How Tom Szaky and TerraCycle built a global recycling empire

By Marjorie Preston

Photography by Mitro Hood

His story sounds like a frat-house comedy, in which a shaggy-haired Princeton kid discovers the recipe for totally awesome pot, and turns the idea into a business. His secret: fertilizer made from worm poop.

Hilarity ensues. The young entrepreneur harbors thousands of wiggly red worms in a box in his dorm room. He scavenges for garbage to feed them, and beseeches university officials for permission to mine dining-hall Dumpsters. He plows his savings into the zany project, borrows from family, and even taps friends for their bar mitzvah money. He goes so broke he ends up eating Dumpster food himself. Finally, he enters his lowly product — a hyper-potent plant food packaged in used soda bottles―— in a nationwide business contest. First prize: $1 million.

At a swanky dinner in New York, dressed in his usual jeans and T-shirt, our hero is snubbed by his fellow finalists, and almost leaves early — until his partner reminds him there’s free food. He sticks around, and in a Rocky-style climax, wins the million-dollar prize.

BUDDING BUSINESS

This is no comedy. It’s the strange-but-true story of Tom Szaky, founder and CEO of Trenton-based TerraCycle Inc., now in 21 countries, with offices in Berlin, London, Tokyo, Toronto and other cities around the world. Szaky’s first product — the fertilizer that revived a dying pot plant named Marley — inspired a multimillion-dollar recycling business built, literally, from a pile of trash.

But success would be hard-won. In 2004, shortly after winning the contest, Szaky discovered a hook in the bait: To claim his big payday, he would have to cede control of the business to its new investors and fire his existing staff. Inexplicably, he would also have to agree to downplay the most interesting, entertaining part of TerraCycle, the angle that had garnered mentions in the New York Times and Inc. magazine: the fact that it was based on garbage.

With just $500 in the bank, the 22-year-old — by that time a Princeton dropout — walked away from the million bucks. He would grow the business his way, from the ground up.

Of necessity, Szaky started small. He relocated from Princeton to Trenton, recruited an army of interns to help with the grunt work (including the worm-poop assembly line), and enlisted schoolkids to collect the plastic bottles. He sold his fertilizer to the equivalent of mom-and-pop shops, and schlepped it in the back of an old Ford Taurus station wagon.

But business grew at a crawl. A few investors helped TerraCycle survive the lean times, but Szaky was impatient for a breakthrough. He would have to think big — as in big-box retail.

BIG DEAL

After a month-long cold-calling marathon, he finally reached a buyer at Home Depot. According to a 2006 Inc. magazine profile, he showed up for the meeting in a John Deere cap with a day’s growth of beard, looking less like an up-and-coming CEO than “Ferris Bueller on his day off.” But he got the order. Szaky embarked on an extended road show, pitching his plant food to QVC, Publix, Whole Foods, Target and Stop and Shop, among other major outlets.

When Szaky landed a meeting at the Bentonville, AK, headquarters of WalMart, he and his partner Robin Tator came bearing gifts: massive, two-pound tomatoes that had been grown using TerraCycle plant food. The buyer was skeptical.

“If you don’t like what we have to offer you,” joked Tator, “you can throw the tomatoes at us.”

That broke the ice. Though the partners left without an order, they didn’t leave empty-handed. The buyer slipped them five bucks for the tomatoes, and a promise to consider the product.

Meanwhile, TerraCycle’s offbeat product and amiable anti-CEO continued to generate positive buzz. Just as a feature about the business aired on CBS News (Dan Rather called it “proof that the American dream is still alive”), WalMart placed its first order — for every one of its stores in Canada.

The team in Trenton had to scramble to fill the order for 100,000 bottles of fertilizer, but it paid off to the tune of a quarter-million dollars in sales.

BIGGER DEAL

By 2007, just as TerraCycle was gaining some traction in the marketplace, Szaky learned he was being sued by lawn and garden company Scotts Miracle-Gro. The suit was based on alleged similarities in packaging, and TerraCycle’s claim that Worm Poop could “outgrow the leading synthetic fertilizer,” AKA the market-leader, Miracle-Gro.

In his 2009 book, Revolution in a Bottle: How TerraCycle is Eliminating the Idea of Waste, Szaky admits he was unnerved by the suit. But when the David-versus-Goliath story hit the media, the potential disaster became a catalyst for growth. During a six-month legal wrangle (TerraCycle ultimately settled with its billion-dollar competitor), he estimates the little green plant food manufacturer got more than $5 million in free publicity, including 30 million media impressions and articles in the Wall Street Journal, Businessweek, the New York Times, San Francisco Chronicle, and even BBC World News.

But Worm Poop was just the seed of a much bigger idea, one that has sparked a revolution in the way big business thinks about waste disposal.

“We began as a company that’s trying to eliminate the idea of waste,” says Szaky. “After growing in four years from zero to $3.5 million selling worm poop in a soda bottle, we started expanding, looking at other products we could make from garbage.”

Bypassing traditional recyclables — cans, bottles, paper, metal — TerraCycle took on a much bigger challenge: trash that has long been considered unrecyclable, like polypropylene snack bags, aluminum pull tabs, plastic toothbrushes, individual coffee capsules, ballpoint pens, tape dispensers, and countless other products. Because the overwhelming majority of waste costs more to recycle than to dump, companies and communities have little incentive to do more than trash their trash, either by landfilling it or incinerating it.

THE HALO EFFECT

If the stuff is worthless to begin with, and even costs money to recycle or upcycle, what exactly is TerraCycle peddling? For corporations, it starts with a good feeling, but ends at the bottom line. Consumers care about responsible corporate practices, and reward them with brand loyalty.

“If I went to Staples and said, ‘Would you like to do binder recycling? It’s the right thing to do,’ they would say, ‘Probably not,’” says Szaky. “If I go in and say, ‘Would you like to do binder recycling? It’s the right thing to do, it gives you business value, drives people to your store and does other things you want to accomplish,’ they would say, ‘Absolutely, enthusiastically yes.’ We find that when a brand brings a recycling program to their waste, their market share increases dramatically.”

The program has attracted scores of stakeholders from major corporations (Colgate, Procter & Gamble, L’Oreal, Nestle, PepsiCo, Kraft Foods, the aforementioned Staples); to city governments including New Orleans and Vancouver; and thousands of other manufacturers, retailers and factories, along with small groups and even individuals.

“You have to combine the environmental issues with cost issues and also reusability issues,” says Ernie Simpson, global VP of research and development. “Lots of guys go into this and think companies will simply buy a product because it’s recycled. But there is always a cost-performance balance that has to be recognized in the recycling business. … If the cost is too high and the performance too low, you can’t sell it.”

To identify new potential partners, the company gets boots on the ground, says Albe Zakes, global VP of marketing. “We send interns to supermarkets and have them go up and down the aisles and write down different kinds of packaging that are non-recyclable. We target those companies, saying, ‘You have a non-recyclable packaging format. TerraCycle has a solution for you, where your consumers can earn money by collecting it and you’ll get lots of great PR. We’ll do lots of great social media for you, and you’ll get attention for taking ownership of your packaging.’”

Collection programs known as Brigades accept the materials and pay to ship them. In some cases, Brigade members can get redeemable “points” or cash that can be donated to nonprofits and schools. In the U.S. alone, 75,000 schools use this platform to collect things like drink pouches, pens and glue bottles. “We’re also in thousands of hospitals, gathering plastic gloves and safety equipment,” says Zakes.

SOLVING THE PROBLEM

Each month, TerraCycle repurposes millions of pounds of raw materials, giving them second life as park benches, flower pots and trash cans. Its merchandise line includes rain barrels made from Napa Valley wine casks, backpacks made from Capri Sun pouches, handbags woven from Chips Ahoy and Oreo cookie wrappers, and iPad cases made from used canvas postal sacks.

With TerraCycle, Szaky has cornered a market that he actually created. “I’d like to see a lot more competition and a lot more innovation,” he says. “What’s sad to me is that the whole garbage industry is ridiculously uninnovative. The cool science types don’t go work in waste management. They go work at Pfizer, Coca-Cola, Apple, Google … At TerraCycle, we can be ridiculously innovative because no one else is even trying to invent anything.”

His business model — offering environmental solutions that actually appeal to big corporations —has been hailed by Ben Cohen, co-founder of Ben & Jerry’s Ice Cream, who says TerraCycle is “doing more than selling good green products; it is changing how manufacturers, retailers and consumers treat their waste.” Aveda founder Horst Rechelbacher said “ecopreneurs” like Szaky “will revolutionize and save the economy and planet’s future.” Deepak Chopra has called Szaky a “waste pioneer and an eco-capitalist” who is “tackling a seemingly unsolvable global problem.”

But it’s not one man’s problem to solve, or one company’s, Szaky says. It’s the job of consumers, who cast their votes each day at the checkout line. “It’s a very aggressive vote because companies are in the business of figuring out what you want and giving it to you as cheaply as they can. We need to buy more durable things and keep cycling those things in our economy. If we want to live in big houses, drive lots of cars and buy everything in disposable packaging, then this will never stop.

“We have to take that on as our own individual fight,” says Szaky. “It’s up to us, how I shop tonight and how you shop tonight.” CEO

Marjorie Preston is a freelance writer based in Media, PA. Contact us at editorial@smartceo.com.

FROM IVY LEAGUE TO INNER CITY

When TerraCycle CEO Tom Szaky relocated his headquarters from Princeton, NJ, to the state capital of Trenton, he moved 20 minutes down the interstate — and a world away, to a city plagued by poverty and gang violence.

To prove that he (and his mostly white upper-class crew) came in peace, Szaky told local graffiti artists to consider his building their canvas. TerraCycle headquarters, set in the shadow of a gothic state prison, is notable for its vividly painted walls; each month, the artists come back and repaint the place.

It’s just as colorful inside. The lobby is furnished with cast-off couches upholstered with old men’s suits and silvery juice pouches. The floor is Astroturf covered with carpet remnants. The space is lit by chandeliers covered with old film spools and coffee canisters. There are no cubicles and few dividers; offices are separated by “walls” of hanging plastic bottles. Tables are made of old doors (complete with doorbells), stacked on top of wine barrels or secondhand file cabinets.

At lunch, employees can relax in a courtyard covered with playground filler made of old flip flops and wine corks. Here, everything old is new again.

“You’ve gotta walk the walk,” says Albe Zakes, global VP of marketing. “Everything in our office is made entirely out of garbage, and it’s become a huge PR opportunity at absolutely no cost. We have people come here to shoot videos. Ladies’ Home Journal did fashion shoots down here, and the New York Times put it on the front of their design section a year ago.”

TerraCycle also hosts an artists-in-residence program with studio space where artists can live and work, as long as they make all their stuff from garbage. The unorthodox workplace is even the subject of a reality show, “Human Resources,” now in its second season on Pivot TV. In a 2014 review of the series, the New York Times noted, “For the disgruntled millennial bartender or office assistant, it is evidence that it’s still possible to find meaningful work in a relaxed but challenging environment.”

“It’s a cool place, very laid-back and fun,” says Darshan Alatar, of TerraCycle’s design team. “We have couches around the office so people can take a breather, but no one ever really does — it’s relaxed and stressful at the same time, but nice.”

The crazy workplace “never gets old; I still find it dazzling on a daily basis,” agrees Daniel Rosen, the company’s VP of administration. “When I stop to think where I could have been, in the basement of some law firm instead of choosing where I could make my mark …” He pauses. “It’s open and loud and it can be chaotic, but you feel the energy, and that inspires you and motivates you to give everything you’ve got.”

THE ALCHEMIST

Tom Szaky created a socially responsible, multimillion-dollar business that gives new life to old trash. To understand where Szaky is coming from, it helps to know where he came from.

Born in 1982 in Hungary, the son of physicians, he lived behind the Iron Curtain until 1986, when the Chernobyl nuclear accident sparked riots over contaminated food. Taking advantage of disruption at the border, Szaky’s family fled, and moved around Europe before immigrating to Canada, where Szaky lived until he enrolled at Princeton University. Early on, he discovered that, though his story began in a former communist stronghold, he was a born capitalist.

“I left a country where entrepreneurship is not even allowed as an idea,” he says, “and landed in the heartland of capitalism. Here entrepreneurship is celebrated. It’s the American dream.”

Szaky started young to fulfill that dream, launching a web design firm at 14 that grossed $30,000 a year. Next, he tried “a bunch of dotcom ideas that never panned out,” he says. “But I learned a lot about legal stuff, human resources and how to raise money.”

The seed of TerraCycle was planted early, says Daniel Rosen, VP of administration at TerraCycle and Szaky’s boyhood friend. “When Tom was 7 or 8, he and his father found a bunch of TV sets in a Dumpster. Where they came from, this would have been considered a luxury good that only a few people could get their hands on. They took them home, rewired them and made them work again. Thanks to the guidance from his parents, Tom sees value in what’s been forsaken.”

Szaky has been hailed as a standard-bearer for social entrepreneurship. But for him, he says, business came first, followed by environmentalism.

“I started to think about the purpose of business back in high school. Making money and being a business owner was pretty awesome, but also a little shallow in a way. It gets old if only the margin matters, but everything I was learning was that the only purpose of business is profit. I don’t want to devalue the idea of profit, but is that the reason we exist?”

On his company website, Szaky writes that his goal as CEO is to “maintain modest profitability and to reinvest as much capital as possible, increasing compensation, hiring more employees, and adding more tools and resources to deliver our services in better ways.”

That strategy, he continues, should lead to stronger growth, more revenues and profits, and of course, “more impact.”

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