Betting on RecycleBank: The Next Big Thing?

Chris Zwicke

Chris Zwicke

By Chris Zwicke, Erb MBA/MS student, class of 2012.

This blog entry is cross-posted on Triple Pundit.

In the CleanTech space, solar may be hot, the future of the smart grid may be bright, but Ron Gonen, CEO of RecycleBank, is proving that recycling can be sexy too.

At its ECO:nomics conference, the Wall Street Journal announced its first ranking of the Top 10 venture-backed, clean technology companies. The survey “seeks to identify green companies that have the capital, executive experience and investor know-how to succeed in an increasingly crowded field.” CEOs from three of the ten firms—John Baumstark of Suniva, Cree Edwards of eMeter, and RecycleBank’s Gonen—were on hand at the conference for an elevator pitch competition titled “Uncovering the Next Big Thing.” After the pitches and follow-up questions, the audience voted on who they would fund with a hypothetical million dollars. RecycleBank won the three-way race with nearly half of the votes.

At its core, RecycleBank is a program that motivates people to recycle through rewards points—an average household can earn up to $400/year. RFID chips in recycling carts, GPS technology, and proprietary software largely automate the process of awarding points based on consumer’s recycling volume. Triple Pundit has eagerly followed the company’s development over the past few years. MBA students take note: the idea was born at and received seed capital from business school.

What is it about the business model that got corporate executives, venture capitalists, and entrepreneurs at the conference excited about recycling? According to Gonen, “people were looking at the economics of recycling incorrectly. The true value of recycling is not in the value of the commodity it is in the value of diverting from the landfill.” With billions of dollars spent every year landfilling recyclables, and RecycleBank fees coming out of these savings, the market potential is significant. Increased taxes on landfills would make the business case even stronger. Advertisements from the online store where customers go to redeem points provide a secondary revenue stream.

Pressed on the company’s source of sustainable competitive advantage, Gonen spoke of the 5 to 20 year contracts he signs with municipalities as a significant barrier to entry. With 50 U.S. cities under contract, including Los Angeles, Chicago, Houston, Phoenix, and Philadelphia, and service beginning in the U.K., Gonen is moving fast to capitalize on this first mover advantage. And though many of the big cities self-haul their own material, RecycleBank is simultaneously developing relationships with waste companies large and small. With the endorsements rolling in, raising the capital needed for expansion should be getting easier.

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