Page 91 from: May 2013

91May 2013

The Spotlight on Electronics session began with an observation from its
moderator Jake Player, chair of the US
Institute of Scrap Recycling Industries’
electronics division and vice president of
Arrow Electronics, that the industry has
undergone tremendous consolidation in
recent years, with immense amounts of
capital flowing into the market. ‘The goal
of this session is to understand why
we’re seeing this consolidation, why
we’re seeing capital deployed in this sec-
tor, will it continue, and how companies

can participate, if they’re interested in
participating,’ he explained.
The stage was set by Rob Schafer,
research director at Gartner, an informa-
tion technology research and advisory
company that covers the global IT asset
disposition market. He wondered how
the industry would dispose of the esti-
mated 2 billion electronic devices that
will need to be recycled this year alone.
‘There are increasingly high risks for get-
ting asset disposition wrong,’ he said.
‘It’s no longer “What’s it going to cost
me to do this?” but more “How do I
minimise the risk that my company’s
name will not be in the headlines?” But
there are also increasingly high rewards
for getting it right.’

Insatiable back-end demand
Michael Farello, a partner at equity
capital provider Catterton Partners,
cited three reasons why he began
investing in e-recycling seven years
ago: one was the insatiable back-end
demand that has more or less persist-
ed; second was that, whether driven by
regulation, legislation or corporate
responsibility, ‘there’s a growing sense
that these assets need to be disposed
of in an environmentally responsible
manner’; and, lastly, ‘seven years ago,
we thought a few high-profile leaks of
data from computers, notebooks and
desktops would bring a sense of the

cost of getting things wrong – and that
has only grown in the last seven years’.
One of the two reasons Martiza Liaw, a
partner at venture capital firm Kleiner
Perkins Caulfield Byers, has invested in
e-recyclers is the exponential growth in
the volumes of e-scrap. ‘Mobile sub-
scriptions surpassed landlines in 2002,
tablet sales surpassed PCs in 2010, and
the installed base of smartphones and
tablets will surpass PCs this year,’ said
Liaw. ‘That kind of volume and growth
creates new business opportunities.’
She also anticipates considerable value
in assets that are retired because they
lack consumer appeal but nevertheless
retain technical capabilities.

‘Winner-take-all market’
The nature of the market represents its
other appealing aspect. ‘The continuing
interest for us is to explore more oppor-
tunities in downstream processing and
distribution, which continue to be
highly fragmented with opportunities
for more efficiency,’ said Liaw.
Ben Gordon, founder and managing
director of BG Strategic Advisors, out-
lined strategic options for e-recyclers
operating in ‘a winner-take-all market
where, increasingly, a small number of

companies will reap a disproportionate
share of the benefits’. With competitors
coming from four different directions
– electronics distributors, reverse logis-
tics companies, waste management
companies and electronics manufactur-

ers – small companies have five distinct
options: they can do nothing ‘and wind
up competing for a smaller space’; they
can aggressively pursue organic
growth; they can bring in new capital
via self-financing, from family and
friends, or venture capitalists (‘which
tend to go after businesses with pro-
prietary ideas and great technologies’);
they can merge with one or two other
companies; or they can sell the busi-
ness.
‘But don’t just sit back while the mar-
ket goes by,’ Gordon urged delegates.
‘Pick a strategy, decide where you want
to go, and put yourself in a position
where you can be one of the winners
in what we believe will ultimately be a
winner-take-all market.’

S p o t l i g h t o n E l E c t r o n i c S By Terry Fischer

‘Pick a strategy,
decide where you

want to go.’

Venture capitalists ride the
e-scrap bandwagon
The boom in the electronics recycling industry over
recent years has been accompanied by consolidation and
a need for capital. For venture capitalists, this has
become a new and profitable business into which to
step. At the Institute of Scrap Recycling Industries’ lat-
est convention in Orlando, a panel of experts addressed
the question of what makes the industry an attractive
target for capital investment.

Jake Player: immense amounts of capital have
flowed into the market.

Martiza Liaw: exponential growth in e-scrap volu-
mes.

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