TerraCycle stock is the first equity crowdfunding idea I’ve seen on InvestorPlace that I might invest in.
The company probably doesn’t need crowdfunding at all. While you can still buy shares at $100 each through StartEngine, TerraCycle stock has already issued its first dividend, $2.09 per share.
The recycling disruptor earned $3.2 million in 2019 on $27.1 million in revenue, up 35% from the previous year. It’s currently seeking $14.8 million on a $50 million valuation.
TerraCycle isn’t flying under the radar. It was called the “Coolest Start-up in America” back in 2006. At the time its main business was converting food waste into fertilizer using worms. Now it’s focused on hard-to-recycle plastic, building networks that collect packaging, process it and sell it back as new packaging.
TerraCycle CEO is the Musk of Garbage
TerraCycle CEO Tom Szaky is the Elon Musk of this garbage pile (I mean that in a good way).
Szaky was born in Hungary in 1982 and grew up in Canada. He started his company soon after finishing high school with an International Baccalaureate from what’s called Upper Canada College. Princeton was his first stop in the U.S. but dropped out to form TerraCycle. He has been running the company for half of his life.
Szaky is not a serial entrepreneur looking to sell. He’s committed to a cause and seeking to build. He has developed a TV-ready persona, complete with a mild Canadian accent.
Over the last year Szaky has signed deals with a who’s who of corporate America. McDonald’s (NYSE:MCD) is recycling cups. Bimbo Bakeries is recycling bread bags. Proctor & Gamble (NYSE:PG) is recycling Tide detergent containers. Walmart (NYSE:WMT), Target (NYSE:TGT) and Pepsico (NYSE:PEP) are also on the client list.
Szaky has produced four books about TerraCycle’s efforts. The most recent is a 2019 paperback called The Future of Packaging: From Linear to Circular, which describes what has become the Loop process. In interviews he talks about having gone “from communism to capitalism” seeking both purpose and profit.
How It Works
The big bang for TerraCycle is Loop, the system it’s launched in the U.S. with Kroger (NYSE:KR) and Walgreens (NYSE:WBA), and with other stores in Europe, Japan, and Canada.
Loop puts a 100% refundable deposit on packages, delivering products in a reusable tote. Packages are also collected in stores. It uses a “smart bin” that can scan an item and refund a deposit to a customer’s bank account. The tote gives Loop a “milkman” model, covering 400 different products so far.
TerraCycle’s latest venture is recycling Personal Protective Products (PPE) like masks. It’s one of the hard-to-recycle products for which TerraCycle uses its EasyPak system. Containers facilitate the collection of masks from places like hospitals. After cleaning and melting, the old masks are remolded to produce new ones.
InvestorPlace writers who have previously profiled TerraCycle talk about the mission as much as the profit potential. Our Josh Enomoto says the company is “saving us from ourselves,” reducing the 90% of solid waste that currently isn’t recycled.
The Bottom Line
Most technology companies grow through an “S-shaped” demand curve. Early years see low sales, the targets being hobbyists and enthusiasts. Then, a well-run company will seem to zoom through the center of demand, becoming a household name and a “must have” item. Finally, growth rates slow as the company matures at scale.
For an investor, the best time to invest is right before the consumer market discovers a company, before it scales quickly. TerraCycle’s retail and product partnerships place it at precisely this point. Forget about whether this is good for the planet for a moment. You can make money on TerraCycle, possibly a lot of money.
On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this story.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn.