This case walks readers through the history of TerraCycle, an environmentally friendly company launched by two Princeton students that faced many financial hardships and setbacks over the years.
Szaky and Beyer, founders of TerraCycle, just won one million dollars in a business plan competition organized by a venture capital firm called Carrot Capital. Their business was based on using worms to eat organic waste, creating a waste management company that earned money by collecting waste and processing it into fertilizer. Prior to the competition, the company had been struggling. It had been running off $60,000 from family and friends and from other business plan competitions with few resources, no money to hire real employees, no factory and no scale. Shortly after winning the competition, Carrot Capital’s managing partner told the founders that although he loved their business idea, they would need to tone down the product’s environmental identity and bring in real professionals. This made the founders wonder if accepting the money would mean having to change the core of their green business.
They had tried to get funding before by sending their business plan to many venture capital firms but they only received rejection letters. In addition, they could not find anyone who would pay them to take their garbage and no one was interested in buying the worm poop. Eventually, they hired a CEO with 20 years of experience who began recruiting board members with relevant experience. But since their business was still not profitable, they ended up changing their business model and started focusing on home users. They realized that home users may not want to have direct contact with the product, and spent time turning it into a sprayable indoor plant food instead. Following their eco-friendly mission, the company decided to “upcycle” by packaging their product in used plastic bottles. Although the company had the idea, product and packaging figured out, they were still in desperate need of funding. The company had to decide if they were going to join up with Carrot Capital, search for angel investors, go back to friends and family or try to find a partnership with the competition. They had to decide how to tailor the pitch to each group and to think about whether any funding would result from all the time and effort since their time was running out.