Growing City composting company puts the brakes on franchising after Dragons’ Den appearance

Founder of Growing City, an environmentally oriented compost company, Lisa von Sturmer says she was shocked to find how easy it is to compost.

The pitch Lisa von Sturmer studied media and animation at Emily Carr, a Vancouver art school. For several years, she worked in the film and television industry and while she enjoyed it, she always felt there was something missing.

“I was working at an MMA fight television show and I never really felt like I was leaving much of a legacy,” she said. “I wanted to create a business where I knew I was making a tangible, positive impact.”

It was a huge leap, particularly because she had always believed it was impossible to start a company without a traditional business background. But when she bumped up against the glass ceiling, it was the catalyst that pushed her into taking the leap.

She started with a wish list for the type of business she would build. “I knew I wanted to do something that involved the environment and sustainability because I am passionate about it. I really wanted to build a recurring revenue model because when I started researching starting a business I knew that was critical.”

Then, a trip with friends to Savary Island, B.C., introduced her to composting. “Whatever you bring on to the island, you have to take off,” she said. “It shocked me how easy and impactful composting is. When we left the island we had this tiny little bag of garbage for a whole group of people.” Back at work, Ms. von Sturmer took note of the organic waste produced each day: coffee grinds, paper towels, food. She began looking for a service that could take care of the organic waste produced by her workplace and found no one was providing commercial or corporate composting in Canada, the U.S. or Europe.

That was the genesis for Growing City, an office composting service she launched in 2009 with an investment from the Canadian Youth Business Foundation. It was the first company to focus on corporate organics in North America and was an immediate hit in her hometown. “We started getting phone calls right away, which validated the fact that the corporate world was ready to compost and we followed the curve.”

That curve is growing. In 2015, Metro Vancouver will ban organics from landfills, forcing property owners and managers to implement organics recycling programs. The provinces of Ontario and Quebec are putting similar legislation in place. Growing City installs sustainably made stainless steel bins in clients’ offices and offers two organics recycling services, as well as traditional in-office recycling. It is also subcontracted by larger companies, including being hired as the preferred organics contractor by one of the country’s largest recycling companies, Ms. von Sturmer said.

Growing City works with a licensed composting facility in Vancouver and donates compost to community gardens. In the early days, Ms. von Sturmer and her then business partner (she is now the sole owner) did all the pickups, working seven days a week. In 2010, sales hit $100,000. That doubled to $212,000 in 2011. She has received interest from people in Canada and the U.S. to franchise the model. When she entered the Den, she had signed up 82 offices in Vancouver.

Still, she wanted to get the word out on a grand scale. “I want people to think of Growing City when they think of organics recycling. I know this is a new industry and no one company has defined itself as the go-to company for organics … I wanted to get a deal and introduce us to Canada.”

The deal Ms. von Sturmer asked for $100,000 in exchange for a 25% equity stake. The money would be used to hire an operations manager, allowing her to focus on sales. She received offers from Arlene Dickinson, Kevin O’Leary and Jim Treliving and accepted the deal from Mr. Treliving, who offered exactly what she asked for on air. While the deal did not make it through due diligence, Ms. von Sturmer counts the experience as a positive one and is pushing forward with her expansion plans. She is opening subsidiaries in Ontario, Quebec and California and is speaking to new investors for those territories. “At this point, we are keeping the growth corporate. Maybe in five or 10 years it will make sense to franchise,” she said.

A dragon’s point of view “It’s a great little company. When we looked at it, we realized that anyone can get into the business. She’s doing a lot of great work but it’s not proprietary. Other companies are moving into the space,” Mr. Treliving said. “My interest was the franchising but we didn’t see any way to do that at this time because of its size. And she didn’t really need a lot of capital to do what she is doing. She’s a good sales person and has a good team in place and she takes advice. Any time she wants to talk again, that’s great.”

An expert’s opinion Thomas Hellmann, a professor at UBC’s Sauder School of Business, said Growing City is a good idea at the right time.

“I like that she is glamorizing a business that isn’t naturally glamorous but it is hugely valuable from a social perspective. Her expertise in arts and media is a plus because she understands the importance of and how to create a buzz. Her appearance on the Den was very smart,” he said.

But there are challenges. “My biggest concern is on the cost side of the business. All of the business plans I’ve seen in this area had giant transportation costs. As fuel costs increase, this will dip into profits. It will be a thin margin.”

Mr. Hellmann said Ms. von Sturmer chose the right market in targeting corporate clients as opposed to residential, but he said there are few barriers to entry. “She is right to expand the sales force and to target major high density markets — Vancouver, Toronto and Montreal — but the big question will be what happens if the municipalities want to take this service on themselves?” he wondered.

“It’s also unclear if she will be able to get contracts in those places that already have mandatory organic waste collection. Perhaps she could convince the municipalities to let Growing City provide the service and pay the company.”

As for franchising, Mr. Hellmann feels at this point it’s a distraction and she should stick with her current plan.

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