For Jack Cutter, a better mousetrap doesn’t just catch mice, it lets them live.
Cutter, founder of Seabright Laboratories, invented a green plastic Smart Mouse Trap after disposing of one too many mice mangled by conventional snap traps.
Instead of being killed, mice caught in his $10 reusable trap are carried off to a release point and eat their way to freedom through a soda cracker lodged at one end of the trap. (The cracker-release method allows the squeamish to stand clear of the trap during release.)
Seabright, based in Emeryville, Calif., is one of thousands of small businesses across the country attempting to capitalize on renewed interest in protecting wildlife and the environment.
Raising money for an environmentally oriented company may seem easier in the midst of the Green Revolution, but companies still need a sharp business plan and competent management to attract money, says Shelly Guyer, an associate at San Francisco-based Hambrecht & Quist’s Environmental Technology Fund.
“There are more and more deals being made, but the floodgates are definitely not open,” Guyer said. Since the $17-million fund’s creation in July, 1989, it has invested in three deals with companies involved in chemical, solvent and plastic recycling.
“We probably receive an average of six business plans a week, or 300 a year,” Guyer said. “We are primarily focusing on technology and new ways to do things.”
She said many entrepreneurs wrongly believe that they will automatically attract investors and make money on anything related to the environment.
“It has to be a good business for venture capitalists to be interested,” Guyer said, adding that venture capitalists usually require a 25% stake in a company and promise of “a superior return” on their money.
Nora Goldstein, executive editor of In Business magazine, which covers environmentally oriented business, said there are investors who are very interested in hooking up with the companies she writes about.
“But I don’t have the sense everyone is rushing to venture capitalists the way the computer companies did 10 years ago,” said Goldstein, who works in Emmaus, Pa.
Instead, companies caught up in the recycling boom are turning to private investors called angels or to such companies as the Catalyst Group of Brattleboro, Vt. Founder and President Bob Barton recently said the environmentally oriented management consulting firm plans to arrange about $50 million in financing in 1990. Catalyst also helps smaller companies form strategic relationships with other firms.
Back in California, Seabright is trying to raise $1 million by selling stock at $5 a share to qualified investors. According to the prospectus submitted to the California Department of Corporations, Seabright plans to use the money for new-product development and to market existing products.
Seabright’s growing line of “Earth Friendly” products includes a Yellow Jacket Trap, Sticky White Fly traps and a tape that snags snails. Its most televised product is a trap used to catch the bane of California farmers--Mediterranean fruit flies.
Unlike many corporate presidents who dread the annual shareholders’ meeting, Cutter said, he expects shareholders to suggest new products and help steer the company along the right course.
Founded 10 years ago, Seabright has lost money the last two years because it puts most of its money into developing and registering new products with government agencies.
Cutter provided the start-up capital and has lent the company another $500,000 the past 10 years. Cutter, who previously founded Cutter Lumber Products, said his interest in developing environmentally safe pesticides stemmed from his involvement with an environmental trust he created called Pacific Waters. The trust helped establish a wildlife refuge, among other projects.
To prosper, Cutter said, any firm developing environmental products or technology must keep its formulas secret.
“You should file for a patent to help keep the competition away,” said Cutter, who holds 15 patents.
While Seabright is busy trapping pests, another San Francisco Bay Area firm is putting its special grease-gobbling bacteria to work in restaurants around the country. Bio-Care Inc. of Campbell, a suburb of San Jose, is also in the midst of raising $3.2 million from private investors to expand its operations.
At this point, venture capitalists own 35% of the firm, private investors 35% and management 30%. Sales were about $1.7 million in 1989, according to Chief Executive Bob Larive.
Founded in 1985, the firm produces the bacterial products and sells franchises to people interested in helping restaurants cope with their constant grease-disposal problems. So far, Bio-Care has sold 26 franchises, dividing up the country into territories containing 600 restaurants each, according to Larive.
“We offer a real alternative to traditional ways of grease disposal,” he said, adding that new, stricter waste-disposal regulations are fueling the firm’s growth. Restaurant owners are seeking new ways to dispose of grease, rather than paying others to cart grease off to a landfill or waste-water treatment plant.
In addition to producing grease-loving bacteria for restaurants, Bio-Care makes a home version for septic tanks, called Septi-Save.
Owners Express Less Optimism on Economy
Even before Iraq invaded Kuwait, small-business owners began to feel less optimistic about the economy, according to a survey by the Washington-based National Federation of Independent Business.
“Small-business owners don’t like what they see on the horizon,” said NFIB President John Sloan. “And now, with the Iraqi invasion, there will be even less hope for an upturn this fall.”
A July survey of owners of about 2,100 firms revealed that only 17% expect the economy to improve, compared to 22% in May. About one-fifth see worse times ahead.
About 16% of the firms are planning to add workers, while 10% expect to reduce their work force the next six months. But the news was not all gloomy: Only 23% of the business owners plan to raise prices in the near future.
QUEST FOR CAPITAL
Hambrecht & Quist’s Shelly Guyer has these tips for environmental entrepreneurs seeking capital:
Prove that your technology or products can work in the real world.
Assemble an experienced management team.
Research the regulatory environment to see how it helps or hinders your product.
Determine the size of your potential market.
Check out the competition and understand why customers should buy your products over someone else’s.