Arqlite has a valuation cap of $18 million. As of August 2021, this would make the company’s revenue-to-valuation multiple a steep 75x. This multiple is far too high, so Arqlite’s valuation is not justified by its revenue. Compared to other early stage startups, an $18 million valuation is also far above the norm. Overall, Arqlite’s valuation for this round is overpriced.

Arqlite operates within the aggregate industry — aggregates are materials like gravel, crushed rock, and sand. The global aggregate market was worth $463.3 billion in 2019. Arqlite currently only operates in the US, but it plans on expanding globally as it grows, opening itself to a projected $723.28 billion market by 2027. The aggregate market is currently seeing a steady growth of 6% per year and is well established. However, Arqlite is proposing a disruptive product. The company’s growth has high potential as more consumers are trying to have a positive impact on the environment.

Arqlite’s main competitors are companies producing gravel and aggregates out of rock. These businesses produce their gravel from mining, which has a negative impact on the environment. Their products are heavier, which limits transportation capacity and increases costs. However, these competitors are more established since they have been in the aggregates market much longer.

Overall, Arqlite is trying to disrupt an old and well-established market. The company will need to play on its sustainable advantage to integrate itself and become a strong competitor.

Arqlite is led by its founder and CEO Sebastiàn Sajoux. As a serial entrepreneur, he has been involved in companies focusing on sustainability for a decade. Born in Argentina, he holds a master’s degree in environmental consulting from Madrid. He is also involved in several non-profits to promote sustainable economic development. Most importantly, he founded B-Green in 2013 to support the sustainable development of corporations and governments. Arqlite’s CEO is pursuing his personal mission to improve the world through this company. His passion is key to surrounding himself with a competent and dedicated team.

Carlos Paviolvo is the chief development officer at Arqlite. He joined the company recently and is a key addition to the team. His background in mechanical design balances with Sajoux’s skillset. To help the manufacturing side of operations, Alonzo Renteria became Arqlite’s facility manager. He recently worked as a recycling supervisor for rPlanet Earth, a company focusing on recycling post-consumer plastic.

Overall, even if he is a single founder, Sebastiàn Sajoux successfully surrounded himself with a skilled team. No one on the team has experience exiting a company, but this is balanced by the team’s reliability and expertise.

Arqlite’s product and method isn’t revolutionary but is quite disruptive. First, the company is able to recycle previously non-recyclable plastics, which is an achievement in itself. In addition, this recycling process is able to create a new aggregate. This method starkly contrasts with traditional aggregates, which are usually obtained through environmentally harmful methods such as mining.

Additionally, Arqlite’s Smart Gravel is lighter and cheaper than most gravel available on the market. This formulation allows higher volumes of gravel to be transported at once and reduces gas costs. Consumers also find an advantage in the cheaper solution that Arqlite offers for home potting and landscaping.

Moreover, the company doesn’t need to buy its raw material but is paid to collect it. Therefore, its business model is quite efficient. However, the company had to invest massively in recycling machines before launching its industrial production. Indeed, the company has more than $2.5 million worth of assets. The capital intensity of Arqlite is pretty high, and it might be hard to scale the company in the future without substantial revenue.

Overall, Arqlite’s product is cheaper and more sustainable than its competition. In a society where climate change is a growing concern, this could become an attractive solution.

Arqlite has partnered with wide distribution channels such as Walmart, Home Depot, and Amazon. Consequently, the company has had revenue of more than $20,000 per month since the beginning of 2021. This traction is reassuring, especially considering Arqlite’s operating costs. These expenses are close to seven-times bigger than the current revenue. The company’s monthly burn is bringing a major financial risk, which will need to be overcome by significant growth. Arqlite’s differentiation from its competitors will be key in reaching profitability. The products seem to be satisfying customers, as it reached ratings of four stars and above on Home Depot, Amazon and Walmart.

The company has raised more than $3 million since its inception. This new raise is necessary to sustain the high burn rate and allow Arqlite to invest in marketing. It is also important to note that Arqlite holds more than $600,000 in debt. As of right now, the company expects to break even in the next year or two.

Arqlite offers a moderate risk profile with financials being the major area of concern. Even though it is finally showing some traction, the company’s burn rate is extremely high. At this rate, the company will need to raise again soon, increase its revenue exponentially, or face bankruptcy. However, the risk is balanced by the opportunity and the considerable investments that have already been made. The company is planning to focus on marketing and promotion with this new raise. Hopefully, its traction will grow and balance its debt ratio.

Additionally, the team presents a small risk due to the team’s low experience in startup environments. It is slightly balanced by the passion of the founder and team’s well-rounded skill set.

Arqlite’s product is new, and its traction is only very recent. The company has already spent a considerable amount from its raises and loans, and it continues to have a high burn rate. The financials of the company are its greatest risk of failure and need to be addressed quickly. 

Arqlite operates in a well-established market. Its main obstacle will be to convince construction professionals to adopt its new products and change their habits. Arqlite will need to focus on marketing and sales, while proving the efficiency of its product. Finally, the team lacks industry and exit experience, which could impact its ability to grow and scale.  

Arqlite’s product is highly disruptive. It is bringing a sustainable product into an industry that is generating 39% of the world’s carbon emissions. Therefore, its potential for growth is high. The company’s early traction with consumers is also promising. Arqlite has received some publicity, which will likely help bring in business. Arqlite has a dedicated team and a considerable number of investors who believe in the company. It can disrupt the industry at a time where climate change is becoming more critical for Americans.

Arqlite’s business model is promising, as the company is paid to process its raw materials. Its Smart Gravel also presents major advantages for construction because it is lighter and more insulating than currently available products. Moreover, the gravel’s price is affordable, which could give it an edge over competitors.

With its growing line of products, Arqlite is on the right path to increase its valuation. In the case of an acquisition by an aggregate leader, even a valuation at $180 million could generate a 10x return for investors.

Arqlite recycles plastics from landfills to create a lightweight, more insulating, and more affordable gravel. Its Smart Gravel is disruptive to the aggregate industry. It might be hard for competitors to create a similar technology. Since the beginning of 2021, Arqlite has been seeing promising traction. Its gravel is distributed by three major retailers: Home Depot, Amazon, and Walmart. The founder is passionate about recycling and has successfully brought on board two experienced recycling and manufacturing experts.  

However, Arqlite has been around since 2014 and has limited results to show. The company is hampered by a high burn rate. Financial risk is high for Arqlite. Strong efforts on sales and marketing will be needed for Arqlite’s to acquire consumers in this well-established industry. While the founder is passionate about the company, he does not have strong experience in the aggregate industry. Arqlite may struggle to grow and scale its operations due to these disadvantages. For these reasons, Arqlite is a Neutral Deal at this time.

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Analysis written by Léa Bouhelier-Gautreau.