BUSINESS

THE WORM WRANGLER

Tom Szaky's no tree hugger. He just wants to make a fortune feeding worm poop to your plants. And he's making his rivals nervous.

CHRISTOPHER SHULGAN June 4 2007
BUSINESS

THE WORM WRANGLER

Tom Szaky's no tree hugger. He just wants to make a fortune feeding worm poop to your plants. And he's making his rivals nervous.

CHRISTOPHER SHULGAN June 4 2007

THE WORM WRANGLER

BUSINESS

Tom Szaky's no tree hugger. He just wants to make a fortune feeding worm poop to your plants. And he's making his rivals nervous.

CHRISTOPHER SHULGAN

The shill. The spiel. The pitch. The sell. Everybody in this room has one. The Home Depot has invited media to their north Toronto corporate headquarters so that suppliers can demonstrate the fabulous products available at the continent’s largest home improvement chain. This includes stuff like a rolling snow shovel with something like a bike wheel halfway down the handle. “It’s like a seesaw,” the salesman says. “All you do is direct it.” There’s a Dremel rotary tool manufactured in the shape of a gun grip, and a Stanley claw hammer with a tuning fork embed-

ded in the handle, to dampen vibrations.

Amid these dozens of booths there’s a kid years younger than anybody else. Scruffier, too—in a ’90s stoner ensemble of jeans, wrinkled plaid shirt, John Deere ball cap and goatee. His booth isn’t anything—a laptop with a little QuickTime movie on it, and some free samples of his product, a liquid plant fertilizer sold in recycled pop bottles. But the kid draws an unusual amount of attention. “One of the cool things about our fertilizer is that it’s all organic,” he tells them. “It’s so safe, you could pretty much drink it.” But only if you don’t mind gulping a mouthful of worm

trailings—the all-natural secret to his burgeoning business empire.

Then, around 2 p.m., the room shifts to a state of heightened alertness. All eyes turn toward the main entrance, where a svelte blond has appeared. It’s Annette Verschuren, president of Home Depot Canada. Like dolphins at feeding time, the salesmen all angle for some bit of attention. Soon, Verschuren’s gaze falls on the rumpled young plant-food salesman. “Tom Szaky!” she exclaims, leaning in for an air kiss. “Have you seen our new Eco-Options magazine?”

“Absolutely,” says Szaky. “It’s great.”

“You have anything new to show me?” Szaky hands her a plastic bottle of his new spray-nozzle lawn fertilizer. “The spray nozzle-nice touch,” she says. “Any innovative products, Tom, you should always consider test-marketing them with us.” Verschuren inclines her head at an underling. “We should do an interview with Tom for the Eco-Options magazine.” Then the executive gives Szaky one last look and says, “You really should come to work for us some day.”

And she’s gone. Leaving Szaky’s rivals looking at his jeans and his baseball cap, and thinking: what’s he got that I don’t?

TOM SZAKY, 25, is the chief executive of TerraCycle Inc., an organic plant fertilizer manufacturer based in Trenton, N.J.—about 10 minutes from the place where Szaky, a Canadian citizen, lived during the year he attended Princeton University. The company now puts organic plant food in more than 10,000 stores across the United States and Canada, including most Wal-Marts and Home Depots. To make things extra-green, most of TerraCycle’s products are sold in recycled pop bottles or milk jugs. At their seasonal peak, his 70 employees fill 20,000 bottles a day with one of about a dozen different plant food varieties, such as orchid food, or nutritive brews for cacti and roses.

Ostensibly, the company’s products are intended to produce extra-vibrant flowers, say, or more bountiful tomato plants. But products like TerraCycle’s Pro-Fusion fertilizer, which “dramatically increases root growth and bud quantity,” have been embraced by certain underground “horticulturalists” who tend to grow their plants hydroponically. “Let’s just say my yield has increased to over double what it was last year,” says one online review of a TerraCycle product. “And the potency is out of this world.”

TerraCycle’s story starts, as so many good stories do, in Montreal, where a 19-year-old Szaky took his Princeton buddies on a road trip during his freshman year. It was there that Szaky happened on the substance that would dominate the next phase of his life. In

polite parlance that substance is the casting of the red wiggler earthworm—Szaky favours the scatological euphemism: worm “poop.”

The young eco-capitalist has always had an eye for business. Both his parents are doctors who left Hungary after the collapse of the Eastern bloc, eventually landing in Toronto, where they enrolled him at Upper Canada College. While Szaky attended a school for privileged youth, the young man was not rolling in dough himself. Drs. Esther and Thomas Szaky had to start their medical careers over when they moved to Canada; rather than a Rosedale mansion the family lived in an apartment. Szaky would go out to dinner with friends like Jake Cohl, the son of Rolling Stones promoter Michael Cohl, and Anthony Green, whose father is Don Green of Roots Clothing. His buddies usually picked up the tab. “I wanted to be one of my friend’s fathers,” recalls Szaky. By the time he was 14, he’d already started a Web design company that helped create Roots’s first website.

Then it was on to Princeton, where Szaky and his classmates embarked on their road trip to Montreal, bunking with some of Szaky’s UCC friends in the McGill student ghetto. The apartment was home to dirty dishes, towels for curtains, and, crucially, one thriving marijuana plant. The pot plant was so healthy that Szaky asked his friends what they were feeding it. The secret was worm poop, which the students gathered themselves by feeding hundreds of red wigglers copious amounts of organic waste: coffee grinds, banana peels, whatever was handy.

Szaky had a brainwave. Maybe there was a way to make a business out of this worm poop, with its near-magical powers. Szaky knew waste-disposal companies charged a fee to haul away people’s garbage. So, he reasoned, you could probably make money taking away people’s organic waste, which you could feed to these extraordinary worms. Then just gather the poop and sell it as fertilizer. Szaky and a few friends gathered $20,000 to buy a “worm gin” that used red wigglers to transform Princeton cafeterias’ foul, maggot-filled organic waste into the perfect plant food, which they loaded into used pop bottles and sold to area gardeners and landscapers. That was enough of a hook to get them some serious help—from people like Bill Gillum, a 58-year-old former Bell Labs scientist with a Ph.D. in inorganic chemistry, and Robin Tator, a client from Szaky’s Web design days, who at the age of 43 became TerraCycle’s VP of marketing. To become profitable, though, TerraCycle needed to scale up. Gillum created a way to liquefy the fertilizer without losing any of its power. (The process is similar to brewing tea.) But the production line

they invented only filled 80 half-litre bottles a week. Building a factory that could produce tens of thousands of bottles per week would cost around $300,000.

Seeking cash, Szaky sent his business plan to every venture capital firm he could think of. He entered every business plan contest he could find. None of the VCs bit, but he struck gold with one of the biggest competitions, beating out 750 other entrants in a contest run by a New York investment firm known as Carrot Capital. The purse was US$1 million, and the win generated a tremendous amount of publicity for Szaky and his company. He even got to ring the opening bell for the NASDAQ exchange. Unfortunately, the Carrot Capital funding fell through

SCOTTS MIRACLE-GRO SUED TERRACYCLE FOR TRADEMARK INFRINGEMENT

(they wanted sweeping management changes and detailed business projections, neither of which Szaky was keen on).

But all was not lost.

Thanks to the publicity from the competition, Szaky found himself fielding calls from plenty of other investors. Some were hippie environmentalists; others were entrepreneurs who saw a bit of themselves in Szaky. Although he walked away from Carrot Capital’s six-figure deal, TerraCycle still managed to raise US$1.2 million in fundingmore than enough to convert a Trenton warehouse into a factory. The first products came off the line in 2004.

Sales last year were around US$1.5 million, and Szaky’s hoping to hit US$6 million this year. Not bad, considering Szaky retains an 11 per cent stake in the company.

THERE ARE REALMS of business in which youth is an advantage. Selling worm poop to major retail chains is nc)t one of them.

But Szaky’s timing was auspicious. His ecofriendly company entered the market just as many big-box retailers were seeking ways to convince their customers they were concerned about the environment. Carrying TerraCycle plant food, with its young CEO and his captivating story, was one mediafriendly way to do that.

So one factor behind Szaky’s success is timing. Marketing’s another. He displayed his genius for that earlier this year when

TerraCycle was sued by its largest competitor, the US$2.7-billion chemical fertilizer conglomerate Scotts Miracle-Gro, which accused TerraCycle of infringing on its trademarks by using similarly coloured product packaging. (Both companies favour a yellow and green motif.) The matter’s still pending, but in the meantime Szaky has peddled the civil action into a tremendous amount of free publicity, including news items in the Wall StreetJournal and Business Week, mostly thanks to a cheeky website (suedbyscotts.com) that plays up TerraCycle’s underdog status.

Szaky, however, labours to distance himself from the eco-warrior stereotype. “I wouldn’t call myself an environmentalist,” he says. “I’m not out there hugging trees. I’m

just a normal guy. I wouldn’t buy a Hummer. But I doubt I’d buy a Prius either. I want to make tons of money selling eco-friendly products.” Szaky ridicules the attitude of organic competitors like Vermont-based Seventh Generation Inc., which won’t sell to the Wal-Marts of the world. And that, as much as anything, may be what sets TerraCycle apart. “If I go into some buyer’s meeting championing TerraCycle as some eco-nut hippie company, I’m telling the buyers that I don’t get it. I don’t want my products just bought by environmentalists. I want them bought by the average guy who watches football and drinks beer. Not selling to the WalMarts of the world means you’re stuck in little, overpriced boutiques where your sales volume is next to nothing—and how does that help the earth?” M