Boxabl is Overvalued

Back in March I took a short vacation to Vegas and y’know what? I’m really bad at taking a break from work. Aside from ogling the architecture, materials, and construction quality on the strip, I found a proptech company to visit… Boxabl.

What Boxbl Does

Boxabl is aiming to lower the cost of housing while maintaining high quality standards by manufacturing them in a factory. It’s got some key differences from modular home building, with the most prominent being that their flagship product isn’t modular. It’s an entire house. Albeit a tiny one.

The Casita is a 375 sf home complete with kitchen, bathroom, electrical, plumbing, and HVAC installed, and they can fold up, fit on a freight container and be delivered on a truck. And the price? $49,500. Sounds pretty amazing. But let’s dive into the details and see if it’s the next big thing in proptech or too good to be true.

Company Info and Valuation

Boxabl was founded in 2017 by Paolo and Galiano Tiramani, a father and son team. Paolo has over 30 years of experience inventing and patenting ideas, and Galiano ran two startups prior to Boxabl.

They’ve currently got approximately 30 employees on the operational side and over 100 employees working in their factory side, all based in their Las Vegas headquarters, which you can see the tour of in the video above.

They’ve raised $76MM to date and just wrapped up a regulation crowdfunding round on StartEngine, asking a massive $3.3 billion valuation.

Part of how they’re justifying this valuation is that they’ve got a ridiculously long waitlist for the $50k Casita- supposedly over 130,000 people. But if you start digging into what’s going on with the waitlist and start digging into the fine print you start realizing that some of this is smoke and mirrors, some is overpromising, and a lot of it is just really really good marketing.

The Waitlist

If you want to reserve a Casita on the website, you’re presented with 3 options.

1. Get on the waitlist for free, but go to the back of the line. This is basically signing up for their email marketing, but they inspire so much more investor optimism out of calling it a waitlist.
2. Officially get on the waitlist for $200, meaning other orders can cut you in line.
3. Get early access to a Casita for $5000, meaning you’ll be close to the front of the line.

Galiano Tiramani said, “We have a waitlist with over 130,000 names on it, reserving millions of units.“

If everyone on the list buys, then sure, they’re looking at billions in sales that they have to fulfill. And a lot of investors are buying into this hype.

But their SEC filing for the offering provides a lot more clarity on the breakdown of the waitlist:

As of December 30, 2021, we have received over 4,000 deposits from potential customers of $100, 200, or $1,200 for over 4,400 Casitas, and in total we have received interest from more than 70,000 additional potential customers wishing to reserve their place in line for when production of the Casita begins…

…Further, if each of the 70,000 potential customers, who have all agreed to our Room Module Order Agreement (included as Exhibit 6.5), purchases a single Casita, that extrapolates to potential revenue of more than $1 billion. While it is unlikely that we will receive these orders or revenue from most of these potential customers, even the ones who have placed deposits, it shows the excitement and interest in the Casita. Conversion of even a small percentage of these potential customers will allow for full production of our planned production facility.

Boxabl had to disclose that it’s unlikely that most of the waitlist will not buy a Casita, and they haven’t delivered a unit to anyone on the list yet.

Boxabl’s Revenue Multiple

They have booked some real revenues to date though. The US Government placed an order for $9.2mm for 156 Casitas, which they completed and delivered in late summer 2022. They’ve also just partnered with DR Horton, America’s largest home builder by volume, to produce 100 Casitas.

According to their SEC filing, 2021 revenues didn’t exceed $2mm, which is a 1650x revenue multiple. To put it in context, high growth startups with huge TAM are usually priced at 10-20x revenues. Mature blue chip companies are around 1-3x revenues.

Boxabl’s current production capacity is between 3 and 8 units per day, and they’re aiming for 12 per day with the opening of their second factory.

Assuming they produce 12 per day for the next year, and they sell Casitas for $60k each (more on that later):

12 Casitas x 365 days x $60,000 per Casita = $263mm per year. That puts the revenue multiple at 13x, which is back down to earth but very ambitious.

Even though they have a strong enough following to have successfully raised the round at the $3.3B valuation, they have a lot to live up to.

How they can reach a $3.3B Valuation

Boxabl cannot achieve the 13x revenue multiple in 2022. And likely not even below a 100x multiple. It’s realistic for them to hit their 12-Casita per day goal once factory 2 is running, but there’s no clear timeline on that yet.

They will really need to execute perfectly on a few fronts in 2023 to hit a healthy revenue multiple in 2024. They’re looking to expand the number of factories through franchising, they’re trying to raise enough to build a billion dollar factory, and they need to get their costs down. Because by the time production is in full force, they need to focus on profit margins. And this is all assuming the demand will always be there to meet full production capacity.

In short, the $3.3B valuation is pricing in perfect execution in the next two years. And they’ll likely raise more at an even higher valuation later.

Casita Pricing

Inflation has driven pricing up across every segment of the economy, and Boxabl isn’t pricing the Casita $49,500 anymore. The website no longer lists a price and just notes that material prices have gone up.

Furthermore, there are lots of additional costs that every manufactured housing and modular builder has to contend with. The FAQ’s warn that beyond the Casita price, you also have to set up the site, which means you have to pay for the permits, landscaping, utility hookups, and foundation. Boxabl notes this can range between $5,000-50,000. Shipping is also $3-10/mile from Las Vegas.

The SEC filing notes that per unit costs were $46,600 back in 2021, leaving very little profit margin. More factory automation will bring this down, and they’re aiming for $30,000. But inflation is also bringing everything up.

So on top of the execution challenges, they face a pricing challenge. Because with all the ancillary costs, traditional methods cost approximately the same on a per square foot basis. ($200-300/sf all in).

So their growth strategy heavily depends on economies of scale driving costs down. By the time they get there, profitability metrics will be much more important than revenue multiples. They’ll be challenged to keep prices below other building methods but high enough to justify beyond a $3B valuation.

SWOT Analysis

STRENGTHS	WEAKNESSES
+ Possibly the best marketing I’ve ever seen in a proptech company. + Large customer base / waiting list. + Great concept and strategy. Optimizing on a single design doesn’t put the onus of scale on the customer, like most other modular companies do.	– Marketing tends to overpromise, creating really high expectations. – Pricing isn’t as good as marketing makes it sound, and it’s rising because the margins are too small. – Scaling will be incredibly difficult – Zoning codes limit who they can deliver to, and make it hard to try to standardize
OPPORTUNITIES	THREATS
+ They plan to expand to truly modular construction after they achieve economies of scale with Casita. + They’re franchising out factories + Going to Mars with SpaceX	– Competition from other modular builders – Competition from 3D printers – Maintaining margins with rising costs

Conclusion:

Usefulness: High

As a developer, I could see this being really useful if I wanted to add an ADU to a rental house. It’s really a direct to consumer product though, and for its size, it truly is useful for a lot of people.

Risk Level: high

If I paid a deposit today, I don’t know when I’m going to receive it, how much it’ll actually cost, whether I can install it where I want it delivered, or if the company will still be around by the time that happens.

Outlook: mixed

Boxabl’s success really comes down to whether their strengths will consistently overshadow their weaknesses as they expand. Given the risks and the insanely high valuation, I wouldn’t invest in it, but I do think they’re capable of pulling off a lot of what they’re aiming to do. And I really do hope they succeed because they’re solving a real problem here.