E-Recycling Your E-Waste: Tom Tullie, CEO of EcoATM

Hello and welcome to Zing Talk, where Benzinga brings you the biggest names and brightest minds from Silicon Valley to New York City.

In this episode, we talk with Tom Tullie, CEO of electronic device management kiosk company EcoATM. EcoATM offers consumers cash for their used electronic devices giving the gadgets a "second life" through refurbishers and resellers, or by responsibly recycling the products.

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Benzinga: You are listening to the Zing Talk podcast on Benzinga radio. I am your host, Hilary Louise. Joining me on the line is Tom Tullie, CEO of EcoATM.

So Tom, Eco ATM is a very unique concept. Could you start by telling us a little bit about this?

Tom Tullie: Sure. We have built what we call an eCycling station, which is an automatic kiosk that buys back used electronics specifically cell phones in the start in a fully-automated way. You put your cell phone into the device, it figures out what it is and what condition it's in, provides you with an up-to-date market price of the device and pays you on the spot.

We then collect the devices and for about 75% of the devices we collect we find a second life for it in the world somewhere as a refurbished product. About 25% gets recycled in an environmentally-sensitive way, IE it is melted down for its metals and content so that nothing hits the landfill.

Benzinga: I noticed that, according to the website, you look at different consumer devices. Does your machine take in more than just cell phones?

Tom Tullie: Currently we take back cell phones, MP3 players, iPods, iPads and things like that, as well as game media and as we continue to grow, add additional content. We will be doing other portable electronic [devices] such as GPS devices, portable cameras, and things of that nature. But at this point it is just the list that I spoke about.

Benzinga: Now walk us through the process. I come to a kiosk, and I plug in my device – I understand that you have different input devices so that your system is able to scan it – and I find out my purchase price and I agree to trade it in. How does it work, if I were standing in front of a kiosk right now?

Tom Tullie: Sure. You walk up to the kiosk, you hit the touch screen. The first step you do is put the device into an inspection chamber and our vision systems are going to look at that device. We have some artificial intelligence software that will basically identify what it is from a pure visual side. It will give you a price range of what that device is worth depending on the condition it is in and we'll go through and do an inspection, because [now] we know what the device is and know what cable goes with it.

We have a little robot that will present the appropriate cable for you so you can plug it in. At that point, we inspect the device. We fire up the screen, we look for damage to the screen and to the phone itself. Every night, we have gone out to a worldwide marketplace of buyers where it is refurbishers, aggregators, international buyers, etcetera.

We've gone out and we've bid whatever the highest price that we can get for every device in a variety of different conditions – whether it's perfect, or a broken screen, broken mechanics, etcetera. We then put that price into the machine every night and sometimes even throughout the day – continually – to update what the market price is.

Now that we've tested the device in the machine you now know exactly what it's worth. Let's say it's an iPhone 3G and it's worth say $150 – you say, “yes, I want to recycle it” – you press the button. Then, the device, the robot, takes the cable off of it, vends it inside of the kiosk. Then, there's an ATM machine built right into the device that just spits the cash out for you right there.

Depending on who has the highest price it could be going to India, it could be going to China, it could be staying right here in the US – refurbished and sold back [sic] and it could very well be that product that comes back into the market.

Benzinga: That is actually really incredible, the idea that [EcoATM] is built up into so many different areas, and so many different places in the world where these phones go, or these electronics can go. Sellers are able to take cash or an in-store gift card. What stores do you currently offer those for?

Tom Tullie: Yes so it depends on where the kiosk in. For instance – in malls, and places like those, grocery stores, we'll be providing cash. In some of the big box retailers and other venues providing store credit that can be used in-store and often there are other [incentives] to the venues.

For instance, we're in a couple of retail establishments – Nebraska Furniture Mart, out in Omaha and in Kansas City – we pay in-store dollars, and there's also a lot of promotions that are also put in that to add some additional incentive, coupons and things of that nature so the customer can get a variety of value.

Benzinga: Your company, Eco ATM, has attracted attention of some major investors including Coinstar and Silicon Valley Bank Financial Group. What is it about Eco ATM that makes recycling very attractive to your investors than other recycling venues or other companies?

Tom Tullie: From a recycling perspective, what we've done is we've taken to what we call the lowest common denominator. People generally want to do the right thing, but you also need to make it convenient for them. So by putting these kiosks in their normal walk of life whether it's a grocery store or a mall or big-box retailer it is somewhere they are going to be anyway, which makes it very convenient.

Also – basically people are driven by immediate gratification so by providing cash on the spot or store credit on the spot it makes an incentive for them to go ahead and do it. If it's worth a lot of money that's great, if it's worth five or ten bucks it's also great. Even if it's a phone that's been sitting in a drawer for ten years and you know you're not supposed to throw it away it gives people the peace of mind that if they work with us and put it in the machine they're going to get some value for it and that it's going to be recycled in an appropriate manner. I think people enjoy that as well as and in addition to the financial incentive.

I think that why my investors like it is we are able to reach a very difficult to get unit, one unit from a consumer all the way to India. And that's where it's going. Our approach to it is by making it convenient, making it financially incentivized, and making it an immediate gratification to solve all those problems.

We make it very easy to make that transaction, and make people feel good about recycling.

Benzinga: And I guess that brings us into some bigger issues. On your website you reference the “e-Waste” problem. Is there an environmental issue at play here? How does this work into your business model and what is it you are looking to do?

Tom Tullie: There's about 150 million cell phones on an annual basis that are retired in the US alone. When people no longer want to use them they put them into their drawer or god forbid they throw them into a landfill. There are about 75,000 tons of electronic products going into the landfills every year from this problem right here.

So, if we can not let it go in there, and stop this, and put it back into the market again, then we can solve a big problem. The other thing we can do by giving these phones a second life we can slow down the need for new devices in some of these other areas. [Also,] each phone takes about three tons of mining waste just to create the gold and platinum and palladium and etcetera that go inside the phone.

By giving these phones a second life, we can stop that three tons of mining waste. In addition there's a lot of EPA numbers that we use – so for instance annually one Eco ATM, one machine that sits in the mall and collects phones for a year will save about 2400 gallons of oil. Equivalent of taking 110 houses off the grid [or] 16 automobiles. So it's really a great device for both the recycling aspect and greenhouse gases as well as the stimulus package.

By providing all these dollars back into the economy that would have normally just sat in your drawer we're allowing that money to get spent back into the economy and basically get used as a stimulus package. Basically it's a great “win-win-win” – the consumer benefits, the environment benefits, and even the community as a whole benefits.

Benzinga: You had mentioned China and India based on these global marketplaces where these phones – either their parts, or the phones themselves – can be reused. Howe are you involved with underserved markets, where do these phones go – how does this process work?

Tom Tullie: Our buyers, the people who buy our phones – a variety of refurbishers, aggregators, channel partners – by throwing this net out as we do to a large set of buyers, they kind of find their own niche.

For instance, a lot of our phones from CDMA will go into Brazil because they are a CDMA place. A lot of different phones go to a lot of different markets. And a lot of this growth is driven from the explosion of new handset operators.

For instance I think there's something like five to ten billion new subscribers over the next ten years, and a lot of them are coming from populations where the average income is three dollars a day. They can't possibly buy a brand new iPhone or a Blackberry. If they can get a phone for five or ten dollars or something of that nature then they are able to get that service and get connected for the first time in their lives. So a lot of the demand offshore has been driven from those markets.

Benzinga: To bring it back to EcoATM and not so much about what you do, but where [your company] has been – when was your company founded?

Tom Tullie: EcoATM was founded back in 2008, but we figured out the concept and what we were going to do – we actually put our first test kiosk in the market in late 2009 where we basically tested out the fact of whether or not people would sell to a machine.

What it is we learned is it's a convenient thing for them to use. We easily determined that that was the case and we built all the technology from that point on, all the visions systems and electrical systems. We are still in our prototype phase but we have about 20 units out in the market, most of it in southern California.

As we've perfected our technology we are just now in the position to get our newest machine finished being built which is the machine that we're going to ramp production on and that will start to come out over the next few months and then ramp through the back-end of the year.

Benzinga: When we last spoke with EcoATM and covered what was happening, we had you for having kiosks in California and I believe some involvement in Washington, Kansas and Florida as well. When you speak of this new machine, where do you hope to place this in the market?

Tom Tullie: We're going to start nationwide, probably up the coast with our first set in California and then start expanding Eastward, probably hit a lot of the major cities toward the Q3 and Q4 timeframe – Chicago, Boston, New York – and then fill in. We'll probably be targeting the larger malls, grocery stores, big-box retailers and things of that nature as we begin to get the footprint.

Benzinga: You may have touched on this already. In 2008, when this was formulating for you, where did the idea of EcoATM come from?

Tom Tullie: Really it came from the concept, “how do we solve the eWaste problem.” The founders were a bunch of electronics guys who created a lot of semiconductor and electronics in our past and saw that this was a pretty big problem.

We read a report from Nokia that illustrated how bad the problems of recycling cell phones were. It said that only about three percent of all the devices were being recycled. That's about 150 million a year. And we realized that's a pretty big market and that's a lot of phones being thrown away that have a lot of value – why are these systems that currently exist not working?

So we looked at the charity box market, where you throw your phone in either at a service provider like a Verizon or an AT&T store, or at your church, or something like that. We looked at the web buyback business, where you can go online and type in what you have to get a price for it. But by the time you mail your phone and get your check back it is a month or two later.

We said, “well, why are they failing?” And really what it came down to is it's just not convenient enough that it's worth the time. Our population works in convenience and real time, so we figured – what mechanisms can we do to solve those two issues? An automated machine that can figure it all out and do it at a very cost-effective price. We can test it and figure out the pricing and do all that very cheaply, so we can pass on the value to the consumer.

And that's basically how it came around. It wasn't technology and a solution to look for a problem, it was a problem that we figured out, and well how do we solve it, and the EcoATM came out as the answer.

Benzinga: Have there been any challenges in working with this business model and in growing EcoATM? Maybe anything that came out more positively [than you had planned] – what have been some of the key points in the development of the company?

Tom Tullie: The consumer response has been great. When you embark on something like this you don't know how it will take, will customers really like selling their phone back to a machine. And so that was overwhelmingly positive – people feel it's quite fair, there is no negotiation where it's a used car salesman-type thing where “I'm getting ripped off” or something like that.

They're selling it to a machine, where the machine has gotten out there and is delivering the best price it can in the marketplace and [the consumer] feels they are getting a fair price. That was a good thing that we learned. The immediacy of the financial reward obviously went over very well.

On the negative side, this technology is certainly far from trivial that we've had to develop. So we knew that would be hard but it has been a big challenge. Luckily we have been able to solve that and have been able to come up with a machine that works – but the vision systems and the electrical systems and the artificial intelligence software was quite a challenge to pull together. The engineering team here has been pulling that together over a couple of years now and getting that to work.

Tough problem to crack, but if you can crack it, it works very well.

Benzinga: Well and I think that the life cycle, especially in our technical age of electronics – every company is making a new model, a 2.0, the iPad. How, with our society and with our technological advancements, does a buyback model such as EcoATM change that or move along with that process?

Tom Tullie: There's always going to be the early adopters, and people who want to cycle through their technology. There's also going to be a large part of our population who would like a better deal, who doesn't need the latest and greatest but last year's model will work very well for them. Really, we're providing an ability for the early adopters to buy the latest and greatest and then get paid for last year's product and not throw it away in their drawer or throw it away in the landfill.

[This provides] a low-cost of entry for those who want to use last year's technology and even on from there, people who could never afford to be on a cell phone or another device worldwide, allowing them to modernize and be able to get in with the price point they can be afforded because it's too hard to develop a brand new product that can fit that market niche.

The early adopters are going to keep on buying this new stuff, but instead of having it just pile up in a drawer or pile up in the landfill we're allowing these phones to have a second life and really just helping the overall economy as well as the environment by not having them be improperly recycled.

Benzinga: Nothing too specific, but if you have ballpark numbers of how many electronic devices you've recycled, how many of those you were able to rehabilitate?

Tom Tullie: Well I can't really get into exact numbers here, but about 75% of all the devices we see at EcoATM are used in a second life which means they go to a refurbisher as a phone or an iPod or what have you and is used again as a device. Only 25% of what we get actually goes to a smelter to have the metals reclaimed. That's a pretty good number when you look at your drawer and how old some of this stuff is. The more phones we can turn into a second life the better we do for the environmental position.

I think there's about 4,000 handsets that have ever been created and we have prices that we're paying back for about half of them – and that is all the models that have ever been built. That's a pretty large number, so we feel pretty good about that.

In that first year we only had a handful of boxes – ten machines, or in that nature – we've gotten tens of thousands of phones and tens of thousands of customers and paid out hundreds of thousands of dollars to customers. It's been really well-received on our prototypes, and we hope that with our new production box we can serve a whole lot more customers in the balance of 2011.

Benzinga: That's impressive, especially when you think of all of the different leaps in technology recently, all of the different adapters you need for all the different products that you just have in daily life, that you are able to service that many –

Tom Tullie: And that's where the technology comes into play, the visions systems and the robotics systems. Out of the hundreds of different plugs, trying to plug in the right thing into your device could be daunting.

Benzinga: I have a problem with that just in my own apartment.

I am curious to see what some of the more popular devices that EcoATM receives [are], and have there been any of those devices that surprise you? Like, a lot of iPods, or just that turnaround – what have you been seeing?

Tom Tullie: Sure. Well iPhones especially of late in the last six months, I'd say iPhones are certainly one of the most popular devices that we have. There have been a lot of people turning from the 2G to the 3G to the 3GS and onto the 4. With Verizon coming into play, there's a whole lot of AT&T customers selling their GSM phones and going and getting the CDMA ones. That's probably a bigger runner.

There are a lot of Blackberrys, and definitely number three on the list would be the whole Droid series especially from Motorola as they're getting more and more Android phones out there.

We still get, on a volume basis, the old Motorola Razr is still up probably in the top ten of devices that we get back. There are a lot of those out there and interestingly a good demand for that especially internationally [for] a good, solid flip phone for some of these third-world markets.

They aren't so much on the data side but they need to be connected telephonically and there's a big demand for that. Even though some of those models were made eight, nine, ten years ago we're still paying for them and we're still shipping them offshore.

Benzinga: To close things up: anyone who is listening and who is interested in learning more about EcoATM, where would you send them?

Tom Tullie: There are places on our website: www.EcoATM.com, and we have a lot of places they can go to, learn where our current kiosks are, to learn more about our green message. Soon, over the next couple of months as we are building our roll-out plan nationally we will be showing where the new devices will be placed – so people need to be ready to go at their drawers and pop [their devices] in the machine, save the planet and make a few bucks on the way.

Benzinga: Alright! We were speaking with Tom Tullie, CEO of EcoATM. Thank you, Tom, for joining us today.

Tom Tullie: I enjoyed it. Thank you.