Randy Hawks: Cleantech Startups Turn Garbage into Gold With Reverse Logistics

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The average American generates 4.6 pounds of garbage every day, making the U.S. one of the biggest throwaway societies on the planet. E-waste, including cell phones, TVs, and computers, is a huge part of the problem. In 2009, this country generated 3,190,000 tons of e-waste, according to the Environmental Protection Agency. The vast majority of that e-waste (82.3%) ended up in landfills and incinerators, with only 17.7% going to recyclers.

That’s a dirty shame. But it’s a golden opportunity for startups that can find a solution. That’s why our venture capital firm, Claremont Creek Ventures, is actively looking for investments in the waste management space. In particular, we like companies that can profit by preventing consumers from placing their unwanted items in the garbage.

They say that one man’s trash is another man’s treasure. Except we don’t call it trash, we call it reverse logistics. The idea is that instead of throwing away a product, like an old cell phone, consumers move it through a reverse supply chain, so it ultimately ends up in the hands of people who can re-utilize the product. The trick to being successful is getting consumers directly involved in the reverse logistics process.

A number of innovative startups are accomplishing this business strategy by offering cash for trash. Specifically, a company called EcoATM, which we invested in, is currently rolling out ATM-like kiosks in shopping malls throughout the nation. Consumers drop their old or unwanted cell phones into the dispenser, and instantaneously receive anywhere from several dollars to several hundred dollars in exchange.

Other companies in the cash for products space include Gazelle and FlipSwap. BioSurplus, is another that’s breathing new life into discarded laboratory equipment.  An innovative approach has been launched by RecyleBank applying gamification to the process. That’s right, you earn and redeem points for recycling your products. It’s a different approach than EcoATM, and it’s gaining some traction.

These days, even big box retailers are hiring third-party specialists to handle their reverse logistics. When you return your flat panel TV to Best Buy, for instance, they don’t simply box it up and ship it back to the manufacturer. They work with a reverse-logistics specialist that helps them find buyers for broken or defective products that would otherwise go straight to landfill.

Though concrete numbers are hard to come by, the worldwide market for reverse cell phone recycling is approximately $5 billion annually. The market gets even bigger if you start to add other electronic devices, like tablet computers. Overall, it’s a huge market that has been relatively underpenetrated. Until recently, the market was left in the hands of small mom and pop recycling shops. But competition is on the rise and a number of new venture-backed startups are looking to clean up in the market.

I see the reverse logistics space becoming even bigger as consumers play a more active role and get rewarded for their efforts. As a firm, we are looking at opportunities that expand the market further into areas like batteries and tablets. After all, reverse logistics is the ultimate win-win. Consumers win, companies win, and so does the planet.

(Randy Hawks is co-founder and managing director of Claremont Creek Ventures. Photo courtesy of Claremont Creek.)