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Worm poo in plastic bottles: Get rich and save the world

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(CNN) -- Add heaps of red worms to mountains of raw, rotting garbage. Then collect the worms' feces, brew it into a liquid, and squeeze it into a used soda bottle.

Sound like a twisted fourth-grade boy's concoction for messing with his sister? Not quite. Rather, it is TerraCycle's recipe for success -- as a booming, eco-friendly fertilizer business.

"We're not doing this to help save the environment," said co-founder and CEO Tom Szaky. "We're doing this to show that you can make a lot of money while saving the environment."

It does that not only by avoiding excess waste, but by embracing others' throwaways -- from the organic material fed to its hard-working worms, to its used plastic packaging, to the once discarded desks and computers in the firm's Trenton, New Jersey, headquarters.

The nonprofit environmental group Zerofootprint recently recognized TerraCycle for having "net zero" negative impact -- the first consumer product to earn that distinction.

"Garbage is all opportunity," said Szaky, noting that TerraCycle's new factory (with the worms' help) will consume all the company's office waste. "It's a way to do the right thing, and make a lot more money off it."

After a somewhat rocky start, TerraCycle has emerged as a model of "eco-capitalism." Growing between 300 to 600 percent annually since its 2004 market debut, Szaky said he hopes that, by the middle of next decade, TerraCycle will be a $100-million enterprise and oust Miracle-Gro as the world's top fertilizing company.

This unique business takes its cue from Szaky. The Princeton drop-out, born to Hungarian parents and raised primarily in Canada, said he doesn't consider himself an environmentalist, admitting he doesn't eat organic food or drive a hybrid car. Yet he believes strongly in TerraCycle's mission, his passion helping to attract similarly enthusiastic, if noticeably older, employees.

"People ... enjoy being part of a company that can make millions while saving the world," said Szaky, 25, who started four Web-related businesses as a teen. "It's all about the excitement of growing something ... And I have a factory to play with. It's so much fun."

Selling the dirty, eco-friendly dream

The fun began in 2001 in a Montreal basement, where a friend showed Szaky his plants thriving on worm excrement. Returning to New Jersey, he joined up with fellow freshman Jon Beyer to dream up a product that used worms and garbage to make all-natural, inexpensive fertilizer. The two entered Princeton's annual business plan competition and finished fourth -- out of the money, but not without hope.

Being a 20-year-old trying to raise funds "for worm poop was really tough," Szaky said. He, Beyer and a few volunteers spent one summer shoveling dining hall scraps teeming with flies and maggots and concocting their brew. "We didn't have too many friends at the time," Szaky joked.

While largely striking out with venture capitalists, Szaky tapped into his and his friends' savings, got backing from a few "angel investors" (who more than once rescued TerraCycle from insolvency), and won several business plan contests.

"My job really just became making investors, clients and customers out there believe in what TerraCycle stood for," Szaky said. "Every time someone says it's not possible, that's just more fuel to make it work."

After placing first at the prestigious Carrot Capital Business Plan Challenge, Szaky rang the NASDAQ stock exchange's opening bell and formally dropped out of Princeton. Beyer stayed in school. Yet Szaky ultimately turned down the $1 million prize, unwilling to dramatically alter TerraCycle's mission or direction.

'The world's biggest worm poop company'

That was mid-2003, with TerraCycle still desperate for money. Fortunately, a relatively quick $1.2 million infusion of investor cash helped the firm launch its product and rake in just under $100,000 the following year.

In 2005, revenues soared five-fold as TerraCycle's signature fertilizer debuted in Whole Foods and Wild Oats, as well as Home Depot and Wal*Mart locations in Canada.

This growth came as TerraCycle attracted new -- and, per Szaky, often underpaid -- talent and refined its products and daily operations.

Many of the breakthroughs came out of necessity, conveniently married to the pro-environment, anti-waste cause. The two core components are worms -- which eat, excrete and procreate freely -- and similarly cheap, all but omnipresent organic waste.

When short on cash, TerraCycle decided to place the liquid fertilizer in used, plastic soda bottles scooped off the streets instead of buying new or recycled bottles. Nowadays, the company recruits scores of church and student groups, plus Home Depot shoppers, to collect soda bottles, and its new potting mix will be packaged in reused one-gallon plastic milk and water containers.

Even the spray tops are half-price leftovers from other manufacturers, and the boxes used to transport the bottles are cast-off misprints. (All labels, however, are custom-made.)

"We want to try to bring extremely eco-friendly products out there, but not make them more expensive than the current competitors' [products]," Szaky said, calling the tactics cost-effective and consistent with TerraCycle's mission. "If organic and eco-friendly products can do that, that's what is really going to make them mainstream."

Placing 30,000 gallons of worm fertilizing brew into 50,000 bottles a week, TerraCycle products can now be found in 7,000 locations, including CVS and domestic Home Depot and Wal*Mart stores. Szaky estimates 2007 revenues -- fueled by expansion into Target and elsewhere -- may jump from more than $1.5 million in 2006 to $5 million.

"There are so many problems, so many mistakes we've made. But every time you just learn from it and keep going," said Szaky. "When we have no other choice and we have to come up with a way to solve a certain problem -- if people just commit themselves to it, be creative or think out of the box, the solution is almost always there."



Worms

Red worms and garbage are the keys to TerraCycle's fertilizers, which are packaged in old plastic bottles.

FACT BOX

Tom Szaky was 19 in 2001, when he and Princeton classmate Jon Beyer dreamed up what would become TerraCycle. The following is a year-by-year look at the company's history:

2001: Idea is born to mass produce worm-centered fertilizer; Szaky and Beyer place fourth in Princeton business plan competition

2002: Summer spent soliciting funds, shoveling and brewing worm excrement

2003: Win $1 million Carrot Capital business plan prize. Money turned down, yet individual "angel investors" contribute $1.2 million

2004: First TerraCycle products become available, with annual sales totaling just under $100,000

2005: Sales near $500,000 as Whole Foods, Wild Oats, plus Home Depot and, Wal*Mart in Canada begin carrying TerraCycle

2006: TerraCycle products available at CVS and domestic Home Depots and Wal*Marts, with revenues reaching around $1.5 million

Sources:Tom Szaky, TerraCycle

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