To build factories, pay salaries, and invest in planting, RIZOME is raising money with a convertible note. RIZOME’s price comes in a little high with a $27 million valuation cap. For the company’s current revenue and development stage, this price is unwarranted. However, this is somewhat blunted by the discount rate — 12% — and the interest rate — 5% — being offered in the note. Balancing these factors together, RIZOME’s price score is above average.

RIZOME is targeting construction markets across the U.S., Canada, and Southeast Asia. The Asian market is a particularly good idea, as the region is developing by leaps and bounds. Construction as a whole is an absolutely massive market. It’s estimated to reach $10.5 trillion by 2023 while growing at a CAGR of 4.2% from 2018 until then. Construction materials represent a significant fraction of those costs. The global market was valued at $1 trillion in 2020 and will reach $1.75 trillion by 2027. RIZOME intends to use bamboo to replace lumber, which accounts for a relatively minor $223.1 billion in 2017 (reaching $275.2 billion by 2022) as well as other building materials, including steel. The company’s target market is very large, though growing at only a modest pace. Thus, RIZOME’s market score is only slightly above average.

RIZOME’s leadership represents a span of long-term bamboo construction enthusiasts (with one exception). Chief Strategy Officer Troy Carter is that exception. Having joined the team relatively recently in 2019, Carter holds a Bachelor’s degree in economics from Stanford and has a relatively short resume, working to promote planet-positive initiatives and founding his own cider company.

President Russell Smith is another matter. Smith, who holds a Bachelor’s degree in economics from Westminster College, has been with RIZOME and its sister company, Bamboo Ecologic Corporation (BEC), since their inceptions eight years ago. Prior to his work promoting bamboo construction, Smith was a partner at Sabre Airline solutions, a SaaS provider for airlines to market themselves. Head of Product David Sands also has a long history working with bamboo. Like Smith, he has been with RIZOME since 2013. Before that, he worked as chief architect for Bamboo Living since 1995, working to manufacture bamboo buildings that are approved and safe. That experience is useful as bamboo construction could face regulatory hurdles as RIZOME attempts to promote it on a large scale.

Finally, while not on the management team proper, Chairman Frederick Murrell does serve as CEO at BEC, RIZOME’s sister company. The crossover between BEC and RIZOME is notable and may assist both companies in furthering their missions. Due to the strong industry expertise within RIZOME’s core employees, the company scored highly in the team metric.

RIZOME has done the work to set itself apart as a provider of construction materials. Thanks to a large-scale engineering process, it can deliver bamboo lumber that is highly fire- and earthquake-resistant and offers material advantages over wood, steel, and concrete. Its mission to provide environmentally-friendly infrastructure is one highly resonant throughout Asia, particularly in China, which has seen significant growth in the use of wood for construction. With one working factory in operation, the base has been laid for operation in a capital-intensive space, and the low cost of its product offers it a competitive advantage to more conventional materials.

Although the company lacks patents, RIZOME has succeeded in creating a product that stands out from the competition. Thus, its differentiators score is quite strong.

Considering it has been in operation for eight years at this point, RIZOME’s growth has been slow, and it remains pre-profit. Research and engineering have taken considerable time to get the company to a place where it can manufacture at scale. Still, the company has begun to see small levels of revenue, taking in $3,546 last year over a COGS of $5,831 for a net income of -$264,369. This limited success has come at a cost, with short- and long-term debts adding up to $785,320 at the end of 2020. Balancing these factors are the company’s low burn rate and its success in prior rounds of fundraising. Therefore, RIZOME scores well in the performance metric.

Building with traditional materials may not be the most efficient method, but there’s a reason most construction companies stick with it. It’s proven, it works, and it’s gone through centuries of regulation and study. When huge numbers of human lives are dependent on reliable and easy-to-use materials, these things are a large part of the equation. Bamboo construction on an industrial scale simply hasn’t been around long enough to go through the same vetting and practice processes.

As RIZOME seeks to recoup its significant down costs, it will need to address challenges on both the sales and supply ends. Working with indigenous populations and small farming communities may be ecologically coherent, but it could present unforeseen challenges in comparison to working with traditional, more regulated suppliers. In addition, regulators are likely to have significant questions and challenges to ensure material safety. As a pioneer in bamboo construction, RIZOME will need to adequately address these challenges. Given the company’s significant liabilities, it will need to accomplish these things in relatively short order to avoid running out of runway.

RIZOME is well-positioned at the intersection of several desirable product qualities: environmental consciousness, low cost, and style. RIZOME-constructed buildings are likely to have a look and feel that can’t be duplicated by any other means of construction. Especially in an Asian market primed to see the virtues of bamboo, RIZOME has plenty of room to grow. With access to an absolutely massive market with the strength of a powerful mission, RIZOME could see significant dividends paid after an exhaustively built foundation.

Much will depend on how well RIZOME addresses regulatory concerns and establishes partnerships to assist with growth as well as reliable supply chains. With these concerns taken care of, RIZOME could become a highly attractive and profitable player in the global construction market.

RIZOME is a construction materials company engineering bamboo to support global regenerative urban construction. RIZOME hopes to launch a total reimagining in how modern buildings are constructed while sequestering massive quantities of carbon through growth of bamboo, a hugely environment-friendly plant.

RIZOME has been eight years in the making and is beginning to take in revenue as it ramps up to build more factories and expand across Asia and North America. However, the company’s valuation is too high for its current stage, and it faces potential regulatory challenges in multiple markets. Still, its product is strong and differentiated from competition along with a powerful and timely mission. Therefore, RIZOME is a Neutral Deal.

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Analysis written by Benjamin Potts.