November 8, 2011
On November 1, SJF Ventures’ portfolio company CleanScapes, a Seattle-based recycling and waste collection firm, closed a merger transaction with another leading West Coast firm, Recology, the largest U.S. employee-owned company in the waste and recycling industry. The deal was a strong win-win-win for customers, employees, shareholders and the environment. The two companies share a similar employee engagement culture and a pursuit of ‘waste zero’ communities. The merger further proves that strong performing companies that do well by doing good, as CleanScapes demonstrated, can attract aligned acquirers that share a vision of building companies that create impacts beyond the bottom line.
SJF first read about the company in an article in Sustainable Industries about three years ago and was struck by the young company’s accomplishment of winning a $35 million annual contract with the City of Seattle. Shortly thereafter, SJF’s Cody Nystrom and Dave Kirkpatrick met with the company and discovered a mutual alignment with management given SJF’s deep recycling and waste expertise and positive impact mission. SJF was the only venture capital fund invited to participate in an $11.8MM equity round and invested $1.92 million.
CleanScapes performed exceptionally well on the City of Seattle and Shoreline contract, which contributed to their success in winning two additional municipal contracts in the greater Seattle region. The recent win with the City of Issaquah proves that a company offering strong customer service, a great place to work and a sustainability focus does not have to mean higher costs. In fact, a recent article in the Issaquah Press indicates “Consumers could experience a rate decrease as the city transitions from the current hauler, Waste Management, to CleanScapes in early summer.”
Chris Martin started CleanScapes in 1997 in Seattle’s Pioneer Square neighborhood. At that time the Company offered exterior cleaning services to businesses and properties seeking to present a cleaner, more orderly appearance to prospective customers, employees, and other stakeholders. In 2002, frustrated by the messes, odors, and collection noise created by the dumpsters clogging Pioneer Square’s alleys, the CleanScapes team introduced an innovative pay-as-you-throw model for commercial garbage and recycling collection. Called “Dumpster Free Alley Service”, this model replaced dumpsters with color coded bags which economically incentivized customers to reduce waste or divert trash to lower cost recycling streams. Building on this initial model, the company has continued to implement new forms of environmental, social and workforce innovation in waste management including: neighborhood waste reduction competitions, waste audits, CNG fleets, two-man driver crews and sharing of key performance metrics with employees and communities . In short, CleanScapes has certainly created a unique platform in a space that has historically lacked innovation.
When SJF first approached CleanScapes in late 2008, they were doing around $12 million in revenue and about to embark on a significant growth plan. The company only raised one round of capital and grew to over $47 million in sales by 2010 demonstrating a clear fit with SJF’s capital efficient, growth stage investment theme. Another theme that aligned well with SJF’s expertise and interest was business model innovation in recycling and waste verticals. SJF Ventures has developed a niche vertical within cleantech in recycling, asset recovery and reuse companies. The SJF portfolio includes several successful companies in the segment outside of CleanScapes, including Salvage Direct (auto recovery), eRecyclingCorps (cell phone recovery and reuse), Optoro (returned retail goods recovery), and Living Earth (organics composting). These firms, and many others like them, are using business model innovations to capture significant value from used goods that would otherwise be sent to landfills, generating incremental additional jobs, wealth, resource conservation and carbon reduction for the U.S. economy.
SJF Ventures is very pleased that Recology recognized CleanScapes’ unique value offering a strong return for investors and company shareholders. CleanScapes employees will now have the opportunity to participate in the value of this new partnership through the Recology ESOP model, which we believe will motivate employees to help make the next chapter of CleanScapes as successful as the last.
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