For all of its noble goals, the business of recycling old electronics and mobile phones is fraught with challenges and not very profitable. Retrace, a Seattle startup that spun out of Xinova earlier this fall, believes providing better data to recyclers and other players in the global market for used mobile phones will help.
“It’s not necessarily as clean and green as everyone seems to think it is,” says Michael Rubel, founder and president of Retrace. “Even the good players struggle with the compliance measures and it’s a tough game, even for the big guys.”
Xinova, formerly known as the Invention Development Fund, rebranded itself this fall as it completed its spin off from Bellevue, WA-based Intellectual Ventures, the patent aggregator and multifaceted invention shop of former Microsoft CTO Nathan Myhrvold. A mashup of the words for new in Chinese and Latin, Xinova is pursuing a new model for uniting research and development with commercialization in industries including IT, agriculture, and manufacturing. It connects its customers—ranging from startups to Fortune 500 companies—to a network of 10,000 experts in more than 30 countries to define and solve problems, and make better products and services.
The company, based in Bellevue with offices in Japan, Korea, China, India, Singapore, Australia, Germany, and Israel, spun out other startups including Coffee Flour, which is commercializing a byproduct of coffee production, and QSense, which makes technology to monitor and share air quality information. (We’ll hear more about Xinova from executive vice president and head of global partnerships Paul Levins at Xconomy Intersect on Thursday. Learn more and register here.)
At Retrace, Rubel took a circuitous path to the business of providing phone makers, recyclers, brokers, and mobile carriers with data on flows of second-hand phones from one market to the next.
After a career as a Naval officer and nearly eight years working on innovation programs at Michelin, Rubel found himself at an Austin, TX, based e-waste recycler. He helped the company restructure, raise funding, and obtain certification from Sustainable Electronics Recycling International. He thought things were being done the right way, he says. They weren’t.
“They were basically taking bad electronic waste, putting it in the back of a shipping container, filling the front end of it with teddy bears and cute little things that no one would ever notice and shipping it off to China and just not telling me about what they were doing,” he says.
Several U.S. e-waste handlers were caught shipping e-waste to junkyards in places like Hong Kong and elsewhere in Asia that have weaker protections from the environmental and health impacts of scrapping old computer monitors, printers, and the like. The Seattle-based Basel Action Network (BAN) sniffed out the practice, which ran counter to assurances consumers were given about e-waste recycling, through the e-Trash Transparency Project, revealed last May.
After discovering the practice at the Austin company, Rubel resigned. But he still felt drawn to the e-waste recycling business. He founded Second Wave Recycling, which recycles a couple thousand donated phones each month, giving the proceeds to charities. While there, he was invited to review Intellectual Ventures’ portfolio of intellectual property related to recycling. He ended up becoming an entrepreneur in residence at IV and began working on what would become Retrace.
The company’s original idea was an e-waste marketplace to “to bring more transparency and efficiency to an otherwise struggling market,” Rubel says. “Everyone needs to audit everyone else and so this whole audit trail—even though a good thing on one hand—really kept anyone from doing any business efficiently using technology. It was still very old-school. [You] have to fill out paperwork. It’s got the little carbon copy underneath it.”
Retrace decided to focus specifically on cell phones.
“Arguably cell phones are growing a lot quicker than any other e-waste category,” Rubel says. “There’s more value there. There’s more trade internationally because they’re lighter weight.”
BAN says a million cell phones can yield as much as 20,000 pounds of copper, 550 pounds of silver, 50 pounds of gold, and 20 pounds of palladium. Smartphones in particular are often resold to consumers in emerging markets.
The biggest value Retrace saw in its marketplace was the data.
“I was watching the transactions go around the world and we saw pricing, we saw trade, we saw volume, and we saw models,” Rubel says, adding, “This is a commodity, just like any other product.”
The company now provides that data and analysis to customers throughout the phone recycling and resale supply chain.
”We’re working on the ability to predict the future as far as what will happen when they launch the iPhone 8, where the best price is, and where the phones are going,” he says.
Rubel credits Xinova for incubating Retrace as it sorted out its technology and business model—even though the business Retrace landed on doesn’t use any of the initial intellectual property—and also with honing his skills as an entrepreneur. Before pitching investors, he practiced with the Xinova team members, many of whom have venture or corporate investing experience, and received “oftentimes brutal and honest” feedback.
That paid off when he went to pitch his business. Last month, the company announced that WaterStone Capital, an early stage venture firm with offices in Seattle, Beijing, and Shanghai, acquired a controlling stake in Retrace and paired it up with Miao Miao Cloud, a Chinese tech company that was also building a marketplace for mobile phone resales. The combination creates a global marketplace for second-hand phones and expands Retrace’s market for its analytics tools.
Rubel says that a more efficient marketplace could help increase phone recycling rates.
“More consumers will want to recycle their phones because they’ll realize there’s more money in it when the carriers pull it from them,” he says.
