Hunting for the next Amazon (NASDAQ:AMZN) doesn’t necessarily mean you’re searching for the next big consumer tech explosion. “The next Amazon” largely means finding the next high-growth stock of the future. And the earlier you invest in these companies, the bigger the gains. Few options can beat privately traded firms in this regard, but private investing has historically held a high barrier to entry.
Does your net worth exceed $1 million (not including your primary residence)? Do you make more than $200,000 per year ($300,000 if you file taxes jointly with your spouse)? If you do, congratulations! You’re an accredited investor and can invest in private businesses.
If not, don’t fret. You can still invest in privately traded companies through equity crowdfunding … but, boy, if there were ever an area of the market that felt as if it were pioneered by the likes of Saul Goodman, it’s regulation crowdfunding.
That’s because regulation crowdfunding stipulates that firms raise no more than $1.07 million … per year. This severely hampers the quality of offerings, as few startups worth investing in need such small amounts of cash. Regulation A+ offerings, though, can raise substantially more. So when looking through offerings, I stuck to swiping through companies in the latter category … and I stumbled on an anomaly in TerraCycle.
Now I’m sure many of you have heard of this company in passing before, but what caught my eye was the amount it’s raised ($12 million) and the revenue it already brings in ($20 million in 2018).
By the end of its funding round, TerraCycle hopes to raise $25 million. Just what is this company that I’ve never heard of and how is it that it’s already profitable. And why does it continue to attract so much cash from everyday people?
What Is TerraCyle?
TerraCycle’s main concept is “recycle everything.” With that, you can tell it’s not your ordinary recycling business. TerraCycle springboards off of the sustainability trend, making #RecycleEverything a creed to live by, and not simply a corporate motto.
The firm wants to eliminate the idea of waste, which it does by recycling things that were previously un-recyclable. It can recycle waste such as your red wine-stained corks, crooked cigarette butts, dirty diapers and even your acid-leaking batteries.
By this measure alone, TerraCyle’s claim is a godsend if it actually does what it says.
Per-capita solid waste generation has grown tremendously in the decades since 1960, until it trended sideways nearing the early aughts. In the 1960s, the average individual produced 2.68 pounds of waste per day. But by the 1990s, a person could expect to create 4.57 pounds of trash each day.
Household waste consists of (typically) paper and other paper-made materials, such as packaging (think of all those Amazon packages you discard each week). Sure, paper is recyclable, but tell that to the landfills that play host to 17.6 million tons of paper in a year. With that kind of waste, it’s no surprise the global waste management market is expected to increase 60% by 2025.
Its mission to erase waste and transform previously land-filled goods into new materials is a value proposition both consumers and corporations can get behind. But TerraCycle still has to do the legwork of winning over consumers with its promise of sustainability.
What Does TerraCycle Do?
TerraCycle works by offering free recycling programs across the globe and in partnership with many large companies. Some of its partner brands include Arm & Hammer, Barilla, Bausch + Lomb, Brita, Colgate and Hasbro (NASDAQ:HAS). Here’s how it works:
Customers simply search for a recycling program that match their lifestyle, and those of their community members, and sign up. Say you sign up for its Brita recycling program (free of charge). You can start collecting Brita filters, pitchers, bottles and more in your home, school or office. Some brands even provide reward points for participating.
Once you’ve collected at least 5 pounds (the amount necessary to keep down greenhouse gas emissions), you ship your package to TerraCycle. The company then separates the products by composition and makes new recycled products out of them.
TerraCycle’s unique methods yield some fantastic results. Through upcycling, the company has sewn juice pouches together to create book bags. It’s even able to make casual shoes out of used chip bags. When it comes to good ol’ fashioned recycling, the company claims to recycle more than 97% of the waste that comes through its doors. Through programs like its cigarette waste program, TerraCycle is able to collect tobacco from used cigarettes for future composting.
Further, the company’s Zero Waste Box platform skips the landfill and the incinerator to free communities of their single-use lifestyles. Through this program, participants can recycle pretty much anything with TerraCycle’s highly specific Waste Boxes. These are great for businesses, who can even house their Zero Waste platform inside a “permanent collection unit” right on their property.
It’s hard to believe this company started by selling a sustainable fertilizer made from worm poop.
Loop is the part of TerraCycle’s business that excites me the most. With Loop, consumers pay a small, refundable deposit for a Loop tote. This tote is chock-full of whatever brands’ items the consumer chooses, featuring things like Tide laundry detergent, Pantene shampoos, Gillette razors, Febreze and more, all made from sustainable materials.
Once you’ve finished using your items, simply leave the tote outside your door and schedule a free pickup. TerraCycle will clean, refill and return your desired products back to you in the same Loop tote. Talk about service.
The big challenge TerraCycle’s Loop faces is in getting people to buy into its vision for a sustainable future. Single-use materials are ingrained in society, and the worldwide history of plastic production and use shows the trend.
In the 1950s, plastic production worldwide was just 2 billion metric tons. By 2017, it soared 315% to 8.3 billion metric tons. And by 2050, it’s projected to hit 34 billion metric tons.
The amount of plastic waste, however, will fall out of step with production as wasted plastics are projected to rise from 6.3 billion metric tons in 2015 to 12 billion metric tons in 2050. The ratio of produced plastics to wasted plastics being far, far less in 2050 than presently.
But does this mean TerraCycle is a good investment?
Is TerraCycle ‘The Next Amazon’?
The world is changing its tune on climate risks, which portends good things for TerraCycle’s stock offering on StartEngine. A 2019 study found that 19% of respondents are “passionately” attempting to limit their use of one-time plastics and convince others. Another 32% are actively changing their daily plastic habits. Only 16% are unsure of, or don’t care about, single-use plastics.
While climate risk awareness isn’t growing at the pace most would like, it is growing. The 2020 election will be a huge determiner of whether that growth picks up in a meaningful way or stalls. President Donald Trump’s perspective on climate change is non-existent, but a President Bernie Sanders would do wonders for institutional policies on climate change.
Still, it’s not unusual to see other sustainability-first companies rocket into the headlines. Take Beyond Meat (NASDAQ:BYND) and its plant-based meat. BYND shares have popped some 50% in the past year, and that’s in spite of a steep drop from the late-July high.
Consumers are making it known that they want their companies to be more climate-minded, and now even investors aren’t afraid to vote with their wallets. In our InvestorPlace Q&A, Legal & General’s chief executive Nigel Wilson talked about L&G’s Climate Impact Pledge. This initiative aims to set more companies on a sustainable path by divesting from stocks whose leaders have not met L&G’s base guidelines for sustainability. Even companies like McDonald’s (NYSE:MCD) and Starbucks (NASDAQ:SBUX) have made climate-friendly bids to rid their restaurants of plastic straws and cups.
For TerraCycle to become the next great stock to invest in, it has to become the sustainable waste management company. Right now, it certainly has no peer.
John Kilhefner is the managing editor of InvestorPlace.com. As of this writing, Kilhefner did not hold a position in any of the aforementioned companies. If you have questions about the site or suggestions about our content, email us at email@example.com. Want to pitch us an article? Send your ideas and tips to firstname.lastname@example.org, and if we like it, you’ll hear back from us!