Consumer recycling company banks Series C

RecycleBank, a startup that works with municipalities and businesses to reward households that recycle, raised $28.25 million in a Series C round last week.

The company called on existing investors Sigma Partners, RRE Ventures, Kleiner Perkins Caufield & Byers, Generation Investment Management and The Westly Group as well as at least one undisclosed new investor.

The round brings the startup’s total amount of venture funding raised to $71.35 million.

“We appreciate the support,” says Ron Gonen, RecycleBank’s co-founder and CEO.

The New York-based startup installs sensors on recycling bins that measure the weight of materials recycled by a household. The information is stored and converted into points, which can be cashed in for coupons used at such retailers as Dunkin’ Donuts, Home Depot and Ikea. RecycleBank has put as much as $400 worth of coupons in the average consumer’s pockets per year, and it saved Cherry Hill, N.J., $200,000 in landfill fees, according to the company.

“I truly believe that while most people are focusing on biofuels and solar, recycling is on the cutting edge of clean technology,” says Steve Westly, managing partner of The Westly Group.

The big reason recycling is catching on is the commodities business.

Better ways to turn trash into resources, such as glass, aluminum and copper, mean bigger profits for disposal companies. Waste Management, for example, collected revenue of $1.1 billion from its recycling operations last year. While commodities prices were rising, the company reported increased year-over-year revenue by $178 million during the first three quarters of 2008.

One of the easiest ways for big trash companies to up their recycling revenue is to get more people to recycle.

“Eighty percent of all garbage is recyclable, yet the average residential recycling rate is less than 20%,” says Trae Vassallo, a partner at Kleiner Perkins. Vassallo also says that RecycleBank has more than doubled recycling rates in every community that’s deployed the program to date.

But VCs are also backing more tech-heavy ways of pulling resources from refuse.

Consider Lehigh Technologies, a startup working to improve rubber recycling. The Tucker, Ga.-based startup raised $34.5 million from Index Ventures and Kleiner Perkins last year, bringing its total funding to date to $52 million. Lehigh is using the capital to expand its production facilities beyond the 50,000 tons it can already process annually.

“We decided to invest in Lehigh because it solves a major environmental problem,” says Neil Rimer, a general partner with Index. “Lehigh’s product is cheaper and higher quality than other recycled rubber solutions.”

Lehigh’s recycling efforts come at a time when rubber is becoming more valuable. Over the past decade, the price of rubber has risen more than 170%, according to data from the International Monetary Fund. And that’s before the U.S. financial crisis kicked into gear last year. As recently as June 2008, rubber had increased to 4.4 times its 1999 price.

Still, selling cheaper commodities via recycling isn’t something many VCs have had a chance to look at. Just a handful of recycling companies have raised funding so far:

• Mohr Davidow Ventures-backed Simbol Mining, for example, which uses industrial effluence as an input to produce lithium and other commodity metals;

• Benchmark Capital-backed MBA Polymers grinds up computers and other consumer electronics to produce plastic;

• Robeco Private Equity-backed Alternative Waste Solutions makes plastic from bottles;

• and Goldman Sachs-backed Reklaim Technologies turns tires into carbon and steel while the remaining gas produced in its process is condensed into oil and used to power onsite generators. —Alexander Haislip