Startup Series: Outlast Earth
Today's guest is Sam Saltzman, Founder & CEO of Outlast Earth.
Outlast is disrupting the biggest market you've never heard of. The bulk recyclables industry is a ~$1 trillion industry – yet is largely a technological desert. Outlast is transforming recyclables trade through technology. Their platform enables suppliers and buyers to safely and effortlessly transact their materials at the push of a button. Beyond connecting suppliers and buyers, they also provide global logistics, financing, and quality control.
Sam is the CEO of Outlast. Before Outlast, he was COO at AMELCO, an aluminum recycling plant and the Chief Geologic Officer at Extracon. He also served as the Chief Operations & Technical Officer at Aroa Commodities, where he worked to develop, manage, and supervise sustainable copper, gold, and silver mines in Colombia. At the University of Iowa, Sam was the Interim Lab Manager and Researcher at the University of Iowa's Electron Microprobe Lab. Sam has a BS in Geology and an MS in Geoscience from the University of Iowa.
In this episode, Sam takes me through his climate journey, what led him to leave commodities for bulk recycling, and Outlast Earth's mission. We also talk about why the bulk recycling industry is lucrative, Outlast's unique approach to the circular economy, and how the startup measures impact while balancing profits. Sam is a great guest, and it was educational to dive into the thorny topic of recycling.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@mcjcollective.com, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded March 8th, 2022
In Today's episode, we cover:
An overview of Outlast
How Sam went from a long career in commodities to focusing on bulk recycling
How frustrations with the supply chain pushed Sam to explore what would become Outlast
Key learnings along Sam's climate journey and how to company has grown since day 1
Why the bulk recycling market and industry is so lucrative and important to a clean tomorrow
The problem Outlast is setting out to solve and the theory of change behind the company
Outlast's key stakeholders, position, and value proposition
Outlast's platform and products
How the bulk recycling landscape has operated before Outlast's founding and why the startup is providing a unique solution
Outlast's relationship with the brokers in the industry
Outlast's approach to a quality offering and where Sam sees the company in the future
Why the industry has been so inefficient and fragmented until now
How Outlast Earth measures impact and how to balance mission and profit
Funding and staging to date
How resourcing can shift policy and why policy is important to the future of bulk recycling
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Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Sam Saltzman, founder and CEO of Outlast. Outlast is disrupting the largest market you've never heard of, bulk recyclables, which is about a trillion dollar industry, yet it's also largely a technological desert.
Outlast is transforming recyclables trade through technology. They have a platform that enables suppliers and buyers to safely and effortlessly transact their materials at the push of a button. Beyond that, they also provide global logistics, financing and quality control. Company's been around for a few years and they've been quiet, but they actually have a lot of traction. We have a great discussion in this episode about the origin story for the company, the recyclables industry in general specific to commodities and materials.
We talk about how the industry varies from region to region and from material to material. We talk about some of the problems and inefficiencies in the industry and the incentives from brokers to manufacturers to the buyers of these materials as well. And we also talk about Outlast approach, their entry point, some of the key learnings along the way, their position and value prop to the different stakeholders, their traction to date and the path forwards. I enjoyed this one and I hope you do as well. Sam, welcome to the show.
Sam Saltzman: Hey Jason, I'm very excited to be here.
Jason Jacobs: Excited to have you. And it's funny too because recycling is such an important area, but it's also an area that's pretty controversial and- and that catches a lot of flack and you're right in the thick of it. And I'm dying to learn more about it. We've covered it a bit. We have, you know, Matanya from AMP Robotics and we've done one or two other episodes, but you're coming at it from a different angle and you've been at it a long time and I'm so grateful that you're making the time to come talk to us today.
Sam Saltzman: Yeah, just grateful to be here. And it's certainly an opaque space. I think there's no college class or education you can really get outside of the industry that would keep you in tune to the actual mechanics of what it takes to operate within the bulk recyclable space.
Jason Jacobs: And before we get too far down on that path, 'cause I have tons of questions there, but just starting from the top, what is Outlast? What do you do? How would you explain it in an elevator?
Sam Saltzman: So Outlast, we are a tech enabled brokerage that is growing towards a true marketplace for bulk recyclables. There's basically three pillars to our software. We have a marketplace that's managed internally and that's matching supply and demand through suppliers, which is everyone from an industrial manufacturer that might have some insulated copper wire they need to get rid of to your mom-and-pop operated, you know, auto dismantling junk yard that's basically pulling engines and transmissions out of cars and then crushing the actual steel frames.
And then it's matching the demand, which is industrial manufacturers, everyone from large automotive companies to breakage yards in India and Pakistan that are actually hand sorting copper and steel. The second pillar of the software is a fulfillment portal. And that basically answers the age old question how do you get 40,000 pounds of aluminum from Atlanta, Georgia to Busan South Korea? So it's creating tasks and automation to make everything from shipping and logistics to customs clearance more transparent and easier.
And then we have our customer portal, and think of that as kind of a tip of the iceberg, right? You have all this happening behind scenes with the marketplace and the fulfillment portal. But our customers come from an area where technology has not really been a focus of their life, right? They view technology as the ability to lift a car up with a crane and crack it in half over a pile of cinder blocks. So this is an easy button. It basically takes a series of emails and creates a data silo for them to manage orders with Outlast and also create new bids and listings to put on our marketplace.
Jason Jacobs: Nice. And sometimes with these companies you see that people tackle them after careers at Facebook or Google or Uber or Stripe or places like that. You come at this from a different path. It- it- it looks from my research like you're a longtime commodities guy. So maybe talk a bit about kind of how you grew up professionally and- and what led you to this problem in the first place.
Sam Saltzman: So I have been an environmental nut since I was a little kid. And actually before I was in the world of commodities, I was a climate scientist. I lovingly say I'm a recovering geologist, an analytical chemist. I studied climate change in the high Andes. And one day a- a switch kind of flipped in my brain. I spent a lot of time drawing squiggly lines on a whiteboard, but I never felt like I was actually doing any sort of preventative work or any sort of kind of proactive work to kind of help these changes that were actually occurring.
So I had a friend who basically said, "Hey, I'm buying a bunch of gold mines in Colombia. You're a scientist, you know geology, would you like to join me in setting up sustainable minds for smaller communities in rural Colombia?" So I basically dropped outta grad school, packed a suitcase and moved to Bogotá and we started basically exploring a number of different mind sites across the country. Long story short, it's very difficult to operate coal mines in Colombia, but his family had a- a 60 year old aluminum recycling business in Venezuela.
And they basically approached me after working with them and said, "Hey, our country is unfortunately destabilizing, but we have a bunch of equipment down here that could be used to start a new aluminum recycling operation." And this was right when China had, was about to implement this thing called the Sword Policy. And so that's basically saying that these more contaminated goods that would traditionally go to China to be recycled were no longer being accepted. So our plan was to put a aluminum recycling plant in Southern Arizona, taking some of these lower grades of scrap and then export them out to China and other or Southeast Asian markets. And it was that experience that was ultimately the inception for me of Outlast and the frustrations I had with the supply chain in particular with that experience.
Jason Jacobs: And so when was this and what were some of the frustrations that you hit up upon?
Sam Saltzman: So I think it was 2015, 2016, 2017. So on the- on the supply side, it was like a whole new universe to me, right? Like I'm- I'm going, I'm touring all these facilities where it's just like literally like a pile of rotten steel. And I'd never really been attuned to this. And there was something very romantic about it. But at the same time, I was spending more time buying people beers and lunches than I was ever actually looking at like any hard data.
And there was this like moment too where we were about to give this guy a significant portion of equity within the company, or basically pay him like 5% on top of every transaction just to go and do procurement for us. And I was like, "Why?" Like, "Why can't I just go online like I would with any other normal marketplace and like find reliable supply to this?" And then we went over to demand and demand was a whole different universe.
There were websites at the time that were very Craigslist esque in the way they were set up. And I would dive into these and I'd start calling people all excited like, "Hey, we're building this new aluminum recycling facility. We're gonna be able to supply you this great recycled material," and it was just like a needle in a haystack. It was either fraud or was either a broker who was talking to another broker who was talking to another broker. I've seen brokerage chains from a- a supplier to an end processor in this industry of seven people passing paper to make money. That's how inefficient it is.
So I- I basically approached a friend at the time and said, "Let's build something digital here like..." And I think the original thing that we pitched AngelPad was like an aggregation system for secondary commodities that took logistics rates and combined them with material rates. Lo and behold, it is way more complicated to actually execute than that but that was enough to spark Thomas Cortez's attention. And basically three weeks after inception, I called the family in- in Venezuela and said, "Hey, I'm- I'm pursuing this other opportunity to basically go venture route with a potential marketplace." And we ended up in New York City, which was a very interesting experience as well.
Jason Jacobs: Got it. And so maybe talk a little bit about the initial entry point when you started, some of the experimentation and learnings that you had and then what some of the key iterations have been to get you to where you are today.
Sam Saltzman: Yeah. So I think the [laughs] initial entry point was having no clue what we were doing to be completely frank, which I think is how a lot of startups like start. You try every idea, you get a lot of negative feedback. I think at one point for like a total of like seven hours, we pivoted to like a service for demolition companies to better manage their resources and then realize like the core focus here is like green tech and recycling. So went through AngelPad, raised absolutely no capital after that.
We're basically bootstrapping the company and trying to figure out how to connect buyers and sellers and learning very quickly that it's not just an open marketplace, right? These are companies with long standing relationships and these are complex movements. I mean, we're talking in instances thousands and thousands of tons of physical material and not an organized physical material, a very disorganized pile of waste that needs to be successfully moved halfway across the globe to be successfully recycled.
So our- our entry point, what we learned is that this whole industry from an export perspective was communicating through WhatsApp, which is technology in itself, right? So our- our entry point into this was basically creating a- a push pull service to and from WhatsApp where we would find someone that had like 40,000 pounds of like rotten electric motors at like our first revenue was just generated off of piles of rotten electric motors. And then we'd- we'd create this like ticket and we'd send this ticket to like five different brokers on WhatsApp who would come back with pricing and then we'd use that to effectively like secure this deal.
And at the time, we didn't realize the significance of the discovery of that but looking back, it was so important. Because as I've talked with more founders in the B2B space, one of the things I've really started to realize is- is no true B2B marketplace actually starts as a genuine marketplace. There's always this element of tech enabled brokerage, where you have these high value customers with very nuanced needs and you're providing a very specific service from them and using that to create the liquidity that eventually fuels your marketplace.
Jason Jacobs: And so what was that service in this case?
Sam Saltzman: So it was- it was basically marketing of the material and then providing like effectively like three to four day financing because the brokers were paying slightly later than we were gonna pay and basically what we discovered is like US scrapyards, they need to be paid immediately. So it was a pretty teeth rattling situation for us because I think we effectively had like $20,000 in the bank and like each transaction would cost us like $19,000.
So [laughs] we'd watch our bank account like go to zero for like three days, be sitting there chewing our nails and then it pop back up to like 21,500 like we'd make like $500 on the transaction and then we'd like move on to the next one. And that was effectively the inception of like Outlast, was just a push pull system and then a way of kind of like bridging a very small financial gap, which created enough value with the suppliers to start getting inventory into the database that we were building.
Jason Jacobs: Uh-huh [affirmative]. So the market then on the supply side were people that had the excess material and were trying to find a home for it.
Sam Saltzman: So it's not necessarily excess material. Like maybe we should take a step back and like talk about like what a recyclable supplier is. It's fascinating, right? It's- it's everyone from like Sims Metal Management which is a multi-billion dollar company down to Al's Junkyard, right? And Al's Junkyard's family owned. Maybe they're doing $5 million in sale. These- these typical kind of mom-and-pop shops, you basically have a- a matriarch or patriarch who's doing everything for them, right?
They've got a crane, they're moving steel around, they've got 10 unskilled laborers that they're instructing not to start fires in their yard. And at the time, they've got a smartphone and they're like calling, texting, emailing procurement teams and brokers trying to find the best price and best payment term for their materials, right? Do you have a window by you by any chance right now? 'Cause I- I absolutely love this analogy.
Jason Jacobs: I do.
Sam Saltzman: Do you see a piece of metal between the wood or the cement and the glass in your window?
Jason Jacobs: I'm a little far away from it, but I think I do. Yeah.
Sam Saltzman: Yeah.
Jason Jacobs: It's just like a thin strip, right?
Sam Saltzman: Just like a thin strip, yeah. So that's- that's 6,000 series extrusion aluminum. Just recycling that alone's a multi-billion dollar industry. So what I always tell people too is like if you're on the Caltrain, you're going from San Francisco down to San Jose, look off to your left, and in the middle of some of the most expensive real estate in the entire world, there's like a five acre scrap yard. That's how profitable this business is, and these companies have been around for hundreds of years.
So in the US, we're well over $100 billion. And if you took the four largest companies, you wouldn't even touch 10% of the market, it's highly fragmented. Globally the data is a mess, right? But there are some reports that say we are approaching a- a trillion dollar industry. And kind of the average consumer like never really like notices that there in every major metropolitan area and non-major metropolitan area, there's 50 foot high piles of metal in trash, and that is this industry as a whole.
Jason Jacobs: And so when you looked at the industry, I mean, you- you talked about how it- it wasn't tech enabled and had Craigslist like experiences and how there's, you know, fees on top of fees because there's humans involved where there doesn't really need to be humans involved. So just opportunities for, it sounds like consolidation and efficiencies. You mentioned before we started recording that the reason you're doing this is because of impact. Can you talk a little bit about what you mean by that? And it'd be great to understand both the problem that you are trying to solve with Outlast, but also the how and the theory of change behind what Outlast is doing to help address that problem.
Sam Saltzman: Yeah. So from an impact standpoint, we actually went ahead and- and built an environmental calculator for kind of like a quick growth metric on us. We did about $6 million in sales in 2020, went up to about $23 million in sales in 2021. And you say, "Well, what does that mean from environmental standpoint?" If you look at using secondary materials, so recycled goods, so waste steel, waste aluminum, waste copper, which is what we focus on, there is a net savings of CO2 if you were to use prime.
So we basically looked at that net savings and said, "You know, what was our net CO2 reduction based on seeing these materials on the market?" And it was over 200,000 tons of CO2, and that's the equivalent about taking 43,000 passenger cars off the road? The why for me personally, and I- I feel like I speak to the company a lot about this is the first time speaking about this publicly, pardon my French, but winter's too hot. You know, like our kids and our grandkids will not have the same planet that we have today.
And since I was a child growing up in Chicago, that city was blanketed in snow with the '90s, you know? In the '90s you'd have snow from basically like late November through March. Now you have like one or two storms and you have like 50 degree days in January. And there's this kind of whole concept of we don't see anything like first degree, we don't ever really like realize it or actualizing as humans.
And- and we're starting to see it first degree, but I- I still don't really think there's enough awareness other than people who are on the front lines of like what climate is actually doing. So this company for me is- is my way of hopefully making a dent in those carbon emissions and- and our company's way of making it done to those carbon emissions and hopefully preserving some of the- the natural wonders of this planet for future generations and slowing down what could be a- a real terrible inevitable spiral here into global warming.
Jason Jacobs: I'm gonna try to parrot back what I think I heard just to test my understanding of it. So- so basically to use the recycled material is far more energy efficient than to produce or mine new material. And I'm assuming, although we didn't talk about it directly, that because of these inefficiencies, new materials used in far more cases than it needs to be used for if a more efficient marketplace was built. And so by helping create that more efficient marketplace, you reduce the amount of new material that's used overall percentage wise, is that right?
Sam Saltzman: That is the goal. So, I mean, if you look at commodities in general, it's a very, very low margin business. Like in today's market where we're seeing, you know, astronomical price increases as an intermediary for steel, like 1 to 2% is an amazing margin. Now, when there's no visibility from, you know, export steel producers in the United States to import steel consumers abroad, right? You can have three brokers in that transaction trying to make 1 to 2% a piece, which means you have a lot of inefficiency in that process. And the actual margin that could be realized is much lower by the actual producers and consumers of this material.
Jason Jacobs: Got it. And because the margin is smaller, it means that less transactions are done.
Sam Saltzman: Ultimately, yes. I think for especially high risk materials like plastics and paper, right? If they don't know a direct outlet and they're saying, "Well, it's cheaper for us to consume virgin resin at this point," they're going to consume virgin resin. There's no financial incentive there. If they have a direct line to high quality recyclables, they're gonna be much more likely to purchase that product and incorporate that in their manufacturing process rather than a virgin product or prime product.
Jason Jacobs: Got it, got it. So all else being equal, they'll go with the lower price, but if it's not... if there's too much margin in there, it makes it not price competitive, which means it won't get utilized in as many situations.
Sam Saltzman: Yes. But we are starting to see a shift. Like right now, we're kind of just putting the first legal link on a potential. I mean, it's a contract that would basically like 4X our business. And with this, the company is actually very focused on the ESG components, right? So like when we talked to them, we said... they said yeah, there's a huge cost savings with us in comparison to prime, but like our whole thing is like carbon reduc- reduction and decarbonizing our supply chain.
So that started to be one of our focuses as well, is going straight to these manufacturers and saying, "Hey, we know you guys are sourcing prime today. Like here's a direct line of sight to the actual secondary product that you can convert into your manufacturing process. And here's what we estimate to be the carbon reduction of that material as well."
Jason Jacobs: Uh-huh [affirmative]. So you... I mean, you mentioned the three different sides to your business. Can we just take a step back and talk about the stakeholders in these transactions and then what your positioning and value prop is to each one of those?
Sam Saltzman: Yeah, absolutely. Let's start with the suppliers, right? So our sales process to suppliers starts off very old world. We have a very easy sales pitch to some of the older scrapyards in the industry. We can buy your scrap, right? [Laughs]. We can buy your scrap, we can pay you quickly, right? And we can move the material quickly. We have a very efficient shipping and logistics process, right? What we do from there is we contract with them and we say, "Hey, we think we have a tool that's gonna make your life much easier."
And we do a- a platform onboarding and show them the order management system and the marketplace, the ability to produce bids and listings. And what we've seen is a particular example in Atlanta, Georgia with a shredding facility that now wants to commit basically as much of their material as possible to Outlast. And that's because we are saving so much time and effort and giving them such an amazing customer experience. One of our OKRs is actually industry defining customer experience, right?
We want to be like the Zappos per se of the recyclables industry, which I don't think anyone's ever taken that approach before. So you- you kind of get these aha moments with some of these suppliers where they kind of go in and they're like, "Well, I've been doing my banking on my smartphone for the past 10 years and it works really well, like why haven't we been running our business on the smartphone?" So it starts with this very kind of like manual old world pitch, and then it moves to, this is what we've built, we've built it for you, we're here to take your feedback and build for your needs, and then that creates customer lock in.
Jason Jacobs: And is that a- a separate subscription for the platform?
Sam Saltzman: No. We only charge when we're able to transact. So we're gonna be expanding into some order management systems. We're experimenting with a lot of things that can just generally help their business, and the whole goal is just to get them to visit the Outlast platform and have us be their first choice in transaction.
Jason Jacobs: And do they need to use the platform to transact through Outlast?
Sam Saltzman: We will set them up with a customer service representative. They can talk with that customer service representative and that representative can actually guide them and- and basically use the platforms for them. What we do see is people convert more and more towards the platform as they get comfortable working with us. As we execute, it promotes automation.
Jason Jacobs: Uh-huh [affirmative]. Got it. And so it- it's in your best interest, I would assume because it's more efficient and less- less human intervention to get them using the digital automated version, and then they find that it's in their best interest if and as you create an experience that's easier and gives them more control to not need to talk to a human in the first place. Same reason that I'll do everything I can online without having to call a human for- for support, if I can avoid it.
Sam Saltzman: Absolutely. I mean, it's a mutual lowering of the contribution margin on an individua- individual transaction basis, right? If we're lowering the amount of effort they have to put in and we're lowering our amount of effort we have to put in, both companies are effectively saving money on that transaction and creating a more efficient experience.
Jason Jacobs: Okay. So that is the supplier, and do you find that the early adopters have been more of those old line suppliers that are doing things in a highly manual way? Or I guess I'll ask a different question, are there suppliers that are further along on that innovation curve?
Sam Saltzman: Yeah, there are, absolutely. I mean, we- we have a range of suppliers from people who have never sent an invoice before to people who have an ERV and point of sales system installed. So the industry itself like isn't like necessarily like a complete tech desert. I just don't think for the longest time there wasn't a lot of like really like excellent technology, right? There's still a lot of stuff that exists within the industry that will give you like a quick flashback to like Windows XP and the way that it's structured, and that's- that's really what a lot of people rely on.
But what we've seen is as we execute, as we prove the value of Outlast to people by actually fulfilling on the promises that we give, then even the old world suppliers that are like, "I have a spreadsheet, the spreadsheet works great. Why do I need this?" Are kind of like, "No, there's something here, and we really like it. Like we want more of this, like how do we expand business with you?"
Jason Jacobs: Okay. So the suppliers are one stakeholder, what are the other keys stakeholders that you serve?
Sam Saltzman: So you've got demand, right? Every marketplace has at least two sides. So the other side that we serve is going to be demand. And I think there's a grace case study for this. There's a company we're working with in South Korea. We started working with them about four months ago and I think pretty quickly scaled up to out a fourth of their demand, had a call a couple weeks ago where they basically said, "How do we get to a hundred percent?" Same situation.
Instead of the email chain of 15 emails, instead of calls at odd hours of the day because your representative in the United States is awake between, you know, 6:00 AM and 10:00 PM our time and you're basically a- a 10 hour pivot from that, here's all the information siloed. So it's a very similar value proposition. We're basically digitizing your supply chain, we're gonna be an aggregator for you, right? We're gonna bridge this financial gap that you have between your demanded supply and very similar outcome. How much can we put through with you guys? How much business can we do? What do we need to do from our end to make Outlast kind of our preferred or only provider of scrap into our facility?
Jason Jacobs: And so in a world where Outlast doesn't exist, how has this demand gotten fulfilled to date?
Sam Saltzman: Brokers, brokers, and a lot of phone calls. And so if- if you think from the standpoint of these consumers of goods, right? They can have a procurement team managing like 10 relationships with brokers, they can have no line of sight to the actual producer of the goods, right? So let's say a- a load gets to this- this factory in South Korea and it is like 50% variance from the quality that they ordered. They're not communicating directly with the scrapyard that's supplied it, they're communicating with a broker, right?
So that makes the mediation of that quality risk difficult. And in a lot of instances that broker's buying from a broker who's actually buying from another broker who's buying from the scrapyard. So you have this game of telephone and it's happened to me, even it's happened to Outlast too, where, you know, we sold material at 30% to a broker. By the time it arrived at the end processor's facility it was 40%, we're like, "Wait, that's not what our contract specified." Like people were trying to make money as an intermediary in this, and actually marked up the quality here.
Jason Jacobs: Got it. And I have a question about those brokers, but I wanna get through the rest of the stakeholders. So- so you've got demand and supply. Are there other key stakeholders that you serve in this equation?
Sam Saltzman: So there's been a third stakeholder that we were aware of, but not as in tune to in the past, right now it's shipping an logistics. As I'm sure you're aware, there's a massive backlog at the majority of the major ports in the United States for containers. So one of the biggest pain points for our suppliers right now, and- and consumers is we can't get on vessels, we can't receive goods, we can't ship goods. So with that, our fulfillment portal comes into play and our amazing operations team also comes into play and- and figuring out ways that we can adjust our strategy.
You know, in fact now we're actually coming of our basically consumers and suppliers and saying, "We've actually already made the booking. We know based on our data, you're probably looking to procure these materials." Like you can accept the contract today and we can get these out within the next couple weeks. And that's been a way to add liquidity to the market and- and really has been a- a challenging third side that we're- we're currently playing into as well.
Jason Jacobs: Got it. But the only charging that you're doing at least today is around the transactions and all this other stuff is- is just to provide a better experience so that you lock in them transacting with you.
Sam Saltzman: Yeah, absolutely. I mean, today we operate on a bid-ask spread model, right? So we're basically saying, "Here's the buy, here's the sell, here's all the meat in the middle that we're doing and we get a contribution margin off of that, right? What we do offer our customers is on any transaction we'll be a hundred percent transparent with you. We'll show you the shipping and logistics cost, we'll show you any financing costs associated and we'll show you exactly what we're making." So it is starting to adjust people to more of that marketplace model, which we see in the future as being kind of fee based. You come in, you want to buy material, okay, it costs you 2%, right? And that 2% is for the services that Outlast are providing.
Jason Jacobs: And so I wanna come back around to these brokers. So what do the brokers think about Outlast?
Sam Saltzman: We work with the brokers. Honestly like if we can add value to brokers and- and brokers can add value to us, like- like there's no reason not to create a synergy there, right? I could definitely see how we're viewed as competition, but at the end of the day, we give brokers access to a completely open marketplace where they can see every material that's currently stored in our database. And if they could purchase that material and it can equate to the revenue that the scrapyard needs and the margin that Outlast needs, we let them participate.
It's a massive space and the is a lot of good brokers out there that we work with that we believe add value. Now there's a lot of brokers that we've had incidents with, and I think a great example of this is we were in like the first months of revenue generation for Outlast. We were looking to ship steel from Puerto Rico, working with a broker down there who came on some financial difficulties and actually sent us cinder blocks instead of steel. [Laughs]. It cost us about $25,000, I- I believe his trademark was he put snake heads on top of the cinder blocks.
So when it got to our customer in India, I mean, we did the right thing. He just basically said, "Great, send us a documentation [laughs] and we'll refund you." And that was a very difficult lesson. And- and honestly, I- I think it's one of the biggest moats we built is- is those traps and pitfalls are all around this industry. And quality is something that has not been standardized and is something that we're working to standardize and really create a systematic approach to- to handle and create transparency around.
Jason Jacobs: Can you talk a bit about the quality problem and some of the challenges with that in a world without Outlast, and then talk a bit about the Outlast approach and where you are today with quality and directionally where you aspire to get to over time.
Sam Saltzman: Yeah. I can give you another example of a quality problem that occurred with us. We got hit with a $300,000 claim that we had to pay out because a supplier loaded incinerator ash into a shredded metal product. So he was fraught, right? Like there's no other way to put that. Again, did the right thing like ended up settling and- and working with the buyer to kind of rectify what happened there. But it really got the gears turning within the team, right? And what we started thinking about is like, you have to start to master and understand quality in order to control a market where quality is so opaque and unregulated. And have you ever seen the Matthew McConaughey movie Gold?
Jason Jacobs: No.
Sam Saltzman: Okay, not a great movie, don't watch it. But it does shine a light an issue that happened within mining and metals, and that was the Bre-X scandal that occurred. I believe this was back in the '90s, are you familiar with this?
Jason Jacobs: I'm not.
Sam Saltzman: Okay. So basically this- this mining company falsified like hundreds of millions of dollars in investment into this massive gold deposit in Indonesia. And what this did for the mining industry is it prompted Jork and NI 43-101. And that's basically if you're going to list a mine on the Toronto or the Australian Stock Exchange, this is the prudency of geologic standards you have to abide by to document those reserves.
Scrap is the wild wild West, we do not have anything like that for materials recovery. So we've really started to standardize in database quality control, right? With the goal of ultimately building a- a data set around photographic recognition of scrap that gives a major competitive advantage to all participants in the marketplace. Because now it's not based on someone's word, it's based on the documentation of materials prior to shipment and during shipment. So if there's a problem, I would say 80 to 90% of the time you're are gonna be able to deduce that through photographic and physical evidence, and we can nip those problems before it's actually delivered, save suppliers a lot of money when there's an honest mistake and save buyers a lot of money when there's bad actors in play.
Jason Jacobs: And given how- how obvious and acute this fragmentation and inefficiency seems, I have to imagine that others have tried before you. Why hasn't anyone been able to do this successfully to date and why is this time different?
Sam Saltzman: That is a- a very deep question. I'll- I'll start with another story. When we were in Angel Pad, I- I contacted an- an old friend of the family who had been in the scrap metals business for 50 years. And I think when I... after I explained to him what we were doing, explained to him why we were doing it, his first word is, "Well- well, that'll never work." And for me, there's nothing more [laughs] motivating and encouraging than someone telling me that something will work.
So in that instance, we really sat down and tried to think about, "Well, why hasn't this worked in the past?" And I think there had to be movement in the middle of these transactions. There had to be a company that said, "We're going to do what this industry requires, which is you know, the incorporation of principle risk into our business model, but we're gonna digitize and reduce risk and optimize the actual managing of that principle risk until we find liquidity within the market."
So I think that's the real difference with us, is there's been a lot of marketplaces, you know, even 10, 20 years ago, in kind of like internet 1.0, metals.com was a thing that existed where people were kind of going on to look at scrap. But I think there was always, and honestly, this was like a major insecurity for me too to be completely vulnerable here, is when we first went out to pitch the seed round like you're trying to explain it as a marketplace, but there's this principle risk component and people are like, "Well, that doesn't sound very much like a tech play."
Like, no, it's very much a tech play. There is a huge operational cost you can reduce and bringing liquidity will eventually yield a marketplace. You just can't start at a hundred. You gotta start at zero and you're not even going by step increments of one, you're going like increments of like 0.1 to move the participants in this space towards automation and technology.
Jason Jacobs: And you mentioned that revenues have had jumped quite a bit from 20 to 21. I think you had said six in 20 and- and was it 21 in 21?
Sam Saltzman: 23, and that's- that's total sales, yeah.
Jason Jacobs: Got it. So why the jump and then give us a sense of what that equates to in terms of the number of transactions or even just how you think about your progress. This is not a very succinct question, but like what are the KPIs that- that you manage to as it relates to the key operations of the business?
Sam Saltzman: So I think this actually kind of like dives into an interesting conversation around culture. I'm lucky enough to have some pretty awesome investors that really got me to think about culture at an early stage. Kind of in 2019 we were getting going, there was this friction between scrap and climate and we really found a great way working with one of our- our particular investors on how to merge that. And we track on a per load basis.
And so what that means is like the minimum unit of measurement is like one truckload or one shipping container filled with waste of materials, and I wish I could screen share and show you some photos 'cause it's- it's fascinating. So as a team, our- our rallying cry is really how many loads of scrap are we recycling, right? Like and what is the- the net carbon impact from recycling those loads? So last year was I believe right around 1200 loads that were recycled, the year prior to that, it was right around, I believe 200 loads. We were working with some higher value commodities at the time. So our key KPI internally is going to be just like loads recycled, carbon impact from those loads.
Jason Jacobs: Uh-huh [affirmative]. And what are you doing to grow those tactically?
Sam Saltzman: Tactically, well, we're very excited. We just hired and he'll be joining next week, a- a new vice president of revenue. That's really gonna be revamping our go to market strategy. And we've got a couple pilot programs right now that we're really excited about, which I- I won't jump down into right now 'cause we kind of have them in stealth mode. And then we've got some major contracts. I mentioned one earlier on the call, but I can't speak to who it is, but I can say it would be very industry defining.
And we're- we're actually in kind of the process of drafting that right now. And then there's just organic wallet share growth. It's a cool market dynamic. And- and one of the things I- I love about it is it just forces you to talk to so many different people because a scrapyard, right? Like they're gonna produce like one load a month of like 40 different materials, right? And these end processors that we work with are gonna buy 40 loads a month of like one material.
So it's taking different mark- market segments that our active scrapyards are producing and say, okay, who are the end buyers that we can target so we can capture more of that wallet share? How do we just grow within our customer base and- and give them what they want, which is additional use of Outlast? And then obviously always looking for new customers, love talking with people in the industry and- and really just love being kind of, you know, listeners and saying, "What are your pain points? How can we incorporate you into our ecosystem? How can we add value?"
Jason Jacobs: Awesome. And I- I wanna come back around to talking again briefly about the- the impact side because we had talked a bit about how impact is what drives you and how using reuse materials is far more carbon efficient than using new materials. And I just wanna understand, you know, this is an example of a, what I would call a non-obvious climate story, but it's so key to your motivations when it comes time to look at how to track and the right metrics to track and how to verify that you're actually having the impact that you aspire to and things like that.
Where did you get that expertise? How much expertise did you get around the table? Was it external? Was it in-house? Was it consultancies? Was it service providers? What does that landscape look like? 'Cause this is a huge pain point for lots of entrepreneurs out there that are... You know, 'cause climate's not an industry, right? Like the industry is ag or the industry's mobility or the ind- industry is recycling or industrial processes or whatever, climate is more of like a- like a reason for being kind of thing, but it's not an industry, right? So for people that work in an industry, where do they get this expertise?
Sam Saltzman: I would say I'm- I'm fortunate... [Laughs]. It's a- it's a great question. It is difficult to verify that you're ESG, right? And I think for us, there's a lot of published data on the imperative using recycled goods or secondary goods versus prime. So when we went to build this environmental calculator, there was a lot of resources out there, right? And you basically looked at 10 different resources, kind of took an average and then compared it with a- a major publication for one of the advocy- advocacy groups and used that to create our calculations.
But I think for a lot of manufacturers that are starting to have these kind of like aha moments of like we could decarbonize our supply chain, it is really difficult. How do you know you're actually decarbonizing? And I- I think the fortunate thing for us is there is just so much evidence that says if you have a piece of metal, right? That's already a piece of metal, it is so much more efficient than digging something up from the ground, you know, putting it into a blast furnace to convert the oxides to something metallic and then putting it through another furnace to put it into the form you actually need for an industrial process. If it's already metal, keep it metal, would be the best way I would put it.
Jason Jacobs: Uh-huh [affirmative]. And obviously that... I mean, the financial KPIs are pretty straightforward. How do you know over time if you're having the impact that you inspire to have?
Sam Saltzman: It's a loaded question for me, as I will read a climate report on my- my home range, the Wasatch here in Utah and you know how that's gonna affect our winners and spend the next four hours like pacing around my house and just like grunting because there's not enough [laughs] I- I can do, but I think the more reach we have, right? We start with metals, metals get recycled and the more we can branch down into the higher risk items, plastics, electronic scraps, paper waste, rubber waste...
We just- we just processed our first loads of rubber and I was like so happy about this because it's like such like a high risk item that could just go to landfill, I probably like told the company how happy I was like 50 times over the course of like two days, right? So it's looking every year basically, what are the volumes we're putting through our platform, right? And then going back to these resources, hey, is this still consistent with our estimates? Is using these secondary goods opposed to prime still producing the same reduction rate of CO2 that we're talking about?
And then like most importantly, it's about the people at the company too, right? It's about when you hire like not only hiring for core values, but like are you at this company for our mission? Because our mission is to decarbonize supply chains. If you're here to expand your career, make money, like man, but we've said no to amazing people because they didn't align with that core value of decarbonizing supply chains and really fixing what is a- a fragmented uh, in with a huge amount of opportunity.
Jason Jacobs: Are there business situations that have come up where there would be a more compelling financial choice for the company that worked against the mission?
Sam Saltzman: Actually it wasn't one just a couple days ago where someone was offering us a bunch of wood products, I completely forgot about this. And they're like, "Oh yeah, the technology will work great for it." And we were just like flat out like, "Absolutely not. Like this is a marketplace for secondary commodities, not prime." So yeah, I've been [laughs].... We've- we've- we have turned down business actually like as like frequently as like last week where we're just like, "Nope." We were offered, you know, prime a number of times as well, just no, not interested. It's a secondaries marketplace.
Jason Jacobs: And I know you're growing quickly, but what are some of the barriers that are holding back your ability to grow faster?
Sam Saltzman: Right now let's talk, I guess, hiring for a second. We're looking for just amazing people to join our mission, and that's amazing people from both tech and recycling. So I think kind of our- our key hire right now is we're looking for a vice president of product and we're looking for someone who's customer focused and- and not afraid to put on the work boots and- and really kind of walk the yard with the people who operate in this industry on a daily basis. So I- I always say the biggest barrier is just having more smart lines to work on a problem. So it's absolutely recruiting, it always is.
Jason Jacobs: Uh-huh [affirmative]. And what about, uh, geographical focus? What geographies do you focus on today? Which ones do you aspire to focus on and how different a sport is this in different parts of the world?
Sam Saltzman: Oh, it is a very different sport in [laughs] every part of the world. And that's part of the huge opportunity to it. What works in the United States does not work in India, what works in South Korea does not work in India, very different. And it gives us something... It keeps us literally up at night because we're on phone calls with those counterparties in- in different parts of the world. But we- we primarily focus on US export. So up until recent months, about 95% of our supply came from the United States, we're starting to diversify that now working with South America and the UK. And then we have a- a pretty large domestic business as well going into domestic steel mills and working with scrapyards to move their scrap.
Jason Jacobs: Uh-huh [affirmative]. And you- you talked about the difference between expanding to different geographies and of course from emissions standpoint, the difference between prime versus I forget the word, is it second life or-
Sam Saltzman: Secondary.
Jason Jacobs: Secondary. What about additional material types? Would you ever get into plastics for example, or what does the roadmap look like there and how different a sport is it as you expand your material types?
Sam Saltzman: Once again, it's a- it's a different sport. I think different materials are compatible from a fulfillment process, right? But from a quality perspective, it's a different game. We're actively looking at paper and plastics as well. It's not a- a bread and butter product yet, but we see a huge opportunity there. And like frankly, we get really animated when it comes to landfill divergence. So anything that could be going to a landfill, if we could find a home for it, that really excites us.
Jason Jacobs: Uh-huh [affirmative]. And I didn't ask, but how's the company been capitalized to date and whatever you're comfortable sharing in terms of, you know, how much over what tranches and also just what- what type of capital, equity or debt and- and is it, you know, traditional tech money or impact money? Like just any color you can add o- on that topic would be helpful for me and for listeners.
Sam Saltzman: Yeah. So pre-seed was a group called AngelPad, which is- was based outta New York, now they're in- in LA. Our seed round was led by WaveCapital who have been just phenomenal to work with. And then our series A was last June, and that was led by Park West with participation by Oyster Capital and a handful of angels, including Dan Lewis of Convoy, Craig Sherman, Meritech. And we also have a substantial credit facility which allows us to provide financing for our customers as well.
Jason Jacobs: Nice. And how are you thinking about this next phase? So you did a fairly recently, do you anticipate that there'll be more equity capital into the business? What are the key milestones that you're trying to hit in between? How are you thinking about staging?
Sam Saltzman: We're actually just in the process of right now of increasing the debt facility so hoping to have that done here in the next month or so. And then equity raise probably towards the end of the year is what we're eyeing. We don't burn much, fortunately for us. We've got a pretty long runway, but it's more about liquidity and balancing that from financing. So we're- we're probably targeting equity end of this year, early next year. And- and really like I'm taking conversations with like ESG investors right now, and really starting to like meet people today, start to build a relationship because I think fundraising, you could do like one of those lightning rounds where you kind of get into bed with someone really quickly. My goal is to like bring in partners that like learn about the business from an early stage and then as we approach that series B, you know, can make a real educated decision on- on how we're gonna work together.
Jason Jacobs: And does this look more like venture capital, private equity or class of investors?
Sam Saltzman: It's venture capital, absolutely.
Jason Jacobs: Mm-hmm [affirmative].
Sam Saltzman: Yeah. One of our- our core values is have no ceiling. And I- I think venture aligns perfectly with that kind of premise. We want this to be an industry defining and honestly, industry retooling company. And I think working with the right venture partners definitely unlocks you to do that, and we've been fortunate enough to have some amazing partners in previous rounds.
Jason Jacobs: Nice. And one thing we didn't talk about is just the- the regulatory landscape, how important is policy to what you do and how much do you think about, and, or resource to that area?
Sam Saltzman: I'm trying to think of the best way to describe this, but policy, it- it's a bit like having a- a total switch, right? And a- a great example of this was the Sword Policy when basically China said, "We're not gonna accept this waste anymore, right? We're generating enough of our waste internally, we don't need to accept the United States' waste." And that pivoted major supply streams from China into Southeast Asia, India, Pakistan.
And that's gonna happen again, and it's gonna happen again and again, and as we build out this network and start to bring liquidity to our marketplace, I think we're gonna be kind of that key turning point that people look to and say, "Here's Outlast. There's a veil of trust here, these guys know how to execute." And all of a sudden, we had this major shift in the market, let them divert the goods for us because they understand where these are supposed to be going.
Jason Jacobs: Well. So that- that answers the question of when these shifts happen that are likely driven by policy that you'll be positioned to get the call, but do you resource at all to bringing about these shifts on the policy side?
Sam Saltzman: We're not really involved in the policy side, no. We're all about creating efficiency within the market. And politically, we haven't really lobbied for anything. We are active within ISRI, which is the Institute of Scrap Recycling Industries, and always trying to create a better climate for the participants within our marketplace.
Jason Jacobs: What about trying to understand future policy and how it's likely to play out? Is- is that something that ha... since it sounds like it has big implications for your business, is that something that you stay on top of or try to?
Sam Saltzman: Data, yes, absolutely. Not to dive too deep into that, but like the predictive nature of where these markets are swinging is something we're really kind of tooling aggressively towards right now. And I think policy has an influence on that as well, but like also like overall manufacturing, right? Like copper, for example, like we think copper is going to explode because of the rise of the use of EVs. So that's kind of like a macro perspective and we're also really starting to track that on a granular level as well.
Jason Jacobs: Uh-huh [affirmative]. And now that- now that you're starting to get some real scale, it sounds like, and I know you're just getting warmed up, but if I asked five different, random, old timers in the industry that are well placed about Outlast, what do you think they'd say? Like have they heard of you? What do they think about you? Maybe talk a bit about your brand. And I know that's a hard run because your brand is not what you say, it's what others say about you. So I guess I'm trying to get at, what do you think others say about you?
Sam Saltzman: That's a tough question. I would hope the old timers that never heard of us would say it'll never work. [Laughs]. To be honest with you, I- I- I love that response. I think if you were to ask a random customer, they'd say they're trying something that's never been tried in the space before and they focus on us, right? They put the customer above everything else. But to be honest, like I would just encourage you to go out and ask and see who does know what we're doing out there, because I think the growth and wallet share with the customers that we've worked with kind of speaks for itself.
Jason Jacobs: Awesome. And if you could change one thing outside of the scope of your control that would most accelerate your progress, what would you change and how would you change it?
Sam Saltzman: I would find a way to rectify this- this shipping and logistics crisis today, absolutely. And it- it's not just us, it's- it's everyone basically in trading, manufacturing, is just suffering through this. So that would be one thing that I know for like the month of January, we probably would've, if it weren't for the shipping and logistics crisis, put another probably 50 to 75% of revenue on top of what we did. It was that bad.
Jason Jacobs: Any thoughts on diagnosing what's causing the crisis and, or any ideas for what we could do or someone could do to help address it?
Sam Saltzman: One that's above my pay grade, I'll be the first to admit that [laughs]. But I think a lot of it is stemmed with the fact that these jobs of trucking, offloading containers and logistics, they're not glamorous jobs. People, and especially in the United States, like don't necessarily want them. So I think you need to create a better work environment for people who are working in these really harsh conditions and really say, "Hey." Like they're kind of in a sense like unsung heroes, right? Like this... No industry would operate if it weren't for international logistics. And those jobs are not fun ones in the United States and especially overseas I've visited Nhava Sheva Port but I have never seen controlled chaos work in a manner [laughs] like that before in my life. It was pretty remarkable.
Jason Jacobs: I mean, this has been such a wide ranging discussion. Is there anything I didn't ask that I should have, or any parting words for listeners?
Sam Saltzman: I just really appreciate being here. Parting words for listeners, if- if you know people who are- are mission oriented and looking to join a- a fast growing company looking to make a difference in- in one of the original green industries, which is recycling, you could reach out to me directly at sam@outlast.earth. We'd love to talk. We're really just trying to grow with- with amazing like minded people. And Jason, I- I really appreciate the time today. It's- it's been great having a conversation with you here.
Jason Jacobs: Was a lot of fun, I learned a lot too. So Sam, thank you.
Sam Saltzman: Awesome.
Jason Jacobs: [Laughs]. Thanks so much for coming on the show and best of luck to you and the Outlast team.
Sam Saltzman: Thank you so much. Hope to talk to you soon, take care.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note that is .co not .com. Someday we'll get the .com, but right now .co. You can also find me on Twitter at Jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
