and audacity caught the imagination of a local businessman who called a meeting and stumped up $2,000 as an angel investor. It wasn’t much, but the pecuniary vote of confidence resuscitated Terracycle to fight another day. And fight it had to, with Szaky barely keeping it alive by entering and win- ning a succession of business competitions. Then, in 2003, he entered the Carrot Capital business plan contest, which offered $1M in seed capital to the winning team. Stunningly, against the odds, Terracycle triumphed. But Carrot Capital had a different vision for the company; Szaky would have to tone down the environmental rhetoric and step up as the “poster child” of organic fertilizers. Despite having just $500 in the bank, Szaky rejected the offer to go his own way. He had a big problem, though; the fertilizer was good to go, but Terracycle couldn’t afford to bottle it. This potential showstopper was elegantly sidestepped when Szaky noticed that for all the galaxies of drinks on the market, there were only four bottles sizes by volume, all of which took the same caps. What’s more, with- in each of the four size categories the bottles had the same height and the same diameter. This meant they could be run through a high- speed bottling machine. Problem solved. Full of confidence, Szaky embarked on a fundraising mission, netting $1.2M within five months. By late 2004, Terracycle’s fertilizer was jostling for shelf space at major retail stores, standing out for its highly distinctive, wonky appearance (replete with a logo doo- dled by Szaky during a tedious Princeton lec- ture) and cheeky sloganeering proclaiming the merits of “worm poop” while dissing its chemical rivals.
“What we find is that in our greatest des- peration we find our best innovation,” Szaky explains. “I’m really OK with the company taking a risk and seeing what hap- pens. I’m a big fan of experimenting, push- ing the envelope, going for scale and not being conservative.”
After setting up in its Trenton HQ,
Terracycle stepped up its game, to turn over $220,000 in 2004, $560,000 in 2005 and $1.2M in 2006.
By 2007, even Miracle Gro, the leading fertilizer brand, was sufficiently rattled and slapped a lawsuit on Terracycle for similar- ities in design and advertising statements. Knowing that he was outgunned in the lawyer stakes, Szaky used his formidable PR powers to cast the contest as a David versus Goliath affair, launching
SuedByScotts.com to take pops at his adversaries (including CEO James Hagedorn, who was lambasted for, among other things, his private jet use). The case is now settled, though Szaky can’t discuss the
’ ‘
Above: Tom Szaky, co-founder of Terracycle. Right: A tote bag, designed for Honest Tea, in 2007. Below left: Terracycle’s “worm poop” – an alternative fertilizer
details. “We’ve happy with the outcome,” he concedes. “We’re very happy.” Terracycle’s business model radically changed in 2007 when he was approached by Honest Tea CEO Seth Goldman, who had launched a new line of organic juice packaged in non- recyclable, landfill-bound pouches. “You guys are the trash people,” he reported- ly told Szaky. “Can you help me?” The Terracycle brainstorms resulted in some rudimentary tote bags and pencil cases, cobbled together on the fly with a sewing machine. Goldman loved them, and agreed to fund “juice pouch brigades” to scale up the solution. Szaky immediately knew that he was onto something, and had soon convinced Safeway, Target and Walgreens to place huge orders for the products.
In doing so, he had committed the company and the brigades to an impossible workload, but when their backs were against the wall, serendipity and creative brinkmanship came through once again. Terracycle discovered that retailers in British Columbia had to pay consumers to return used drinks pouches, and over 20M pressed into insalubrious, sticky blocks were festering in storage. Canadian officials were stunned when Szaky asked to relieve them of their burden and run bounty down to the US with a fleet of rented trucks.
Noting that the pouches were the popular Capri Sun brand, Szaky met its maker, Kraft Foods, and explained what he intended to do
I’m really okay with the company taking a risk and seeing what happens. In our greatest desperation we find our greatest innovation
with them. A major waste stream would be taken off their hands to their reputational ben- efit and transformed into products with Capri Sun logo clearly visible. It was a no-brainer, and it wasn’t long before other Kraft divisions were hooking Szaky up with raw materials. Other consumer goods companies duly converted to the upcycling revolution, and Terracycle’s product arsenal went into over- drive. “There are a lot of winners in [the virtu- ous] cycle we create, and I really don’t think you have any losers,” says Szaky. “No one likes to throw things out, it’s not some- thing anyone feels good about. So [our] solution to that is something people typically love to get around and get very excited about – it becomes contagious.”
But despite its burgeoning reputation and an increasing- ly star-studded roster of col- laborators, Terracyle strug- gled to make money, and in 2008, the company lost $3.5M. True to form, Szkay refused to buckle, adroitly shifting the game plan to implement a unique licensing scheme. Under the supervision of a head of licensing formerly of Disney, Terracycle now partners with manufacturers that produce the products and pay Terracycle a royalty to use its brand.
Szaky is constantly looking to push the company forward; in addition to the ongoing international expansion, Terracycle is making moves into retail, recently establishing a tem- porary store in New York to sell its wares. Meanwhile, Szaky’s knack of convincing investors to join him for the ride is as strong as ever ($18M has been ploughed into the com- pany to date), and there are canny PR aplenty: last year he churned out a highly readable and critically acclaimed memoir, Revolution in a Bottle, and Garbage Moguls, a reality series about Terracycle’s waste alchemy, is currently airing on the National Geographic channel. Opportunities, Szkay observes, exist every- where and are inexhaustible. “My market is really easy – everything that ends up in the trash can is something we want to work with,” he laughs.
“In many ways, our competition is the trash can. I’d rather people give it to us than to the garbage.”
Sustainab le Business ❘ April 2010 23
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