We’re drowning in plastics. The problem is monumental and global. It’s threatening to slowly but surely kill the planet.
It’s also getting worse. And what’s really worrisome is that the biggest companies in the world can’t figure out how to stop it.
They’ve been trying and failing for decades while following the same sad script. A new supposedly groundbreaking technology is announced. A big firm says it will build a plant and scale from there. Delays set in. The project never gets started or scaled up. The plans are quietly dropped.
As far back as 20 years ago, British oil giant BP, German chemical maker BASF and U.S. oil company Texaco all began such plans amid much ballyhoo. They planned to use a process called pyrolysis, which involves burning plastics with little or no oxygen. None of these plans came to fruition.
Believe it or not, this technology is still being trotted out as an environmental savior.
It’s not. Pyrolysis emits greenhouse gases. And to work properly, it requires a high-quality blend – which is next to impossible to find in mixed waste. These plants suffer from low performance, high operational costs and people’s health issues. Most have shut down. None have scaled.
Getting the technology right is critical. But that’s just half of the problem. The other half is recycling plastic waste into materials or fuels that can be used or sold. The recycling system simply doesn’t work if there are no uses for recycled materials.
Enter a small startup called Arqlite.
It’s the only company I know that has solved both sides of this problem. It has developed a technology that effectively recycles all kinds of plastics, whether those plastics are separated or mixed with each other. (Geek note: Plastic containers and packaging are assigned numbers 1 to 7. Arqlite’s technology handles the entire spectrum except No. 3 – PVC, which is little used in packaging these days. PVC emits a high level of toxins when heated, making it unsuitable for Arqlite’s technology.)
The company has also developed its first recycled product: smart gravel. The product is available to consumers via Amazon, Walmart, Home Depot, HRG and other stores and is selling well. Smart gravel replaces dumb gravel in concrete, landscaping, green roofs, hydroponic farms and cannabis farms. It’s three times lighter and 10 times better at insulation than mineral gravel.
Retail customers love it and with certification right around the corner, construction companies will soon be buying it too – which should give sales a big boost.
This small startup from Argentina is solving a problem that has stymied bigger companies for decades. Its technology was developed, tested and proven in Argentina.
So how does it work?
The plastic waste is heated, liberating water vapor and gases. The gases are then reinjected back into the mix. It creates a bubbling goo, which is then extruded in the form of pellets. The material is porous and light but surprisingly strong, like bone.
Argentina served nicely as the company’s proving ground. The smart gravel was initially made in a small factory there. Customers loved it. When Arqlite grew certain that it had achieved product-market fit, it moved to the U.S. to scale and begin realizing its full marketing potential.
Arqlite’s new factory in California is fully outfitted and 10 times bigger than the one in Argentina. During this early phase, it’s operating at less than 50% capacity. But it’s all part of the plan. Arqlite is looking forward to demand growing as it increases its marketing efforts (using the funds from this raise).
And it’s busy developing other products. Next in line: A ready-mix concrete product that will become available next year.
In the meantime, Arqlite is in discussions with several European and South American countries to build plants there using its technology.
Seven Reasons to Like Arqlite
A company that’s fixing a huge planet-threatening problem with proprietary technology that is proven and already being licensed out is what early investors dream of. But once you look under the hood and examine the company in more detail, the investment opportunity becomes even more appealing. Here are seven reasons why.
- A Game Changer. Being able to process all types of plastic in all kinds of mixes would eliminate expensive sorting and cleaning operations. If Arqlite’s technology can truly do this – and plenty of reputable third parties, including satisfied customers, say it can – then the upside is enormous.
- A Better Approach to Recycling. China used to buy mountains worth of used plastic. It was the biggest importer by far. Then in 2018 it banned them. Other countries are also slowing or stopping their imports of plastic waste entirely. The West now has to deal with its own garbage. And recycling offers the best solution.
- More Urgent Than Ever. Plastic waste is not going away. On the contrary, the problem is getting worse. The oil industry is doubling down on plastics. As a result, plastic production is forecast to double by 2040.
- First-to-Market Advantage. Given this urgency, the first company that can offer an effective solution will have no shortage of customers, partners and licensees. The opportunity to establish a dominant position in this space is there for the taking.
- Dual-Payment Model and Fat Margins. Arqlite gets money from collecting plastic waste on the front end and selling the resulting recycled products at the back end. Collecting the “tipping fees” at its rate of $60 per ton covers 40% of the recycling costs. It’s nice to get paid for your raw materials rather than paying for them. And it puts a lot less pressure on margins. Breakeven would be $150 a ton. That would put the company’s gross margins at 100% – a pipe dream. But Arqlite comes close. It has charged as high as $120 tipping fees per ton.
- Rollout Capital Opportunity. Everything is in place. The factory. The equipment. Sourcing the plastic waste. Rollout capital tends to be low-risk capital. Investors’ money will be used primarily to beef up the marketing behind the Smart Gravel. Under the right circumstances, rollout capital can bankroll hockey-stick-like growth. I’m not sure if Smart Gravel has quite that upside. But it doesn’t have to. It’s just the first of many products Arqlite will be offering. In any case, the product should do reasonably well. It’s grown 46% month-over-month on retail channels since September.
- Powerful Partnership with Cemex. There’s nothing like a big powerful partner to have your back. And make no mistake, Cemex is BIG. It has 64 cement plants, 1,348 ready-mix concrete facilities, 246 quarries, 269 distribution centers and 68 marine terminals. It operates on four continents and makes more than $13 billion in annual sales. The partnership is real. Cemex is a major investor. And it’s licensed Arqlite’s technology for a plant it will build in France.
A Compelling Investment Opportunity
I can count on one hand the number of startups fixing a problem as big and as urgent as the one Arqlite is fixing. There are even fewer startups that are doing it by themselves — without a direct competitor in sight.
Arqlite has a realistic shot of becoming a true environmental savior. Its timing certainly couldn’t be better. Plastics are slowly but surely choking landfills and despoiling oceans. In recent years, so-called advanced recycling projects have emerged to resolve the global explosion of plastic waste. And they’ve failed. As a result, more than 90% gets dumped or incinerated because there’s no cheap way to repurpose it.
Exquisite timing doesn’t guarantee success. Nor does a proven technology that also happens to be the ONLY option capable of processing mixed plastics at a large scale and low cost.
Perhaps Arqlite’s highly awarded technology has some fatal flaw. Though small, there is technological risk here. There is also marketing risk regarding its recycled products. And there is execution risk. But so far, Argentine-born CEO Sebastian Sajoux has done an outstanding job bringing the company to this point. In my conversations with him, he displayed an encyclopedic knowledge of the plastics recycling field. I have no doubt he can do the job.
Simply put, Arqlite has something the world desperately needs. How many startups can say that without exaggerating? Successful startups have been built on lesser foundations. But Arqlite’s value proposition makes this investment opportunity one you shouldn’t miss.
Security type: Convertible note
Valuation (cap): $18 million
Minimum investment: $100
Where to invest: Wefunder
Deadline: January 18, 2022
How to Invest
Arqlite is raising up to $1.07 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 Arqlite raise page. Now enter the amount you want to invest and click the red “Invest” button on the right-hand side of the screen. The minimum investment on this deal is $100.
This opportunity, like all early-stage investments, is risky. Early-stage investments often fail. Arqlite may need to raise another round of funding in a year, if not sooner.
If it executes well, this shouldn’t be a problem. But that’s a risk worth considering when investing in early-stage companies. The investment you’re making is NOT liquid. Expect to hold your position for five to 10 years. An earlier exit is always possible but should not be expected.
All that said, I believe Arqlite offers an attractive risk-reward ratio.