Setting the Ecotone: Dylan Lew with Scott Hartley
Dylan Lew, co-founder and CEO of Ecotone, chats with Scott Hartley, General Partner of Everywhere Ventures on episode 114: Setting the Ecotone.
In episode 114 of Venture Everywhere, Scott Hartley, managing partner at Everywhere Ventures, talks with Dylan Lew, co-founder and CEO of Ecotone Renewables, a company replacing traditional waste hauling with on-site biodigesters that convert commercial food waste into a locally distributed organic fertilizer. Dylan shares how building and operating an early digester that broke down constantly pushed him to rethink the entire food waste system from the ground up. He discusses how Ecotone is rewriting the economics of food waste management, turning what businesses write off as a disposal cost into a revenue stream and a locally sourced fertilizer supply chain.
In this episode, you will hear:
Using state food waste bans to landfill as a distribution accelerant.
Building a decentralized grid of on-site digesters over centralized facilities.
Upcycling commercial food waste into a locally distributed organic fertilizer.
Expanding from digester hardware to AI-powered waste intelligence with Athena.
Sequencing a multi-sided business from digester manufacturing to retail fertilizer.
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TRANSCRIPT
00:00:04 VO: Everywhere Podcast Network.
00:00:14 Jenny Fielding: Hi, and welcome to the Everywhere Podcast. We’re a global community of founders and operators who’ve come together to support the next generation of builders. So the premise of the podcast is just that founders interviewing other founders about the trials and tribulations of building a company. Hope you enjoy the episode.
00:00:32 Scott: Hi, everybody. I’m Scott Hartley, co-founder and general partner at Everywhere Ventures. I’m super excited to have here, today, Dylan Lew, who’s normally based in Pittsburgh, Pennsylvania, founder and CEO of Ecotone Renewables.
00:00:46 Scott: Dylan’s working on some really fascinating stuff around food waste management, turning nutrient-rich foods that come off of restaurants primarily into reusable fertilizers and really helping solve the global fertilizer crisis that we’ll talk a little bit about today, pioneering a new method of doing this at scale.
00:01:05 Scott: So Dylan, thank you so much for being with us today on the podcast and we’d love for you to tell a little bit about your background. You guys started Ecotone straight out of college, made all the lists, the 30 Under 30s for people really innovating in circular economy. But maybe walk us through that decision to start Ecotone, the market opportunity that you saw and how you got started.
00:01:26 Dylan: Definitely, and thank you, Scott, for having me on the podcast today as well. I’m the CEO and co-founder here at Ecotone. My background is much more on the technical engineering side. Studied material science and engineering from Carnegie Mellon, got my bachelor’s and master’s there. And then was working for both NASA and GE Renewables, helping them manage their fleet of hardware systems.
00:01:49 Dylan: For GE, was doing failure analysis on their 55,000 operating wind turbines around the world. Every time one of them broke or collapsed, they’d send my team all the broken parts to figure out what went wrong and how we prevent it for the rest of the fleet.
00:02:04 Dylan: Really, really helpful experience as we are also building, deploying, and operating a fleet of hardware systems that are software-enabled. But for us, instead of wind turbines, it’s on-site biodigesters for commercial buildings and kitchens.
00:02:17 Dylan: We did start this while we were still in school, which is a lot to do at the same time. But I do think it was really helpful to have those first three years of the company’s life in this bootstrapping R&D phase.
00:02:31 Dylan: We actually started more as an operator. We asked and we got a custom order for a small scale digester and it was really difficult to operate. The 40-hour a week job was breaking multiple times a week and not actually running well. So we had a few key epiphanies early on.
00:02:49 Dylan: First of all, we think we can build a more reliable system. And the second piece is the automation and really the opportunity that we saw in the market of food waste management and fertilizer, which combined is over a $280 billion global market opportunity.
00:03:06 Dylan: And we saw that there was this gammacing of… you have waste management solutions that are sending all the waste typically to landfill, and you have really expensive fertilizers that are getting shipped from international countries, shipped to the US and to our farmers.
00:03:21 Dylan: There’s no interconnection of that supply chain. That’s where we saw a really interesting opportunity to create what I almost call a vertical integration play in the food waste solution space, where we are doing it all.
00:03:35 Dylan: We manage the food waste, we upcycle it into fertilizer. We actually then distribute that fertilizer to retail stores and farmers directly. That’s where we’re capturing a lot of value across the chain and also then sharing that with our customers and partners along the way.
00:03:50 Dylan: Hopefully that gave you a little bit of context in how we initially started and saw some of the opportunities in this space.
00:03:57 Scott: It’s fascinating because it’s a two-sided problem that we’re all learning about maybe for the first time with the global crisis in the Middle East and the Strait of Hormuz and the choking of global supply chain. Obviously, a lot of natural gas that goes into fertilizer production comes out of the Middle East.
00:04:14 Scott: With the global shipping routes shut down currently, I’ve just been reading about how China has really limited the export of some of the main components in fertilizers, therefore shooting the cost of fertilizer through the roof. Obviously, a lot of farmers buy these on contracts six months in the future.
00:04:31 Scott: Now, fertilizer manufacturers are reneging on those contracts under force majeure, and this stuff is happening simultaneously—not buying corn and pushing the price of crops through the floor.
00:04:42 Scott: So all these global supply chain levers that are moving as a result of conflict shed light on how integrated this global supply chain is. What’s so interesting is you may be taking a step back and talking about this two-sided marketplace where you have huge demand for fertilizer from US farmers and anybody that’s tilling land and cycling crops, contrasted with this urban development dense centers with restaurants with food waste.
00:05:09 Scott: Everybody’s walked their dog through the back alley behind a restaurant and you see the dumpsters and you see the biofuels and the storage of all of the offshoots of urban development in restaurants.
00:05:19 Scott: Tell us a little bit about the ZEUS system and what you guys have built and how you’re integrating that into large restaurant chains. I guess, the first part of the problem is offloading this food waste and how big of a problem is this? And then how you guys are then plugging that into this fertilizer market as you talked about.
00:05:37 Dylan: Very high level. The ZEUS digester is an easier and cheaper way to manage food waste. And it also, especially for businesses in the 11 US states now that have food waste bans to landfill, it helps these businesses meet new compliance requirements.
00:05:52 Dylan: The ZEUS digester is basically a fully automated anaerobic digester. It operates very similar to how our stomachs use. It’s a form of biomimicry. You’re basically using nature’s superpowers, but helping to do that in a condensed and faster way.
00:06:08 Dylan: For us, it is using trillions of different bacteria, fungi, microbes in a stomach tank to basically break down the food waste, turn it into an actual liquid organic fertilizer that we call soil sauce.
00:06:21 Dylan: Right now, our flagship product is the ZEUS digester. It’s an on-site biodigester for commercial kitchens and buildings, not just restaurants. We actually do all commercial kitchens: hotels, hospitals, corporate offices, schools, municipalities as well, are all market verticals that we currently serve today.
00:06:39 Dylan: It’s basically a trash chute on the outside of a shipping container where you dump your food waste in the trash chute, you walk away, and system takes care of the rest.
00:06:49 Dylan: Inside the box is where all of our advanced technology is that processes all of the food waste, produces the fertilizer. We hire local artists that decorate the outside to make sure it really fits in with the local communities where we deploy.
00:07:02 Dylan: The real key is really that automation piece. We’ve developed what’s called the PLC and HMI. Without getting too much into the weeds, it’s the brains of the system that lets us control and monitor these digesters fully remotely, help send our service team as needed.
00:07:19 Dylan: We also have a really advanced data analytics system as well that we’re about to be publicly launching in a few weeks too. Little sneak peek is that’s gonna be called Athena Waste Intelligence. Pairs very well with our Zeus digesters.
00:07:32 Dylan: It’s basically using camera sensors that are taking photos of the food waste, running it through a machine learning and AI program that’s basically tracking and detecting exactly what’s being wasted.
00:07:45 Dylan: These systems are not just upcycling food waste, but they’re also helping to reduce food waste of the source and food purchasing costs, which can be $50,000 to $100,000 a month, especially for some of these larger operations.
00:07:58 Dylan: Today, people have three different vendors to do this. They have a waste management vendor. They have a data analytics vendor. They currently aren’t really doing anything with any byproducts or fertilizers. Our goal is really to provide a really firm key solution that handles everything in one.
00:08:14 Scott: I love the references to Greek mythology. A lot of people are probably familiar with the backyard composters where you collect your banana peels and whatnot. And you maybe throw your food waste into a drum that you mix in sawdust and turn it every once in a while.
00:08:29 Scott: And it emulsifies and turns into a soup that you can then use in your garden. You guys are basically taking that same principle with much more technology, much more analytics, and doing this at scale for large commercial kitchens.
00:08:43 Dylan: Exactly right. What we’ve learned along the way, one of the keys in operations that we’re solving is odor and pest issues, is, especially in the summer months, food waste either sitting in a dumpster for a few days before pickup or in compost collection bins, which is definitely better for the environment, but operationally is still pretty difficult.
00:09:04 Dylan: For a hospital, for example, they cannot have flies going around or odor issues or complaints coming from their dumpsters. Being able to have fully self-contained airtight, watertight tanks, and pipes even within the shipping container really enables the system to actually reduce and eliminate a lot of those pest and odor issues, which are very typical for food waste.
00:09:27 Dylan: There’s this business piece, which we saw first, of making sure we’re reducing waste hauling costs. We’re helping to reduce purchasing costs as well along the way. But there’s also this operational piece of making sure that their operations are easier, cleaner, and faster.
00:09:42 Dylan: For those that are familiar with typical backyard composting, our digesters are basically eight times faster than that process. So instead of multiple months, it’s constant input and output that if you track up a banana peel thrown in to when it comes out as soil sauce, it’s about two or three weeks.
00:09:57 Scott: Wow. It’s amazing. For those of us who’ve may lived 11 years in New York City, we’re very familiar with the summer odor from the dumpsters and food waste.
00:10:06 Dylan: Exactly.
00:10:07 Scott: Maybe talk a little bit about these 11 states that have these requirements of no food waste in landfills. That’s an interesting development where there’s a carrot and a stick and some regulatory compliance aspects. Is this a trend that you’re seeing expand out? Are these 11 states the early leaders and then you see this continuing across the country?
00:10:29 Dylan: Definitely do. There are some states like Pennsylvania where they’re trying to pass similar regulations, but I think is gonna be… a little bit of a long haul to make it happen. There’s some amazing organizations that are really pushing that forward.
00:10:42 Dylan: It’s been interesting to see pretty much every year you see either new states adding these types of regulations or existing states reducing the threshold of who’s included. How they usually roll these out is they’ll have, let’s say, a three or five year rollout plan where they’ll start the regulation of it’s really only large producers.
00:11:01 Dylan: It’s people producing 5 to 10 tons of food waste a week. Those are the only ones that need to find a solution to their food waste that avoid sending it to a landfill. Then they usually stagger it down year over year where then it reduces to one ton a week, half a ton a week, or even less.
00:11:18 Dylan: A good example of that is Washington State actually, who just in January reduced their threshold to anyone producing 500 pounds a week or more. I think they counted it in gallons, but people don’t really understand what gallons typically look like for food waste. So the pounds, I think, is a more helpful metric.
00:11:36 Dylan: But that basically is every food service business. Every restaurant, school, commercial office building, hospital are now legally required to find either compost hauling or an on-site waste management solution like our ZEUS digesters.
00:11:50 Scott: And is that because of greenhouse gas emissions of food waste in landfills like methane? Or do you know what the rationale behind this regulation is?
00:11:59 Dylan: There’s a lot of different reasons that come into play. Honestly, one of the biggest drivers of this is landfills are filling up and starting to get capped. We are losing out on landfill space. There’s not much left in a lot of regions in the country.
00:12:13 Dylan: They’re really trying to make sure we’re intentional of diverting certain waste products out of landfill, trying to extend those lifetimes. Food waste is one of the biggest levers to reducing greenhouse gas emissions globally.
00:12:25 Dylan: For reference, food waste is 8% of global greenhouse gas emissions. That’s just wasted food waste rotting. That’s not even accounting the production and transportation of all the food.
00:12:35 Dylan: Even though people are complaining about Taylor Swift on her jet or all these people flying around, food waste rotting is double the impact of all aviation globally. Just to put that in perspective of the impact that this has.
00:12:48 Dylan: That’s what’s been driving us very early on, to be very excited about solving this problem, is this is really what helps us create global positive climate impact. States are approaching that on a similar perspective of a lot of states have these climate or carbon reduction goals.
00:13:05 Dylan: Reducing food waste into landfills is one of the biggest levers to pull that. It’s also very practical of what they’re doing, again, of whether landfills are filling up. Sometimes a lot of these states and cities are paying really high waste hauling costs to ship these to other states or countries sometimes as well. It’s also a way to actually improve business operations for a lot of facilities.
00:13:27 Dylan: Some states offer some incentives as well to switch over. I’ve seen Austin, Texas has something in place that’s been effective. But it is really helpful to see. We’re never gonna see that at a federal level anytime soon, but states are definitely taking some really practical next steps and options to keep food waste out of landfills.
00:13:45 Scott: It’s a fun action item. Rather than complain about jet traffic to Davos in January, maybe vote for your local compost bill. That’s fascinating. Talking a little bit about both partnerships on the commercial kitchen and restaurant and hospital and school side. I know that you’ve got a really exciting partnership in development with inKind and groups of restaurants.
00:14:08 Scott: Talk a little bit about that on the supply side and then how you guys package and take the soil sauce and then have a bit of a demand side as well, probably from farm communities and groups that want to buy this fertilizer as an alternative, to this heavy reliance on global supply chain and obviously probably more expensive fertilizer that’s less natural.
00:14:30 Dylan: For the digester side of the business, we work directly with a lot of these businesses. So we do just direct outbound campaigns. We’re starting to see a lot more inbound leads as well, which is really exciting to see.
00:14:42 Dylan: At the same time, a lot of my personal time and efforts are really put towards a lot of these more strategic long-term partnerships. So we basically have four or five of those in the works today.
00:14:52 Dylan: And the most up and coming one is with inKind, who is a large financier of restaurants across the country. They help make restaurants and food more affordable for consumers, help restaurants also invest in their own infrastructure and business operations, which is pretty incredible to see.
00:15:08 Dylan: We’ll be launching our fully mobile off-grid ZEUS digester out in Denver, Colorado at the end of this month for multiple restaurants to test the unit out, see if they like it or not before committing to a permanent installation.
00:15:22 Dylan: It’s been interesting. We’ve seen this mobile and off-grid ZEUS digester as a huge unlock for our sales process from start to finish, ‘cause it lets people, again, try a system out, really see if it works the way we say it will.
00:15:36 Dylan: Yes, it really is really easy for your staff to just dump their waste and walk away. And then it makes that decision process a lot easier. So we’ve seen it pretty much cut that sales cycle length in half, which has been pretty incredible.
00:15:49 Dylan: We actually have two different mobile off-grid systems in the work. We have a East Coast one that’s already been touring around the East Coast. Our engineering team is building another one in two weeks. So they’ve been very fast. And that’s gonna be the one that’s going out to Denver, Colorado, and then staying out on the West Coast throughout the end of the year.
00:16:09 Dylan: So that’s been really exciting to see that we’ve seen this coast-to-the-coast expansion that honestly follows some of those state regulations and high waste hauling bills, which go hand in hand. So we see the California, Denver, Colorado, Pacific Northwest has really high waste hauling fees. They also have these existing food waste bans to landfill. Same with the Northeast US. That’s been our two main expansion areas.
00:16:34 Dylan: For this soil sauce, it’s been really interesting to see. So, we’ve done very extensive field trials with this at this point, just to see how does this compare to synthetic fertilizers on the market.
00:16:45 Dylan: If anyone’s familiar with a compost tea, it’s a very concentrated version of that. Very low macronutrients, very high micronutrients, available carbon metabolites. We’re still trying to figure out what makes it work so well, ‘cause with these field trials, we basically saw 14 to 22% yield improvements compared to not using it on corn, soy, and potatoes so the major staple crops.
00:17:08 Dylan Our fertilizer expert… I think his theory is that it really is the available carbon and the metabolites, ‘cause it’s a very different approach to supplying nutrients and microbes to the soil and plants than is typically done.
00:17:22 Dylan: So most farmers and commercial ag, you basically dump nitrogen on the soil very intentionally. They map it all out. It’s all in terms of pounds per acre. But the plants are uptaking all that.
00:17:34 Dylan: So that’s where we also see a lot of issues of nitrogen leaching into our waterways. That’s where we get these toxic algae blooms, whether that’s local or regional. In the Gulf, we see that pretty often as well. There’s a lot of issues right now happening, just the fertilizer industry.
00:17:48 Dylan: And as you said, fertilizer prices have spiked 25% in the past two weeks. 40% of the world’s sulfur goes through the Strait as well. So we’ve seen those prices pretty much double, too. That’s where you see in the fertilizer space, this whole issue of international supply chains that are very volatile that if anything goes wrong, those prices completely destabilize.
00:18:13 Dylan: At the same time, the actual use case of these products isn’t actually the best way to be providing nutrients to the plants. That’s where we’ve seen a very unique opportunity with soil sauce where we can be a really low-cost fertilizer that’s saving farmers money compared to synthetic fertilizers.
00:18:29 Dylan: We’re also then not dumping nitrogen on the soil. So you’re actually reducing a lot of that water runoff issues. And at the same time it’s produced locally, so you’re not worried about shipping this from Russia or Ukraine or China. It’s produced at your neighborhood restaurant or from the hospital down the street.
00:18:46 Dylan: That’s really where we’ve seen really stable and reliable hyper local supply chains that we’re creating. We create these mini hubs in our operating regions. So yes, we work with local farmers and community gardens that use the soil sauce directly.
00:19:01 Dylan: It’s been interesting. We’ve actually seen a ton of traction and interest on the retail side. We actually just launched in 24 Giant Eagle store locations. These are large grocery stores in Pennsylvania, Ohio, Indiana region.
00:19:15 Dylan: Last month, they just expanded to add another dozen stores. Focused on their highest performing stores first, then planning to roll out to all 200 grocery stores pretty much by the end of this month.
00:19:27 Dylan: That’s been super exciting to see that the retail space has actually seen a ton of commercial growth. That’s for house plants and gardens for people to have a very easy to use sustainable fertilizer.
00:19:39 Scott: I need that for my own 20 plants that I have.
00:19:41 Dylan: I love it.
00:19:43 Scott: I’m always taking my coffee grinds and various things and Googling what would be a good addition to the soil. Obviously, enough finite plants that then uses all the nutrients in the dirt and you got to refresh it from time to time.
00:19:55 Scott: We have an LP, a good friend of mine, founder of a company called Farmers Business Network based in Omaha, Nebraska we should connect to you with, because they’re basically providing all the raw supply materials for commercial ag in the form of three or four hundred million dollars a year of sales, fertilizers, all these things.
00:20:14 Scott: I think what a lot of people don’t recognize in the commercial ag space is the planning that goes into each harvest and the six to nine months before that you’re buying features or you’re basically investing in fertilizer.
00:20:27 Scott: To your point, these supply chains are insanely long. Prices can move dramatically. And that in addition to the weather and the yield of the crops and the price per bushel of corn, all of these things come in tandem and determine if you have a great year or a not so great year.
00:21:43 Dylan: And it really all comes down to input costs and what you can sell your product at. The yield improvements really help bridge some of those gaps. But I think exactly as you said towards the beginning of this is that’s where a lot of farmers today are getting pressures of increased costs on inputs and actually pretty stable costs on the actual crops themselves. So they’re not really able to bridge the gap between those two.
00:21:07 Scott: Taking a step back just as a founder building a relatively complex business in the form of hardware, material science, selling into ag, maybe walk us through just the genesis of the business and obviously coming straight out of school, what have been the biggest challenges.
00:21:25 Scott: And obviously we invested three years ago, you’re probably more than four year in. What’s been some of the surprises that you’ve encountered over these last four years?
00:21:34 Dylan: It’s a lot to take on in one company. And it’s been a super exciting and interesting challenge. That’s probably the biggest challenge on its own is just the complexity of the market and the business and trying to figure out all these moving parts.
0021:48 Dylan: What we have found personally to be super helpful is the sequencing of all this. We don’t have to figure it out right away. There’s certain pieces of the business and milestones along the way that we have to hit.
00:22:00 Dylan: And we use OKRs, so just objectives and key results to really be very clear on what we are going to get done every year. And then we have a endlessly growing backlog of things that are of interest at some point we want to tackle, but intentionally postpone and put down. So that, instead of dropping the ball on certain things, we’re intentionally placing that down and pick that up at a later date that’s needed.
00:22:22 Dylan: For us specifically, how that looked is really focusing on the digesters first. It’s making sure that we’re building a reliable system, building a sales process that can scale and is repeatable so that you start to build a supply for the soil sauce.
00:22:37 Dylan: Right now we’re at that inflection point where we’ve really built that repeatable manufacturing, deployment, and sales process for the systems. We’re starting to see a lot more traction on the soil sauce side. Definitely taking some advantage of that and starting to really invest some time and effort and resourcing to making sure that that part of the business is successful.
00:22:56 Dylan: But I think, biggest challenge overall is trying to take on a lot all at once. And we also do all of our own manufacturing in a house. That’s how we have really tight control over quality of our products and services.
00:23:09 Dylan: Something that I always keep a very close eye on is really matching pace our production schedule with our sales schedule. Making sure that we ramp both up in tandem together, that’s definitely a big challenge to try figuring out.
00:23:21 Dylan: But I think over the years, we’ve really gotten into a good pace and intuition on when we need to push the levers and the buttons with additional manufacturing technicians or sales reps. At this point, we also know metrics and outputs of what we get from those investments at a company level.
00:23:38 Scott: If you were to look out five, ten years, I imagine becoming the de facto natural fertilizer brands in the form of… say, a Miracle-Gro that’s derived from food waste, from urban kitchens. Do you have the north star of where you think you’d like to take the business?
00:23:56 Dylan: Overall business goal is global climate impact and world domination of food waste solutions. It’s really true. Today we’re focused on the US market, but we’re even starting to see a lot of international business opportunities.
00:24:10 Dylan: We started working with Compass Group Canada. Compass Group is one of the biggest food service providers in the world. They have 50,000 locations that they service. I think over that at this point. That’s where we’ve seen a ton of opportunities, not just in the US, but globally too.
00:24:25 Dylan: I think a really great example is Island Nations in the Caribbean and in the Pacific as well, where right now they pay not just a truck to pick up their waste, but a boat. It’s immense cost to haul waste outside.
00:24:39 Dylan: They also are seeing a big resurgence in really trying to reclaim a lot of native recipes and local crops and trying to rebuild their food systems because a lot of these populations have basically been relying on international exports for actual food.
00:24:57 Dylan: 90% of a lot of these islands are imported food rather than stuff that’s grown locally. That’s a really good example of areas where we see long-term, where we can be providing a lot of value tapping into these existing problems and potential solutions of very high waste falling costs and really a strong desire to improve local soil health and the food system resilience as well. That’s the big picture for the company.
00:25:24 Dylan: For the different product lines as well, for the digesters, we definitely do see additional product SKUs coming out. Right now, it’s a single one-size-fits-all ZUES digester, but whether it’s smaller systems, larger ones, ones that fit inside the building is what our team is currently working on.
00:25:40 Dylan: We actually are about to deploy a system for the new Theodore Roosevelt Presidential Library opening up July 4th. So this will be our first inside the building digester, which is a brand new capability, especially for hotels, restaurants, places, offices that don’t have room outside of the building to actually have an inside the building solution.
00:26:01 Dylan: And for the soil sauce, pretty similarly as well. Right now, it’s a single brand of soil sauce and type of it, but most fertilizers have a blooming version, a flowering version, a growth stage for the plant fibers, which is basically just different MPK ratios.
00:26:18 Dylan: Additional products SKUs, international distribution as well of soil sauce too, but again, produced locally. That’s the whole point of our distributed grid of these digesters is you don’t need to ship it, the soil sauce, to a farmer across the world or a country. You actually have a local production hub that you can tap into.
00:26:38 Scott: Not only that, but you have a beautiful ZEUS machine that’s painted with local graffiti and local artists. Which I absolutely love what you’ve done in Pittsburgh to really ensconce them into the urban fiber and actually improve neighborhoods and communities with what would otherwise look like an ugly dumpster.
00:26:55 Scott: One of my last questions, I had the chance to have lunch many, many years ago with the founder of Allbirds, the shoes. And what he said is that people on the front end say, I wanna buy these shoes because they’re sustainable business and they’re coming from New Zealand sheep fibers and recycled plastics. But when we actually hold people at the point of sale, the real drivers of purchase behavior are they look cute and they’re affordable.
00:27:20 Scott: A lot of businesses may have the broad desire to do better for the world and save food waste, but probably the brass tacks that comes down to the economics of the carrot and the stick of there’s either regulatory compliance that they have to stick with or the cost of getting rid of that food waste is astronomical.
00:27:39 Scott: How do you guys think of the unit economics of installing these systems, maybe the revenue share around the production of soil sauce on the back end and basically turning this from a cost center of a business into maybe a revenue driver?
00:27:53 Dylan: You’ve hit the nail on the head of this is exactly the flipping of the script that we’re doing today. Most people see food waste as waste. They see it as a cost center. All they do is pay to have it all the way and that’s it. That’s exactly what we’re actively doing today: is turning that into an income and revenue driver for their business.
00:28:12 Dylan: What that does on a unit basis for our partners is increases, provides a little bit of revenue from the soil sauce, we collect and resell that they don’t need to do anything. They’re also reducing their waste hauling bills.
00:28:24 Dylan: So we’re usually saving businesses at least a few thousand dollars a year net, which is really exciting to see that… yes, this is a great solution for the environment and it’s easy to use, but the main driver, exactly as you said, is making sure this makes financial sense for their bottom line, which we’ve been able to prove out. That’s really the big unlock for us is making sure that’s really what helps us scale globally.
00:28:47 Dylan: One of the biggest things that we figured out pretty early on in the company’s development is equipment financing to help with that. We actually finance these digesters for our customers. We work directly with a bank subsidiary that does equipment financing.
00:29:01 Dylan: What that does is it basically turns what is usually an equipment purchase or capex expense into just an ongoing operating expense, which is immediately offset from reduction in waste hauling bills. There isn’t some 24, 36-month ROI. It’s immediate cost savings as soon as you switch over to ZEUS digester.
00:29:21 Scott: Amazing. My last question for you, and this is something that we think a lot about, is not being contrarian for contrarian sake, but predicting where you think future consensus is going and building something that skates ahead of where market trends are.
00:29:35 Scott: Everybody has frameworks that generally lag based on heuristics of past things that have happened. As an entrepreneur, it’s really your job to think about the future, think about where the world is going and make a bet that is something that you have to stick with for many years.
00:29:51 Scott: The question is: within the industry, within the expert pundits of this domain, what’s something that you guys took an approach that was different or fundamentally at odds with, or these folks would disagree with, “Hey, this is not going to work. You guys are never going to be successful.”
00:30:07 Scott: But you guys drew the line in the sand and you said, “We’re going to do it anyway.” ‘Cause I think a lot of great businesses like yours, it takes a high conviction founder, the blend of both stubbornness to continue to go in a certain direction.
00:30:19 Dylan: Very stubborn indeed.
00:30:21 Scott: And the ability to listen to feedback. It’s always that dance of humility and grit and perseverance. But what’s one major maybe industry norm that you guys have gone against or disagreed with that you think that you’re right and the rest of the market is wrong.
00:30:37 Dylan: I think the main one is this concept of centralized versus decentralized waste processing. I don’t think the market is necessarily right or wrong. Ultimately, we need both.
00:30:47 Dylan: But I think this idea of on-site decentralized waste processing systems just isn’t out there. It just doesn’t exist. The only thing we have today are these large centralized landfills, large centralized composting, or anaerobic digestion facilities. Those exist already.
00:31:04 Dylan: But they’re $50 million at a minimum to build. They take 5 to 10 years to get permitting, financing, actually constructing, get it operating. That’s where we maybe do agree with market consensus is there is a really large lack in waste processing infrastructure, specifically for food waste.
00:31:23 Dylan: We know we only have a limited amount of time to make impact for greenhouse gas reduction, also to divert food waste from landfills to keep those operating and make sure they don’t fill up. And so I think that’s where we’ve seen a very unique opportunity in the market of moving quickly.
00:31:40 Dylan: That’s why our bet is on-site solutions. That’s really where we disagree. Yes, sometimes you have to haul it. You don’t have any room. That’s the only option and that works well. And that’s why we still need these large centralized facilities. But a lot of the time, it’s actually better, cheaper, and more reliable to have an on-site digester solution.
00:32:00 Dylan: For us, it’s digesters. You can pick other options or technologies if you want to. But I think this idea of a decentralized grid of these systems is very unique. We’ve started to show people it actually does work.
00:32:12 Dylan: We had all these huge snow storms and power outages over the winter and we’re operating. We are not waiting for a truck to get through the snow and for the driveway or road to get plowed. For an operating business, that’s difficult. They can’t deal with mountains of food waste just sitting there waiting.
00:32:30 Dylan: That’s where we’ve started to show the market that by being on site, by being decentralized, it’s actually a superpower in reliability, is you never need to worry about missed pickups or refused pickups or something going wrong. It’s 24/7/365. You dump your food waste in the trash chute.
00:32:49 Dylan: That’s been exciting to see that it’s starting to work in this space. I think there’s other models and industries where they’ve done this as well. But I think for waste specifically, that really hasn’t been done before. It has always been these large centralized facilities.
00:33:02 Dylan: The financing and construction piece, it also is a permitting benefit. By being on site, you’re actually typically falling under permit by rule exemptions for states. We’re deploying these systems. I think our last system deployment was two weeks from contract signed, to system on site operating and processing their food waste.
00:33:22 Dylan: Because as soon as you start hauling food waste from one facility to another or to one centralized facility, that’s where you need these like large state permits. They’re not super expensive, but they take a while. And again, that’s the thing we don’t have time for. We don’t have time to sit around and wait for permit approvals.
00:33:37 Dylan: And so I think that’s where… initially that was a pretty large bet that the market disagreed with. We started to show that it works well and it actually enables us to scale a lot faster than a lot of other options out there on the market.
00:33:51 Dylan: My perspective is we need both. You need to build more of these centralized facilities. That’s what gets you huge capacity improvements, but we also need these smaller and faster solutions to fill in gaps in the meantime.
00:34:04 Scott: I love that. That’s such a well way of articulating agreement with just the broad gap in the market and the supply for these facilities, but then the contrarian bet to build out a more decentralized way of handling food waste.
00:34:18 Scott: In the quick lightning round that we have to wrap up the podcast, we got a couple of questions for you. What’s a book that you’re currently reading or a podcast that you’re enjoying?
00:34:28 Dylan: Oh, I think a book that I recently read and I’m due to reread soon, very opinionated as you can tell by the title is called, The Man That Broke Capitalism. It’s about the former CEO of GE and his approach of just prioritize shareholder returns above everything, above employees, above staff, the environment, the communities that you serve. It shows the results of it, of what happens when you build that system.
00:34:57 Dylan: I’m personally very interested by that. We actually founded Ecotone as a public benefit corporation. So we have a triple bottom line of positive investor returns and very strong revenue growth, but also positive social and environmental impact as well. So that’s been I think one of the most interesting reads most recently. That was from our IP attorney who’s a former GE engineer as well.
00:35:20 Scott: Amazing. If you could live anywhere, I know you’re in Florida currently and otherwise in Pittsburgh, what would be on your number one place to live?
00:35:30 Dylan: Oh, that’s a tough question. I feel like at least if we’re talking about a year or two, maybe not indefinitely. Long-term, I have to be close to family. So that’s the Northeast, New York area.
00:5:41 Dylan: But short term, I’d maybe say Spain. I’ve been studying Spanish for a while. I’ve always wanted to live in a Spanish speaking country. So I think that would be one, maybe for more personal reasons that I’d be very interested in.
00:35:55 Dylan: Half my family actually lives in Australia, but I think that’s a little too far away and my mom and dad would not be very happy if I was completely on the other side of the world.
00:36:06 Scott: And finally, what’s your favorite productivity hack as a busy CEO traveling, building a complex business? You have any secrets for us out here?
00:36:15 Dylan: Not like a super complex one. It’s really just time blocking is mine. One of my friends taught me maybe four years ago or so at this point. It’s just been a huge unlock for my productivity.
00:36:27 Dylan: Especially as a founder, as a CEO and executive, you get pulled in a lot of directions. Brain switching from sales to manufacturing to engineering to operations has a bit of a toll. So I think the time blocking helps reduce that.
00:36:42 Dylan: You can combine or have half a day that’s just sales or just engineering or just operations, switches that at task switching lag. It also really is just a way to live through your prioritization.
00:36:55 Dylan: We all talk about brutal prioritization of what is urgent and important and needs to get done now. I found that as one of the most effective ways to make sure that I’m blocking off time to complete the things that are both urgent and important. And again, intentionally postpone things that might not be.
00:37:12 Scott: Amazing. Dylan, thank you so much for being on the podcast today. Where can listeners find you if they want to reach out or learn more about Ecotone?
00:37:21 Dylan: We’re on all socials at Ecotone Renew and our website is ecotonerenewables.com. Has a ton of information on our digesters for specific business types on soil sauce. You can order soil sauce right there as well if you want. You can also learn a little bit more about the company and mission as well there.
00:37:40 Scott: Amazing. I’m gonna pick up my soil sauce today.
00:37:42 Dylan: I love it.
00:37:43 Scott: Thank you so much and we’ll talk to you soon.
00:37:46 Dylan: Thank you so much for having me, Scott. Appreciate it.
00:37:50 Scott Hartley: Thanks for joining us and hope you enjoyed today’s episode. For those of you listening, you might also be interested to learn more about Everywhere, where a first-check pre-seed fund that does exactly that invests everywhere. We’re a community of 500 founders and operators, and we’ve invested in over 250 companies around the globe. Find us at our website, everywhere.vc, on LinkedIn, and through our regular founder spotlights on Substack. Be sure to subscribe, and we’ll catch you on the next episode.
Read more from Dylan Lew in Founders Everywhere.