Get at least a 640% Return to Offset Your Carbon Footprint
Andy Gordon, Co-Founder, Early Investing
Deal Details
Startup: World Tree
Instrument type: Purchase agreement
Round size: Up to $10 million
Share price: $1.25 (It goes up to $1.50 per share once the first 1,500 acres are funded.)
Minimum investment: $2,500
Investment portal: Wefunder
Deadline to invest: March 31, 2020, 11:59 p.m. ET
A handful of companies found a way to move ahead with a scalable carbon removal strategy that can generate profits. (The rest are still in the research and pre-commercialization phase.)
But only one offers irresistible profits for its investors.
The Holy Grail: Low Risk, High Reward
Low-risk investments that provide interest payments of more than 5% are pretty rare. I should know. I specialized in finding them some 10 years ago. I found a lot I didn’t like and only a handful I was willing to invest in.
As for interest income above 10%? I found only a couple of worthwhile investment opportunities there.
I was careful and proficient at what I did. And there wasn’t a whole lot to choose from.
That’s why World Tree – the remarkable startup I’m introducing you to today – has challenged my notions of what is possible in generating income streams.
Of course, there is still some risk with World Tree. It’s not like investing in a 10-year U.S. government bond (which, by the way, isn’t as safe as you’ve been led to believe). But I was quite impressed with how low the risk is, especially for the remarkably high gains you should get.
I certainly didn’t believe it… at least not at first. So I was extra careful in vetting this opportunity – triple-checking the facts and searching high and low for risks.
I’ve always told myself, if it’s too good to be true, then it’s too good to be true. So what I found after crunching the numbers was hard to swallow. World Tree is offering the equivalent of 30.4% annual compound interest for a 10-year period… as a worst-case scenario. That means a $2,500 investment will generate a projected average of $35,578 in returns by year 10. Other realistic scenarios would give even greater returns!
The investment opportunity itself is easy to understand. It starts with an extraordinary tree called the Empress Splendor.
Buy a Tree, Cut It Down, Make Money and Save the World
The Empress Splendor is the fastest-growing hardwood tree in the world. It can grow up to 20 feet in its first year. But there’s so much more to this tree.
An acre of Empress Splendors absorbs 103 tons of carbon dioxide a year (11 times more than any other tree). Why is this important?
Greenhouse gases, including carbon dioxide, have built up too quickly in the Earth’s atmosphere to be naturally absorbed by processes like photosynthesis. The infrared radiation they absorb from the sun then warms the Earth’s surface.
Climate models predict that if we continue “business as usual,” temperatures could increase by 5 degrees Celsius by 2100. However, models predict that we can keep temperatures under worst-case scenario levels with the use of global emission cuts and greenhouse gas removal.
The Empress Splendor also replenishes the soil and is noninvasive. One of the softer hardwoods, the Empress Splendor is as strong as pine, as light as balsa and water-resistant. It is also extremely buoyant and rot-resistant. And it acts as a good insulator.
Its unique properties give it a varied and highly versatile market. It can be used to make furniture, musical instruments, veneers, surfboards and sailboats – just to name a few products. (Critically, it’s NOT used as fuel, which spits the carbon dioxide right back into the atmosphere.)
Fast growth. Carbon-eating monster. A wide range of applications. All necessary ingredients for World Tree founder and CEO Wendy Burton to hatch a brilliant plan in which YOU play the role of financier in exchange for pocketing outsize profits down the road.
World Tree Founder and CEO Wendy Burton
Burton is planting these trees all over North, Central and South America without any backing from the government. Her team has already planted thousands of trees. She wants to plant 3.5 million more over the next five years. For that to happen, she needs farmers and money. So she came up with a profit-sharing scheme to attract both.
Investors can finance planting a full acre with a $2,500 check (which is also the minimum investment). As an investor, you get 25% of the profits. Farmers get 50%. And World Tree gets 25%.
Everybody makes out incredibly well. Here’s the math.
One 10-year-old acre generates a 24,750 board feet (a conservative estimate that assumes a 25% loss of trees planted). The revenue generated per board foot (after costs) ranges from $3 to $14. At $3 per board foot, that’s $74,250 in revenue. Your 25% share comes to $18,562. World Tree gets the same, per acre. And the farmers get double that amount.
Using the lowest price the lumber could fetch, with a cautious 25% loss estimate, investors still make a 7.4X return. Too good to be true? Time to ask what could go wrong.
Can the Empress Weather These Risks?
First, let’s examine the obvious risks that accompany any agriculture-related enterprise: weather and disease.
World Tree works with roughly 100 farmers spread across the U.S., Canada, Costa Rica and Guatemala. It’s highly unlikely that an extreme weather event, such as a drought, would affect the entire Western Hemisphere. But in this era of increasing extreme weather patterns, it’s possible that some growth could be affected.
Thanks to the Coriolis effect, Costa Rica is virtually immune to hurricanes. Hurricane Otto hit the country as a tropical storm in 2016. Before Otto, Costa Rica’s most recent hurricane was in 1851.
Hurricanes in Guatemala are rare as well. The last major storm was Hurricane Stan in 2005. Guatemala also has earthquakes. The biggest one in recent history was 1976, with a 7.5 magnitude.
As for disease, there is no known disease that affects the trees. There’s always a chance something infectious could crop up. But an exhaustive literature search showed only caterpillars as something that could potentially slow the trees’ growth.
World Tree also helps its farmers. A World Tree team visits farmers at planting time to train them on how to prepare the land and plant for the best results. It also provides feedback and advice throughout the years to keep everything on track.
Wendy Burton with a 1-year-old Empress Splendor in Costa Rica
As far as weather and disease go, the risks are minimal but can’t be ruled out entirely.
To be extra cautious, the company built a 25% tree loss into the 24,750 board feet per acre (quoted above), which could happen in theory. But the company has taken several measures to make this highly unlikely.
It has developed six regional nurseries (plus three propagation nurseries) to prevent any such loss. Most losses occur when these trees are two years or younger (and are at their most vulnerable). The company has planned for this. It will replace them with trees kept in the nurseries for up to two years of growth.
I believe the 25% loss assumption is excessive. This is especially overly cautious when combined with the minimum $3 per board foot price.
Right now, prices at the American Paulownia Association begin at $7 per board foot and go up from there. Paulownia Timber prices sawn board at $10.25 per board foot. For the same board that has been dried and planed, the price increases to $13.05.
Most farmers are currently reporting survival rates above 90%. If we choose NOT to be ultraconservative and put the loss of trees at a more realistic 10% and raise the price to $10 per board foot (best-case price is $14 for high-grade lumber), we get more realistic results: 29,700 board feet times $10 is $297,000. Your 25% share comes to $74,250… on a $2,500 investment.
THAT’S A 30X GAIN.
I consider $18,562 the absolute minimum return and $74,250 the maximum return. That said, if your gains were to go above $80,000, I wouldn’t be surprised. Here’s why.
Timber Prices Expected to Rise
The biggest risk to the high end of this range isn’t weather or disease, but the market for lumber. What will lumber demand look like 10 years from now? The World Bank estimates that timber prices in 2030 will be roughly 10% to 25% greater than 2018 prices. The World Bank also predicts that demand for timber will quadruple by 2050. World Tree says it has a “waiting list” of buyers for its lumber.
Projecting commodity prices 10 years out is tricky. A global economic slowdown could depress prices. Oversupply could also dampen prices. We can’t rule out that the price of Empress Splendor timber will go down.
But remember, even at the lowest price of $3, that’s still a 7.4X return.
A Perfect Alignment
What makes this high return possible in a worst-case price scenario is the tree’s fast growth and the avoidance of upfront land and labor costs. These are typically the most expensive parts of timber investing that World Tree’s model completely avoids.
This smart setup is the brainchild of Burton, an unabashed Empress Splendor admirer who has been working with the tree for more than two decades. She heads a group of foresters with more than 30 years of experience growing trees for timber. The team is as solid as they come.
Wendy Burton with an Empress Splendor
Each year, World Tree takes in a new pool (or season) of investors who receive year-specific units. For the purposes of this raise, it is issuing World Tree Carbon Offset Program 2019 Units. (Previous investors are linked to their season of trees.)
Your shares (as a 2019 Unit holder) entitle you to share, on a pro rata basis, 25% of net profits of the trees planted in 2019 only. Please note that you are not getting equity in the company. Your shares will be paid out in year 10, 2029, when the trees are harvested. Again, that’s also when World Tree and the farmers will be paid too.
The interests of all three parties are perfectly aligned. World Tree has a vested interest in making sure its farmers are successful.
How to Invest
World Tree is raising up to $10 million in this round of funding on Wefunder. You’ll need to sign up for an account there if you haven’t yet.
Once you’re signed in to Wefunder, head over to the World Tree page. Now enter the amount you want to invest and click the green “Invest” button on the right-hand side of the screen. The minimum on this deal is $2,500.
Special Note: To get World Tree’s special share price of $1.25, you should invest as soon as possible. After the first 1,500 acres are funded, share price goes up to $1.50.
Risks
All early-stage investments are risky. As always, don’t invest money you can’t afford to lose. You should expect to hold on to this investment for 10 years.