Business Cycle - Terracycle

Where there's muck, there's brass. How a young businessman made a success of turning trash into cash.

Manure Manufacture

While some entrepreneurs discover their business plans unintentionally contain excrement, Tom Szaky's was designed around the material. Worm dung to be more precise. Inspired by the horticultural success his friends had using red wiggler worms to process compost and feeding the result to plants, Szaky felt there could be a business in commercially producing and distributing a product he envisioned under the catchy brand name of "Worm Poop." Emboldened by taking 5th place in the Princeton Business Plan Contest, he quit Princeton University after only two full years of study to form Terracycle and devoted himself to delivering Worm Poop to households everywhere.

The Smell of Success

With $20,000 - the combined proceeds of Szaky's bank accounts and credit cards - he purchased a worm gin and began shoveling Princeton University's food waste into it to feed an ever growing colony of worms. A worm can consume twice its body weight each day, so Szaky was soon up to his knees in product. Committed to a fully sustainable offering, he packaged his prized Worm Poop in paper bags and took it to gardening stores inviting them to stock it. The response was that the product looked good, but the aroma was not consumer compatible.

Recycled Idea

The answer already existed. Waste plastic bottles. The product was made from waste, why not the packaging as well? So Szaky developed a process to mix his Worm Poop with water, strain out the solids, and offer a liquid with all the nutrients the worms generated. Fill recycled bottles, seal with waste spray tops, and voila. The idea was so good that Szaky took top honors at the Carrot Capital Business Plan Challenge in 2003, and the prize of a US$1million in investment to boot. Good thing, as Terracycle had only US$500 in the bank at the time.

Committed to Waste

For some entrepreneurs, this defines the moment of success. Validation of an idea combined with the financial resources to make it happen. For Szaky, it was a defining dilemma. The investors wanted to direct Terracycle into a line of plant foods without the environmentally friendly mission that had become synonymous with Terracycle. The firm needed the money. Szacky refused the investment. Instead, he redoubled his efforts with big retailers and brought in a more benevolent form of capital. Revenue. By 2004, Wal-Mart and The Home Depot stocked his products in Canada, and he was negotiating to expand into the United States.

Upcycling

Under Szaky's direction, more and more trash fed more and more worms which fed more and more plants, and with Americans throwing out 2.5 million plastic bottles every hour, packaging was readily available as well. As Terracycle grew, Szaky saw opportunities everywhere. Instead of viewing trash as a liability, Szaky saw it as a resource. Something that can be "upcycled" into an offering more valuable than the original product. He started with the obvious additions of seed starters and potting mix, made from and packaged in waste, of course. Then he offered the Urban Art Pot, made from electronic waste. From there, plastic products from kites to clipboards ? all completely recycled. Partnerships with Target and Wal-Mart as well as Nabisco and Kraft have now closed the cycle. Today, these firms participate in "Sponsored Waste" programs where Terracycle pays "Brigades" of consumers to collect used packaging manufactured by and distributed by these firms, which Terracycle turns into new products. And money. In 2009, the firm made US$ 10 million in revenue, and expects to expand revenues and geographic presence significantly in 2010.

Learning from Trash

Szaky teaches us a dirty secret of entrepreneurship. That opportunities are more a function of what you already have, than a function of convincing a venture capitalist to invest large sums in your business plan. And that even if you have nothing, there are resources other people are paying to get rid of today which can form basis of new and valuable offerings. While building a business on trash might not top the glamour charts, it also offers one more lesson. That the word sustainability can apply equally to the business and to the planet when spoken by an entrepreneur.

Written by Stuart Read is professor of marketing, IMD, Lausanne, Switzerland. Robert Wiltbank is associate professor of strategic management, Willamette University, Oregon.
The art on this page is displayed under the Creative Commons license and its creation is attributed to its author.

Publication: British Airways Business Life
Author(s):
Stuart Read
Robert Wiltbank
Relevant Principles:
Bird-in-Hand (Means)
Crazy Quilt (Partnerships)

BABL Terracycle