A business built on worm power

Has a brilliant idea ever had such a birth?

It was 2001. Tom Szaky took some freshman buddies from Princeton University to visit a friend in Montreal. While there, he discovered his pal's gonzo marijuana plants.

How'd you do that? Szaky asked.

Easy. Worms eating table scraps in a makeshift compost bin were producing mineral- and nutrient-rich feces, which in turn became cheap fertilizer for the pot plants.

"I'd never thought of garbage before," says Szaky, who instantly saw dollar signs. In 2002, he dropped out of Princeton to turn liquefied "worm poop" into the centerpiece of a new organic-fertilizer business.

The name: TerraCycle. The motto: "Better, greener, cheaper."

It wasn't easy raising capital, and TerraCycle, based in Trenton, has yet to make a profit. But already its products have been embraced in the United States and Canada by corporate bigs like Home Depot, Wal-Mart, Target and Whole Foods.

Fourteen thousand stores - and counting.

And get a load of sales: $70,000 in 2004, $500,000 in 2005, $1.5 million in 2006, an estimated $4 million this year, and a projected $8.6 million in 2008.

In another five years, Szaky (pronounced ZACK-ee), a CEO who's "really not much of an eco-freak or recycler," envisions sales topping $50 million. Don't laugh. Inc. magazine last year dubbed TerraCycle "the coolest little start-up in America" - and where it finishes is anybody's guess.

TerraCycle lawn and garden products are made from 100 percent recycled garbage, thanks to the red wiggler earthworm known as Eisenia foetida. The worms' excretions, or castings, are brewed into a "compost tea" and packaged in recycled plastic milk jugs and soda bottles collected by schoolchildren around the country. TerraCycle pays them a few cents per bottle - $78,000 so far.

The finished products are priced to compete with the dominant players in the lawn and garden market, like Scotts Miracle-Gro, whose annual sales approach $3 billion. And talk about timing. Szaky's grand plan unfolds as "going green" zooms from movement to marketplace.

Bonus: He gets to wear jeans and sneakers to work. But, boy, did he upset his parents by trading Princeton for worm poop.

"We always supported him in everything, but this was a bit alarming," says his mother, nephrologist Esther Szaky, who lives in the Toronto suburbs with Szaky's dad, Thomas, a rural emergency physician.

Alarming, maybe, but not surprising. Young Tom was "full of energy and interested in everything," she says, from violin to glitzy computer graphics.

"Even at a young age, he knocked my socks off," says Brian Young, Szaky's former elementary-school teacher in Canada, "and he just seems to be able to convince people these things are good ideas without too much effort."

Retired from teaching, Young works in Toronto for his former pupil. Like others on staff, he's more interested in TerraCycle's mission (and future profitability) than in drawing a good salary now.

It may make companies with green-envy crazy, but TerraCycle spends nothing on marketing or advertising. It doesn't need to, says Joel Makower, founder of GreenBiz.com and author of several books on environmental responsibility and business.

First, there's the product, Makower says: "Anytime you combine the words worm poop and recycled soda bottles, I think that makes Tom a party of one."

Then there's Szaky's own narrative.

"It's about rags to riches, about creating innovation out of the simplest thing, innovation that offers a high-quality product that also does the world some good.

"That's a hat trick," Makower says.

Wesley Neece, who buys Home Depot's fertilizers, heard Szaky's quirky pitch in late 2005.

"I was surprised that his goal was not only to save the planet, but he really wanted to run a business and make money doing it," Neece recalls.

Born in Budapest, Szaky emigrated with his parents in 1986, when he was 4, from Communist Hungary. They landed in East Germany, then the Netherlands and, when he was 9, Toronto. Today, he remembers the journey as "not traumatic," but he knows it affected him.

"I find that very little now can faze me," Szaky says. "You cannot throw a problem at me that you'll get a big emotional reaction about."

Stuff is coming at him pretty fast these days. In the last 16 months, TerraCycle's staff has doubled to 45, including a plant pathologist and chemist. Nine products were tested or sold this year; next year, the goal is 20.

They include organic cleaners and deer repellent; pencil cases, aprons, handbags and totes made of recycled drink pouches; fireplace logs made from old wrapping paper; and rain barrels and composters made out of recycled wine casks.

Not surprisingly, TerraCycle's 20,000-square-foot plant, covered (by design) in graffiti and located in an Urban Enterprise Zone, is bursting at the seams. Szaky is buying a 100,000-square-foot building nearby to accommodate a high-speed soda-bottle line. Everything's done by hand now.

"I just want to think about stuff and jump," says Szaky, who owns 10 percent of TerraCycle. "Time's flying."

Who knows? Maybe the company will eventually go public or be sold. It had a close call in March, when Scotts Miracle-Gro sued, accusing TerraCycle of making misleading claims and copying its labels. The suit, recently settled, cost Szaky $400,000 in legal fees. (New labels are coming in 2008.)

For now, he's peddling a reality show based on TerraCycle's creative process. He's writing a book called The Power of Worm Poop. And he's planning a May wedding in South Korea to his fiancee, Soyeon Lee, a concert pianist with whom he lives in Princeton.

"I know very little about classical music, and she knows very little about business," he says. "We complement each other."

Meanwhile, Szaky's parents hope he'll someday re-enroll at Princeton, where he studied behavioral economics ever so briefly.

But at this point, on that subject, their son may be better suited to professor than student.