25 Years of Recycling the Unrecyclable: Turning Worm Matter Into a $43M Global Empire with Tom Szaky

Host John Lee Dumas opens by introducing Tom Szaky, founder and CEO of TerraCycle, a recycling company operating in 20 countries, and creator of Loop, a circular reuse platform. Asked what he believes about becoming successful that many people disagree with, Szaky focuses on failure. He says the public usually sees entrepreneurs only after their successes, even though innovative people inevitably encounter more failures. His useful comparison is to tuition: entrepreneurs spend money and effort producing nothing immediately, but the experience should teach them what to change. The important questions are what was learned, how the company will adapt, and how it will prevent the same mistake from happening again. Dumas then frames the episode around TerraCycle’s unusual origin: turning worm matter into a business that now generates more than $40 million in U.S. revenue and, according to Szaky, just under $100 million globally. Szaky says his interest began 25 years earlier, during his freshman year of college, when he and friends were trying to grow better marijuana. His friends fed organic waste to worms, used the resulting worm castings as plant food, and saw the plants thrive. That experiment sparked his lifelong fascination with garbage, which he views as an unusual material because society pays to get rid of it. In some countries, he notes, paying to dispose of something is even part of the legal definition of garbage.

Szaky explains that TerraCycle began by commercializing the worm-casting idea. He and his friends collected organic waste from college cafeterias, processed it through homemade contraptions containing worms, packaged the resulting material in used soda bottles, and sold it to retailers such as Home Depot and Walmart. Dumas jokingly asks whether the founding conversation was essentially, “Dude, do you know what would be really cool?” Szaky confirms that the basic economic insight was exactly that: customers would pay them to take waste, giving the company raw materials at a negative cost, and TerraCycle could then turn those materials into a product to sell. As the company grew, the founders repeatedly asked how they could solve waste more fundamentally. That led TerraCycle beyond organic material into recycling items most people assume cannot be recycled, including cigarette butts and razor blades. More recently, the company has focused on moving products from disposable models toward reuse through Loop. Szaky also describes TerraCycle’s office-design mandate: every office around the world must be made entirely from garbage. The carpet consists of unwanted remnants, desks and tables are made from old doors, his conference table uses two wine barrels and a refrigerator door, and dividers are made from soda bottles, vinyl records, and similar discarded materials. He says the offices make the mission tangible and are also an inexpensive form of interior design.

Dumas asks what it really takes to recycle materials that conventional systems ignore. Szaky says the common explanation—that technology or infrastructure does not exist—is incomplete. Recycling worldwide is carried out by for-profit companies, even when local governments pay for it. Those companies compare the cost of collecting and processing waste with the value of the resulting recycled material. Aluminum cans are widely recycled because their recovered value can exceed processing costs; toothbrushes and many other items are not collected because they cost more to process than the output is worth. Szaky estimates that roughly 95% of everyday objects, including baby-food pouches, diapers, cigarette butts, and writing instruments, cost more to collect and process than their recycled results are worth. The central challenge is therefore not only inventing a technical process but finding a stakeholder willing to fund the economic gap. That stakeholder could be a manufacturer, retailer, consumer, or another party connected to the product. TerraCycle develops the required technology and logistics, but the program becomes possible when someone pays the actual cost of recovering and recycling the material. This is why difficult recycling programs often operate separately from ordinary curbside bins and require brand-funded or consumer-funded collection systems.

The conversation turns to TerraCycle’s decision to raise capital through a Regulation A offering, allowing ordinary investors to participate rather than relying only on venture capital, private equity, wealthy individuals, or Wall Street. Szaky says the company used more traditional Regulation D financing during its first decade, when it grew from a dorm-room startup to a profitable business. Regulation A became relevant after the JOBS Act created the framework about 10 years ago. The immediate reason TerraCycle pursued this route was customer demand. People repeatedly contacted customer service asking whether they could invest $100 or whether TerraCycle was publicly listed. Szaky says the offering gave those supporters a way to become owners. It also helps the company prepare for a possible future public listing because Regulation A requires reporting to the SEC, though TerraCycle reports every six months rather than quarterly. The company began this process in 2018 and raised $20 million in its first offering. In the fourth quarter of the previous year, it raised another $5 million and, according to Szaky, ranked first or second among U.S. crowdfunding campaigns. At the time of the interview, TerraCycle was seeking $75 million and had already attracted about $8 million in the first few months. Szaky adds that investors in the first offering had received dividends each year since 2018, totaling nearly 25% of their invested capital.

Szaky traces TerraCycle’s nicotine-waste work back roughly 15 years, when it created cigarette-butt recycling. He says cigarette butts account for 37% of roadway litter and contain toxic substances. TerraCycle’s U.S. cigarette-butt program can be accessed for free through its website, with shipping and recycling paid for, and participants can raise money for Keep America Beautiful. The program has expanded internationally and has collected and recycled close to one billion cigarette butts in the United States. The newer vape problem is more urgent in a different way. Disposable vapes are embedded electronic devices containing a lithium-ion battery, electronics, and a nicotine capsule, all intended for one-time use. If they enter a trash or recycling bin, they can eventually be shredded, causing the batteries to ignite. Szaky calls vaping devices the number-one cause of recycling-center fires and says they can burn down facilities. TerraCycle launched the first national vape-recycling platform in New Zealand two years before the interview and had collected and recycled about one million vapes there. The program then expanded to Australia and, after work with U.S. government bodies, to most U.S. states. Before these programs, schools, airports, and other organizations that collected vapes generally had to pay for hazardous disposal. Dumas asks why people treat cigarette-butt disposal as socially acceptable. Szaky answers that it is plainly littering and should be fined, but has become normalized. Rain carries discarded butts into waterways, where they can break down into microplastics. The filters are made of cellulose acetate, a durable plastic designed to trap carcinogens, so the discarded material transfers concentrated chemicals into the environment.

Dumas asks how TerraCycle and Loop make sustainability practical and commercially viable instead of leaving companies with symbolic pilot programs. Szaky says commercial viability is essential because it allows environmental initiatives to be implemented, scaled, and maintained through difficult economic periods. In his view, the fundamental sustainability problem is that corporations and other stakeholders generally do not have to pay for their environmental externalities. He compares it to a hypothetical sushi restaurant that can take fish from the ocean without being responsible for replenishing the supply. Szaky identifies two ways to make stakeholders address those costs: mandatory action through government regulation, or voluntary action by companies. He argues that current political conditions involve more deregulation and less enforcement, making voluntary programs especially important. For voluntary sustainability efforts to move beyond a pilot, they must create business value. He gives TerraCycle’s pen-recycling program in Canadian Staples stores as an example: TerraCycle must show Staples that the program brings more people into stores than it costs, making it a better use of money than an ordinary television advertisement. Asked about the biggest recycling myth he wants to disappear, Szaky rejects the idea that recycling is a broken system. He says recycling is a for-profit enterprise—effectively a form of urban mining or extracting value from waste—and therefore processes what can make money. He uses clothing bins as an example: much of the clothing donated for resale is not ultimately resold because Americans buy back only a small share of discarded clothing. Understanding the economics explains why some materials belong in conventional bins while others require specialized, paid programs.