It was another high school project that led to the creation of TerraCycle. The project involved certain plants that Szaky and his friends had tried to grow in hopes of being able to harvest the buds, but instead they kept getting seeds. They still hadn't solved the problem when they all went off to college, Szaky to Princeton and his friends to McGill University in Montreal, taking the plant setup with them. There one of the friends learned about fertilizing the plants with worm poop. He proceeded to create a little compost heap in a box in his kitchen, bought a squirm of red worms to put in it, and started feeding them table scraps. By the time Szaky came to visit during the fall of his freshman year, the plants had produced a bumper crop of buds.
As it happened, Szaky had been searching for a business to enter in Princeton's annual business plan competition to be held in early 2002. The answer came to him as he and his friends were enjoying the fruits of their labor. Worms! If these worms could turn table scraps into such terrific fertilizer, just think what you could do with an army of worms! You could recycle all the organic waste in North America! You could solve the problem of dwindling landfill space! You could replace chemical fertilizers with organic fertilizers! And you could make a fortune!
The idea sounded great at the time, and when Szaky returned to Princeton and discovered that his friend Jon Beyer actually knew something about worms--thanks to his father, an ecotoxicologist who had studied them--it was a foregone conclusion that their business plan would center on worm waste. Although they failed to win any prize money in the competition, they kept working on the project. To do the kind of recycling they had in mind, you needed machinery that could handle tons of waste at a time. Beyer knew of an inventor in Gainesville, Florida, Harry Windle, who had developed something he called a worm gin, which used stacks of conveyor belts to deliver waste to the worms. Szaky and Beyer contacted Windle, who agreed to build them a prototype they could use to test their concept. The cost would be about $20,000. Beyer contributed $1,000, while Szaky put in $4,000 of his own savings, maxed out two credit cards to raise another $6,000, borrowed $5,000 of bar mitzvah money from a friend in Toronto, and then told his parents that he'd lose it all if they didn't pony up the $4,000 balance--which they did, reluctantly. While Windle went to work on the worm gin, Szaky began lobbying the university to get garbage from the dining halls and an outdoor space in which he and Beyer could conduct their recycling experiment. For better or worse, he got both.
On the surface, the worm gin was a flop. True, Szaky and Beyer showed they could use it to turn waste into worm poop faster than you could do it with traditional composting, but they didn't prove that such an operation could be commercially viable. What's more, the process was, well, revolting. By the time they got the garbage from the dining halls, it had been sitting for days in the heat of the summer sun and was crawling with maggots and other creepy things. A young woman Szaky had enlisted to help took one look at the contents of a garbage can and vomited, then quit. Szaky and Beyer wound up doing all of the work themselves. By the end of July, they'd learned a lot about the dos and don'ts of recycling organic waste--and were ready to give up. For several weeks, they'd put every waking moment into the worm gin and spent every spare nickel on worms. Meanwhile, they were sleeping on the floor of a friend's dorm room and eating what they could scrounge at the dining halls.
They figured they'd sell the worm gin on eBay, pay off their debts, and return to their studies. At least they'd succeeded in generating some publicity for the idea of using worms to recycle organic waste. Now a local AM talk radio station wanted to have Szaky and Beyer in for a live interview. They thought it would be a cool way to wrap things up. In early August, they went on WCTC-AM and told their story. When they got back to Princeton, there was a message waiting. A local entrepreneur, Suman Sinha, had heard the interview and wanted to meet them. Szaky and Beyer showed him the worm gin and told him how they hoped to expand the operation. Over dinner, he asked them how much money they needed.
"How much can you give us?" Szaky asked.
"Two thousand dollars," Sinha said, and proceeded to write a check. Szaky and Beyer expressed their gratitude and promised him 1 percent of the stock in return. "Fine," he said. "I'm with you all the way." And, with that, TerraCycle got a new lease on life.
Like Eric Smith, Tom Pyle remembers well his first meeting with Tom Szaky, in the fall of 2002. It was a job interview, and Pyle was the interviewee. He had seen an advertisement in the careers section of TigerNet, the online community for Princeton alumni, placed by students seeking a CEO for their environmentally friendly start-up. Pyle, who'd spent the previous 20 years doing large-scale project finance, found their story intriguing. He also had a soft spot for idealistic young Princetonians, having been one himself a quarter century before. So he decided to apply for the job and soon thereafter found himself sitting in a grungy, windowless office in the basement of 20 Nassau Street in Princeton, dressed in his best banker's attire and being interviewed by a kid in a T-shirt and a baseball cap.
"We had a pleasant chat," Pyle recalls. "I was very impressed with him and his vision and his dynamism and his charisma. But I didn't get the job." It went to another Princeton alum, who--like Pyle--was also a Harvard M.B.A. but who--unlike Pyle--drove a Toyota Prius and had experience with start-ups. Pyle wished them luck and went his own way. He might never have given TerraCycle another thought had he not received a panicky phone call from Szaky about six months later. The new CEO had called Szaky into New York City for a meeting the week before. There, Szaky had been told that in order to free up enough equity to offer the stock options it would take to hire better managers, he and vice president Robin Tator would have to surrender 90 percent of their stock.
Bo Burlingham: Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business. @boburlingham