OceanTech, a two-man electronic-waste recycler at inception in 2005, is putting up electric numbers as it takes bigger jobs decommissioning and reselling equipment from large firms and data centers.
OceanTech was founded by entrepreneurs Alex Sumetsky, 35, and Mikhail Zabezhinsky, 33, who worked for small recyclers a decade ago while they were students at the University of Minnesota. They struck out on their own in the Plymouth garage of Zabezhinsky’s parents, just as Minnesota and other states passed laws that banned dumping or incinerating TVs, computers and other electronic waste.
A few years ago, when I first met them at their northeast Minneapolis plant, they had survived the Great Recession that claimed small competitors and led to consolidation in the booming business of electronics recovery, refurbishment, reuse and resale.
Stricter environmental laws, strong demand for used, lower-priced technology components, and a trend toward green practices have boosted industry growth.
For OceanTech — a “zero-landfill” operation that sells for scrap what it can’t sell to consumer and business bargain hunters — 2012 was a breakout year. The company employed 15 people and grossed about $1.8 million collecting, refurbishing and reselling stock from its online and warehouse operations.
The company projects that revenue will hit $4 million this year, double its 2012 numbers, and its staff will climb to 45 people.
The business mix has evolved toward bigger corporate offices and data center decommissioning. Organizations are embracing the cloud, updating their own IT centers to contract with huge independent data centers at remote locations. OceanTech invested early in the licenses and IT security designations it needs for comprehensive hardware and data handling.
“A big burden we’ve had to overcome is the ‘can you do this’ question, from big companies that wondered about a small firm,” Zabezhinsky said. “But our passion is running this business. And we keep opening doors. And data centers are big doors.”
OceanTech’s clients include Allina Health, Thomson Reuters, CBS, NBC and big law firms. OceanTech sells much of the data-cleaned technology to bargain-hunters, school districts and smaller organizations. Those bigger six-figure jobs have added up.
OceanTech lost out on a data center project this year for online gaming company Zynga, outside Washington, D.C., which could have grossed around $1 million after months of work to decommission, transport and sell the company’s high-end equipment.
“It would have taken six months, we estimated,” said OceanTech’s marketing vice president, Mike Satter. “But we could have doubled our money over time. A couple of those a year, it changes everything.”
Still, there have been other big deals, six-figure paydays, that have propelled growth, from Minnesota to California.
“Personally … I found OceanTech to be good … accommodating and professional,” said Palmerino Cera, an NBC Universal technology manager in Los Angeles. “I’ve been in the industry 24 years. The $100,000 job means a lot more to a small company than it does a large one. I’m no slouch and these guys were keeping up with me.”
OceanTech’s expansion has included a move into a second, larger building in Eden Prairie this year. The $1.15 million, 20,000-square-foot modern structure, like the 1950s-vintage warehouse in northeast Minneapolis that is still headquarters, was financed largely through a Small Business Administration loan issued by Highland Bank.
Two years ago, OceanTech hired Mike Meshbesher, founder of C-Tech Inc., which bought and sold excess computer hardware and replacement parts. Meshbesher, 51, sold that business to open OceanTech’s “OT Hardware” subsidiary, which warehouses and sells through Eden Prairie the newer, higher value equipment OceanTech acquires through its corporate jobs.
“It’s a lot easier getting to $10 million in revenue selling a piece of equipment for $10,000 instead of older consumer equipment for hundreds of dollars,” Sumetsky said, holding a like-new Cisco Nexus switch module.
Sumetsky and Zabezhinsky say they’ve sacrificed for growth, taking on no outside investors. They and the two other top executives are still paid well under $100,000 annually. And virtually all of the cash flow generated by the company is being invested in the business, including hiring and training.
They may have moved upstream to the big-corporate business a little too fast. But they felt pressured in the lower-margin consumer and small-business roots of their business because of increased competition from nonprofits such as Tech Dump, and bigger operators such as Dynamic Recycling, Asset Recovery and Renovocom.
“Growth is harder than it seems,” Zabezhinsky said. “More money, more problems.”
One challenge is hiring people in Eden Prairie. OceanTech hires unskilled workers at up to $12 an hour, and pays up to $20 an hour for semiskilled technicians.
“If we can accomplish our [hiring] goals, we’ll double in size next year,” Zabezhinsky said. “We’re looking for technicians, shippers and sorters. And we’re just not finding the people. People are coming in and asking for $20 or $25 an hour with no skills.”
Coincidently, a just-released poll of Minnesota small-business owners by Small Business Majority says two-thirds of owners are hiring but struggling to find enough qualified workers with relevant experience.
“We are working on more innovative training techniques to teach more entry-level personnel on the job,” Satter said. “No doubt that one of our biggest challenges slowing our growth is recruiting the right individuals … that are familiar with processing and selling enterprise-level hardware.”