Young Entrepreneur Turns Worm Waste Into Profit

TRENTON, N.J. -- Tom Szaky is wearing what he calls his "greed hat," turning worm excrement into profit.

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The 23-year-old Princeton dropout set out to be a smart entrepreneur, not an environmental hero. His growing business is built on organic fertilizer made from worm feces, then bottled in recycled plastic bottles.

TerraCycle markets plant fertilizer created by "vermicomposting" -- harvesting worm excrement. It packages the product in 20-ounce plastic soft drink bottles, many gathered by school children. It employs 10 people in a warehouse in economically depressed Trenton.

Those business choices were born not of idealism but to maximize efficiency and keep costs down.

"We're in Trenton because the rent is very cheap and labor is abundant," Szaky said. "The decisions were made by wearing the greed hat ... but ironically we're doing the right thing."

TerraCycle Plant Food has sold since early 2004 in organic groceries and independent garden shops, and earlier this year began appearing on shelves in Wal-Marts across Canada and Home Depots there and in New Jersey. Sales for 2005 are expected to clock in at about $500,000, and Szaky hopes to triple that next year with a planned launch in Home Depots and Wal-Marts across the United States.

There, where the majority of Americans buy their gardening goods, TerraCycle will go up against fertilizing powerhouse Miracle-Gro.

"We don't want to be just be an organic plant food sold in little organic stores," he said. "We want to compete on their playing field."

Born in Hungary, Szaky moved with his physician parents to Toronto at age 9. He entered Princeton to study behavioral psychology and economics in 2001.

While visiting a friend in Montreal that fall, Szaky was intrigued by the success his plant-loving pal was having with homemade fertilizer generated by a box of compost and some worms.

"It wasn't an environmental thing. It was 'Wow, this is a cool business model,"' Szaky said. "The light bulb went on, and it never went off."

Szaky and Princeton colleague Jon Beyer submitted their idea to a campus business plan project, and were rejected. Undaunted, they purchased a "worm gin" -- equipment that houses red worms while they chew their way through decomposing food scraps -- with $20,000 borrowed on credit cards. By summer 2002 the fledgling company was near failure.

Szaky went on an AM radio station to talk up the concept, and fielded a phone call from an investor offering $2,000 to keep TerraCycle alive. Szaky accepted, quitting school at year's end to devote himself to the business.

The company took up residence at Rutgers University's EcoComplex, an environmental research facility run in partnership with Burlington County Landfill near Bordentown, about 12 miles south of Trenton. While a TerraCycle researcher there is still tweaking specialized formulations for orchids and African violets, the company now purchases the worm waste from suppliers and focuses on packaging and marketing.

A private investor in Florida owns a 40 percent interest in TerraCycle, which is purchasing the 20,000-square-foot Trenton warehouse as a permanent headquarters. TerraCycle spokesman Barry Brinster said the company is not yet making a profit, but expects to begin to break even in 2006.

Along with the full-time laborers, TerraCycle has about 10 professional staffers -- including chief technical officer Beyer, now a Princeton graduate -- working for "nonprofit wages." A number of those looking after the startup's research, legal and financial concerns are relative grayhairs.

In August Eric J. Smith, who spent 15 years in top sales positions at such companies as Procter & Gamble Co. and SC Johnson & Son joined TerraCycle full-time.

Smith, 39, working from his Atlanta home, compared Szaky to the founder of Wal-Mart Stores for his willingness to rely on his staffers' expertise.

"He is our Sam Walton. He has surrounded himself with individuals that were leaders in their respective fields," Smith said. "I've worked for 55-year-olds who couldn't hold a candle to him in empowering people to do their jobs."

An 80 percent pay cut has been a bit of an adjustment.

"My wife is confused and my mother-in-law won't talk to me," Smith joked. "But I kind of got addicted to what he was doing. Tom's one of the best I've seen in knowing his product, having a passion for it, and being able to communicate it."