Green Money - College Dropout making money from garbage

Green Money

By Gregory Galant, Emory University

At the head of recycled fertilizer maker TerraCycle you would expect to find an old ex-hippie who is now flirting with commerce, or perhaps a Birkenstock sandal wearing mad scientist crusading to save the planet. Instead, you'd find 23-year-old CEO Tom Szaky who's quick to state firmly, "I'm not an environmentalist," but a capitalist who can't resist "getting paid for garbage."

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The root of TerraCycle's success is infested with worms. As a Princeton underclassman, Szaky qualified as a finalist in the Princeton University Business Plan Contest by convincing judges it would be profitable to reprocess solid waste into fertilizer using vermiculture (farming worms that turn decaying food into nutrients). With this feather in his cap, Szaky made the most of his summer by turning leftovers from Princeton's mess hall into plant fertilizer with great efficiency and success. Emboldened, he left Princeton as a sophomore to focus on TerraCycle. By reusing old soda bottles to package his all natural plant food, he lowered his production costs so far that he could charge half as much as his competition and still "make a hell of a lot more then Miracle-Gro."

TerraCycle's intensity more closely resembles a dotcom startup then an old-fashioned agriculture business. Szaky raised $1.2 million on December 31, 2003 after turning down $1 million he won in a business competition. The controllers of prize money would have pushed TerraCycle out of the garbage business, but Szaky is committed to trading trash. His vision is paying off as he expects $3 million in revenue for 2005, employs 40 full timers, is growing a relationship with Wal-Mart and has enough puns to last a lifetime.

With plenty of gray hair on his ten-person management team, Szaky revels in leading his army of summer interns. He engaged 40 interns last summer and plans to recruit 60 for next summer. If any students thought of this as a way to avoid the hard work of a Wall Street position, they were in for a rude awakening. Szaky describes the opportunity as an "intense internship." His high expectations for interns have their benefits too: they're given the keys to drive the company in addition to stock options, room and board. Steve Kurz, now 19, took the internship last summer after finishing his freshman year at Cornell University. Over the summer, he envisioned and pioneered the hydroponics division that grows plants in nutrient-rich water, and now runs a branch office at Cornell with a staff of seven. Kurz, who couldn't decide on a major freshman year, was initially attracted to TerraCycle simply because "college kids started it, run it and everything's made out of trash." The experience gave him academic focus in addition to business experience: he's now an economics major and an officer of several entrepreneurial clubs.

TerraCycle's intern boot camp has peculiar barracks. Many organizations that offer internships that don't pay cash, such as the U.S. Federal Government, are criticized for being impractical for poor students to work at. To solve this problem, Szaky bought a large home that he uses to house himself and all his interns. Szaky pitches students to "come with $10 in pocket, leave with $10 in pocket, and have a great time." The motivations of the recruits are evenly split between environmentalism and business. While this situation might sound odd, former intern Kurz describes TerraCycle as the "kind of company you dream about working for."

While the interns may have the keys to the company, the CEO doesn't always have the keys to his own car. Kurz recalls from his intern days that Szaky often "can't remember where he puts his car keys." Lost keys won't hold TerraCycle back according to Kurz who hails Szaky as a visionary. Szaky stinks of aggressive entrepreneurship: he's recruited a blue chip management team, courted investors and wooed the press so well that a Google of his name returns ten pages of results. All the while he brags that he hasn't worn a tie in five years.

When shaven, Szaky looks a bit like a young John Cusack straight out of an 80s movie. Sporting a goatee, he looks more like Shaggy from Scooby-Doo. While insisting that "dress is the least important thing in business," Szaky has a style all his own. He's annoyed that many of his peers spend too much time thinking about how they look instead of what they're selling. Szaky fondly recalls entering the finalist round of a million dollar business competition wearing a sweater and jeans. Everyone else was wearing suits - an "I-banking gala" in Szaky's words. Szaky won, beating 29 well-dressed finalists. Not having to put on a tie that morning made victory that much sweeter.

TerraCycle is on the cutting edge of an adolescent industry. This environment focused business movement seems to change its titles constantly, known by terms such as green companies, ecocapitalism and sustainable enterprise to name a few. The Kenan-Flagler Business School's Center for Sustainable Enterprise at the University of North Carolina characterizes this movement as having a "'triple bottom line': financial profitability, environmental integrity, and social equity." Unfortunately, these novel measures of commercial success are often only achieved at the expense of profitability - which defeats the whole purpose of reconciling business and the environment. Many have learned that when the word organic is slapped on a product it's a good idea to hold on to your wallet.

The only measure of success Szaky speaks of is sales. (He expects to grow his TerraCycle to $50 to $100 million in sales in 3 to 6 years.) Szaky's attitude might well save the sustainable enterprise movement from itself. Charging a premium to be environmentally friendly prevents these companies from achieving huge successes by Szaky's estimation. Or as he puts it, when choosing between the $1 regular bar of soap or the $3 organic one, "I'd feel better if I bought the $3 bar of soap, but I can't afford it." He laments that Wild Oats Natural Marketplace, an organic food store he loves to shop at, has chosen to sacrifice profitability to be "granola" (his slang term of choice for hippie) by implementing too much "feel good" bureaucracy such as decision by committee. Perhaps a better definition for sustainable enterprise would be making a boatload of money by doing good.

Szaky would now be a senior in college had he remained a student and "totally misses the college scene". TerraCycle's headquarters is in Trenton, New Jersey; close enough to Princeton to hear of all the wild parties. (A company that runs on garbage located in New Jersey? Szaky insists that it's a "big coincidence.") The only activity outside of work he could recall is spending time with his girlfriend, who was introduced to him, appropriately enough, by one of his investors. "I don't know where I put myself. I'm not an intern, I'm not 40 years old", says Szaky, but "I wouldn't trade this for anything."