June 15, 2017
Each week, I interview a startup founder in Maine to learn more about their background, lessons learned, advice for founders and their technology. This time we’re talking with Clayton Kyle, CEO of Clynk, the bottle and can redemption business and garbage tech.
As CEO of Clynk, the bottle-and-can-redemption business is recognizable to anyone in Maine who shops at Hannaford grocery stores, Clayton Kyle maybe in the business of recycling—but his specialty is growing businesses.
Before he acquired Clynk’s underlying technology out of a Biddeford garage in 2004, Kyle didn’t know anything about the business of recycling or bottle-and-can redemption. He just knew how to spot an opportunity and build a business to capitalize on that market need. Before Clynk, Kyle had acquired and grew a company that manufactured casino chips, and cofounded another that manufactured industrial insulation.
Under Kyle’s leadership, South Portland-based Clynk has evolved from a garage-based technology to a profitable business with 49 locations and growing in Maine and more than $6 million in revenue in 2016.
This year, revenue is expected to reach closer to $10 million due to expansion and Clynk will be setting up operations at 51 of Hannaford’s stores in New York state.
In the interview, Kyle shares his experiences as both an entrepreneur and an investor, discusses the importance of finding smart money, and leaves open the door to the chance his entrepreneurial nature will lead him to launch another company.
Tell me a bit about your entrepreneurial background
Well, it’s pretty straightforward in my case. I went to college, went into advertising for a while. Then I went to business school, and after business school worked at HBO in New York City for a while. You know, a pretty traditional trajectory.
About six years out of business school, my wife and I started thinking about living and raising our kids outside of the city and basically said we’d like to live differently. And that included me taking more control over my business life. I felt having done the Fortune 500 thing and seen that world I felt that I would be better at running and operating a business myself. And so it was really a desire to change the trajectory of my career and the feeling that I could find something to wrap my hands around and manage would be more enjoyable and something I could be more passionate about.
So long story short, I bought part of a small business in Maine. And we moved up here and that sort of started me on a path of entrepreneurial adventures. The fact is, we got to Maine—we had a couple of young kids at the time—and maybe three or four months after we moved here we said it was the smartest thing we ever did.
Talk about your transition into a venture capitalist.
There was a manufacturing company that was in Windham, Maine, that made gaming chips for the casino industry. Eventually I sold my interest in that then joined North Atlantic Capital, which is a venture capital firm [in Portland]. I really got a great education in running businesses as a venture investor primarily focused in northern New England. So we did a couple deals in Maine. We had a bunch of investors from Maine and it was just a great way to get linked in with the entrepreneurial community.
Somewhere along that time I joined the board of the Small Enterprise Growth Fund, which is now the Maine Venture Fund. Anyway, the sequence of events got me really involved in small businesses in Maine and eventually I became a partner in another startup company called Hunter Panels [in Portland].
Hunter was a company that came out of the rigid-foam insulation business. It sells rigid foam for low-sloped roofs. It sounds pretty technical, but basically what it is is insulation that goes on big factories, not on buildings that have traditional steep roofs. Low-sloping roofs have a different kind of weight bearing and insulation need. Hunters was formed when there was consolidation in that business.
There were only a few players in the country who made this kind of material and my partner was active in that business and when her business was sold, she approached me and said: ‘I know enough people in this business and I know that they want a choice of supplier, so if we start a business that makes this foam we will get a part of the market just because everybody wants a choice.’
So we formed Hunter Panels and eventually sold it to a public company that was one of our customers. And that sort of got me in the trajectory. I was then in the business of looking at and buying into small businesses. I formed a private equity company with two partners and a private investor family and we bought three businesses in Maine. One of which ended up being Clynk.
Was Clynk in its current form when you acquired it?
No. It was in a garage in Biddeford. The technology was in its infancy. And we acquired the technology to basically try to automate the counting and identification of the bottles in the bottle bill [which is a reference to the Maine law that incentivizes recycling by offering consumers a refund for each can and bottle they return to a redemption center].
And how did you handle the acquisition of technology?
The original thinking was that it would automate redemption centers. Rather than having employees handling those bottles when people came to drop them off, it would be a machine that would do it. But the machine was going to be too expensive for most small-size redemption centers to afford. So we thought if you aggregated all the bottles in a big redemption center and a bunch of machines and you ran them 14 hours a day, seven days a week, then the cost of the machine could be amortized over millions and millions of bottles and it might work. We’re now on the third iteration of that equipment.
Can you share fundraising advice for Maine startup founders.
It’s tough in Maine because professional equity investors, institutional equity investors, don’t generally get smaller. If anything the industry continually wants to take bigger and bigger bites because it’s as much work to put $500,000 to work as it is to put $5 million to work. You still you got to do all the same amount of due diligence. So it’s a little bit challenging in a market like Maine where there aren’t frequently large opportunities that represent multi-million dollar first round investments from institutional investors that you know team up from across the country and everybody puts in $2 million and you have a $10 million raise.
In Maine it tends to be a lot more bootstrapping, just because if you are going to raise a half a million dollars, you might be able to do it with family and friends and not even need a professional institution. There are entities that provide risk capital in Maine for smaller groups, CEI and MTI are examples. But generally it is a little more complex in Maine if the scale is going to be at the traditional Maine business scale. It doesn’t generally represent something that somebody is going to cross the border from Massachusetts and invest in. But it tends to be a little bit more of a cobble than an institutional deal in Maine.
Do you see the quality of deals in Maine improving and attracting capital?
Well I’ve been out of the traditional investor business and running this business more directly for several years now. But you can certainly say that information flows more swiftly today than it ever has. Maine’s challenge I think is partly been that a critical mass of opportunities is limited by a population. There are not a lot of people in Maine.
So the fishing around, the prospecting for deals in Maine was historically, like any other market, driven by numbers. But I think capital is more fluid than ever, as are ideas. I think what’s missing in Maine is we haven’t had the years and years of entrepreneurial experience and success at a relatively visible scale. We don’t have a number of highly successful track records that can be marketed into the second and third and fourth idea.
That’s coming, but every investor likes to see somebody who’s been battle scarred and learned a few things. And in order to do that you’ve got to bruise your knees a few times and be involved in startups and deals. And so you have a little bit of a chicken-and-a-egg problem. But I think Maine like everybody else, any other place that’s got good entrepreneurial attitudes. As an investor, I’d like to see somebody who has seen fire and rain and that means that they have done some of this before. Maine needs to keep building its velocity in that area.
Any other advice for startups?
I would say a partner that brings a good perspective to your business is much more valuable than a partner that brings just money. I mean, money is obviously what drives so many young entrepreneurs and chasing that money is pretty hard not to get consumed by. But finding a partner that really is a valuable partner is so much more important than finding just the money. It’s very unusual that you don’t hit a rough patch somewhere in your entrepreneurial adventure. And if you have the kind of partner that you’ve developed not only a mutual respect, but you can depend on to be supportive when times are tough, you can’t buy the value of that. So it’s hard to say, ‘Don’t take the money. The person is not the right person.’ We all know that money talks, but you have to value the relationship and put the value of the relationship in its proper perspective.
Read more about startups popping up in Maine at Tech.Co
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