From the Drawing Board

November 10, 2013 7:34 pm

Rady MBA students help give second lease of life to cellphones

Drew Spaventa: 'There is $5bn worth of cellphones sitting in people's drawers'

For Drew Spaventa it was love at first sight.

It was during a presentation by Californian entrepreneur Mark Bowles at the Rady school at UC San Diego, that Mr Spaventa, an MBA student there, realised that the proposed EcoATM was a project with which he really wanted to get involved. “I just fell in love with the idea.”

The problem

When people buy a new mobile phone, the old one often gets thrown to one side. Less than 10 per cent of all cellphones in the US are recycled, yet these phones contain many rare and precious materials. “There is $5bn worth of cellphones sitting in people’s drawers,” says Mr Spaventa.

The solution

EcoATM is a machine that can be installed in shopping malls or large stores, and where shoppers and cellphone owners can recycle their old phones for cash. “You have to mix convenience with immediate financial payment,” says Mr Spaventa, which is why more cumbersome methods of cellphone recycling has not really solved the problem.

How the product was developed

Once Mr Spaventa had seen the prototype of the EcoATM, he persuaded both the inventor and his project group at Rady that the development of the machine should form the project for their MBA Lab to Market class. He even had to persuade the group’s professor, as they had already begun working on a scheme to aggregate carbon credits as their year-long project, and time was short.

Unlike most business projects, this was not jut a case of writing a business plan. “Me and three other MBAs took a prototype machine and ran a trial at UCSD on the college campus.” The pilot lasted for three months in 2010, during which time the MBA students collected 2,500 used phones and got $10,000 in revenues.

The prototype machine bore little resemblance to today’s slick machine, says Mr Spaventa. “It was a person sitting next to a wooden ATM with a touchscreen.” When the vendor matched the used phone to the appropriate model displayed on the touchscreen, he or she was paid the listed amount. “We whipped fifty bucks from our belt to pay people.”

It was during the pilot phase that the inventors of EcoATM received seed funding, in the form of $3m of convertible debt, which kick-started the technical development of the kiosks.

How does the EcoATM work?

Anyone wanting to use the kiosks has to first present valid photo identification, which is remotely validated via webcam by the central office in San Diego. The machine opens and the phone is deposited in a bin where advanced machine vision scans the phone to identify make and model. It also grades the phone for physical condition, which will affect the price.

The vendor is then presented with one of around 20 cables, each designed for a different phone, which when plugged into the cellphone checks that it functions electrically. The vendor is then offered a price for the phone – the average payout is $26.

Is it not a licence for phone thieves to make money?

A lawyer by training, this is where Mr Spaventa came into his own. Only one in every 1,500 phones that are presented is stolen, he says. The company deals with the problem by voluntarily holding all phones for 30 days before recycling. The stolen phones are returned to the owner free of charge and all transaction data supplied to the police.

What next?

Mr Spaventa, now director of market development and compliance for EcoATM, which was bought by Outerwall, operators of a number of kiosk brands, earlier this year, believes the company has room to grow. The company already has 850 machines in shopping malls and in the past two years the company has recycled 2m phones and distributed tens of millions of dollars. Two-thirds of phones are refurbished and sold on.

As well as geographical growth the company is looking to develop the technology to recycle tablet devices as well.

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