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The Coolest Little Start-Up in America
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.
Pyle was furious. He sensed an attempt to hijack the company. "So there I was, back in the gravelly little hole underneath 20 Nassau Street," he says. "I said, 'Tom, what we need to do is get you stabilized. You need a board of directors. You need to get a few tribal elders around here to give you some ballast."
Pyle took over as CEO, giving Szaky the title of chairman--they would switch titles later that year--and he began recruiting board members. One was a former Princeton athletic director. Another was an emeritus professor of engineering. He, in turn, recruited an engineer and environmental consultant named Bill Gillum--a 23-year veteran of Western Electric, Bell Labs, and Lucent--to work full-time for TerraCycle on product development. Together the gray hairs undertook what Pyle describes as "the laborious process of taking an amusing, energetic, youthful garage shop and trying to put some corporate process around it."
Hardly had they begun, however, when another extraordinary event intervened. All that winter, Szaky had been keeping the company alive by entering and winning business plan contests. He had effectively, though not officially, dropped out of school by then, while Beyer continued his studies. (Beyer graduated and joined the company full-time in 2005.) The two of them had reentered the Princeton competition and this time walked off with the first place prize of $5,000. In addition, Szaky had won five other competitions, earning between $2,000 and $10,000 a shot.
