How EcoATM Became San Diego’s Hottest Startup Deal, If I Say So Myself

2/17/10

For a company that was founded by three wireless industry veterans only about a year ago, ecoATM ended 2009 with some pretty impressive results. If there was a yearbook for San Diego startups, you could say we were voted most likely to succeed:

Out of more than 100 local start-ups that entered the San Diego Venture Group’s 2009 PitchFest, ecoATM was voted winner—which included a $20,000 award—during the group’s annual dinner in December. EcoATM also won the $10,000 award that Bellevue, WA-based Coinstar offered at its KioskCom Self-Service Expo in New York for the best new concept in retail-based kiosks. We won Connect’s 2009 “Most Innovative Product” award in the cleantech category. We won the “Best Content Pitch” in the TechCoast Angel’s QuickPitch competition and second place in Qualcomm’s Q-Prize competition. Our startup was among the first handful of companies selected for EvoNexus, the technology startup incubator formed last year by the local telecom industry group CommNexus. Our company was featured on ABC News, and in Inc. and Fast Company magazines.

Today we even have some news to announce: At a time when the capital markets have nearly dried up, San Diego’s Tao Venture Partners is leading our first round of venture funding. Our investors include Jens Molbak, Coinstar’s founding CEO.

We started ecoATM with the idea of rewarding consumers who recycle their “retired” mobile phones by providing an automated kiosk that makes it easy for them to get a “trade up” discount coupon, gift card, or to make a charitable donation to certain organizations.

ecoATM kiosk

ecoATM kiosk

Our momentum has snowballed very quickly since October, when we conducted a field trial of our first prototype kiosk in Omaha, NE. Our kiosk immediately created a sensation with consumers and the press. Consumers were so eager to use our machine that they waited up to 45 minutes to get their turn. We were completely surprised by the response, and felt like we had definitely turned the corner.

It would have been hard to imagine such enthusiasm when it all started in late 2008.

It began at the Starbucks in Del Mar, CA, where I met daily for two months with Michael Librizzi and Pieter van Rooyen. We would sip coffee and contemplate ideas for our next venture. Surrounding us at other tables were other groups of unemployed techies who also were carefully scheming their next moves in the wavering economy of 2008. The three of us were all 15-to-20-year veterans of wireless, mobile, and semiconductor technology start-ups. Between us, we had started nearly a dozen companies, raised several hundred million in venture capital, and had been through some huge financial exits (and a few not so great). Even though the capital markets were in a full-scale meltdown, we were all still committed start-up junkies—entrepreneurs—the most honorable profession in the world. We all craved the excitement and adrenaline rush of creating jobs and wealth for ourselves, and for other folks. But most of all, we were addicted to the process of conceiving and building products that other people would want and pay money for.

I vividly remember the moment when Librizzi mentioned a Nokia survey he had come across—out of 6,500 households surveyed, only 3 percent had ever recycled a handset. Wait a minute! There are a billion mobile phones shipped every year! What’s happening with the other 97 percent? This could be it! How do we solve the problem of collecting and recycling these devices? Of getting the working ones back into the hands of folks who want them? We all instantly liked this problem and wanted to solve it. It was fresh and contemporary. We had spent our careers building the technology that had created this accumulating mass of cell phones and other electronic devices. Now we had a chance to help solve it in an environmentally responsible way. We could do well, and do good at the same time!

Our initial research indicated that there is an average of six used phones per household in the U.S., and we discussed many ideas for getting them recycled. What about charity groups collecting them door to door? What about having the post office pick them up when they drop off your mail? What about a better approach to the so-called “charity boxes” in wireless retail stores? What about a specialized web buy-back engine dedicated to used phones?

We spent the next month scouring the web and contacting folks in the industry. As we refined our thinking, we used Survey Monkey to test a few ideas on about 1,000 folks from our own address books. A clear picture began to emerge; consumers would participate in a mass recycling program if they had three things: a financial incentive (immediate, if at all possible); convenience; and personal data security. Whatever solution we came up with had to provide an answer to all three concerns, or we weren’t going to solve this problem.

Then one day at Starbuck’s, van Rooyen sat down and said, “Hey, I saw some people using a Coinstar machine yesterday; what about an approach like that”? That was it! We could address all three issues if we could build a machine that could accurately evaluate old phones, erase the memory, and pay consumers on the spot.

We spent the next several months investigating visual recognition technology, phone erase software, and kiosk business models. We talked with anyone familiar with the kiosk or used phone business who would give us their time. We leaned on our attorney, Jeff Thacker at DLA Piper, to investigate environmental and pawn-shop laws. We also asked DLA to help write our patent filings along the way. We were confident our idea would work, but we needed to build one and test it before we could validate it in the market. We also wanted to affirm that the capital markets would even fund a deal that was as far off the beaten path as this idea.

So, we pooled our resources, and with the help of a local engineering firm called DynaPac, we cobbled together the first prototype machine last summer. We started looking for retailers willing to give it a try. We also ran the pitch past a dozen or so Silicon Valley VCs to do a laugh test. They didn’t laugh, and in fact seemed open to the concept as long as we could get some strong market validation. Retailer response was also positive, but the first one to say “roll it in and give it a try” was the Nebraska Furniture Mart in Omaha. A few weeks into the trial a perpetual line had begun to form and folks were waiting up to 45 minutes to get their turn at the machine—ecoATM was a hit.

Since then we have performed more pilots and are launching 10 more machines immediately. We have customer contracts in hand and more pending with some of the largest U.S. electronics retailers. Some are planning full-scale national roll-outs for this year. We were also able to attract Tom Tullie to take over as CEO. Tom has run several public companies including Applied Micro Circuits Corp. (NASDAQ: AMCC), where he was president and COO.

EcoATM is not disclosing financial details about our current round of external funding, but we are announcing that Molbak, who took Coinstar public, also has joined our board of directors. The list of investors interested in our next financing is extensive and we are building out the team and the technology as quickly as we can. The adrenaline rush is back!

Now the challenges we face are about executing this vision in full scale. The casualties in the kiosk space are generally failures of execution. It’s no trivial task to build a network of kiosks robust enough to withstand the demands of the public and the retailers who host them. Part of that challenge stems from the capital requirements, but it’s also about avoiding big mistakes. With retailers demanding large scale roll-outs, we will need to learn how to run fast without tripping—and it seems like we just learned how to walk.

Mark Bowles, a co-founder of ecoATM, is a serial entrepreneur with more than 20 years in the semi-conductor and wireless industries. He has founded six technology startups, successfully raised more than $140 million in VC funding, and sold several of his companies for more than $100 million. Follow @

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  • http://www.caltrade.com Rob Gordon

    Is this a paid advertisement? Why is Mr. Bowles allowed to write about himself? What kind of journalism is that? I’m sure EcoATM is a fine company, but letting the CEO tout his own company as “San Diego’s hottest startup” is hardly objective journalism. Even most press releases – which is what this basically is – are more objective than this. SDNN should be able to do better than this.

  • Kathleen Kelly

    Not sure I understand Rob’s comment/ complaint. This piece was clearly written for, and appeared in the Insight & Opinion section of Xconomist Forum and as such clearly wasn’t written to be “objective” but rather a story of how that company got started. The title itself even includes “…if I do say so myself”. If opinion pieces aren’t your cup of tea then you probably shouldn’t read that section of Xconomy. Or when you do, don’t bother criticizing folks for writing their opinions there. Rob, you can do better than this.

  • http://www.caltrade.com Rob Gordon

    Just out of curiosity Kathleen, are you associated with EcoATM ? I came at this through San Diego News Network, and the way it was presented made it look like it was a part of that publication. Even so, it strikes me as being weird – most “opinion” pieces do not basically say “I’m great”. I’ll admit I don’t know much about Xconomy, but it seems like I should have every right to criticize something I think is lame. Could I write an “opinion” piece here about how my company is the “hottest in San Diego”?

  • http://vizitnow.com Mike Green

    I enjoyed the article. However, one of the frustrating things about these types of Idea-to-Fruition stories is they generate excitement that is based upon a false assumption. Mark and his buddies are already well-heeled, sipping coffee in Del Mar daily for two months mulling over ideas. Once they found one, they were able to spend another month or more in research while their attorney assisted and began the process of patenting the product.
    The article would provide context to this entrepreneurial excitement by stating clearly that these three men weren’t in the common position most entrepreneurs find themselves: working to make ends meet while bootstrapping an idea.
    It’s great that the writer walked us through the process, but could we know what costs were involved in each of those steps? Patents don’t grow on trees and aren’t given away. Attorneys don’t do research for free. Building a kiosk and launching it might employ some capital expenses as well.
    I like the story. But making it big comes at a cost. And when money is no object, the story takes on a bit of a different appeal.

  • http://www.xconomy.com/author/bbigelow/ Bruce V. Bigelow

    FWIW in terms of background explanation, I approached Mark Bowles about writing an account about ecoATM in December, after ecoATM had won the San Diego Venture Group’s startup beauty contest and before the startup won Connect’s most innovative product award in the cleantech category. So this article was solicited by me, the editor of Xconomy San Diego. I worked with Mark to develop his ideas and we worked through the edits together. I should add that the Xconomist Forum is not intended to be objective journalism. It is comparable to a newspaper’s op-ed page–part soap box and part social networking platform–for people who want to exchange opinions, views, trends, and insights about technology and startups.

  • http://www.ecoatm.com Mark Bowles

    Mike Green’s comments are great and as author of the story I will add some color here to address his point; Mike is correct that the founders were well-heeled entrepreneurs when we started this project. And we were all serial entrepreneurs with access to resources that a lot of first-time entrepreneurs don’t. But its not the case that money was no object. I wish that were the case but the team actually made great personal and financial sacrifice and just barely kept it cobbled together long enough to get to external funding.
    To mention just a few of the founder sacrifices; Most of the founders tried to keep up consulting jobs on the side to pay the bills. All passed on other lucrative job offers. Some just cashed in 401Ks and/or the kid’s 529 college funds. Some were working on starting other companies in parallel in case this one didn’t work out, and at least one of which is also doing pretty well. I have personally gone 2 years without salary to pursue this project. To finance that effort I sold my house (at the bottom of the market), moved my family, and adjusted our lifestyle significantly. My wife moved from part-time to full-time work. We did this when almost no one believed in this idea other than the founders because it was only just that, and idea. There were no guarnatees at that time other than it was going to be a near impossible task to get it funded in this capital environment.
    Because of our personal track records we were able to lean on colleagues/service providers we had worked with in the past and got them to do great deal of work for free or deferred fees. The patent work and other legal work(DLA), building of the first kiosk prototype (DynaPac), website development, graphic design (Oxford Assoc), financial model development (Blackford Assoc), software development, marketing research (Minogi, YourVeryBestStory.com), PR (GianiWorks), etc, etc. All of these folks worked for little or no fees upfront but instead settled for a promise of being paid, if and when, we got funded. Truth be told, most of those folks would probably tell you they didn’t think we would ever get it funded either. But we were calling in personal favors and the list above is only the the ones that didn’t turn us down. If we hadn’t ultimately gotten it funded, most of the folks even on this list wouldn’t likley feel they owed us any more future favors.
    If personal sacrifice helps makes this story a little less frustrating then there was plenty of that to go around, be assured (if your not convinced yet you can talk to my wife and get her perspective :>). Our advantage wasn’t one of infinite financial resources or time, but instead our advantage was (and still is) our experience, strategic and tactical capacity, network, and ability to lean on key resources for deferred fees.

  • http://www.vizitnow.com Mike Green

    Thanks Mark. Your addendum to the story elevates an interesting story to one that could run in the tech section of the NY Times! Really. I’m not blowing smoke. As an award-winning journalist in the career I just left after 14 years, I can spot a good story.
    Here is my wife’s reaction from an email she sent me after reading JUST your comment, not your story:
    “I love reading this. Absolutely love it. I appreciate reading of their level of sacrifice, even given the tremendous resources that they had, relative to us. It was a collective sacrifice (family and those close); they were unafraid of asking for help/assistance/favors (and were turned down by some/many) and MANY companies took a risk and deferred their payment.”
    Mark, I know you see the story of your company as the point of interest. But the truth is, just like an investor, the reader is much more interested in the people behind the company. By telling us about the challenges and sacrifices, your story resonates with our own.
    As a first-time entrepreneur trying to introduce a disruptive brand in the online marketing and e-commerce market (vizitnow.com), I’m a fish out of water. So I’m looking around for any advice and help I can find. That’s how I found you.
    Thanks so much for sharing your REAL story. It makes me feel like I’m not alone out here. And my wife appreciates you too!

  • http://www.caltrade.com/community Rob Gordon

    I really appreciate the serious consideration everyone here gave to my comments. The original story really did strike me as being over the top, so I appreciate Bruce Bigelow’s explanation as to how this story came into being.

    I also totally agree with Mike Bowle’s point that most entrepreneurs find themselves “working to make ends meet while bootstrapping an idea”. In fact, most entrepreneur’s don’t even have the time or resources to participate in “contests” organized by Connect or the San Diego Venture Group or their many “award dinners”. Mr. Bowles may have made some sacrifices, and I appreciate his more humble follow up explanation, but by his own admission, he “sold several of his companies for more than $100 million”. Even if he no longer has that wealth, most entrepreneurs and small startups have nowhere near the kind of resources he has. This was an interesting and colorful story about self described “well healed entreprenuers” but no one else can follow this path – that option is not available to the rest of us.

    Our country and our State is in extremely serious trouble now, and I believe the only thing that will save us are small business and entrepreneurs. I really don’t think the approach taken by organizations like Connect or most VCs will help all that much. They are far too “exclusionary” – the winners of their “contests” or awards, find themselves with ample funding, while the vast multitude are left to struggle, and often fail, and everyone is harmed as a result.

    Not too many people know it, but California has at least 1.2 million “zero employee companies” – these are basically companies started an run by their founder. That was according to the last census – 10 years ago, and there is good reason to believe that number is FAR higher now. Many people are now finding they can no longer find traditional jobs so they are starting their own small companies. They are all alone, the deck is stacked against them, and they are completely off the radar screen for almost everyone in the government and business community.

    I think we need to take a radically different approach to economic development and find ways for these small and emerging companies to help each other. It is not an easy nut to crack, but I think that modern business and social network technology could be used to greatly enhance collaboration and help form “recombinant companies”. A while back, I started to put together a system to do this, using some community software I am using for another venture. I didn’t get to far because of lack of time and resources, but I think it has some promise – you can see it in it’s very early state at this link: http://www.calstartup.com. Should anyone reading this be interested in helping on a project like this, feel free to contact me.

    Now that I have had time to poke around Xconomy a bit, I do like this publication, but I do think it would be worthwhile to take a look at the very small companies in this community. They are the true source of all job creation and they need our help.

  • Marina Ortega

    Kudos to all the serial entrepreneurs out there willing to take risks with great sacrifices along the way. I’ve known a few people in Mark Bowles’ shoes and they all worked incredibly hard and pushed onward when others would have walked away. It’s false to assume that all of these entrepreneurs arrive at this snapshot in time with a a silver spoon. Usually, this is never the case. Mark Bowles provided us with a glimpse into his life as an entrepreneur and I, for one, applaud him for his perseverance and his family for standing by him!!

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