Vermisoks Case PDF

For the exclusive use of J. Cobbs, 2019.
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Amanda Bullough
VermiSoks: One Man’s Food Waste

Is Another Man’s Tomato
Inside a barren warehouse office, the faint scent of decomposing food drifting through the air, Miguel Jardine,
CEO and Founder of VermiSoks, reveled in his accomplishment of having finally built a functioning Worm
Wine Cellar. The dream of completing his innovative “virtuous cycle” that would eliminate much of the food
waste contributing to environmental degradation in Phoenix was finally coming true after months of couch surf-
ing, penny pinching, and listening to the groan of his own empty stomach. Too many times, he had considered
giving up and finding a job that paid a real salary. It was the constant support of friends and family, the unex-
pected generosity of strangers, and his own drive to succeed that was finally transforming Miguel’s sour-smelling
warehouse into his own personal paradise. But, he still had a ways to go before making it a profitable business.
Despite having already completed the Worm Wine Cellar, the successful test garden, and the in-house
system that allowed him to maximize the efficiency of food waste processing, Miguel still faced a myriad of
entrepreneurial challenges. As he reflected on his day and the unexpected future ahead of him, Miguel thought
about how far he had come. He knew that the next big hurdle wouldn’t be entirely in his own hands, but rather
left to the hopeful funding of multiple venture capitalists. Miguel needed money, and he needed it soon. As they
approached the three-month mark of operations in the fall of 2011, VermiSoks was at capacity and the machines
were straining. Where initially Miguel had anticipated that the small size of the warehouse would be the issue, it
had in fact turned out to be the processing capacity. There was far more food waste coming from Miguel’s waste
clients than the processing machinery could handle. Miguel hoped to secure funding for as many as six times the
capacity of the current machinery, as the warehouse was indeed large enough to handle the additional machines.
As he opened his office door, exposing the sweltering Phoenix heat, Miguel peered out at a budding Ver-
miSoks garden that was growing above the parking lot asphalt. “Now,” he thought, “how to convince investors
that VermiSoks is ready to turn a ‘green’ profit…”
The Current State of Agriculture

In the 20th century alone, agriculture in the United States made a dramatic shift from a primarily family-farm-
owned-and-operated landscape to an industrialized and commercialized business sector. From 1930 to 2000,
United States agricultural output nearly quadrupled, while the number of farms fell from seven million in the
mid-1930s to just over two million in the year 2000.1 This consolidation was driven largely by a need for both
cost savings of commodity-agriculture and a more streamlined supply chain, which would translate to lower
food prices2 for the American consumer.
What resulted was the creation of a new global agricultural system, characterized by “large-scale, highly
mechanized, monocultural,3 and chemically intensive methods4” of production. Though extremely efficient, this
1
Gardner, Bruce. “U.S. Agriculture in the Twentieth Century,” EH.Net Encyclopedia, edited by Robert Whaples, March
20, 2003. URL http://eh.net/encyclopedia/article/gardner.agriculture.us.
2
Drabenstott, Mark. “Consolidation in U.S. Agriculture: The New Rural Landscape And Public Policy,” Economic Review
(01612387) 84.1, 1999: 63. Business Source Complete. Web. 28 Nov. 2011.
3
“The cultivation or growth of a single crop or organism especially on agricultural or forest land,” Merriam-Webster
Dictionary.
4
Norberg-Hodge, Helena, Todd Merrifield, and Steven Gorelick. Bringing the Food Economy Home: Local Alternatives to
Copyright © 2013 Thunderbird School of Global Management. All rights reserved. This case was prepared by prepared by Karissa
Seltz and Michelle Toto under the guidance and supervision of Dr. Amanda Bullough, and revised and updated by Matthew Erley
for the purpose of classroom discussion only, and not to indicate either effective or ineffective management.
This document is authorized for use only by JaCorvis Cobbs in Entrepreneurship 1904 BA751 D1 taught by CHRIS REESE, Brenau University from May 2019 to Jun 2019.
new agricultural system was not without detrimental aspects. In fact, in a 2006 report on agricultural chemical
usages on vegetables published by the USDA,5 264 different chemical fertilizers were listed as having been found
on crop samples from that year alone.
Adding to the environmental stress of chemical use on agriculture, vegetable and fruit production had
become increasingly globalized. Food imports were beginning to constitute a significant amount of daily pro-
duce sales in the United States. Even within the continental United States, produce was traveling approximately
1,300–2,000 miles from the farm to the consumer,6 incurring significant transportation and energy costs and
emissions waste. In 2005, more than 70,000 tons of CO2 was released in California alone from fruit, nut, and
vegetable travel miles.7
Further, a July 2009 report from the USDA on Americans’ access to affordable and nutritious food found
that despite the prevalence of cheap generic produce—both domestic and internationally grown—low-income
consumers’ lack of access to stores selling healthy food was contributing to obesity levels8 of 33.8% of the adult
population.9 These statistics on pesticides, food miles, and the lack of access to healthy nutritious food were
indicative of the growing human health effects of modern agricultural practices in the U.S. More than ever be-
fore, strides were being made to reverse these negative trends, as consumers demanded more widespread access
to healthier agriculture and a return to localized farming methods.
Much of the criticism towards the modern agricultural system spawned a dedicated organic and local agri-
culture scene in communities throughout the United States. The rise of urban farming was creating new access
to quality food for individuals of all income levels. The average transport miles required for food to travel from
farm to fork was also beginning to decrease, and transparency had become more common at all stages of the
growing process. To build on these trends, but not content to solely ride the wave of urban farming, VermiSoks
was created to address the crucial impact of food waste on the environment.
Approximately 181 million pounds of food waste are produced each day in the United States, totaling
about 14 percent of the total waste stream reaching landfills every year.10 This food waste comes from large-scale
generators, such as the agriculture industry, supermarkets, restaurants, and institutions, as well as small-scale
generators, which include households and individuals. Once this wasted organic matter arrives at the approxi-
mately 2,000 landfills in the United States, the food waste begins to decompose and emit Landfill Gas (LFG),
which is composed mainly of methane and carbon dioxide, two greenhouse gases that contribute to the negative
effects of global climate change.11 According to the EPA, “diverting this commercial food waste from landfills
would result in the avoidance of more than 225,000 metric tons of CO2 equivalence each year—the same as
taking 41,000 cars off the road.”12
By establishing VermiSoks as an alternative to traditional landfills, organic matter—including fruits, veg-

etables, and even meat products—has the opportunity to be recycled back through the “virtuous cycle” system,
redirecting potential food waste from contributing to environmental degradation.
Vermisoks: A Disruptive Technology

In his previous professional life, Miguel Jardine lived in Panama, where he traded on the U.S. stock exchange.
Although he had been trained as an engineer, Miguel’s passions for his home country and finance took him back
to Panama, where he was enjoying a very comfortable life. Every day, Miguel would look out across the Bay of
Global Agribusiness. London: Zed, 2002. Print.
5
http://usda01.library.cornell.edu/usda/current/AgriChemUsVeg/AgriChemUsVeg-07-25-2007_revision.pdf.
6
NCAT Sustainable Agriculture Project. “Reducing Food Miles.” https://attra.ncat.org/attra-pub/farm_energy/food_
miles.html.
7
Health Facts: Food Miles. National Resources Defense Council. http://food-hub.org/files/resources/Food%20Miles.pdf.
8
http://www.ers.usda.gov/Publications/AP/AP036/AP036fm.pdf.
9
U.S. Obesity Trends. Center for Disease Control. http://www.cdc.gov/obesity/data/trends.html.
10
EPA 2009. “Basic Information about Food Waste.” http://www.epa.gov/osw/conserve/materials/organics/food/fd-basic.htm.
11
Natural Resources Defense Council. “Is Landfill Gas Green Energy?” http://www.nrdc.org/air/energy/lfg/execsum.asp.
12
Coalition for Resource Recovery. “Food Waste.” http://thecorr.org/programs_food_waste.php.
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Panama and revel in the lifestyle he had worked so hard to achieve. Then one day in 2003, Miguel found himself
for the first time peering past the beautiful yachts,and to the hillside across the bay. In the distance were shacks,
hundreds of shacks, with corrugated tin roofs and concrete walls. It was in that moment that he asked himself
the question, “How is it possible for these extremes to exist in the same place at the same time?” It was this very
question that sparked a six-year journey to create an idea that would benefit the greater good.
Environmentalist or Humanitarian?
While he was certainly concerned for those living in acute poverty, it was Miguel’s love for science and economics
that led him on a journey to understand the environmental factors—social, economic, and natural—leading to
the existence of such a wide wealth distribution gap. Through his exploration, Miguel focused on greenhouse
gases and carbon creation. He decided that the world needed a microorganism that could take in carbon dioxide
and convert it to oxygen, and, after a few classes in a Biochemistry Master’s program, Miguel realized that plants
already did this! While Miguel still needed to learn the technical aspects of the photosynthesis process, he soon
left the program to pursue his own research on greenhouse gases.
Miguel traced the major causes of greenhouse gases not to cars and cattle, but to landfills and the food
waste generated by humans. As he explored options to solve the food waste problem, Miguel came across Janine
Benyus,13 a leading author in natural sciences and biomimicry, who advocated taking a look at nature to see
how nature solves its problems. Ultimately, the waste would need to be broken down before methane could be
produced and potentially deadly chemicals could seep into the ground. As he dove further into his research,
Miguel discovered that earthworms were nature’s food waste decomposers. He thought, “How can I develop an
idea around this finding?” Miguel immediately began considering ways to use these lessons from nature to solve
the environmental food waste issue, but now through the lens of a businessperson.
The Birth of a Revolution

In 2008, Miguel chose to pursue an MBA at the Thunderbird School of Global Management, ranked #1 in
International Business.14 Miguel closely identified with Thunderbird’s mission of “educating global leaders who
create sustainable prosperity worldwide.” He knew from the very beginning he wanted to create a business that
had a triple bottom line—a business that fulfilled growth in three areas: monetary value, social value, and en-
vironmental value. He believed that a company should succeed in all three areas to be a viable and sustainable
social enterprise.
During his time at Thunderbird, Miguel developed two models of sustainability to help him focus on his
key objectives. The first model was a triangle with the three corners titled “People, Science, and Business (Exhibit
1). Where the business sat on the triangle determined its impact on society. For example, a company deciding to
focus on science and people would have the potential to create a “better living” environment; whereas, a company
focusing on science and business was the “commercialization of science.” Miguel believed that a harmonious society
could be achieved by businesses that could focus their efforts on all three equally—people, science, and business.
Out of this triangle, Miguel’s second model was created, called the Sustainable Value Curve (Exhibit 2),
which charted the sustainable value of both a for-profit company and a nonprofit organization. Using the curve,
Miguel was able to identify the type of company he wanted to either work for or create. His ideal company was
found at point “E”—a “Blue Ocean”15 growth company that created and disseminated disruptive technologies.
A “Blue Ocean” can be best defined as a strategy to create growth and demand in an uncontested market space,
rather than compete head to head with other suppliers in an existing industry.16 Miguel desired to be part of
13
Benyus, Janine M., Biomimicry. New York: Harper Perennial, 2002. Print.
14
U.S. News and World Report Rankings. http://grad-schools.usnews.rankingsandreviews.com/best-graduate-schools/top-
business-schools/international-business-rankings.
15
“The aim of BOS is not to outperform the competition in the existing industry, but to create new market space or a
blue ocean, thereby making the competition irrelevant.” INSEAD Blue Ocean Strategy Institute. http://www.insead.edu/
blueoceanstrategyinstitute/BOS/index.cfm.
16
Kim, W. Chan; Mauborgne, Renée (1 February 2005). Blue Ocean Strategy: How to Create Uncontested Market Space
and Make Competition Irrelevant. Harvard Business Press.
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something that was revolutionizing the world in a “big, big way.” Using these two models, Miguel began to
search for opportunities to live out his radical dream of solving issues related to food waste and the environment.
In November 2009, Miguel attended the GreenBuild Conference, a sustainable building conference in
Phoenix, Arizona. As he waded through the sea of different vendors, he came across Filtrexx International and
Burgis Envirolutions. Filtrexx International was selling mesh “GardenSoxx” in which a gardener could put in
soil and seed to grow plants. Burgis Envirolutions sold a machine called the ORCA, which could liquefy food
waste. While Miguel found both of these concepts interesting, it took several days after GreenBuild for him to
understand how the two products might work together.
As Miguel drove around Phoenix with a friend one day, discussing Arizona’s inability to sustain agriculture
without an immense quantity of water, he thought out loud—“Wouldn’t it be nice if we could just grow on a
parking lot!?” Because Phoenix is located in a desert, the ground is hard and there are very few nutrients in the
soil. As Miguel began exploring what it would require to grow plants on a parking lot, it all came together. He
thought, “Perhaps it would be possible to grow organic food from one of Filtrexx’s GardenSoxx and enhance the
process by feeding earthworms the super nutrient-rich composting liquid created by the ORCA.” And so, the
VermiSoks idea was born.
Miguel the Entrepreneur

Like many entrepreneurs, Miguel pursued his new business idea tirelessly, reading everything he could find on
food waste, organic and urban farming, biomimicry, and beyond, and began spending hours in his apartment
tinkering with PVC tubing, different types of joints from various metals, mesh screens, and so on. He was work-
ing on the engineering behind what would eventually become a VermiSoks sock and the Worm Wine Cellar. He
even set up his own first sock in the parking lot behind his building and began growing vegetables.
Beyond Miguel’s entrepreneurial tenacity, he is also a gifted speaker and presenter. He is smart, well-read,
and excels at asking himself difficult questions and engaging in complex problem-solving initiatives. When he
communicated the VermiSoks business model, either in individual and small-group conversations or in presen-
tations to larger audiences, he was gifted at presenting all of his complex ideas and biological and engineering
processes, answering all questions with completeness yet in a simple way that non-experts could understand. He
seemed to have thought of everything and could answer just about any question with intelligence and simplicity.
The Vermisoks Virtuous Cycle

The VermiSoks Virtuous Cycle was the very basis of the VermiSoks business plan (Exhibit 3). Based on his
research, Miguel developed a circular supply chain system that would allow all the food waste his equipment
could consume to eventually be converted into food production. What he needed now was lots of food waste,
a system, and growers who would use the liquefied waste.
Food Waste
The largest input to the entire system revolved around food waste. Luckily for Miguel, Phoenix was teaming
with massive amounts of castaway food; approximately 1,100 tons produced each day. Miguel recognized the
opportunity to source food waste by approaching green-minded grocers in Phoenix, such as Whole Foods, who
proclaimed a commitment to sustainability. Because these companies had to pay a service to take away their waste,
Miguel approached waste collection as an income-generating activity. He decided that as long as these grocers
and restaurants were going to pay a service to take the waste away, why not hire VermiSoks to haul it away for
an environmental purpose? Whole Foods became Miguel’s first waste collection customer. The company saw
the value of the virtuous cycle and wanted to get involved at every stage, beginning with waste collection and
eventually planning to source locally grown produce from the socks.
Liquefaction
VermiSoks originally utilized the ORCA system—a very expensive piece of machinery—to liquefy waste. It
required 24 hours to break down 2,000 pounds of food waste, which would, in turn, generate many gallons of
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extremely nutrient-rich liquid that Miguel called “Worm Wine.” However, the process was too time-intensive.
Miguel’s goal was to speed up the process and make the Worm Wine cheaper and faster to produce. Along with
his colleague, Jarrad Duxbury, the two created a system made literally out of spare parts from Jarrad’s backyard.
As a part of the new system, VermiSoks would first take in a delivery of food waste and dump it onto a
sorting table. After the waste was sorted for nonfood items such as plastic, twist ties, and rubber bands, the
food waste could be ground up and transferred to a 1,000-gallon tank. Within this tank was a mix of water and
beneficial bacteria microorganisms that would break down larger food particles (Exhibit 5). The tank was then
agitated in order to introduce oxygen that would allow the bacteria to work, further liquefying the pulverized
food waste. Finally, probiotics17 were added to help alleviate the decomposing odor. In just two hours, VermiSoks
could create 3,000 gallons of Worm Wine to use in the garden socks.
Growing in VermiSoks
Lying on top of pallets in the middle of the VermiSoks warehouse were stacks upon stacks of black mesh tubes.
These were VermiSoks socks—a platform for growing fresh vegetables and herbs above ground. The socks were
first filled with soil, coconut husks, and worms. The worms were sourced from locations around the country,
including Wisconsin, New Jersey, and Phoenix, while the coconut husks, a nutritionless fodder, were then shipped
from a grower in India. Once the worms were fed the nutrient-rich Worm Wine, using drip irrigation from a
huge solar-powered tank, they would multiply and generate a “super soil” which would allow vegetables and
plants to grow without the need of fertilizers or any other additional intervention—including water. With the
irrigation system in place and the sourced Worm Wine, the socks could then be laid anywhere—in parking lots,
land plots of barren dirt, building rooftops, abandoned Phoenix buildings, or even famine-stricken developing
countries. As long as a 3-foot by 2-foot space was available, a VermiSoks garden could grow. VermiSoks allowed
growers to cultivate more natural produce.
Super Soil
The worms had the potential to produce super soil for up to six months. After this six-month period, the VermiSok
reached its life span. There were no coconut husks for the worms to eat, and the earthworms had multiplied and
created enough soil that the VermiSoks simply couldn’t hold any more. Excess waste from the socks—stems, leaves,
even the cotton fabric from the VermiSok itself—could be recycled through the virtuous cycle and converted
back into Worm Wine. Even the worms, which quickly reproduce within the socks, were sifted out of the soil
and reused from sock to sock. Miguel needed worms from an outside vender to initially fill all of the VermiSoks
that he was producing. Worms from one sock could multiple enough for one or two more socks, but Miguel’s
plan was to grow exponentially, which would still require ordering more worms from an outside source.
Following the replacement of the sock, the super soil produced by the worms could be transferred to nour-
ish other crops. Selling the soil was not an initial focal point of Miguel’s virtuous cycle, although he recognized
its value. After several rounds of testing by expert biologists, the soil generated by the worms in the VermiSoks
was found to be of extremely high quality, and purely organic. The organic soil could then be packaged and
sold by wholesalers and retailers for use in more traditional farming practices, or even for household gardening.
A Virtuous Cycle of Customers

The VermiSoks system had three primary customer segments. These included: (1) food waste removal, (2) cus-
tomers wanting to source Worm Wine for growing fresh produce in the socks, and (3) buyers of nutrient-rich
soil. The growers were to be independent businesses, either in the form of established farmers looking for a new
growing platform, or as new start-up businesses wishing to base their enterprise on the VermiSoks system. The
hope was that local growing customers would partner with VermiSoks’ food waste customers, such as Whole Foods,
to sell the produce grown in the socks. Ideally, the same produce a food waste company might wish to purchase
would be grown using the very food waste they had previously disposed of; thus completing the VermiSoks’
17
“Preparation (as a dietary supplement) containing live bacteria (as lactobacilli) that is taken orally to restore beneficial
bacteria to the body,” Merriam-Webster Dictionary.
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Virtuous Cycle. So, for example, Whole Foods would provide the food waste for the virtuous cycle, and pay a
waste removal fee. At the end of the cycle, Whole Foods would then buy the produce grown in the VermiSoks.
Miguel’s Entrepreneurial Challenges

As with many young businesses, there can be severe ups and downs, including feelings of elated achievement
and second-guessing.
Financing and Facilities: Keeping the Pressure Cooker from Exploding

Raising the necessary capital to finance VermiSoks’ operation was at the core of Miguel’s start-up challenges.
Miguel calculated that it would take $750,000 to build the entire Worm Wine Cellar to his expectations. Reza
Samadi, a friend of Miguel’s with an MBA from the W.P. Carey School of Business at Arizona State University,
challenged this plan and recommended to first bootstrap18 the operation by building a much smaller system. This
would give investors and clients the opportunity to see the functionality, without requiring such a large capital
investment. As with many disagreements, the two ended up compromising to create something in between.
Before graduating from his MBA program, Miguel met an alumnus who was, ironically, getting into the
earthworm business as a form of organic agriculture. After discussions with Miguel, this individual decided
to invest in the first round of seed capital, totaling $19,000. This initial capital allowed for a small amount of
R&D, as well as for a financial model to be built for the business in 2010. A second investor put in $11,000
to get VermiSoks from February 2011 through to the upcoming summer. The money to pay for the company’s
warehouse and the initial equipment actually came from friends, and family members of friends who attended
one of Miguel’s presentations about VermiSoks. Then in October of 2011, five people invested $10,000 each to
open the wine cellar ($50,000 total).
By 2012 and throughout that year, VermiSoks was in operation with Whole Foods waste removal and had
enough money to hire some office and marketing staff. Throughout that year, the capacity of the machines in
the warehouse was increasingly becoming an issue. Whole Foods was a happy client and wanted VermiSoks to
take on even more business, but the equipment needed to be replaced with much larger and more robust versions
that could more adequately handle the waste, like bones that made their way into the food waste, rather than
requiring constant manual sorting by staff and shutting down machinery to remove clogs.
Plus, Miguel hadn’t been as successful as he had hoped with inspiring entrepreneurs to start new business
growing in the socks. Without enough food to grow in the socks, Miguel didn’t have an outlet for all the Worm
Wine he was producing. He simply had a tough time handling the waste he was already collecting from Whole
Foods, and, without a big infusion of financial capital, he definitely couldn’t take more.
By the fall of 2012, Miguel was awaiting critically needed funding from a venture capitalist in the amount
of $1.2 million. By that time, Miguel had put the idea of new urban farming businesses on the back burner and
was beginning to sell the organic soil he produced in the socks through Whole Foods stores. Unfortunately, it
wasn’t enough to keep the lights on and the doors open without the badly needed new funding.
Organizational Structure
Reza Samadi, Miguel’s friend from ASU, had a background in change management and sustainability, and hap-
pened to arrive at Miguel’s door at just the right moment. Reza spent October and November scrutinizing the
VermiSoks model, challenging Miguel to think critically about any gaps in the system, and asking him to defend
his business model. After what seemed like a month of nonstop debating, Reza came to Miguel in December
and informed him he was “in,” and prepared to sit as VermiSoks’ COO.
In January 2011, Adam Lanteigne came on board as head of Customer Relationship Management. In
March 2011, Christian Nys was asked to run Product Development for the company. In April of that same year,
18
“To promote or develop by initiative and effort with little or no assistance,” Merriam-Webster Dictionary.
6 TB0355
Miguel met Esther Michaels at a TED talk,19 and, after discovering an aligned interest in global development,
brought her onto the team to lead strategy and development.
Finally, to round out the start-up team, in May 2011, the friend of a Thunderbird classmate approached
Miguel to point out a crucial disparity. “You have all these people who know how to run a business,” said Jarrad
Duxbury, a certified LEED project manager and wastewater engineer, “but you don’t have anyone here who knows
how to use a wrench. You talk about this Wine Cellar, but who’s going to build it?” In May, Jarrad was brought
on as VermiSoks’ Production Manager, bringing with him vast technical knowledge to design and engineer the
equipment that was to be the core of VermiSoks’ Virtuous Cycle platform.
Once the team had been established, Miguel’s role as CEO was also coming together. Managing a team
of diverse cultures, skillsets, and backgrounds proved to be both a challenge and an opportunity. Because the
initial growth happened with such momentum, Miguel found himself caught in a unique Catch-22, similar to
many entrepreneurial start-ups. Though the company could not yet compensate staff full time, VermiSoks was
completely reliant on the daily expertise and man-hours necessary to grow the company’s sustainably. Of the
five team members, only Miguel and Jarrad worked full time. Each team member was being paid in company
equity and working on an as-needed basis. These partners were not being paid, and, therefore, were abandoning
the business as VermiSoks began to experience some strain. The partners were also less inclined to put in the
necessary sweat equity to build the business.
Revenue started in October of 2011 with a food waste removal contract from Whole Foods, but in 2012
things started to take a downturn with his partners. While Miguel had enough capital and funding from the
Whole Foods business to finally hire a small group of office and market staff throughout 2012, he found him-
self in legal trouble with an ex-employee who stole one of his vans for the Whole Foods waste removal, three
members of the initial leadership team decided to leave, and another significant employee quit. And, while he
was able to keep his new employees motivated through their paid salaries, this created its own issue, as payroll
was becoming increasingly difficult to keep up with.
Challenging the Business Model

From the beginning, VermiSoks sold itself as a “growing platform,” not as a grower. The company also promoted
a number of products and services that were mostly independent of one another. Socks could be sold directly to
growers, super soil was going to be marketed through retail stores, and food waste removal was offered to business
clients. Miguel was pleased with the many ways to monetize the business, but the question of where to focus his
energy was still unclear. As he frequently met with potential investors in the Phoenix area, Miguel was repeatedly
asked to defend his business model and earnings estimates. Without a large number of initial customers, Miguel
was tasked with painting a clear picture of the potential of his Virtuous Cycle. Although he carefully crafted his
pitch, Miguel often felt that investors didn’t clearly understand the many features of the VermiSoks business and
how they could all work together to support both the business as well as the greater good of society.
Collaborators, Not Competitors

As a company operating within several unique spheres—waste services and eco-solutions, among others—Ver-
miSoks confronted other players in the industry as they began operations. Miguel wondered if VermiSoks was in
a position to compete against the existing companies, or if it would be more advantageous to begin collaborating
with the competition to find synergies.
As a new company, Miguel identified the competitive advantage that VermiSoks could bring to the major
waste service providers in the Phoenix valley: that being, nimble action and an already established sustainable
operations infrastructure. Two operators in the area, Waste Management and Republic Services, despite embed-
ding sustainable waste solutions within their business models, were slow in redirecting efforts within a shortened
19
TED is a nonprofit dedicated to “Ideas Worth Spreading.” TED holds two national conferences and one global conference
per year. Cities will hold meetings called TEDx in which local leaders will share ideas. Miguel Jardine presented at a TEDx
meeting in Scottsdale, AZ on May 15, 2011. http://tedxtalks.ted.com/video/TEDxScottsdale-Miguel-Jardine-J. Link to
Miguel Jardine’s TEDx talk in Phoenix: http://www.youtube.com/watch?v=Qr-5k_wHX_A.
TB0355 7
time frame due to their sheer corporate size. In the Phoenix metropolitan region, specifically, neither company
had yet to establish an exclusive food waste program. Miguel’s offer, then, was to provide the waste companies a
location to drop their customers’ food waste in order to satisfy their own sustainability initiatives, while provid-
ing VermiSoks with a hauling and logistics partner. It remained to be seen, however, if these partnerships could
be mutually beneficial and sustainable in the future.
Competing for food waste among the eco-solutions companies also became a non-issue. Global Green
Integrations (GGI), the recycling division of the Phoenix-based company AZ Docushred, approached VermiSoks
in 2011. VermiSoks, whose food-waste transformation capacity was much larger than GGI’s, leapt at the prospect
to outsource the hauling and logistics of their organic waste. Likewise, when Miguel considered other companies
in the field, such as Baker Commodities, a provider of rendering and grease removal services in California, he
saw them not as rivals, but as fellow pioneers. By shifting the business mindset, what at first appeared to be a
competition for business was soon discovered to be an opportunity to grow the industry.
Trying to Convince the Unconvincible

A natural partner for VermiSoks seemed to lie within the nonprofit sector. These organizations often rely solely
on donations and risk losing funding during difficult times, such as during the Great Recession of 2008. Miguel
thought that such nonprofits might jump at the chance to supplement their income by managing a VermiSoks
garden, and then selling the product. Further, caring for living plants, which relies on human care for growth
and sustainability, could provide development, rehabilitation, or therapy for the homeless, disadvantaged youth,
teenagers, disabled persons, senior adults, or even young children.
Unfortunately, instead of seeing VermiSoks as a chance to better anticipate funding and smooth the rough
times, nonprofits viewed the initial investment critically as a chance for Miguel to profit off nonprofits. The
funding of these nonprofits was generally connected to funding through the donations of others, and this was
making it impossible for them to visualize the benefits of setting up what could be both an income-generating
and mission-enhancing activity. Because of this mindset, Miguel was forced to abandon nonprofit partnerships
until he could find a more compelling argument to break through the perspective of donation-only income.
Developing the Nascent Market

Miguel was an entrepreneur at heart. With his knack for identifying gaps in society and creating solutions to
resolve the need, Miguel looked at the current state of the economic recession. Driving down the streets of Phoe-
nix, commercial lots stood vacant every few blocks, bio-waste receptacles for Type II Diabetes insulin injections
hung on the walls of casino bathrooms throughout the Phoenix valley, and national unemployment rates neared
9%.20 In short, people were hungrier, unhealthier, and poorer than at any time in recent decades. Considering
the situation, Miguel saw the need for a new sort of economy—one based on local agriculture.
Though Miguel had established VermiSoks solely as a growing platform, once the operations went live, it
became apparent that the VermiSoks Virtuous Cycle required players at each stage of the process. Partnerships
with retailers and businesses had been launched; collaborations with existing firms to coordinate hauling and
waste transport had been founded; the in-house Worm Wine process had been vetted; so where were all the
growers to grow the food?
Along with a fellow urban agriculture enthusiast and friend, Greg Peterson, the two began shaping the
early seeds of an Urban Farming Education Program, which would include the Local Food Economy Education
(LFEE) Collaborative, targeting any and all individuals who might want to pursue a full-time job in the new
local food economy. As part of the plan, job options within the industry could range from low-skill to high-skill
services, and could create nearly 100,000 new positions.21 Encouraging this budding industry would provide
VermiSoks with both a dependable food waste customer for the Worm Wine and would help complete the cycle.
It seemed like the natural next step for VermiSoks.
20
November 2011 Data. Bureau of Labor Statistics. http://www.bls.gov/.
21
VermiSoks estimate.
8 TB0355
The last part of developing this nascent market was the most rewarding and strategic. By bringing individu-
als together from all industries and sectors—city officials, small-scale growers and large family farms, corporate
retailers, and small businesses—VermiSoks had the power to make the industry come alive and create an innova-
tive local food economy consistent with Miguel’s vision.
Ancillary Company Sphere

Creating an operation with “disruptive technologies” meant that many of the companies VermiSoks needed to
succeed simply did not yet exist. Miguel decided that this could create an incredible opportunity for economic
expansion in Phoenix and other cities. While the number of companies that could support the different phases
in the VermiSoks Virtuous Cycle was innumerable (see Exhibit 6), there appeared to be three concepts that
were integral to the long-term survival of the company, these being: worm farms, packing and distributing, and
residential servicing.
Worm Farm
VermiSoks required 250 pounds of earthworms per “vermacre” of VermiSoks. Because of the high demand
and the feeble earthworm industry, Miguel found it challenging to find a supplier that could keep up with his
demand. According to Miguel’s calculations, if all 1,100 tons of daily Phoenix food waste were converted into
Worm Wine, the company would be able to support 95 million VermiSoks, or almost 20,000 vermacres. To
support 20,000 vermacres, Miguel would need 4.4 million pounds of earthworms supplied every six months.
Ideally, Miguel hoped to develop a dedicated wormery for each Worm Wine Cellar. To entice entrepreneurs
to create a new wormery, Miguel created an interesting proposition. The wormery owner would need to find
and fund the location and the equipment, but Miguel would be willing to supply both the coconut husks and
the Worm Wine to feed and nourish the worms being cultivated. After the worms were sorted and returned to
Miguel, the super soil left behind could be bagged and sold to nurseries for personal profit; yet another way to
monetize the business.
Packing and Distributing

Large food distributing companies often experience a difficult time sourcing locally. In fact, it’s much easier to
source from an international location than from a location right down the street. Sourcing from a local provider
is considered scaling down, which is counterintuitive to many of these companies. A local producer would
typically produce less than a mega-farm somewhere else. So, instead of reducing the number of food miles a
product would have to travel, it is less costly to source from just one location—even if that farm happens to be
thousands of miles away.
To better serve the VermiSoks growers, Miguel knew that a local distributing company would need to be
created to deliver the grown produce to restaurants, hotels, and grocers. Grocers such as Whole Foods generally
managed the logistics of their own products, but this was only offered to larger clients. Going forward, there
would be a desperate need for growers to get their products to their retail or restaurant customers.
Residential Servicing
Miguel understood the importance of not expanding past his key competencies, such as deciding not to initially
sell the VermiSoks system to residential consumers. However, he did see a huge latent market for residential
VermiSoks systems where households could grow their own produce. Miguel hoped to explore the smaller market
of existing landscapers and gardeners who might be interested in 1,000-gallon tanks of Worm Wine, rather than
the large commercial trucks that served commercial growers. To be successful, the households would need to see
the value of growing their own food and be willing to pay a premium for it. He thought that perhaps landscapers
could provide residences that could not previously sustain a traditional garden with access to VermiSoks and the
ability to grow healthy and nutritious food.
TB0355 9
An Uncertain Future
As Miguel sat and pondered the many entrepreneurial challenges before him, he decided that there was no more
crucial time in VermiSoks’ history than the present. Clearly, the grim situation confronting both society and the
environment was only adding to the need for a company such as VermiSoks. Miguel knew that it was impera-
tive to move quickly and grow sustainably in order to keep the company afloat. Miguel’s next round of funding
would require a substantial investment from venture capital funds and private investors in the Phoenix valley.
Miguel felt the heavy weight of the months ahead. VermiSoks had been his dream for so long, and Miguel
was ready for the company to finally take off. There was food waste that had to be kept from landfills and a
whole agricultural system ready to be turned on its head. If not VermiSoks to pioneer the movement, then who?
10 TB0355
Exhibit 1. Sustainability Strategy Triangle
Exhibit 2. Sustainable Value Model
TB0355 11
Exhibit 3. The VermiSoks Virtuous Cycle
12 TB0355
Exhibit 4. The Test Garden
TB0355 13
Exhibit 4 (cont.)
A complete VermiSok with an irrigation system and growing produce
14 TB0355
Exhibit 5. VermiSoks Wine Cellar Photos

Food on the sorting table before being ground A view of the sorting table in the foreground, and
and put in the tank. the 1,000 liquifying tank in the background

A view of the warehouse from the top of the liquifying A look into the 1,000-gallon liquifying tank
tank. VermiSoks socks are in the back right corner.
TB0355 15
Exhibit 6. Potential Ancillary Companies

1. Local Food Economy Education Collaborative (LFEE)
• Targeting any and all individuals who might want to pursue a full-time job in the new local food economy
2. Supplier Businesses
• VermiSoks Suppliers: fertilizer, probiotics, earthworms, plug growers, cotton/poly socks
• Growers’ Suppliers: greenhouses/hoop houses; hydroponics; plugs; irrigation supplies; growin’, pickin’, packin’
supplies; gleaners—roving band of pickers; growing consultants
• Warehouse—pick your own grocery
• Seeds: banks, libraries, companies, specialty, growers
3. Consumer Businesses
• Growers
– Food: staples, specialty
– Herbs: botanicals—soaps and beauty products; edible; medicinal—herbal remedies
– Jobs: harvesters, dressers, harvesters, sales
• Value Added: pesto, salsa, snacks; baby food
• Food Concepts: local restaurants, food trucks, secret meals (announcing on Twitter and FB the last minute),
pay as you can, personal chefs
• Personalized Medicine: wellness centers, nutritionists, food consultants, personal shoppers/cook
• Distributors and Marketers: CSAs (delivery, online); farmers markets; traditional stores; delivery
• The Reach—not directly impacted: payroll services, accountants, PR, packaging, business planners, architects,
programmers, funding agencies—loans, bankers, real estate brokers
• Nonprofit Integration: making jobs and growing food
16 TB0355

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VermiSoks: One Man’s Food Waste

The Current State of Agriculture

By establishing VermiSoks as an alternative to traditional landfills, organic matter—including fruits, veg-

Vermisoks: A Disruptive Technology

The Birth of a Revolution

Miguel the Entrepreneur

The Vermisoks Virtuous Cycle

A Virtuous Cycle of Customers

Miguel’s Entrepreneurial Challenges

Financing and Facilities: Keeping the Pressure Cooker from Exploding

Challenging the Business Model

Collaborators, Not Competitors

Trying to Convince the Unconvincible

Developing the Nascent Market

Ancillary Company Sphere

Packing and Distributing

Exhibit 1. Sustainability Strategy Triangle

Exhibit 2. Sustainable Value Model

Exhibit 3. The VermiSoks Virtuous Cycle

Exhibit 4. The Test Garden

A complete VermiSok with an irrigation system and growing produce

Exhibit 5. VermiSoks Wine Cellar Photos

Exhibit 6. Potential Ancillary Companies

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