Meet the Innovators: TerraCycle
Kevin O’Leary (aka “Mr. Wonderful”) is renowned for his business savvy. Since joining StartEngine as a Strategic Advisor, he’s sat down with several companies running active Reg A+ campaigns on the StartEngine Platform in a series called Meet the Innovators.
This time, he chatted with TerraCycle CEO Tom Szaky about the company’s business model of profitably recycling hundreds of waste materials that no other company recycles—because they can’t make money doing so, and why TerraCycle is turning to equity crowdfunding to access growth capital. You can watch the video, or read the recap below.
Turning Waste into Opportunity
TerraCycle is an innovative waste management company that collects and recycles hundreds of waste materials that aren’t traditionally recycled, including pens, toothbrushes, coffee capsules, contact lens, lipstick, cigarette butts and dirty diapers.“We do what normal waste management companies don’t do,” says Tom. “What makes something traditionally recyclable is whether or not garbage companies can make money on it… It’s really urban mining for profit.”
Today, products and packaging are made so cheaply that the value of materials is lower than the costs to collect and recycle. As a result, most products and packaging ends up in landfills, incinerators and oceans. TerraCycle looks beyond the value of materials to finance it’s recycling programs. Many of the country’s largest brands contract with TerraCycle to run post-consumer collection of waste streams they produce; TerraCycle promotes the programs in the media to gain consumer participation. It has collection locations in over 30,000 US schools, offices and community organizations. Consumers, grateful for the opportunity not to add to landfills, patronize the brands that sponsor the program.
This has proven to be a profitable business model – the company’s US revenues grew from $20M in 2018 to $27M in 2019, while EBITDA increased from $1.7M to $4.3M, showing even stronger growth in profit margin. This was directly reflected in a dividend increase as a way to give profits back to shareholders.
Mr. Wonderful was impressed. “[That kind of growth is] absolutely phenomenal in the waste management business.”
When asked how they’re doing it, Tom noted that it’s all about creating new markets, rather than competing with existing players. “In fact, we have strategic investors who are large waste management companies as they look to learn from us and use our services to differentiate their more traditional offerings.” For example, there’s no other company, according to Tom, that recycles dirty diapers or cigarette butts. These aren’t very attractive materials to work with (in many ways), so while other waste companies avoid them, Tom sees opportunity.
TerraCycle’s combination of proprietary tech and a unique business model has created what the company believes to be fundamental protection against competitors, which is why Tom claims the company doesn’t have any direct competition at the moment.
Accelerating Growth with Equity Crowdfunding
TerraCycle has been profitable for a number of years with growing margins, so why are they raising capital? The company is seeking to accelerate its growth by capturing more of the unique market it’s created for itself before others enter the space.
“We’re in a healthy position [having grown from] a startup that was losing money… to a profitable high growth company” Tom notes. But TerraCycle can only grow so much by reinvesting its own profits, so the company needs outside capital to increase its sales force, while strengthening existing relationships with “just about every major brand in the world”, including names like Gillette, IKEA, Subaru, ESPN and many more. TerraCycle also plans to build on a historical track record of acquiring companies it can efficiently fold into its operations to grow revenues and add new capabilities.
How Equity Crowdfunding Creates Equitability
The answer is one we’ve seen consistently in this series: allowing the people who believe in you most to become investors. “In the US alone, we have over 80 million people who somehow interact with a TerraCycle service,” Tom claims. He says that while many of these people have a strong interest in investing, traditional models would preclude them from doing so. “Typically… you’d have to be an accredited investor and write bigger check sizes and not a lot of our day-to-day participants fit the bill.”
TerraCycle turned to equity crowdfunding to allow the average investor to become part of its growth story.]
Why TerraCycle Chose StartEngine
“StartEngine is not the only equity crowdfunding platform,” Mr. Wonderful noted. So, why did TerraCycle choose StartEngine for its campaign?
“We really believe in the people behind StartEngine,” Tom replied. “We are a mission-driven business, our brand is everything, and the credibility and honesty of our brand makes us what we are.” TerraCycle needed a platform that aligned with its beliefs and mission. “When we looked at similar players [other than StartEngine], we haven’t felt that same level of credibility.”
Tom notes that he has been pleased with the investor community StartEngine has been able to build. Having investors who are not just equity owners but customers helps drive the business.
As a mission-driven business that is not only profitable but growing (with a dividend), “You’re exactly the kind of company we want here,” Mr. Wonderful said in closing.
TerraCycle’s Reg A+ campaign is currently live. To learn more or invest for as little as $700, you can visit their campaign page now.
Terracycle US, Inc. is conducting a Reg A+ offering made available here through StartEngine Primary, LLC.
This investment is speculative, illiquid, and involves a high degree of risk, including the possible loss of your entire investment.
To learn more about TerraCycle, please view their offering circular and risks related to their offering. This testimonial may not be representative of the experience of other customers. This testimonial is no guarantee of future performance or success. Kevin O’Leary is a paid spokesperson for StartEngine. View the details here: http://startengine.com/17b