Infinite Composites is offering equity at a $20 million valuation. At first glance, this price seems a bit too high given the company’s revenues of just $577,000 last year. A revenue multiple of more than 30x raises eyebrows. But Infinite Composites holds a large quantity of intellectual property developed over 10 years and protected by seven patents. Its vessel technology has already caught the eye of major players in the space industry, including NASA and SpaceX. In the aerospace industry, where major deals take years to develop but can suddenly result in tens of millions of dollars in revenue, Infinite Composites’ valuation may be better justified than most companies raising at such a high multiple. 

Infinite Composites is addressing the market for pressure vessels, which are containers that store liquids or gases at a pressure that differs from the pressure of the air surrounding the vessel. Pressure vessels have been around for hundreds of years. Leonardo da Vinci wrote about them in 1495. These days, the market for pressure vessels is decently sized. It’s expected to hit $53.3 billion by 2025. But the market is growing at a mediocre compound annual growth rate of 4.5%.

Many industries need pressure vessels, but they’re still relatively niche products that most businesses aren’t buying every day. Moreover, Infinite Composites is only focused on selling to the space industry for now, which further limits its addressable market size. Obtainable market estimates are even lower, considering the presence of well-established competitors like Northrop Grumman. Those players’ tanks may be less modern, but they’re still the prevailing standard. For the time being, Infinite Composites’ market prospects seem meager. 

Infinite Composites was founded by Matt Villarreal and Michael Tate, friends who met through their undergraduate car racing club at the University of Oklahoma. Villarreal and Tate were competing in a racing competition when they discovered how much weight fuel tanks added to their vehicle. They began investigating solutions, and Infinite Composites was born. The pair started the company right out of college and have spent the last 10 years developing it. (Note that the friends also founded a company called CleanNG. It’s not clear if CleanNG is functionally the same entity as Infinite Composites, or if it is an additional business on the side. The latter would be concerning.) 

What Villarreal and Tate lack in engineering experience is made up for with a strong team of seasoned engineers with experience at established companies. Infinite Composite team members are alums of Virgin Galactic, NORDAM, Northrop Grumman, and more. The company also has several team members focused on finance, operations, and business development. While its co-founders’ experience in this industry is limited (outside of their 10 years managing this business), Infinite Composites has a large, well-rounded team that seems qualified to develop innovative technology in this space. 

Infinite Composites’ value proposition rests on the dramatic improvements its products can offer the aerospace industry and eventually additional industries. The standard method of fuel storage on space vehicles, aircraft, and other heavy machinery is to use lined tanks that are extremely heavy. That weight is a major cost issue, particularly for space organizations seeking to optimize payload for trips to orbit. Infinite Composites’ fuel vessels made from light composite materials offer up to 40% mass savings, 50% cost savings, and 80% lead time savings when compared to traditional tanks. 

Furthermore, Infinite Composites’ tanks are protected by seven patents (six from the US and one from Canada). All of this innovation has caught the eye of major players in the aerospace industry. Infinite Composites has already signed deals with SpaceX, NASA, and the Air Force, a major signal that its products offer genuine advantages over traditional options. With a widening competitive moat and decent traction in the industry, Infinite Composites seems well positioned to become a leader in the future of fuel vessels.

Infinite Composites has been around for more than 10 years but still hasn’t generated a great deal of revenue. Its 2020 sales brought in just over $577,000, but the company still posted a substantial net loss of $772,000. Infinite Composites doesn’t share a great deal of financial data, but it appears that 2021 growth has been strong. Sluggish revenues after a decade in business are less of a red flag in this industry than they would be in others, given the time-consuming nature of developing highly technical, highly regulated products. 

Beyond financials, Infinite Composites has made a great deal of positive progress. The company has been profiled in major publications and is clearly making a splash in the niche world of aerospace. This buzz caught the attention of major organizations like SpaceX and NASA, which is no small feat. In addition, Infinite Composites has raised more than $5 million in venture capital funding from firms like Techstars and the Creative Destruction Lab. 

An industry like Infinite Composites’ is boom or bust. Contracts take years to develop and either bring in nothing or tens of millions of dollars. But based on recent progress with major clients and strong year-over-year growth in vessel sales, Infinite Composites seems to be on a positive trajectory.

Infinite Composites is a high-risk investment. Its products are highly technical, highly regulated, and can only be sold to a niche universe of buyers. Those factors result in a very narrow window of opportunity for Infinite Composites to succeed. Time and funding are particular risk factors, given how much time and capital it will likely take to continue developing innovative products that capture the attention of major buyers. Plus, those major buyers likely take years to make big contract decisions, which could pose a cash flow issue for Infinite Composites. Overall, Infinite Composites is the kind of research-and-development-heavy company that could either be a huge success or an utter failure. It’s a bit too soon to tell.

Infinite Composites has a grand vision for reinventing fuel storage systems across many industries. While it’s true that a wide variety of businesses could benefit from lighter, cheaper fuel vessels, Infinite Composites has made little progress toward that diversified sales strategy. It’s taken the company a decade to break into the aerospace industry, and revenues from those buyers are still relatively low. With a relatively large team and unpredictable sales cycles that take years to come to fruition, Infinite Composites might face serious cash flow issues. The company could be forced to raise hefty amounts of venture funding over and over, diluting investors’ stake in an asset that already seems slightly overvalued. Without more evidence that Infinite Composites has what it takes to sell tanks in high volume, investors may not want to risk their capital.

Infinite Composites has a strong pitch as to why its products are superior to the legacy options currently on the market. Composite tanks are far lighter and far cheaper, and they allow companies like SpaceX to increase their payloads for space launches. If Infinite Composites can make it into the right rooms to pitch high-value prospects, the company could quickly close tens of millions of dollars in revenue. 

While Infinite Composites doesn’t seem to have experienced a real revenue breakthrough yet, there are positive signals that deal flow is increasing and financial performance is looking up. The company apparently quintupled its pipeline between 2020 and the third quarter of 2021, with $2.2 million in potential deals for hypersonic vehicles, spacecraft, and more. If this fundraise allows Infinite Composites to scale up business development (and manufacturing to deliver on those deals), the company could continue leveraging its network to expand its presence in the aerospace industry and beyond.

Infinite Composites manufactures linerless fuel storage vessels made of composite materials that reduce weight, cost, and lead time when compared to traditional lined tanks. The company is currently focused on the aerospace market and has already provided tanks for the likes of SpaceX, NASA, and the US Air Force. With a well-rounded team, strong investor backing, a growing list of deals, and a robust intellectual property portfolio, Infinite Composites could make a lucrative impact in this market. 

Infinite Composites also produces niche products that can only be bought by certain types of businesses. Moreover, established corporations like Northrop Grumman can get away with selling less efficient tanks thanks to decades of relationships with NASA and other major aerospace players. Infinite Composites hasn’t generated enough revenue yet to demonstrate true product-market fit, and it’s too soon to say whether that will ever be achieved (despite a decade in business). Although the industry may justify larger valuation multiples, the company’s valuation is still rather high. Overall, Infinite Composites has been rated a Neutral Deal. 

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

Analysis written November 19, 2021.