INTERVIEW | Make Money Turning Trash into a $100M Business with TerraCycle Founder, Tom Szaky

America leads the world in medicine development. It matters. We get new medicines first, nearly

three years faster. Five million Americans go to work because we make medicines here at home,

and not relying on other countries keeps us safe. But China is racing to overtake us.

Will we let them? Or will we choose to stay ahead? When America leads, America cures.

Let's tell Washington to keep us in the lead.

Learn how at americacures.com. Pay for it by Farma.

100 million dollar business. Terra cycle. Founded by today's guest Tom Sackie is truly changing the

world. The company is an international leader in innovative sustainability solutions creating

and operating first of their kind platforms and recycling. Recycled materials and reuse.

Recycling can be boring but not with Terra cycle. The company known for recycling the hard to

recycle. Recycled cigarette butts and turns them into shipping pallets. Recycled is gum

turning into raw material and juice pouches in the backpacks and picnic benches. They've found

a way to take things that have typically been waste and recycle them and reuse them for other

really useful things, which is one of the cool businesses that I like to see businesses like this

because it's sort of one of those things of like we can rely on the government to try to come in

and solve our problems or we can rely on entrepreneurs who actually build some sort of a

for profit business that helps solve the problem while also creating jobs and helping the economy

and things like that which one of my favorite things about entrepreneurs in general. So Tom,

what's up man welcome to show. Thanks for having me pleasure to be here. So this is 25 years ago

that you started this was this your first business ever? No I mean I fell in love with entrepreneurship

at a really young age. I started I mean I had a pretty bad ass lemonade stand but you know first

real business was 14 you know I had a little web design company. This was back like in 1999

2000 internet was just starting so as a kid you could code websites and get clients and

that was sort of the beginning you know business for me and then Terra cycle I started my

freshman year of undergrad and then left and you know that's 25 years ago. No kidding did you go

to school for business or entrepreneurship? No I mean I from high school went down every

time I got to Princeton or went to Princeton University hence white hair cycle starting the

Princeton area and it was just a general you know sort of undergrad you know what was nice there

about schools you could take any classes you wanted for the first two years I was doing

Buddhism and art you know economics like just all over the place and came up with the business

concept you know within about six months of landing there and by sophomore year I just got too busy

with it so I left school and and dedicated myself full time to it. Yeah but you I don't know if

you anybody told you this Tom but you can't be successful if you don't have a college degree so

I mean I love school don't get me wrong it's just you know I couldn't do both well right

it got so much and you know I decided like I had to pick one or the other because there's no way

I could have done both you know in a high quality. Where did the idea come from what was the first

iteration so it's fascinating you know at the beginning what what attracted me to entrepreneurship

you know in high school was I figured it's my ticket to fame and fortune right which are relatively

sort of selfish points of view and in college I was you know sort of grappling a bit more with

more utopian concepts like why is it that people make a lot of money then become philanthropist why

can't the whole thing come together you know at the very same time why can't you make money in the

business of doing good right and so I was just like had my eyes open for like purposeful entrepreneurial

ideas and the idea of waste sort of came across my desk it did in the sense like my friends

is before like pot became as acceptable as it is now you know they were growing plants in their

basement couldn't really make them work and one day they took organic waste fed it to worms and

took the worm poop and fed it to the plants and miracle the plants are doing well but for me the

real exciting part of that was like thinking about the the idea of waste because it's filled with

all these insane anomalies I mean just to give you a few right like garbage is the only material or

or you know product in the world that we pay to get rid of yeah it has negative demand to the

point where we pay people to get rid of it garbage is the only industry that will own everything

we possess one day legally no one else can say that and for how big of a statement that is my

mind you 99% of what we buy is their property within the year of purchase right for how big of

these statements are it's also the least innovative industry by far per dollar of revenue so

it's like the opposite of starting an IT company or entertainment company or you know you name

it healthcare because then competition is everywhere in garbage it's all blue ocean innovation

it's just because no one wants to think about it so there's all these like anomalies and it got

me really excited because those are like you know beautiful fertile ground for entrepreneurship

and it's incredibly purposeful to solve at the same time so it was the first step like what

was the first thing that you jumped in with so with the realization of the whole you know

worm poop thing growing plants right tear cycle started as a worm poop company that's why this

episode of the show is brought to you by Mars men so look guys I don't know if everybody listening

knows this but a couple years ago I was diagnosed with cancer and around that time I also noticed

that my testosterone levels were dropping like crazy and I know that some of it was due to the fact

that my body was sort of in disarray but then I also learned through this experience that most men

start losing testosterone levels around the age of 30 and then it starts just getting worse and

worse after that about 1% every year after that so what I learned during this is that basically

your body makes testosterone but a lot of it gets locked up and can't be used so there's this protein

called SHBG that basically handcuffs your testosterone so even for bodies making testosterone SHBG

locks it up so you can't access it it's like having money in the bank but your debit card doesn't

work so Mars men is designed to help free locked testosterone so your body can actually use it

no synthetics no needles just real ingredients that help optimize energy focus and strength

and since I started taking stuff like this I noticed increased physical performance especially

recovery in the gym which as I am getting older I'm starting to realize is a real thing I have to

like stretch a lot more I have to like take breaks more I have to have rest days and things like that

and Mars men has helped me to be able to recover a little bit faster plus more consistent natural

energy it's different than having a cup of coffee or an energy drink or something it's a

steadier sense of drive throughout the entire day supports healthy tea levels energy and stamina

with eight natural clinically-dosed ingredients made in the USA and third party tested plus it's got

a 30-day money back guarantee so there is absolutely no risk to you the worst case you don't

absolutely love it and you get your money back but over 91% of users report higher energy levels

thousands and thousands of guys are feeling incredible results from this so just check out the

reviews on the website to see for yourself for limited time our listeners get 50% off that's

50 50% off for life plus free shipping and three free gifts at men go to Mars dot com that's men

go to Mars dot com for 50% off and three free gifts when you check out after you purchase they'll

ask you where you heard about them just please support our show and tell them that we sent you

that's men go to Mars dot com the world moves fast you work day even faster pitching products

drafting reports analyzing data Microsoft 365 co-pilot is your AI assistant for work built into word

excel powerpoint and other Microsoft 365 apps you use helping you quickly write analyze create

and summarize so you can cut through clutter and clear path to your best work learn more at

microsoft dot com slash and 365 co-pilot was terror cycle the logo i drew originally as a worm

and what we did is we effectively started taking organic waste from the cafeterias at school

feeding it to worms then taking the worm poop making it into a tea or liquefying it if you will

then we have sort of a packaging breakthrough which is we packaged it directly in use soda bottles

like old coke and Pepsi bottles and then got that listed at Walmart Home Depot you know big

box retail and became a fertilizer company and that was our journey from like zero in revenue

over five years to about five million in revenue was a consumer product company making stuff

out of garbage no kidding so yeah so you so you line the shelves of Walmart with basically fertilizer

in a bottle yeah yeah it's our specific use case or like like product plants type of a thing

yeah so our fertilizer would have competed with miracle grow you know would have been like the big

brand people know and it was everything from like think ready to use fertilizer that would be

like for potted plants or home garden all the way to like cactus fertilizer effort and violet

rose it did what the insight there was depending on what you feed the worm they poop different poop

right just like how if we eat Indian food or pizza we're gonna have something else in the toilet

and that created these different formulas and we even had like lawn fertilizer then we started

expanding to imagine taking like a two liter use soda bottle flipping it upside down and then

filling it with bird suit and making it a bird feeder you know or old wine barrels from

Napa Valley turned into rain barrels like all sorts of mostly lawn and garden products made from

waste we could find wow that's insane dude what what was the first like big obstacle you remember

thinking like I have no idea how do you you know package worm poop you know to me like even just

something like that how do you how do you overcome some of these challenges yeah so as you ask

the question I think you know at the beginning I mean I was 19 at the time right and the business

experience I had was really like small almost like consulting business you know like doing websites

for people and whatnot that I wouldn't call that like real enterprise you know at this level

so I didn't know anything like how to build a team how to raise capital the solution to all of

that just came down to grinding really hard like you know I remember like in capital raising we would

just go and pitch angel networks business plan contest and we properly sucked at the beginning

and just by doing them over and over and over we honed it to the point where we were winning these

and getting capital or the way we got listed at big box retail was honestly and this is you

remember 20 20 plus years ago so the world was slightly different but we got the name of the buyer

you know through LinkedIn or whatever we could scrounge and then we would just call the buyer

every hour from a different phone number because you know you had the caller ID thing pop up

so we'd use like 10 different phones call every hour and after like six weeks of doing this the

guy gave us a meeting I think just to have us stop doing this and he even said it when we went

down the bettenville he gave us you know the shelf space because he goes I you know this is a nutty

project it's crazy warm poop in a use soda bottle but your passion is like so fierce I know you

guys are going to make you know it it promoted enough that it's going to get off the shelf and it

did you know it worked and so for a lot of it it was you grind through it and you really hear

what is the feedback like take the criticism as a gift you know the good feedback never helps

because it's like good for the ego and what not but you learn nothing so we were always trying

that like when an investor said no I was like okay great now please rip the business apart tell

us all the problems because that was then what we worked on and then we fixed it and we did it

again and you just kept refining in that in that fashion that the you know the only other note

there was it was also in like big moments of desperation that our biggest sort of innovations

happened like a big thing that really crystallized that product at the time was actually packaging it

in use bottle so imagine we would have used coke and Pepsi bottles running through a bottling

line filling warm poop right which is you people have never done that before but we could we did that

because we couldn't afford packaging we were sleeping on the on the basement floor you know

and couldn't afford it was our idea was a wait there's people are throwing packaging away

and recycling bins let's just go get that and use it temporarily it became a huge differentiation

for the product at the time were you filling the bottles yourselves or like how did you even

how do you even find a manufacturer that's like all right no we did it ourselves at the beginning

yeah yeah so yeah and funnel in pouring well at the let me tell you okay so the first palette when

we did this was all hand so the the bottle had to come and had to be cleaned so we just you know

cleaned it in dishwashers then we made the warm poop and brewed it into a tea in these like

big drums we then had to put a label on and the idea I sort of have an example this is not the

exact label but this is one that I had from like 20 years ago you could sort of see the coke bottle

and you have to put like a label right yeah and to get the label on because we couldn't afford a

heat tunnel we just put four hair dryers you know like up like this and would dip the bottle

burn your finger a little bit then funnel fill yeah hand tighten and put it out that was the first

like maybe hundred grand of orders we did and that's like hundreds of hours of filling and then

from there we bought equipment and you know grew and and but we never outsourced because a co-packer

would never fill in this fashion yeah right you know right so yeah they're because they're filling

other like I assume it would be almost like a conflict in the you know cleanliness of their

facility oh my god and even just how do you deal with the fact that they're all different bottles

going through so we have to like construct special equipment you know just figure it out but

but it was always that if if if there was a problem you just grind through it and grinding could

be hand filling if that's what needs to happen I mean you just do whatever is needed to be done

what were you raising capital for so we because we were dealing with you know trying to sell to you

know big retailers at the time and fertilizers exceptionally seasonal right so you got all your

orders about this time of the year Q4 you sell in the spring and then there's you know sort of a

break if you will so we had to use the capital to bridge that gap we wanted to buy things like

filling equipment we had to do studies on the efficacy of the fertilizer like all those different

and then also funding all the mistakes we made were you blown away also by the payment terms of

retail some distributors yeah so we learned quite a bit and especially like if you're selling to

a store you're never going to get paid what you what the what the PO says at the beginning you know

you're going to have all these chargebacks and discounts and then you got to go down I mean I

spent so many days at Wal-Mart's and Home Depot's demoing products right you never truly think

about all those costs and I would say it's you know after five years of doing it right and we grew

you know five million is a nice little revenue number when you're 23 we did a big reflection

at that time you know we really thought to ourselves like is are we a fertilizer business because I

never created a recycle with the intention of being a fertilizer business it was how do we solve

this crazy anomaly of waste and we realized that you know we needed to pivot and we have

factively within one year shut the whole worm poop business down and changed the company to

effectively what we are today and the crazy part is we're able to do that and grow revenues so like

had you seen our revenue growth you would have never noticed the company went through a foundational

metamorphosis we had to change half our staff we had to I mean everything shifted and instead of

focusing on the output like the product is the business hero we upstream didn't focus on the

garbage as the business hero right so instead of hey we want to make a you know let's say a bird

feeder what type of garbage can we make it up from we said well hey juice pouches are not recyclable

or cigarette butts are not recyclable how do we create a supply chain to solve cigarette butts

or juice pouches are now this episode is brought to you by Indeed stop waiting around for the perfect

candidate instead use Indeed sponsor jobs to find the right people with the right skills fast

it's a simple way to make sure your listing is the first candidate see according to Indeed data

sponsor jobs have four times more applicants than non-sponsored jobs so go build your dream team

today with Indeed get a $75 sponsor job credit at Indeed.com slash podcast terms and conditions

this is your fix i am your host stassy shroder welcome to tell me lies the official podcast what's

the most unhinged thing of these in three Steven because he's so evil i do think he is misunderstood

you see everyone based consequences it's intoxicating the writers just know how to trick yeah there's

always a twist in this show tell me lies the official podcast January 6th and stream the new season

of tell me lies January 13th on hulu and hulu on disney plus hundreds and hundreds of different

waste trips how are you able to do that without dropping revenue in that for like it sounds like

it sounds like a like it sounds like a long process to learn how to but the supply chain to reuse

these things we we we locked into it right so we had to get in the worm poop days use soda bottles

like we had to get those and you couldn't really get them from a recycling center easily because

out of a recycling center they would have already been driven over with vehicles they would have

been like really deformed and you know it's not nice on a shelf later and so we need to get it

right from the collectors and so we created a thing that we called the bottle brigade where we

went to schools and we said hey guys can you collect soda bottles from us we'll pick them up for

you and we'll pay you two cents a bottle as a thank you and that became a really good source of

quality waste if you will like these bottles were not deformed very easy to you know to fill and

then put the worm poop in and all that and that became a really great way to collect waste

and then as we expanded into other products we started setting up these brigades if you will

for other waste streams and it works very well think like yogurt cups to use as planting pots

and so on and so forth and when we went into the pivot we realized that we have this great asset

of how we get waste we're really good at getting pure like if I needed to just get you know just

energy bars or just eyeglasses I could get that like it was functioning so we went to you know

I'd say we took first the big academic step backward we took this big sort of academic journey

on what really drives recyclability because in my eyes and I think this is for most folks you'll

you know one would say a cardboard box is recyclable because it can be and a toothbrush is not recyclable

because it cannot be and as we dug into it we realized that it's it's nothing it has nothing to

do with the truth the the reality is all recycling in the world is carried out by for profit garbage

companies and believe it or not there's no law anywhere that says they must recycle anything they

collect so you're like local recycled to take your blue box throw it out in front of your face

and you'd have no recourse right well it doesn't mean it's broken it just means what their recycling

is not something that's mandated but instead what they can make money on sure and the reason so

aluminum cans are recyclable or cardboard boxes are recyclable is because they're profitable because

they can monetize getting there yeah yeah but if I was going to recycle just things I'm looking at

in your screen like your eyeglasses which we do you know we recycle almost a hundred million pairs

of glasses a year now it costs more to collect and process eyeglasses than the plastic and the

metal in those glasses are worth same with your hat your t-shirt your microphone I mean the sound

protection behind you like everything you know 95% of stuff is like that and so we realized that

the answer was here we need to go to you know companies who care about a certain waste stream like

a producer or you know like let's say a nispresso who cares about coffee capsules or a staples

retailer that cares about say something they're attached to like pens and if they pay whatever

it really costs us to collect and process that stuff we can set up a supply chain to go do that

and we were getting pretty good at how do we turn waste into new things and so to answer your

question that started growing really nicely which then made it made it possible to wind down

the worm poop business as that grew and if you zoomed out you would have just seen the company go

from 5 million to 7 million to 10 million not realizing that we effectively completely

transformed what we started with you were just intentionally shrinking the core skew and

while I'm saying other skews that were potentially more profitable yeah and think of it like we were

we were shrinking the idea of us selling finished goods in exchange for building services that

recycled things that people wanted to see recycled so you would charge these companies to recycle

the materials that they couldn't recycle through other yeah exactly so you know and that's really

what has now grown to you know 20 countries in a large size business if let's just take an

example let's say you make an energy bar right Travis's energy bar you know T.C. energy right

and and you're going to package that in wrappers energy bar wrappers are not recyclable anywhere

again because they are not worth economically to do it so I'd come to you and say hey dude you know

100% of the energy bars you put out become garbage I can set up a platform where your consumers

can collect those if they want to and they get recycled the bill you would pay is whatever it

costs for the collection and processing minus what the resulting waste once recycled is worth

and and you know with margin and that's what you fund and then we still take the energy bars and

you know they get recycled into a new thing but the but the business driver is that you Travis

want to see your energy bars recycled it's not about what we can sell energy bar plastic for we

can sell it for something but it's not the thing that sort of you know wags the dog so so you are now

and Krippy if I'm wrong trying to understand yeah you are now basically getting paid to source

materials to build new products from which you also sell and make money on something like that but

let me give you the equation right okay so let's take something like just coffee capsules so I

happen to know numbers top of my head coffee capsules let's say they're the aluminum ones right so an

aluminum coffee capsule is 3% aluminum and 97% wet coffee by weight once it's used like that's

sort of the makeup so if we're gonna let's say collect a bunch of coffee capsules right and you know

like a chunk of them like maybe a big garbage can a bag of them it probably costs about 10

dollars to do the collection that is you know picking them up from the consumer or a retailer sorting

them all that it probably then costs another five dollars to take those and and shred them and

separate out the aluminum from the coffee and the wet coffee we have to pay a composter to accept

that's in that five dollar cost then the only thing that is sellable there is say the aluminum

which in that equation is about 15 cents so it goes 10 dollars a collection cost five dollars

a processing cost minus 15 cents of say aluminum value so that would be 14 dollars and 85 cents

we add some margin to that and that's what say an espresso pays or a curry or a you know

Tosimo the capsule producer or maybe a retailer pays it who sells capsules or maybe an office

pays it who uses coffee capsules in their system or a consumer what someone you know has to pay that

so the output is has some value but I just want to put the proportionality right that it's usually

like a subsidy or you know we're about to recycle our billion cigarette butts cigarette butts

we're almost at a billion yeah having been collected and recycled so take a cigarette

butt right it's made from ash tobacco paper and the filter is cellulose acetated type of plastic in

fact in your eye glasses the frame is cellulose acetate it's the same plastic as an example

so again cigarette butts expensive to collect then we got to shred them clean them separated all

out the ash tobacco paper is composted so we have to pay a composter to do that and the cellulose

acetate it's worth something but it like offsets the cost by a percent maybe two yeah and then

and then you what do you do with the materials once you've like extracted the value from them

well so once we have like say a pen recycled into a bunch of metal and plastic as an example

our general process for let's say more than 90 percent of the volume is we sell it as a raw

material to manufacturers right who they take it and make a chair from it or watering can or a

drainage pipe or whatever in some cases though the manufacturer who's funding it says wait a minute

I want to do something special with that waste which we love more because it becomes intrinsically

more circular so it could be they might buy the material back from us like pilot pens in Japan

they take the pen plastic that we recycle for them buy it back and make it into new pens

and it creates the world's first pen from pens or with asic shoes we make a shoe from shoes right

where they or it could be even not necessarily closed loop like with proctor and gamble

we collect their waste then with them for the summer Olympics like for Tokyo and Paris and

you know soon you'll see it coming up again we've made all the Olympic podiums from this type of

waste so it could be or with keels which is like a cosmetic store we in Korea we take the keels

cosmetic packaging and make it into the store fixtures and that's maybe about 10 percent of the

volume is when the stakeholder funding says hey wait a minute I want to direct that waste in some

cool way dude this is awesome man I this is why I love this is why I love entrepreneurs I love

I love that you were able to take the just the initial philosophy that you came into it with when

you were 1920 just being like hey why how how come people are only giving and being philanthropic

after they already make their money and is there a way that we can potentially like do good and do

well at the same time and then starting with fertilizer and then and then being nimble enough to

recognize that this was not going to be a sustainable business long term you know I'm just some

I'm I'm I'm I'm a big fan bro you you've earned a new fan so I appreciate the work you put

now into the world where can people go to get more from you man yeah so our website is

terricycle.com check out the lots of information there you also find me on LinkedIn if you want to

get in touch with me but those are two great starting points and I would say one thing if you go to

our website there's a lot of free services right this is free because companies are funding them

take advantage of those before you use any of our paid services right so first look at all the free

stuff we offer and then if you can't find something free then maybe consider buying one of the

terricycle.com that's t-e-r-r-a terricycle c-y-c-l-e terricycle.com or at terricycle instagram

facebook and linkedin mad seriously seriously this one of my one of my favorite episodes in a long

time dude this is really cool to to learn about this story time I appreciate you taking the time I

know you're a busy guy so do not take that for granted everybody else tune in remember money

only solves your money problems but it's easier solve the rest of problems with money in the bank

so let's start there here on the Travis makes money podcast thanks for tuning in catch next time

peace hey i'm josh speagle host of the podcast lunatic in the newsroom if you enjoy journalism that

drifts into mild panic wild overthinking and a guaranteed nervous breakdown lunatic in the newsroom

is for you it's news like you've never heard before the only newsroom with a panic button

you'll laugh you'll cry and gasp and horror as the show spirals completely out of control it's

not just news it's emotionally unstable lunatic in the newsroom listen today