Modern-day scrap dealers use eBay and creativity to recover value from obsolete electronic components.
Think of Alex Sumetsky and Mikhail Zabezhinsky as modern-day scrap dealers, descended from the immigrants who once dominated the old iron-and-steel yards of Washington Avenue N. in Minneapolis
Their latter-day scrap company is called OceanTech.
And these two, Russian Jewish immigrants and boyhood friends, are the sons of medical and business professionals. They stumbled into the fledgling, fragmented electronics-recycling market through part-time jobs while at the University of Minnesota nearly a decade ago.
Today they are growing entrepreneurs in the booming business of electronics recovery and reuse that is driven by strong demand for used technology components; tougher government regulations that ban TVs, computers and other hazardous stuff from landfills and incinerators, and the growing consumer and corporate "green" movement.
"I finished at the university in 2005 in economics and finance and was interviewing at places like Target and U.S. Bancorp," said Sumetsky, 31. "I was working part time for a recycling company that no longer exists. And we starting a 'remarketing department' that used eBay to sell parts online. Before that, I was just using the phone."
Their next-generation ambitions span a growing, multi-state customer list of Fortune 500 companies and smaller clients. OceanTech's clearinghouses range from the 1950s-vintage warehouse they own in northeast Minneapolis -- stuffed with laptops, disk drives, printers and cameras -- to the vast Internet marketplaces where every day they find buyers for their goods. Most days, OceanTech has about 2,000 electronic items for sale on eBay.
Sumetsky and Zabezhinsky say they are growing in a consolidating market because they have invested in marketing, certifications, secure-data destruction and asset-management expertise to build a higher-value business around "recovering value" for clients. They find buyers for old technology, refurbish some things, and share a percentage of sales, rather than just charging customers for pickup and grinding plastics and metal to shreds and selling it as industrial feedstock.
Maggie Mattacola, interim director of the Recycling Association of Minnesota, has watched the evolution of OceanTech.
"They work hard to use as much as possible,'' Mattacola said. "There is a waste hierarchy, and reuse is higher value than recycling. It saves money, time and energy when somebody fixes or upgrades and reuses. This is what distinguishes them."
OceanTech says it reuses 65 percent of what it collects and recycles virtually all of the rest, compared to traditional recyclers who may sell for reuse 20 percent of what they collect.
Zabezhinsky, 30, a one-time biology student at the university, said the company was started in his parents' Plymouth garage with $300.
"We saw stuff that was worth something that people were throwing away," Zabezhinsky said.
The partners started buying and selling from other recyclers, repair shops and end users. Gradually, the company expanded through asset-management contracts that have included more than 1,500 companies, a small fleet of trucks, the 30,000-square-foot warehouse it acquired several years ago, refurbishing and recycling equipment and achievement of industry-standard certifications for electronics recycling, plus EPA and Hennepin County designations.
Zabezhinsky said OceanTech had 70 competitors in 2007, around the time of new landfill laws and high commodity prices, but the recession and commodity-price plunges wiped out all but a handful.
OceanTech, which employs 20, expects revenue approaching $3 million this year.
"We're not that passionate about old computers," Zabezhinsky said. "Our passion was to create something out of nothing."
Sumetsky and Zabezhinsky said they have not required outside capital and pay themselves about $50,000 apiece.
In September, the partners were joined by Mike Meshbesher, founder in 1998 of C-Tech Inc, which bought and sold excess computer hardware and replacement parts. Meshbesher, 49, sold that business and has opened a new subsidiary for OceanTech -- Eden Prairie-based OT Hardware. The operation is designed to help companies maintain IT infrastructure parts and service.
The partners expect the consolidated operations to generate revenue of more than $5 million and employ 30 workers in 2013.
"We never had $250,000 to invest in this business," said Sumetsky. "But over the last five years we got the checklist accomplished with cash flow from organic growth."
Neal St. Anthony • 612-673-7144 • email@example.com