Tom Szaky is the co-founder and CEO of TerraCycle, a New Jersey-based company that sells plant and lawn fertilizer made from worm castings, sold in recycled soft-drink bottles. Born in Hungary and raised in Canada, the 25-year old dropped out of Princeton to start his waste-full venture at 19. In the years since then he's managed to turn down a million dollars of financing rather than sell out his values, land his products on the shelves at big-name retailers such as Wal-Mart and Home Depot, and draw the ire of a plant food giant that's suing TerraCycle over its product packaging.

Blue Egg's Annie Muzaurieta spoke with Szaky recently to get the inside poop on his eco-friendly enterprise.

Clearly, you've always been entrepreneurial. You started your first company, a graphic-design studio, at age 14. How were you inspired to start working with worms?
Well, the honest story is that in Canada one of the great things, especially when you're under 21, is that you can drink. So you can imagine what we did as freshmen in college.

I was from Canada, and I came down and explained how great this is. So fall break freshman year, my buddies and I hop in a car and head up to Montreal to enjoy, you know - that legislation, let's say. The other cool thing is that Canada is pretty relaxed about certain plants. My buddies had been growing plants at their house, and they just weren't doing too well. That's because they were trying to feed them chemicals. And because it's hard being a 19-year-old guy, gardening doesn't come all that intuitively to you.

I think all guys in their teenage years or early 20s have black thumbs. It wasn't working. But they had started feeding them worm poop before I got there, and these plants were now doing amazingly well.

Were these legal plants?
Maybe. It depends on what country you're viewing them from.

OK.
Anyway, you can imagine that it was a very inspiring sight. But what really got me going, more than the plants, was the fact that they were taking garbage to feed the worms to make the worm poop. The fact that you could take garbage, get paid for it, make a product, and then get paid for that sort of felt like it had to be good business.

Your friends were just composting on their own?
Yeah. One of my buddies was really into the environmental thing and had been doing this at home. It was his sort of inspiration to help save the plants that led to this idea.

So then you drop out of Princeton to start a company that sells worm poop.
Yeah. Well, initially our whole business model - it always revolved around garbage. John, who's our co-founder, and I thought that we would make all our money taking garbage and getting paid for it. And then we'd have worm poop to sell, but it wasn't really our core focus.

It was more about getting the garbage?
Right. We couldn't raise money at all, in any possible way, so we entered a business-plan contest as a way to keep us going. We ended up winning about seven of these things in a row and sort of kept building the company. Over that period of time, we evolved the whole idea - realizing that you couldn't just sustain yourself on garbage - into a consumer-products company that made products from garbage. Completely revolved the focus away from the raw material to the finished product. Nothing fundamentally changed, except the focus went completely in the other direction. It was pretty wild.

April 2003 was a big turning point for us. We had run out of money; we had about $500 in our bank account at the time. No one would invest in us. I mean, I've never heard more no's.

As a socially conscious company, was it harder for you to get investors?
It wasn't necessarily the fact that we were socially conscious that made it hard. We were 20-year-olds in the worm-poop business. I think if we were 40-year-old execs in the bio-diesel business, it wouldn't be as difficult, you know?

Anyway, we entered this one last business-plan contest for $1 million, and we ended up winning. Which was pretty cool.

Wow.
Yeah, it was sort of a very awesome thing - except that it was an offer of funding, not just a $1 million check. And the venture capitalist wanted us to move away from garbage as the basis of our company and make just another organic fertilizer. I even remember him telling me, "You should tone down the eco stuff." I have never labeled myself an environmentalist. But it just didn't make sense to move away from what embodied the core of the company. On sort of a crazy night, we decided that we would leave the money, and so we turned it down.

So you turn down a million bucks. And you didn't really consider yourself super-eco - it just made sense to you to use garbage?
It made all the sense it the world. It just didn't make sense to leave the core. It's ironic, because we completely shifted our focus from raw material to finished product, from a waste-management to a consumer-product company, but that didn't affect the core of what we were doing.

So here we are, broke. We had to figure out a way to start selling our product because, at that point, we hadn't actually done that yet. That's when we thought, Hey, we make a product out of garbage. Why don't we package it in garbage? That night, we went around and sorted through everyone's recycling containers and thought it would be a stop-gap measure to package in used soda bottles - which turned into our biggest thing ever. That sort of catalyzed us as the world's first product that is made and packaged entirely out of waste and has led to the honor that we have right now as being, quite literally, North America's most eco-friendly line of products. Period. It doesn't get more eco than organic waste into worm poop in a used soda bottle.

I love that you reuse soda bottles as containers for your products! You collect them from schools and nonprofits, right?
We have well over 3,200 schools, churches, and other places - mainly schools, though - collecting soda bottles.

Do you have any trouble collecting the number of bottles you need?
No, because we also work with recycling centers. It only works in bottle-bill states. But in the bottle-bill state recycling centers, we get a bunch of bottles.

Now we're getting into milk jugs. We have potting mix in milk jugs. We're launching a number of new products next year that will be packaged in milk jugs, from turf-patch mix to a solid fertilizer. And we're looking at all sorts of other cool items for next year. You'll see us move away from just a worm-poop company to one that specializes in making the world's most eco-friendly products and making them entirely out of garbage.

We'll be launching a line of cleaners and a line of pots made from crushed cars that are covered in graffiti. Some very, very cool new stuff coming out next year, all around this idea of making super eco-friendly products out of waste. What's cool about making it out of waste is that it actually retails for less.

Speaking of retail: You have a chart on your website illustrating the vast differences between you and the Scotts Miracle-Gro company. Despite this, Scotts claims your packaging looks too similar, and they're suing you. Does this mean you've arrived?

I think it does. We're doing something that is at least somehow threatening these guys - I can't think of any other way to describe it. So they've gone ahead and sued us.They've sued a lot of companies before, but most companies they sue are closer to their size, like in the billions of dollars. But most of them have also settled, and we're really fighting this straight on and not just going to settle. We actually tried to work with them, to be quite honest. We tried to make changes to the things they were worried about, and once we made those changes they came back with, like, 30 more. I'm just worried that if we start doing everything they tell us to do, which would defeat our brand, they'd just keep doing it until you can't even say "plant food" on the bottle.
(Editor's note: Scotts Miracle-Gro spokesman Jim King responded, "It's not a matter of going after the little guys. We've invested hundreds of millions of dollars in the brand and in building awareness of the brand. [Our packaging] is synonymous with plant food. We've always been assertive in protecting that.")

Do you have pro bono legal representation?
No, we don't. We actually just raised just under $500 for our legal-defense fund, which is pretty cool since we're a for-profit. But the big thing that's funding us is people going out and buying our product. In the past three weeks, sales of our product have doubled in stores. So the more people find out about this, the more they go and buy the product, and that's going to keep us going.

You sell your products in Target, Wal-Mart, and Home Depot, which is great for sales. But it can also be a problem for a small company. Have you faced any production problems?
No, we produce everything in-house. Every single thing is made in our factory in Trenton. We're looking at probably moving into a bigger factory in the next couple of months. Production is an issue, but it's not a problem. I mean, it's sort of a challenge, and we've always overcome it.

We went from four products last year to 13 this year, and next year we'll probably be closer to 40. It creates challenges and stress, but we've never had a disaster. We've never missed orders. We have really, really good people on our team, and that's leads us to our success.

Wal-Mart only recently started thinking greener. Did you ever feel that it was an odd place for you to sell your product?
Here's the statistic that makes me say we have to focus on the big retailers: 80 percent of all consumer products are bought through the top four retailers in the category. So for fertilizer, 80 percent of all fertilizer is sold by Home Depot, Wal-Mart, Target, and Lowe's. And that's a very important thing, because if you're going to change anything meaningful, you've got to do it there. That's just what the facts are. I couldn't battle that fact.

These guys allow us to grow. Wal-Mart was the first place to give us an order - which is ironic, but it does say something. These retailers are going more green. Home Depot has created an entire organic section. So we are seeing big change, and any change there is huge. That is where America shops, so that's a very important place for us to be successful. I think, mind you, that's also why Scotts is bent out of shape. I think if we were succeeding in the little retailers, we would probably never hear from them.

How many worms do you have employed right now?
Probably, like a billion or so, give or take. It's hard to count.

And you deal in compost tea?
We sell everything. Worm farms create the worm poop that comes to our factory in Trenton. There it gets liquefied into a tea, which we sell. The by-product - you know, like you'd have a teabag leftover, we have a big teabag leftover - we sell as our seed starter and our potting mix. We have no waste at all. It all gets reused in new products.

Any issues with the worm poop? Does it smell?
It smells like a wet forest.

Do you say, "I sell worm poop"?
All the time!

Does it help your love life?
No, but I am recently engaged, so I got very lucky in that department.

Did you meet before or after you started selling worm poop?
During. One of my investors introduced us. She's a concert pianist.

So it did help.
In a way, yeah, worm poop introduced us.

If home gardeners made the commitment to change one thing, what would you say is the most important thing to change?
They should stop using chemicals and go organic, whether they buy Terracycle or not. Make it more fun and safe for their kids and their pets. If they have a vegetable garden and they eat what they grow, going organic is the most important thing. It's sort of going back to the way it was meant to be, instead of just dumping chemicals and making it a temporary solution. I think that, without sacrificing money or performance, people should consider going organic when gardening.

Any books, articles, or websites you would recommend?
There are so many websites. But I think that Natural Capitalism [by Paul Hawken, Amory Lovins, and L. Hunter Lovins] is a fantastic book that I would recommend for anyone to read.

Just out of curiosity, what eco-sin are you least proud of?
That I'm not an environmentalist. I don't have a hybrid car, I don't buy organic food. I think I consider myself the same as the average American: I care about the environment, but I'm not really willing to sacrifice for it. What I'm trying to show and do, and what our team here is trying to accomplish, is that we can do the best thing for the environment-which I think every human being wants to do-without sacrificing anything that you would think you'd have to sacrifice. Which in our case, in consumer products, is price and performance.

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