A Machine That Turns Rotten Groceries Into Energy? Meet the Guys Making Waste Useful.

Ryan Begin (left) and Nick Whitman keep asking why food is being thrown away — and turning the answers into profit.

Image Credit: Courtesy of Divert, Inc.

Here’s what Ryan Begin knew: Food waste is a big problem — which meant, potentially, a big business opportunity. “Have you ever seen the back room of a grocery store?” he asks. “It’s really scary the food we throw away.”

The thing he didn’t know? What kind of business actually solves this problem.

That turned out to be OK. Many entrepreneurs begin with a product or service, and then convince people to buy it. But many other smart founders take the opposite path: They start with a problem, then refine a solution until it clicks.

That’s how Begin and his cofounder Nick Whitman built Divert, which has taken on many forms and tried many models, and now has more than 250 employees and serves 5,500 retail locations including Target, CVS, Albertsons, and Kroger. Here’s what they did.

Step 1: Find a customer.

Begin and Whitman had an idea: They’d build anaerobic digesters — machines that break down food and convert it into energy — that could be installed in back of grocery stores. Then they tried raising early money — but an investor yelled at them for it. Don’t try chasing venture capital, the man said, banging on the table. Go find a customer! He pledged $1 million if they followed his advice.

So they did. They went to Hannaford in Chelmsford, Massachusetts. The store loved the digester idea and paid $500,000. “We did waste audits for 24 hours with our notepads, sitting there in the back where they’ve built a hole in the wall to throw the food,” says Whitman of their early days visiting stores. “It was eye-opening.”

Step 2: Redefine your problem.

Before they finished Hannaford’s unit, they realized a problem: It would be difficult to scale by selling digesters to individual stores. So they pivoted in 2011 by developing a $20 million digester system for Kroger in Compton, California, to serve all its 330 local stores.

Immediately they had more problems: First, the system didn’t work as well as they hoped. But more so, the grocery store industry just wasn’t excited. “Our customers don’t need to produce energy. That’s not the business that they are in,” says Begin. “They’re trying to sell food.” The cofounders realized that, to solve the problem of food waste, they couldn’t only focus on processing it — they also had to figure out how to prevent it.

Step 3: Refine and repeat.

In 2014, the duo built sophisticated technology that could track everything in a store, right down to spinach sitting out too long on the dock. Their clients were very interested in this — because reducing food waste could increase company profits. So Divert kept refining, based on stores’ needs.

For example, to compete with online food shopping, grocery stores are emphasizing their fresh produce. But that means the fruits and vegetables must look amazing. To help, Divert developed a sensor network specifically to identify when, say, lettuce might be wilting or peaches could get bruised. The company also started building its own network of anaerobic digesters, which could process any food that does get tossed from stores. Then Divert would sell some of the energy itself.

Step 4: Scale the sale.

By 2017, having refined its multilayered solution, the company adopted a subscription model, which drove up revenue. And today, after being acquired by the private equity firm Ara Partners, it’s truly ready to sell that solution. As Divert keeps finding new ways to attack food waste, Begin hopes someday to help restaurants, sporting venues, hospitals — even the average home. “I do think the formula is the same,” he says. “Why are they wasting food? That’s the first question. We just go from there.”

This article is from Entrepreneur.com