Startups

Rising from the ashes to figure out the business of dry waste

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But, just like the resurgence of the Indian cricket team in Australia after the debacle of getting all out for 36, Patel picked himself up and fought back. Today, Ahmedabad-based Nepra handles more than 500 tonnes of dry waste a day, making it the largest player in this space. It is also the highest funded waste management startup in India, with over $36 million in funding, according to data from Tracxn. That includes a recent series C round of $18 million led by Singapore-based Circulate Capital with participation from Indian impact investors Aavishkaar Capital and Asha Impact.

Disasters can spur you to rethink and improve, if you have a positive mindset. So, just as the Indian team altered its selection and strategy to bounce back in the second Test, Patel analyzed the flaws in his business model which had exposed him to huge loss.

“Earlier, our approach was to stock the material to get better prices. But we switched to a just-in-time approach where the material goes out every day. So, the changes we made after the fire have become the foundation of our business today,” says Patel.

Initial hiccups

The initial years were a struggle. Then the Swachh Bharat Mission and new regulations began to create awareness and a new interest in adopting solutions. Nepra, which is the parent company of Let’s Recycle, focuses on collection and sorting of dry waste which it sells to recyclers, aiming to minimize the harm and cost of dumping waste in landfills around cities.

It works with waste pickers from the informal sector. So, its social impact is twofold: giving dignity and better livelihoods to the underprivileged and helping mitigate the massive problem of pollution from plastic waste. Its model is to connect generators of waste, including large corporations that have to take responsibility for the waste they produce, with recyclers that come up with different ways to extract value from waste.

This sounds simple but is in fact a complex, fragmented chain. That’s why digital technology is a big part of Let’s Recycle’s value proposition.

“Our responsibility as a company is to segregate the waste as per the requirements of recyclers. And that is also one of the biggest bottlenecks in scaling this business. That is where we are using technology for everything from traceability and tracking to sorting,” says Patel.

It begins with facial recognition on the waste picker’s mobile app which creates a traceable process. Then the collectors, who are micro-entrepreneurs with trucks, come into the platform. In this way, an end-to-end digitized system is put in place from collection to delivery at the sorting plant and finally the point of service for the client, who is the recycler.

The value proposition for the waste picker in such a system is transparency in weighing and rates. For bulk generators of waste like apartment complexes and corporations, the assured timely collection of waste is important. And for the recycler, it’s about getting the right kind of waste without contaminants. For example, there are eight kinds of plastic, some of which have laminations that are harder to recycle because of their metallic component and may not suit some clients.

Bengaluru-based Hasiru Dala has a similar model. It began as a not-for-profit entity, backed by philanthropists to bring waste pickers into the ambit of dry waste collection centres that the city corporation was rolling out in 2013. Then, with the support of social impact startup incubator Social Alpha, it pivoted to Hasiru Dala Innovations two years later. It had realized that the not-for-profit model was harder to scale. Now, it has a business model to provide waste management services to hundreds of organizations as well as segregated waste to recyclers in India and abroad.

The key to making a dent in waste is scaling. Although Nepra has done well to be handling over 500 tonnes of waste a day, the next step is to expand nationwide to plough into 60,000 tonnes of dry waste being generated daily.

Funding needs

The total funding in waste management startups last year was a little over $20 million, according to Tracxn. Singapore-based Circulate Capital’s commitment to invest half of its $106 million “ocean fund” targeting plastic waste will ratchet it up. But that’s still a drop in the ocean.

“We need billions of dollars to flow into this space. It’s going to take a lot more than the $100 million from our fund and others (impact investors),” says Rob Kaplan, founder of Circulate Capital. “The only way we are going to get there is if institutional investors, whether its venture capital, infrastructure funds or sovereign capital, start allocating capital to the sector. There’s also a role for municipal finance and mezzanine debt. Our strategy is to find ways to catalyze all that capital to come into the space.”

Success stories of profitable, scalable startups will be the best catalysts.

Sumit Chakraberty is a Consulting Editor with Mint. Write to him at [email protected]

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