Arc is raising a Crowd SAFE at a $32 million valuation for early-bird investors and at a $40 million valuation when the early bird round closes. This is a shockingly reasonable price. Arc generated around $11.8 million in revenue last year, so the early bird valuation represents a 2.7 times revenue multiple (3.4 times for the non-discounted valuation). That’s an incredibly low multiple for a company with this much traction, particularly a tech company with a proprietary platform. Investors have the chance to get in on excellent terms with a company that is very likely to continue growing, so Arc’s price rating is nearly perfect.

The US online recruitment site industry is valued at $13.1 billion in 2021 and is expected to grow 12.7% this year alone. Software and web developers made up about 1% of the workforce in 2019, according to the Bureau of Labor Statistics. It’s particularly expensive to hire developers, so one can assume that they take up a few percentage points more of the recruiting market than the overall workforce. But even with the generous assumption that developer hiring makes up 5% of the online recruitment market, the US market for recruiting developers is still fairly small. 

And considering that Arc’s current employer fees seem high (a placement fee of 15% to 20% of developer salary), Arc’s obtainable market is even smaller. In addition, Arc is competing within a fairly crowded landscape of recruiting sites, both developer-specific and not. For all of these reasons, Arc’s market rating is its lowest.

Arc was founded by Weiting Liu, an experienced entrepreneur. Liu graduated with a bachelor’s degree in computer engineering from the University of British Columbia, followed by an MS in management science and engineering from Stanford. He founded his first company immediately afterward. SocialPicks was a social finance company and graduate of Y Combinator that was ultimately sold to Financial Content after three years. From there, Liu founded a couple more seemingly failed concepts before starting Codementor in 2013. He’s led Codementor for the last eight years, growing it to a community of more than 900,000 developer members and 110,000 matched pairs of developers. And he still leads the company today. Arc is an extension of Codementor. 

Beyond Liu, Arc’s team is very well built-out (presumably because it’s the same team from Codementor). Arc has a COO, head of marketing, head of growth, head of design, vice president of sales, and a number of other senior management roles for a total team of 47 people. Many of these senior employees have relevant degrees, previous entrepreneurial experience, and domain experience in hiring and recruiting. 

Given Arc’s large and experienced team, the company’s team rating is its highest across all our metrics.

Arc is laser-focused on matching software developers with top remote jobs. That’s a worthwhile niche with decent demand from both job seekers and employers. However, it’s not clear that more general recruiting platforms can’t provide the same solution. 

There are a number of leading online recruitment sites, from Indeed to LinkedIn and AngelList (and scores of others for particular industries and roles). All of these platforms have the option to list a job as remote, functionality that many have prioritized given the shift toward remote work in the last year. In addition, there are already recruiting sites focused specifically on remote work, including FlexJobs, JustRemote, Remote.co, and more. Arc’s particular niche is a specific focus on remote jobs, combined with a specific focus on development roles. That does seem to be a differentiated approach, but that differentiation might not be enough for job seekers or employers. 

On the other hand, Arc does benefit from a wide competitive moat in that the related Codementor community numbers more than 900,000 developers already. It would take time for another job platform to build such a large user base. Therefore, Arc’s differentiation rating is above average.

Arc is an extension of Codementor, which has been operating for eight years. As a result, Arc’s performance (really Codementor’s performance) is very good. In 2019, the company generated $9.1 million in revenue and  sustained a relatively narrow net loss of $370,002. In 2020, Arc brought in $11.8 million in revenue and turned a small profit with a $26,943 net income. Those are impressive revenue numbers, and Arc’s profitability is even more compelling. 

Beyond revenue, Arc has strong traction within the developer community. The company’s first product, Codementor, has garnered a community of more than 900,000 developers in 205 countries. More than 200,000 mentoring sessions have been held through Codementor. While that community doesn’t relate directly to Arc’s recruitment platform, it’s still a very strong asset and continues to be Arc’s primary revenue generator as recruiting gathers steam. In addition, Arc has already raised more than $3 million from Techstars, 500 Startups, and leading angel investors. 

Arc is a very high-performing company. It’s worth noting that most of these strong performance signals are driven by Codementor, so the specific success of Arc’s recruiting platform still isn’t guaranteed. Nonetheless, this team has a strong, profitable operating history, so Arc’s performance rating is quite high.

Codementor, Arc’s first product line, has been operating for eight years and is generating millions in revenue. As a result, an investment in Arc isn’t particularly risky. However, prospective investors should note that it’s still a bit too soon to say whether Arc’s recruiting platform will take off. This risk is primarily financial. Recruiting made up only a small portion of Arc’s revenue last year (roughly $400,000 compared to over $11 million from mentorship sessions), so Arc as a standalone concept is unproven. Along those lines, there’s some risk that Arc’s team isn’t fully committed to Arc while still working on Codementor, and the company’s valuation is steep for a brand-new recruiting platform. Overall, though, if viewing Arc and Codementor as highly correlated (which they seem to be, based on positioning on their respective websites), an investment in Arc is relatively low-risk.

Some prospective investors might argue that Arc is merely a distraction for the Codementor team, a concept that has yet to be proven successful. The online recruitment market is very competitive, with huge legacy players like Indeed and LinkedIn addressing most employers’ and job seekers’ needs. And the developer recruitment market is fairly small. Arc might be focused on too narrow of a niche. Plus, it’s worth probing the viability of Arc’s business model. The company charges 15% to 20% of developer salaries as a placement fee, which seems steep when compared to the low price of posting a job on LinkedIn or AngelList. Overall, Arc hasn’t yet proven product-market fit, so prospective investors can’t be sure that this concept will take off.

Codementor is a very successful company that achieved profitability with almost $12 million in revenue last year. The last eight years have proven that the Codementor team has the technical and operational skills to serve the global developer market. The team is very experienced, and founder Weiting Liu has a previous Y Combinator-backed, exited company under his belt. Leading venture capital firms like Techstars and 500 Startups have already backed Arc, which is a strong signal of credibility. 

An expansion of the Codementor platform to include Arc seems smart. Codementor is home to 9000,000-plus developers, many of whom are likely interested in remote jobs. The COVID-19 pandemic drastically accelerated companies’ adoption of remote work. It logically follows that both job seekers and employers could look to Arc as a great place to find high-quality development jobs or skilled developers. 

This is a slightly unusual fundraise in that Codementor is a well-established company, and now, Arc is raising money for a concept that seems simultaneously distinct and highly integrated. Investors may wonder how the Codementor team will prioritize Codementor over Arc or vice versa, how Arc will be promoted to the Codementor community, and so on. Nonetheless, Codementor’s traction seems to be an extremely strong signal that Arc can succeed.

Arc is a global talent marketplace matching skilled developers with remote development jobs. Arc grew out of Codementor, a very successful developer mentorship community that boasts 900,000-plus members and has facilitated more than 200,000 mentorship sessions. Driven largely by the popularity of Codementor, Arc generated almost $12 million last year (and turned a profit). 

It’s not yet clear whether the market needs Arc’s specific remote developer recruitment site. Arc brought in only a few hundred thousand in revenue from recruitment last year, perhaps because both job seekers and employers are already satisfied by mainstream options like LinkedIn. However, the Codementor community is undoubtedly an asset in fueling the growth of Arc, and the Arc team is experienced enough for investors to feel optimistic about the company’s prospects. Therefore, Arc has been rated a Deal to Watch. 

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