Blog Post

Waste Management: The Trash Company With An Investment Strategy

Trash company Waste Management (s wm) has an acquisition and investment strategy that’s about as aggressive as a high-tech firm, like Cisco (s CSCO). It’s unusual in the age-old business of collecting and sorting waste and negotiating public contracts. This week Waste Management bought majority equity interest in yet another startup called Garick, which makes organic lawn and garden products and will contribute to Waste Management’s organic recycling services and supplies.

Think products like composting and selling and processing organic soil. Waste Management says in the U.S., a third of city solid waste is organic, (food and plant waste), but only 2.5 percent of food waste is collected and reused for composting and organic soil.

Here’s an edited excerpt of an interview that writer Alex Haislip did with Carl Rush, Waste Management’s senior VP for organic growth, and the company’s point man for its half-dozen investments over the past three years. This Q&A was originally published last month, but it sheds an interesting light on the investment this week.

Q: So what is the future going to look like?

A: We’re focused on making our material reclamation more efficient and more discrete, and then we’re looking at how to convert those materials into chemicals or products of higher value.

We were able to identify those materials that have scale and value and develop those into something that’s a viable market. We’re making a lot of different investments around organics and organic processing, for example. Roughly 35 percent of the material we manage is green waste, food waste and that kind of stuff. There’s value in that, there’s real resources there. When you look at the value of a ton of organics being composted as mulch and compare that to the value of using the same material to get 70 gallons of gasoline, there’s a big difference in the value there.

Q: So you’re investing in startups that can help you make the leap from the value of compost to the value of gasoline with the resources you collect?

A: This isn’t a high-growth industry let’s face it. But if we can get more value out of the materials steam than anybody else, we should be the leader in it. That’s where we’re trying to head.

Q: You recently invested in a startup called MicroGREEN. Tell me about that.

A: MicroGREEN has the ability to insert tiny bubbles in the skin of recycled PET. It allows you to close the loop on PET by taking it from bottles to make cups and food containers and to keep recovering that material and producing new things from it. When we first invested in it they were still very much on the drawing board. We see that the demand for recycled PET will be very high. Some people are already looking at making blister packaging from PET.

Q: What do you bring to the financing syndicate beyond money? Is there anything a startup can get from working with you that it can’t get anywhere else?

A: Part of our effort is taking some of these small technologies, like a MicroGREEN, and taking them to scale. It’s neat to have all these wizbang things, but it’s getting them to where they can do something that matters. That’s the sort of things that we’re focused on, achieving scale. It’s a very industrial effort. It’s not a high-tech effort. It’s hard to make that work. It’s not easy. We’re still in an industry where you have to educate the consumer, maintain the logistics, move the materials and execute.

Q: You’ve really driven the investing that Waste Management has done. Is there any stage of development you focus on or deal structure you prefer?

A: As we’ve become better known out there, we’re seeing different deals than we saw a year or two ago. The structure has never been the defining element for us. It’s been about whether we think the technology has a place in what we’re trying to do. If it’s a fit, we’ll figure out a structure that makes sense. We’ve never gone in with the structure as the lead.

Q: So why is Waste Management interested in technology startups now and wasn’t say, five years ago?

A: A lot of the technologies we’re talking about today wouldn’t have been economic or weren’t advanced enough to see where you could find value. The development has been phenomenal. It’s come from universities and entrepreneurs as well. A lot of bright people have put their minds to work on these types of problems and it’s starting to pay dividends.

Date Startup What It Does Involvement
May 2010 MicroGREEN Polymers Blows air into PET to make it stronger and more resource efficient. Made a $6.9 million investment syndicated with venture firms..
May 2009 S4 Energy Developing plasma gasification facilities. The company is a JV between WM and InEnTec.
June 2009 Big Belly Solar Makes a solar-powered trash compactor. Big Belly entered into a distribution agreement with WM.
Jan 2010 Harvest Power Recycles organic material into renewable energy. Made an undisclosed investment with Kleiner Perkins.
Feb 2010 Enerkem Converts municipal waste and biomass into cellulosic ethanol and other fuels. Invested in a CDN $53.8 million financing round with Rho Ventures, Braemar Energy Ventures and BDR Capital and others.
August 2009 Terrabon Converts waste to fuel using an acid fermentation process that converts biomass into organic salts. Made an undisclosed investment syndicated with Valero Energy.
August 2010 Garick Converts organic waste into compost and organic soil Made an undisclosed majority stake investment.

This originally was published last month, written by Alexander Haislip, the author of “Essentials of Venture Capital,” out this autumn from John Wiley & Sons.

Image courtesy of Bukowsky 18.