Rubicon, a software company that provides recycling and waste management services, announced in December 2021 that it signed a merger agreement to go public in mid-2022. The total value of the merger deal will be nearly $2 billion. Rubicon will merge with a special purpose acquisition company (SPAC) called Founder SPAC.
Rubicon is backed by several prominent investors: actor Leonardo DiCaprio, billionaire investor Paul Tudor Jones, and Henry Kravis, co-founder of the private equity firm KKR.
“While waste and recycling is a highly resilient category, it is ripe for improvements in efficiency and sustainability,” said founder and CEO Nate Morris. “Rubicon excepts to gain increasing market share because we have a business model that has been purposefully designed for the future of recycling.”
How Rubicon Manages Waste and Recycles
Based in Lexington, Kentucky, Rubicon aggregates large pools of data and tailors it to a particular customer’s recycling and waste needs. Rubicon believes its technology-driven approach to trash management helps customers save money and reduce emissions.
The RUBICON Connect portal is designed to deliver a highly customized experience for its corporate clients. The software provides real-time quotes for over 150 waste categories. Rubicon serves corporate clients in more than 20 countries. Corporate customers include Apple, Walmart, Starbucks, and Amazon.
Rubicon also works with local government officials in cities across the United States such as Baltimore, Philadelphia, and Spokane. The RUBICON SmartCity portal uses real time analytics and image recognition models to deliver efficient citywide waste management services. The technology serves over 70 U.S. cities.
Rubicon partners with thousands of third-party recycling and hauling firms. According to an investor presentation, Rubicon estimates it has over 8,000 customers and 8,000 third-party hauling partners.
A Growing Competitor to Traditional Waste Management Companies
Founded in 2008, Rubicon’s revenues and market share have grown dramatically. Traditional players such as Waste Management view Rubicon as a competitive threat. Similar to the traditional industry model, Rubicon partners with third-party haulers to provide trash collection services to corporate customers. However, Rubicon uses advanced technology to automate many steps in the process. The company has secured over 50 patents and uses proprietary technology for AI, camera vision, and machine learning.
Despite the perceived competitive threat to traditional players, Rubicon’s CEO has challenged that notion. “There is plenty of waste for us all to build massive companies, and there is plenty of waste for Waste Management and Rubicon to coexist,” said Morris.
Rubicon’s Revenue Streams and Growth Predictions
A few main revenue streams drive Rubicon’s growth: waste collection, software subscription fees, and recyclable commodity sales. The company owns no physical assets. Instead, it employs equipment leasing arrangements.
Rubicon anticipates $577 million in revenue for 2021. The company predicts overall revenue will exceed $1.5 billion by the end of 2024.
“We are creating a new standard for the waste and recycling category,” stated Morris. “Historically, waste has been an overlooked issue, but Rubicon exemplifies a different kind of company, one that has sought to address the entrenched shortcomings of the industry and bring the issue of waste into the public consciousness.”
SPAC Merger Partly Funded by a PIPE Deal
The SPAC merger will follow a strategy other formerly private tech companies have used. Also called a blank-check company, SPACs are shell entities that trade on a stock exchange and seek private companies as merger targets. SPACs have been under heightened regulatory scrutiny by the Securities and Exchange Commission (SEC) and other regulatory bodies. Despite this, SPACs have remained popular.
The transaction will generate approximately $432 million in proceeds. Part of the proceeds were raised from a private investment in a public equity (PIPE) transaction. In a PIPE deal, several large, accredited investors buy stock shares below market price through subscription agreements with the company before the deal closes. Investors include Palantir Technologies, the New Zealand Super Fund, and Rodina Capital. The company will use the funds raised by going public to increase acquisition spending and to grow Rubicon’s platform organically.
A Certified B Corporation with Strong Growth Potential
After the merger closes, Rubicon Technologies Inc. will be listed on the New York Stock Exchange (NYSE) under the ticker symbol “RBT.” It is a certified B corporation, a designation given to businesses that balance social and environmental performance with profits. Rubicon will continue to be based in Lexington, Kentucky.
Marc Benioff is CEO of Salesforce and a Rubicon investor. He believes the company has the potential to be a leading player in the $2.1 trillion global recycling and waste market. “If the other guys [Waste Management and Republic] can get to $50 billion, I don’t see why Rubicon can’t,” Mr. Benioff stated.