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Jim Barrood: All right. So Tom, tell us about your journey. You can start in high school or college.
Tom Szaky: Sure ... both of those are good starting points.
Yeah. So I'll give you guys like the accelerated version of the past. I've been running TerraCycle for twenty-five years. I've always loved entrepreneurship from a very young age.
Started my first company, it was like, web design, nothing super special, but back when I was fourteen. Ended up coming down here for college, went to Princeton and for me, maybe one of the most pivotal turning points from a love of entrepreneurship to really thinking about purposeful entrepreneurship, which is what TerraCycle has been very much about.
I remember very clearly one of the first classes I took here was Intro to Econ. Professor gets up on stage and asks, "What's the purpose of business?" Very appropriate sort of opening question for an opening class like that. And the answer she was looking for was maximize profit to shareholders.
And it felt a little incomplete, it bothered me a little bit. And where I ended up thinking about this for a while, where I ended up landing, at least it's been my philosophy, has been profit is critically important, right? Without it, we're dead, and with it, we flourish and have longevity.
So it's critically important, but it's more an indicator of health, right? Just like health is critically important. If we're not healthy, we're not here. And if we are, we, can make... have an effect, do things. But maybe if you frame it that way, it leaves room for the, what I view as the purpose for how does a business benefit as many stakeholders as absolutely possible.
One of which, of course, are shareholders, but it's not the only one. And so I had this idea floating in my head and for me TerraCycle has been really a manifestation of a lifelong sort of interest in the topic of waste. And I'm really interested in garbage as a topic because it is, one it's highly purposeful to solve, right?
So it's something that solutions to it, are great. It's something that we all need and all those, the plants, animals, everyone needs it. But the fascination part beyond its purpose is that it's filled with all these crazy anomalies, right? For example garbage is the only- material in the world that we are willing to pay to get rid of.
And in fact, that's the legal definition of garbage in some countries, like in Japan. That is the legal de- When is this garbage, right? I was actually on with a German lawyer just because we're dealing with this in our German division. At what point is this not a product? When is it waste? And then, because the moment it becomes waste, it's governed by different rules, right?
You can ship it differently. You can do things with it differently versus when it's a product. Now, I could... This is mine. I bought this, right? I can own this, cherish it for a very long time. I could give it to you. You could enjoy it. In some countries, it's only waste if I'm willing to pay you to remove it from me, right?
Or isn't it interesting that everything we possess will be property of a garbage company ninety-nine percent of which within the year of purchase. But everything will one day be legal property of a garbage business. For how big that is of a concept, isn't it wild that garbage is also the least innovative industry per dollar of revenue?
And it goes on with all this weirdness in it because it's a it's not a natural concept. So that was the spark, and everything we've done, and I'll just give you a little tour visually in a quick moment just to give you a sense of what, what this all looks like, has been thinking about how to use business to solve for waste.
And to give you a sense of the maybe the journey. I'll do it that way. But because I can't see my slides on the screen, I'm going to have to do it in a not as beautiful view. Maybe here's a good way to... we'll do it here. So maybe today, TerraCycle, what are we twenty-five years later?
We're a global waste management company. We're just under five hundred employees, about a hundred million in revenue. We operate in twenty countries. We're headquartered in Trenton, New Jersey, but, a chunk of our staff there, a chunk spread out across the US in different locations.
And then, this is where our geography is today. Everything we try to do has two major theses to it. One is it's about elevating waste up the waste hierarchy. So the waste hierarchy, if you think about circular economy, starts at the very bottom, which is this idea of a linear economy where we take, make waste, and the very worst way to waste would be littering.
Better than littering is put all the litter in a pile. That's a landfill. Better than landfilling is to burn that, maybe get some caloric value or energy value. Then better than that would be recycling. Better than that would be say, upcycling. Better than that would be reuse, and that's the sort of how you elevate up the hierarchy.
The types of things that we do to do that at the very bottom here, you'll see eliminate informal disposal. In many countries around the world, especially emerging countries, like this is in Bangkok thirty percent or so of the waste generated ends up as informal disposal, which is just really a fancy word for litter.
So one example project, and that's the only thing we run as a public charity. So we can also, if you guys are interested, talk about how do you deal with purposeful entrepreneurship from a nonprofit context or a for-profit context, because we are both. We are a thriving for-profit, but we also do some work as a 501[c][3].
So that work is done is you can see pictured here, we run Bangkok's biggest river cleanup apparatus. So a lot of the waste, in the city will get washed out, during the the monsoon season, end up in canals, rivers, in the ocean, and we try to clean up as much as we can and capture it.
Above that we have our recycling division, where the goal is that we collect and recycle those objects that are not locally recyclable. So we are the world's largest coffee capsule recycler or largest cosmetic recycler or everything from laboratory consumables like centrifuge tubes to bicycle helmets and truly everything in between, about half B2C, half B2B. And if you Google TerraCycle, that's what our-- that brand is very much known for. And that could look like... Here, I'll have some better visuals for you guys. But that could look like cigarette recycling in over a thousand cities. I think that's Vancouver. It could look like flexible film recycling.
This would be, like, outside Shoprites. It could be guitar string recycling, flip-flop recycling, cosmetic recycling. I think that's in France. Toy recycling, that's in Australia. Cosmetics, dirty diapers, that's in Holland. Credit card recycling in the UK. Blister packs. You name it. Just goes on and on.
Then above that, what we think about is it's not just about how do we collect and recycle things, and truly, like anything from, advanced filtration devices with Cytiva or halogen tubes, one of the world biggest lamp recyclers in the US is one of our facilities in Chicago. All the way to then how do we help make things from waste?
So it could be fun, comedic things, like this, all the way to Frisbees from dog food bags. Bicycles from Unilever deodorant containers. This is exercise parts made from Nike shoes in Korea, all the way to playgrounds from toys to really fun things. We built every Olympic podium since the Tokyo Olympics.
This was out of, We were cleaning up the the rivers to get ready for the Paris Games, and that's the waste was made into the Olympic podiums, all the way to some really fun technical stuff. This is the, for example, the world's first pen from used pens. That's in Japan. Or this is ASICS' first shoe made from itself.
So our role here is we collect the shoes, we deconstruct them, we reformulate them into a new material that then ASICS can just take and plug and play right into its production and make new shoes. And then from there about ten years ago, we started thinking what's beyond recycling, right?
Because if I recycle something, if you take an object like this, I would really argue it's made from three things. It's made from this particular one, plastic, so the material it's made from. Let's call that its composition. But this plastic is not just a pile of plastic in my hand. It's formed as a cup, which also costs money, by the way, to form it.
That's its form. But it's also more than just plastic in a form. It's an idea that also costs someone money. You have to invest in someone coming up with the idea. The idea of this is to hold a cold beverage, right? If, if it was scalding hot, my finger would probably-- or my fingers would get too hot, right?
It's for a specific thing. And when we recycle, we only recover the composition of something. But if we upcycle, which is pretty limited, that's like that jacket I showed you that's made from chip bags, there we're recovering everything but the intention. But even better than that is just clean this and use it again.
That would be where reuse comes in. And so ten years ago, we started really thinking about reuse much, much more. And that's like the most forward thing we do is we developed a platform called, I'll just show it to you. Sorry, it's not going to be as beautiful as me putting up the slide formally.
Called Loop. And basically, we work with hundreds of CPG companies who've created packaging. This is Nestle, or that's P&G, through our platform, where you can now... That's Clorox wipes, that's Cascade, Dish soap, all brands you probably know. It's been very interesting as a ride. We launched it this was in Davos in two thousand nineteen with the CEOs.
It was actually a really interesting press conference because you have the head of Greenpeace, you can't see it here, on stage with the CEO of P&G, Pepsi, and we were all together announcing this thing. And just the day before, Greenpeace had done an attack on P&G. So it's like getting this all to be organized and happen in that moment was quite something.
But we ended up launching pilots all over the world on Loop. It-- it's, it's-- If you guys are interested in that, we can get into more detail. That's why I'm trying to go quick, so your questions can really fuel where we take our dialogue today. But m-- very fascinating experience with launching pilots in Canada, the US, Japan, the UK, France.
Very challenging, but where we landed is we now run France's biggest reuse system. So it struggled here. We couldn't get it to work here. If that's interesting, I can explain why, but today in France, across most major retailers, you can go in to a supermarket, and it would on shelf, hundreds and hundreds of products look like this.
These are all fully reusable, like Nutella to whatever, whiskey. Over four hundred products where when you buy them, you just pay a deposit. So if you buy that Nutella, you pay whatever, twenty cents, or if you buy the the Oasis, maybe five... Whatever the deposit is. Then when you're done, dirty, no sorting or anything, you can throw it into one of our bins at any store.
You get your money back, then the packaging is sorted, cleaned- Yeah ... and goes right back to the manufacturer who refills it, right back on shelf, and there is no garbage whatsoever. And, this is how propane tanks run here.
It's how beer runs in Canada. If anyone's of a certain vintage, that was the past, right?
But this is like how do we modernize that and make it work in, in, in today's, mass market environment. That disappeared in almo- in almost everywhere in the world. And even in Ontario, Canada, they're canceling the reuse beer system very soon. So that's where we are now.
That's like our future, if you will, and where things go. But that hopefully gives you a whistle-stop tour from of what we what we do today. And it's all around this idea of how do we elevate waste move it up the hierarchy, and try to only do what traditional garbage companies do not do, right?
We try to fill that gap. And that's where we try to play. We don't do things that where there's lots of other offerings available because they're already there and, people can choose those.
Speaker 10: So let's just build- Yeah ... on the Loop-
Speaker 12: Yeah, please ...
Speaker 10: experience- Yeah ... because that's fascinating.
Speaker 12: Yeah.
Speaker 10: I remember when you first launched that I asked you to bring me to Davos with you- Yes. Yes ... with you.
Speaker 12: There you go.
Speaker 10: You did not. That's right.
Speaker 12: So- You were invited. I just... Let me turn that off.
Speaker 10: So it's subsidized by France. I don't want to go, you don't have to go through the really reason- Yeah
it didn't work other places, but what is the-
Speaker 12: It'd be interesting. You want to hear why it didn't work?
Speaker 10: Yes, go ahead.
Speaker 12: Yeah. Okay. So let me maybe give you pitch version one, how we pitched it at the beginning, and I want to... I'll contrast that to how we do it now because it's a huge foundational learning.
And the essence of this, why I'm excited to share it with you, like the journey of the challenge is the biggest lesson I've learned in purposeful entrepreneurship, and what I mean by that is when you're trying-- Whether you're internal to an organization and you're trying to make it better, you want this building to, to put solar panels up.
You want everything to be as forward-thinking. Only have vegan food. Come up with whatever version that is for you, if you want an organization to be purposeful, you could d-do that internally or what I do as an external, come in and try to influence. And generally speaking, the starting point on doing that is saying...
let's take diaper recycling as an, a simple example. Diapers make up three percent of landfills. So one way you can go into a diaper company, and that's usually the starting point for a social entrepreneur, is to say, "Hell, Pampers, Huggies, three percent of your production ends up as, three percent of landfills are your product.
I finally figured out how to collect them. I finally figured out how to recycle them. Can you now fund solving this externality?" And that's not how the chess piece moves, right? So if you go in with that type of approach at most you're going to get-- If you find a really cool person in the organization, you're going to get a symbolic amount of funding for a very short period of time, and that's all it'll be.
But if you really empathize with how the chess piece moves, what I mean is what is the goal of the org? What's the goal of Huggies is to increase its market share. Do more revenue with less work. That's how water flows in businesses, right? I want to make more money, revenue, and do less work, meaning more profitability, and that's how every decision flows.
So if you instead go in and say, "Wait a minute, I can launch diaper recycling, and by doing so, increase your market share," suddenly you can unlock and make these programs huge and long-lasting and so on. Like that diaper bin I showed you, that's how it does it. You can put in any brand of diaper. It'll weigh it for you and send you coupons into, in that example, Pampers, and that market share shift funds the cost of diaper recycling.
And everyone wants to do the right thing instead of benign things like a TV commercial, and suddenly that's live in three countries. So backdrop to Loop. Let me give you the way we pitched it at the beginning. Ba. Let me go... The major insight at the beginning, these are actually the original slides, was this Oh, sorry.
Let me start here. Okay. Back up until... Garbage, that's another weird anomaly, was invented in the '50s. I want to be super clear. Garbage is a seventy-five-year-old idea, okay? There's only two, two things happened in 1950s that really begot waste. One is the things around us. Imagine if we were in this room right now, in 1940.
The chair we would be sitting on would be made from wood, some metal pieces. Our clothing would be like, what? Cotton, wool, maybe silk. And if we were eating food, which we are here, it would be, certainly on its own package, like an apple with a peel or something like that. Or if it was milk, it would've come from a milkman.
All those things are things that you can throw into nature, and nature has systems for it, right? It would thank you. It would be nutrients for the forest. Now, take that exact same thing now, seventy-five years later. The chair we're sitting on is all advanced materials, right? This is something nature doesn't have systems for.
Look at all the way our food came, all in materials that are advanced and amazing, but nature has no systems for, and sixty percent of our clothing is polymer. It's either embedded or it's like nylons and whatnot. That came into the nineteen fifties, and the other thing that really changed is disposability came onto the scene.
So back in the milk mandate, it wasn't just milk, it was also motor oil and many things, came in reusable packaging, and the packaging was a asset to the manufacturer, meaning that they were financially motivated, the milk company, to make that thing go around as many times as possible. Because the more times it went around, the more you could depreciate the cost of that bottle over the uses.
And if it broke, whose problem was it? The milk company. That's why you can still buy these at flea markets today, seventy years later. Nineteen fifties rolls around, by the way, and this is a positive photo from the nineteen fifties celebrating the virtue of disposability, which is convenience, and you don't have to wash the dishes.
You can throw them away. But a strange thing happens. The package becomes a cost, the cost of goods sold to the manufacturer. And think about all the packaging on the table right now. That's all your property, right? You own that Sprite container, right? Y-you didn't just get the juice, you got the aluminum.
Double win, right? But do you want that now that it's empty, right? I presume you don't. And that is really a weird thing, that we own this stuff when we don't want it. And what's the big mega trend that gets created is the goal of the manufacturer is to keep making the investment in that as low as possible.
So was birthed the biggest mega trend, light weighting, and that actually makes things less recyclable constantly, because recycling is just urban mining. So we went to manufacturers and said, "Wait, if we go back to the way it was, you could move from a cost of goods sold on your package to an asset," oops, "to an asset, and that would allow you to make the most unbelievable product designs you could possibly imagine."
Because instead of having to design them for one use from a cost basis, you can design them for many uses. And that's how we got two hundred massive CPG companies. And look at how gorgeous these are. Isn't that the nicest bottle of Tide you have ever seen in your life? Or Clorox or Cascade or Häagen-Dazs?
These are like museum quality things. And we got all these companies to join. Off we go, right? That's why it ended up launching at Davos, became the number one sustainability story in two thousand nineteen worldwide really big blast. And what was really fascinating is then we said to retailers, "Let's now launch this."
And, luckily, we put lots of chips on the roulette table. We said, "Let's try, in each major region we're in, at least one or two markets," hence Canada, US, UK, France, and Japan. And we went to the retailers. Oh, I remember this right. Okay. And they said wait. Let's make sure that our customer actually cares about this offering."
So we solved that by launching e-com platforms for everyone. So you can see it's in the Walmart look and feel or the Loblaw look and feel or the whatever, Aeon in Japan look and feel. We launched e-com stores where people could buy these reusable packages, and we'd ship it to them, pick up the empties, wash them, get them around, and so on.
And it worked great. All the health and safety, which is a huge lift. Imagine baby food. You don't know if once this has gone if you took it, I don't know what you put into this. I have to assume the most horrible things that you've done to it, and I gotta clean that in a way that I can fill it with, say, baby food and sell it to the next mom, right?
And have Nestle or Danon be comfortable with that, right? So all the health and safety protocols and everything we were able to to solve. And then these guys went into in-store pilots that looked like this. Same concept, but now they're doing their thing, and this is that's Fred Meyer or in Tokyo, or that's London with Tesco.
And then, and this was the very interesting moment where we then... because w-by this point in time, we have invested maybe fifty million dollars into Loop. It's a huge investment for us. And these pilots cost us money. And so we started telling the retailers, "Look, there's no more learning.
It's the same everywhere. It's functioning. People like it. It's the same data in every country. There's no more learning. Let's start scaling." And th-and we got back from, like, all these companies saying, "No, we don't want to scale till we are forced to by regulation." That's to your question on regs.
And this has-- We forgot how the chess piece moves. Even me, who lectures about knowing how the chess piece moves, we forgot because why do brands not want to do reuse? It's not because they're, like, evil or anything. It's because if a manufacturer's primary goal is to make more money tomorrow and do less work tomorrow, right?
Higher revenue, higher profitability, reuse has a big problem. Because even if, we make in these beautiful packages, you're not going to buy two ice creams. You're just going to buy that same ice cream now in reusable, but you're not going to increase your volume of ice cream consumption. And so what's the essence there?
What a-- If you're a shampoo company, what do you really want to do is invent conditioner. And then when you've convinced people to use conditioner, then you want to invent treatment. And then when you've gotten that solved and everyone's doing step one, two, three, you want to figure out what the hell the fourth stupid thing you put in your hair.
And that's how you grow basket size. You're laundry detergent, you want to invent fabric softener and then fabric scent, right? Think every category this has happened, right? You are a toothpaste, you want to invent mouthwash. I can keep doing this, right? Always these extra things. That's what is easy way to grow incrementality.
And reuse has no incrementality, but it has extra work. At minimum, even if we simplify it, you have to be aware that used package went out in the universe, and who knows what they put in the bottle and has to come back in a way that it passes at least a health and safety standard. And so every retailer, everybody in the world said, "Hey, we'll keep learning.
We'll do ten stores, but we're not going to really scale until we're forced." And that's where France was different. France has the laws that are forcing reuse and subsidizing reuse. And that was a huge breakthrough for us in France. But we also, as well, learned w-the question was not just relying on regulation.
It wasn't just, "Hey, we're going to sit back and wait for regulation to occur." We thought a lot about, okay- If that's the truth, how do we solve this without being dependent on regulation? Because if we're only dependent on regulation, we're only going to make it work in France, where the regulation is there. And look at this environment in the US, we're far from any form of good regulation.
In fact, all good regulation is out the window, and more of it every day, right? So how do we make that work? And we realized that if the chess piece moves always in this way, then-- and we're not going to be incremental, we have to be zero work. Absolutely no work. And the way we solve that, we realized, after really carefully thinking about this, I want to try to make sure I find you the right slide because, yes. Is that if you take-- This is why for us, understanding theory has always been really important because then you can take bigger steps back. We said if you p- stack all packaging forms on a chart like this, and the spectrum is here, the most expensive per kilo or liter, like that's like a perfume bottle, a liquor bottle, like expense- wine bottle heavy laundry detergent bottle.
And then over here, the cheapest way to package things like, the way that potato is packaged There's no silver bullet. It's not like reuse is going to work everywhere. But in this bottom area, which is about one-third of what's in a supermarket shelf, the packaging doesn't have to change at all. A wine bottle is way over-designed for one liter of juice, right?
Come on. It should be in a pouch if it's going to only ever serve a liter of content and then be thrown away. Like your whiskey bottle, your, hot sauce container, your jar for pickles, all this stuff, perfume container, is way over-designed to only be used for one fill. And it turns out, in those bottom packages, you can enable reuse with next to no change, right?
At all. And when you don't change it, suddenly all the reasons that people didn't want to scale it evaporate. It completely goes away. And it turns out the reusable package becomes more profitable than the disposable one because you are trading the cost of collection and cleaning for the cost of making the new thing.
And then those expensive packages it's actually cheaper to move to reuse. And it was so interesting because the more then we empathized on not getting angry that, that people don't want to do what we felt is the right thing and further sustainability, but understanding how those the water flow in the organization and then matching that, that has become for us the biggest unlock in this overall journey.
And it was a big, very expensive, winding road, but now, a bunch of retailers in the UK have signed. You're going to see more progress of this launch throughout Europe and the UK, and then, slowly, hopefully come to this side. That's
Speaker 10: amazing. And- Is there a certain time period where they get to a threshold where it becomes break even or profitable?
Speaker 12: Oh, yeah. You want to see this. There, there's a magic for this question. And th-this is what it looks like, Lach. You see what I mean? So it's not like a new fancy bottle anymore. Everything looks very normal. That's baby food. Looks very normal. These are now fully reusable versions of those things.
But look at how traditional they look, right? It's the exact same pack. So now to answer your question, the really fun part in this is that If you think about a disposable package is just the cost of that pack. Let's just say this is a thirty-cent package. So it's the thirty cents every time you sell...
What is this? Seven hundred and fifty milliliters of gin, right? The reusable is a bit more complex, right? You have to look at what the return rate is, and I'll answer this for you if it's a low return rate and a high return rate. So at the beginning what's cool now is, we just did a bunch of liquor launches a few weeks ago in France, and the liquors that launched have just upgraded their current bottle to now be reusable, meaning that the only version available on shelf of brands like Campari and Ricard and these sort of French liquors is only the reusable version, right?
At the beginning, your return rates are going to be low, which means you're not going to have a lot of sorting and washing costs. But if you set the deposit at something more than the cost of the acquisition of the bottle, you're going to have what, a lot of what I call profit on deposit loss, right? So if you have low adaptation of reuse, the bottle becomes very profitable because you don't have to return the deposits to the consumer.
Then, as the system gets bigger and gets to maturity, your profit on deposit loss goes down to close to nothing because the bottles are all turning, but then your cost of washing and cleaning is at such scale that it's cheaper than buying new glass. So in every derivative between starting point and end point, so no returns to full returns, it's always cheaper than the disposable version.
But that only works if you keep the bottle exactly what it was before, and that sort of the, was the big breakthrough on this, and then it doesn't need subsidy anymore.
Speaker 10: Good.
Speaker 12: Yeah.
Speaker 10: I just want to... We'll get the questions in a sec. Yeah. There's a lot to talk about. But as mentioned, you raised some money recently.
Yes. So tell us how the company has evolved- Yeah ... and what's going on with that raise-
Yeah ... and what are you doing?
Speaker 12: Yeah, absolutely. We've gone through sort of three phases of capital raising, and I think the third phase will be the most interesting to the group. But just to give you context, the first phase in our first ten years, which got us from zero or from losses to profitability, that's what that really is accentuated by, was traditional what you call Reg D financing, where you have to go after accredited investors if they're individuals, basically rich people, which I think is, what is it?
Some minimum net worth or minimum yearly income. I think it's like a mil-million a year income or some-- basically rich people. The concept there is that they can withstand the loss if they make the bet and lose, right? But that means that most Americans can't invest in, in Reg D, and then you can go after venture capital, private equity, family offices, right?
And that's what we did at the beginning as a dorm room startup. For our first ten years, we did a number of rounds and reached profitability. Then the next ten years was more strategic partnership type investments. We're in twenty countries, and waste-- garbage companies are very fragmented. There's no big global company.
So Waste Connections, the biggest garbage company in Canada, bought twenty percent of our Canadian company, or Itochu, a big conglomerate in Japan, bought a part of our Japanese company. This brought in investment into our subsidiaries, which is a great way to bring in capital, but it's limited on how much of that you can do.
And then we're twenty-five years old, so we're in the next phase, and we've been doing this for five years, where four or five years ago, we first did this, and it was this Wild West. It's called Reg A investment and it's a uniquely American construct through the Jobs Act, where you can crowdfund for equity, take any investor, so it doesn't have to be accredited.
But in exchange for being able to take from the general public, you have to file with the SEC as if you were a public company. The only difference is you file twice a year instead of four times a year. But it's the same filings. You could go to Edgar and download our financials for the past five years and there's some-- you have to probably assume, at least half a million dollars of cost to get through the process and then at least a quarter million a year to do that type of reporting.
But then you can take money from the public, like through a crowdfunding mechanism. And so we did that for the first time, In 2018 to '20, so just about five years ago, and we raised just under twenty million. And it was great. Everyone did well on that. We got in capital. We were able to do some acquisitions.
We've done four acquisitions so far, and we can also talk about M&A theory if that's of interest to folks. And if you invested in that round, you would have already paid-- been paid back about twenty-five cents of every dollar you put in dividends, because we've been paying dividends every year, and your equity value, would've increased as well.
So it's not like a startup where you put in money and don't see anything until the potential liquidity event. There is this nice sort of dividend process that we've done. Now, mind you, we're I think the only Reg A company that's paid dividends every year. So it's not common in that space, but it's something that we really focused on.
And then last year we said, "Let's do this again." So we did a five million dollar round. That became the number one crowdfunding in the US last year. Did really well. And so we-- now we've opened up a seventy-five million dollar round that we're in the middle of, and that's going quite, quite well.
So if you not here soliciting investment, but if you want to see what that looks like and what it what the what we share and what the filings are, it's invest.terracycle.com. You can go there and just see, what it's all about and look at it. It's a really great way to raise capital because today, if you're out there capital raising, venture is horrible.
It sucks. There is money out there, but it is not playing. It's not investing. It's really the driest I've seen for money flow in twenty-five years of being involved in like startups and so on. And if you're in sustainability, it's a double headwind because headwind-- there's a lot of headwind on sustainability as a topic right now.
So if it's like venture sustainability, that's a tough combo today. But this whole Reg A environment has been phenomenal. And what's also interesting about it is that When you do the traditional Reg D type investment, when you go pitch investors, you're going on a roadshow. You're out there, you're pitching investors, you're in these types of meetings, doing PowerPoints and convincing investors to invest.
And then you might also have lots of discussions on the terms, right? The bigger the investor and the more hungry or the more you need it, the more they're going to mess with you with terms and do all sorts of weird bells and whistles that'll really bite you in the butt later when it comes to payday, right?
The Reg A is different. You never talk to investors. You promote it through advertising, right? Your-- What I look at with my team every day is not how they did on the roadshow, but what is the ROAS, the return on advertising spend. We do ads on, Google and Meta and all these places, which promote the brand, drives our own business, and then brings in these retail investors.
It also allows your team, like your compliance team, HR, legal, to... Or not HR, but legal, f- finance, to warm up to public reporting because they have to report to the SEC. So that's a hop, skip, and a jump to an IPO. Much easier than going from no reporting to, to a public offer. So it does that as well, and it gets you a good sense of what the retail appetite is.
So for me, it's been a phenomenal thing. And if you're raising capital not if you're very early stage, but if you're mid, it's a really interesting thing to to look at, I would say.
Speaker 10: And also this is a testament to your leadership, but also because it's a brand that people can relate to-
Speaker 12: Yeah.
Speaker 10: -that they use.
Speaker 12: Yes.
Speaker 10: It's got purpose.
Speaker 12: Yes.
Speaker 10: It's good for the environment.
Speaker 12: Yeah.
Speaker 10: Yes. And those factors also contribute to
Speaker 12: that. I think that was-- I think you asked the question, how do you raise capital for a thing like this? And what has been our truth all the way through is that our promise to our investors is it's two birds with one stone.
It's fulfills the same thing as if you donated to a nonprofit. All, but you also are going to get fiscal returns. That's why for us, maintaining profitability is paramount. It's why we really ensure we can pay dividends every year, because that's a demonstration of profitability. You know what I mean?
And that is there while everything we do is purpose-driven. So it it brings those two things together, and you get that double benefit, it's it's like an NGO donation and an investment wrapped together.
Speaker 10: Got it.
Speaker 12: Yeah.
Speaker 10: So let's just talk about what you're going to do with that money.
Speaker 12: Yes.
Speaker 10: Sure. You talked about M&A.
Speaker 12: Yeah.
Speaker 10: And then we'll open it up to questions.
Speaker 12: Yeah. Yeah, that'd be great. Yeah. We're profitable, so it's not about plugging losses, right? That's traditionally what you would do when you raise capital is fund losses till you're profitable. For us, it's all about growth because we're at the point, it's twenty-five years, so if you're in my shoes, you want to now be looking at how do you take the company public or, or sell it.
For us, we think the public market is probably our path. And so that's what we're th-thinking about a lot. And then the question is what does the public market want, right? And it wants growth, but since maybe the past five years, it also wants quality P&Ls, but four or five years, man, all ma-all that mattered was growth, and no one looked at the the profitability, which is insane.
But today it corrected, I think rightly where your fundamentals really matter, right? You have to be profitable and then grow. And so the primary use of the money is about eighty percent is into M&As, and I'll tell you our M&A strategy in a minute, so buying companies. And then twenty percent is into internal investments.
How can we accelerate this or accelerate accelerate that? And M&A is really interesting because like you mentioned that your business, your family business is three generations. Yep. And that's, by the way, incredible that it's passed through so many generations. You know what doesn't pass generations is garbage companies.
No-- because that's another anomaly of garbage. It is literally shitty, nasty, gross. In the flesh. There's no metaphor needed, it's literally that. And so the kids don't want it. And so we look for high quality, which we define as a company that's been profitable for a long time stable or growing demonstrated profitability for ten, twenty years, so really, high quality, and is doing something in specialty recycling that takes a long time to get into, requiring a lot of permits.
So things that have attracted us have been in the regulated waste space. So think, halogen tube recycling e-waste recycling, batteries all this sort of stuff. And we've done, So our strategy is we buy a company, say for about five times EBITDA, somewhere there.
The moment we bring them in, we can, with operational efficiencies, get that to a four, maybe three and a half. The last one we did is three point two. And then these companies who might have only been selling one type of waste service, let's say they've been selling battery recycling, they can now go into the place they sold battery recycling to and be like, "Do you want recycling for five hundred other waste streams?
Do you want to see..." And look, remember, everything becomes waste, right? Do you want to recycle your carpet? Do you want to recycle your tables? Do you want to recycle... anywhere you look, every object here is going to be garbage, right? And that grows their top line, and that allows us to, get our money back in Two, three years, which is a pretty good, return.
And that's the- ... what we're doing. And it's ni- It's-- We focus on these specialty ones because starting in that would require years of permits and, so we can really accelerate that that overall process.
Speaker 10: Okay, great. Yeah. Thank you. And before we open up, what was your first product?
Speaker 12: Oh, I didn't mention that. Yeah. So I'm going to show it to you because it's not in this presentation. Bear with me. Let me just pull up a different document for you guys so you can see it. But the way we began, So I remember I told you the story goes, this was like this thing about the role of profit, right?
The story from Econ 101. And that-- So my fall break freshman year, I I'm originally from Hungary, but then grew up in Canada, so my friends and I went up to Toronto. And by the way, this is not like today where you could buy pot on every corner. My friends were growing some plants in their basement in Montreal.
They were going to McGill. I'm the guy in the white hat there. And suddenly they were doing phenomenally well growing these plants, and I asked my friend, "How did you do it?" And he said, "I took organic waste." It's actually the Princeton cafeteria dining hall waste, which we had the pleasure of dealing with for years.
And he was feeding that to worms. And the light bulb for me, that was my first fascination with garbage, was, wait a minute, you can get paid for your input, and you can get paid for your output. That's pretty cool. Us- you have negative raw material costs. So we went to I came back very inspired.
The bug of being fascinated around garbage had, stu- you know, got me, and convinced the dining halls to give us their food waste, which was real pleasant, and built a machine that this was at the bottom of the campus that we installed it which you take the organic waste, put it into that sort of composting drum.
Then this was a machine that we created where it's a conveyor belt for worms. Imagine the conveyor belts go outward while the worms move out of their poop into food, like anyone would, right? And they stay in the middle if you time it and then the worm poop comes off, and we literally packaged it in used soda bottles.
So liquid worm poop in a used soda bottle, and that we then sold to Walmart and Home Depot and those sort of places. And that was TerraCycle's first five years. We were from zero to five million. And in fact, the TerraCycle logo I drew is a worm. That's what it is. And the word TerraCycle, Earth Cycle, like that's-- it's worm poop the reason we moved out of that to recycling is we realized that as a consumer product company, your business hero is the product.
And you're going to do-- make the very best product you can. And even if you make the rule it must be garbage, you're still going to be selective. So we found ourselves taking organic waste from some places but not other places, because what you feed the worms creates different poop, right? If you eat different food, you get different poop.
Even the bottles, even if they were used, we weren't taking crushed soda bottles that may have come out of a recycling facility. We had to have schools start collecting them because if they had... if you take that Pure Leaf bottle and, like step on it, it's not going to look as good, right? And it won't look good on shelf.
So we realized we had to shift over to make garbage the hero, and that's where we are today, right? And we stopped the worm poop thing. But that's how it began. Very humble roots,
Speaker 10: and is that not sold anymore at
Speaker 12: all? No.
Speaker 10: Okay.
Speaker 12: No. Five years ago, it took us one to two years to do a full transition.
Okay. That was very much like a metamorphosis. Imagine you're a worm poop manufacturing company, and you're trying to wake up as a recycling company, and you have to do all that without revenue going down, right?
Speaker 10: Wow.
Speaker 12: So on the top level, you would have never noticed, but we completely morphed as an organization.
Speaker 10: That is incredible. Yeah. Yeah.
Speaker 12: That's really incredible.
Speaker 10: Yeah. Okay. We're going to take questions. So let's keep... Say it loudly and- Yeah ... and short question and so we can get as many questions in- Yeah ... as possible. Go ahead.
Speaker 11: I have a thousand different questions, but you said you wanted to go IPO.
Speaker 12: Yes.
Speaker 11: And, one of my few things in life, like startup took an IPO, and it's the one thing I would never wish on someone- Yes
unless you're a capitalist. Having your twenty-five years of stewardship-
Speaker 12: Yeah ...
Speaker 11: whatever you want. Like, all of a sudden, everything is ninety days. And I, I- Yeah ... remember it was-- it almost killed or did kill our company.
Speaker 12: Yeah.
Speaker 11: It's an interesting... I was just curious why-
Speaker 12: It's a great question.
Speaker 11: Yeah. Yeah. I just I'm no big, I'm no big Wall Street guy, but went through that, and it just-
Speaker 12: Yeah ...
Speaker 11: crushed us because you've all you've big thoughts. You're, you seem very well-read and-
Speaker 12: Yeah ...
Speaker 11: you have a microscope, and it's a shitty-
Speaker 12: Yeah ...
Speaker 11: lifestyle being a public company. I, I was just curious why you're picking-
Speaker 12: No, it's an excellent question.
I'll tell you, because I've, I've been advised in similar fashions, right? So if you're thinking like on my end, what does an exit look like? This is not a family business, this is, the, We've raised money where we owe returns to our investors, like that's the deal we, signed up for.
And so I have two paths that are in front of me. One at, for an exit is a sale, and the other is going public. Those are the generally two, two paths. Yeah. So both are available. It's not one or the other. What fascinates me about the IPO space is that if you look at the past number of IPOs that have been true sustainability, not like a company that now has a sustainability strategy.
Where it's but it's like in its DNA, all it does is sustainability. The response from from, from the investors has been phenomenal. When Beyond Meat went public, they were about our size when they went public. They were eighty-eight million in revenue, thirty million in loss.
Now mind you, we're profitable, but same revenue.
Speaker 14: Yeah.
Speaker 12: Twelve billion market cap for many years. And I could list off ten more that- ... did exactly that. Now, all of these have corrected. Beyond Meat is now one percent of its original market share, but that's because it never made money in its life.
For every dollar of revenue, it had a dollar of loss, more or less. And that's why, we've held onto the fundamentals. We also have been reporting to the SEC, twice a year for a while, so we're comfortable with that. And that is still what we are marching towards and our-- We don't really have seasonality in our business, so our quarters look the same.
It's pretty predictable. We're pretty comfortable there. But I think there is such an appetite from in, from investors looking for true pure sustainability plays, that we think there could be something very special there, on the other end. That's at least the theory,
Speaker 11: yeah. Just, yeah. It's just I've never had a warm-hearted discussion like this in twenty years, but- Yeah ... it-- you do get all that money, but it does change yourself-
Speaker 12: Sure ...
Speaker 11: quarter by quarter though. And but being acquired, like I've acquired companies, I've been acquired a couple times. Yes.
And I've coordinated all that, and it's y-you subsume yourself into something, but it's usually there's a stability of you already have the corporate structure that's used at a quarter by quarter-
Speaker 12: Yeah ... and look, and that would be fine too. We're very flexible, right? But I think one is opportunistic, like when you're ready to do it.
We haven't been acquired, but we've done acquisitions. So you know, we're very comfortable to, with that process and so on. On the other side, it's something that you have to keep getting ready for. So we're continuing to do that, and we'll see what happens, yeah. Yeah. I
Speaker 11: How-- I love how excited you are and knowledgeable. I'm trying to- Yeah ... I really didn't know what to expect. This is like you're- Oh, good ... very compelling considering your-
Speaker 12: Yeah.
Speaker 11: Alright. Next question.
Speaker 15: So two questions.
Speaker 12: Please. Yeah.
Speaker 15: So I, I watched your CNN-
Speaker 12: Yes ...
Speaker 15: two thousand and ten, I think.
Speaker 12: Possible. Yeah.
Speaker 15: Right.
Speaker 12: Yeah.
Speaker 15: Since then, I've been following you.
Speaker 12: Nice.
Speaker 15: I've seen your work, one of the interviews. Oh, very cool. Yeah.
So I-I'm, I'm following you, and I I applied for a job just to come and meet you.
Speaker 12: Very cool. But
Speaker 15: now we just have to finalize it. Nice. But my question is, five years, what do you think really want-- what do you think this place, your company would be?
Speaker 12: Yeah. I'm, we just want to keep furthering as much as we can the volume of what we do, right? Whatever supply chains we're doing, want to make them bigger, stronger. More affordable, more convenient, like just better, and then keep innovating as much as we can, right? So it's those two things at the same time because you want to-- we want to build those, those big-- what how do we make coffee capsule recycling bigger or light bulb recycling bigger because that's the real engine that drives good revenue and profit.
And then the profit is what we deploy into innovation. Like Loop, for example, is negative fifty million dollars today, right? That's the cost of that innovation, and it's going to be a while before that recovers, and that's all paid for by the recycling business. So it's tho-- the more we can grow our base and-- That's why acquisitions.
Abridged
