Not only will notable investors attract additional funding, but they also propel Terraformation’s marketing efforts. While the company’s valuation cap is relatively high in the online private market, these notable investors give credibility to Terraformation’s current round. 

The founding team of Terraformation is another highlight of the company’s positive outlook. Its founder’s deep managerial experience and ability to fundraise are invaluable to Terraformation’s future success. Forestry experts in the remaining team fill the void of industry experience. While the company is still pre-revenue, Terrafomation’s strong team is very encouraging for potential investors. 

Terraformation’s solution to climate change poses a strong social impact. The success of the company will directly impact people’s health and wellness. Organizations that conduct forestry restoration are deeply in need of a scalable system. The demand for efficient forestry restoration services will only grow, as awareness of climate change grows.

Executive Summary

Terraformation is a forest restoration service company that provides comprehensive and scalable solutions at a global scale. Its goal is to reduce carbon emissions and fight climate change. The company’s target customers are organizations and government agencies that conduct forestry restoration projects. Through an end-to-end solution that includes seed banks, water desalination, localized training efforts, and forestry software, Terraformation is designing a modern approach based on an old method. 

While Terraformation has a relatively high valuation cap for its current round, a strong founding team and notable investors provide some justification to this price tag. The company will require significant capital, so the founder’s experience in drawing investors will prove quite valuable. Although it is growing slowly, the forest restoration market opportunity is fairly large. Perhaps more importantly, Terraformation is addressing climate change, which has a valuable social impact. The company’s approach to fighting carbon emissions is more affordable than carbon capture technology, and it comes with several innovative solutions to fight the usual challenges of forestry. Therefore, Terraformation’s current Republic raise has been rated a Deal to Watch by KingsCrowd’s investment team.    

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

Analysis written by Zee Zhong.

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Terraformation on Republic 2021
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Platform: Republic
Security Type: SAFE
Valuation: $105,000,000

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