Four years ago, Tom Ricciardelli and Michael King were on the verge of shutting down SelecTech Inc., the 50-person company they'd run since 1993.
SelecTech had helped pioneer the process of recycling dirty plastics - previously considered worthless - by shaping them into new products like planters, plastic timbers, and traffic dividers.
But in 2004, after a key partnership with a unit of DuPont deteriorated, "we were essentially a bankrupt company with a few intellectual property assets," Ricciardelli says. "We considered going under."
Instead, the two founders decided to restructure. They shed employees, worked out settlements with vendors, and renegotiated deal terms with investors that had given them millions. "It was six or nine months of real transition pain," Ricciardelli says. But having survived, Avon-based SelecTech is emerging as one of the state's most innovative suppliers of "green" building products to consumers and businesses.
Since its near-death experience, SelecTech is focusing on making flooring tiles mostly for commercial use; they contain anywhere from 20 to 100 percent recycled plastic, and don't require any glues or adhesives to install. The flooring has been installed in Best Buy stores, labs operated by Norwood-based Analog Devices Inc., and at least one dentist's office.
"The environment is my most important issue," says Cambridge dentist Loren Wilson, who scoured the Internet for environmentally sensitive products like countertops studded with recycled glass, nontoxic paints for the walls, and flooring from SelecTech.
FMI, a Raleigh, N.C., consulting firm that annually publishes the US Construction Overview, expects spending on nonresidential "green" construction to surpass $21 billion this year, up from $13.4 billion in 2006. "There are few projects that are not to some degree considering sustainability," says Dan Arons, cofounder of the Boston architecture firm Architerra, which specializes in green projects. "The awareness of the issue is dramatically higher than it was five years ago."
SelecTech's founders met in the early 1990s as employees of an ill-fated Boston company that processed medical waste for incineration and recycling; both had a hunch that recycled products could become a growth industry. But what kept the process of recycling plastic expensive was the need to wash, dry, and screen all of the used plastic as it came in, to ensure high purity. After researching the problem, Ricciardelli stumbled onto a German-made injection-molding machine that didn't need such a pristine supply of plastic.
With it, he says, "We could take junk plastic, which is a really low-cost feedstock, upgrade it into a nice product, and make money."
SelecTech wasn't exactly sure what kind of products it would sell - maybe buckets, maybe plastic lane dividers for roadways, which had been a hot seller in Germany. King and Ricciardelli started to talk to investors, hoping to raise $4 million to build a factory, develop some products, and start marketing them.
The company raised just $1 million to start. But over time, through what King calls "trickle" financing, the company raised more - a total of $10 million - from funds like the state-supported Massachusetts Technology Development Corporation, the Sustainable Jobs Fund in North Carolina, and Claflin Capital Management.
The funding allowed the company to build an 80,000-square-foot facility in Taunton, with five of the German machines. Though the lane-divider business was slow to take off, SelecTech produced plastic planters that resembled terra-cotta, which sold well at Home Depot. DuPont Flooring Systems got in touch with SelecTech, asking whether the company could do anything with old carpeting.
"They didn't want lane dividers," Ricciardelli says. "They wanted a recycled flooring product that their sales force could sell to customers."
Almost all of the company's resources went into developing a not-very-attractive black flooring product called SelecTile. (King acknowledges that the first-generation floor tiles were "ugly, splotchy, and there were globs of nylon that didn't melt.") DuPont's sales force had trouble moving the tiles, and in 2004 the DuPont division was sold, then broken into pieces. That spelled the end of what had once seemed like a lucrative partnership.
SelecTech still hadn't figured out how to turn a profit, and its investors were "getting tired," Ricciardelli says. "We looked at all the different options," King says, including bankruptcy. "Keeping it running as it was wasn't an option."
They shed all of their employees, shut down the factory, and sold off the planter and lane divider businesses for a pittance. They kept two of the injection-molding machines and relocated them to a custom manufacturer's facility in New Hampshire; they'd no longer be responsible for the full cost of the facility's overhead or the employees who ran the machines. "We were just clearing house," Ricciardelli says.
Most of the original investors who chose not to keep funding SelecTech had their stakes diluted; the Boston Community Venture Fund, which invests in "double bottom-line" businesses, stuck with the company, as did two angel investors. (The company has raised a total of $10 million so far.) Then, SelecTech's founders made three key decisions.
First was to make only flooring. Second was to improve the appearance of the product, and offer more than just basic black. Third was to sell it through as many channels as possible, to avoid again relying too heavily on a single partner like DuPont.
The tiles are made with the flexible PVC plastic that is used as the backing of most industrial carpeting. SelecTech buys nuggets of the plastic from a processor, and mixes in other recycled plastics before it melts everything down and feeds it into a mold at high pressure. The company can also fuse a laminate surface onto the tiles, which can make them look like stone or wood instead of plastic. At the edges, the tiles have tabs that lock into the neighboring tile. That eliminates the need to glue them to a subfloor; they can simply be pounded into place with a mallet.
Ricciardelli says that SelecTech's products are a few dollars more expensive than traditional flooring, when measured by the square foot. But in cases where an old floor needs to be removed, he says SelecTech is the cheaper option, since the tiles can simply be laid over the existing floor. And he notes that SelecTech can recycle its own tiles at the end of their lifespan.
While customers like Wilson are sold on the environmental benefits of the flooring, other buyers hardly notice. "The fact that it was recycled material wasn't one of our major concerns," says Chris Norcross, a lab manager at Analog Devices. "It was the cost aspect, and how long it took us to install it." Norcross says he installed the tile - a variety that absorbs static electricity - by himself, rather than hiring a contractor.
Whether or not the customer cares about the product's green aura, Ricciardelli says it finally feels that SelecTech has found its place in the market. He says the company has been getting so many inquiries this year that revenues could surpass $10 million in 2009. And after a long period of retrenchment, he's now thinking about expansion: "We're going to double our production capacity by May, and then we may double it again by the end of this year."
Innovation Economy is a weekly column focusing on entrepreneurship, technology, and venture capital in New England. Scott Kirsner can be reached at kirsner@pobox.com.
