Last month, an Atlanta-based company called Rubicon Global announced its entry into the rarefied “unicorn club” of startups worth more than $1 billion. Rubicon is not an obvious candidate—it’s in the gritty business of waste disposal. Then again, it’s not a typical garbage company. It has raised about $200 million, and its investors include and Salesforce.com Chief Executive Officer Marc Benioff. Rubicon’s co-founder and CEO, 36-year-old Nate Morris, has referred to the company’s service, which connects independent trash haulers with businesses that need their dumpsters emptied, as the “Uber of Trash.”
Garbage, a $60 billion industry, has traditionally been low-tech. According to Morris, the three companies that dominate—Waste Management Inc., Republic Services Inc., and Waste Connections US Inc.—have no interest in changing this because of their vested interest in the status quo. Morris has said that like Uber, Rubicon is building a tech platform that will break the stranglehold of the incumbents, save customers money and make it easier for drivers to make a living. And it’ll lead to more recycling.
The results, at least so far, have been disappointing, according to interviews with nearly 20 former employees—who requested anonymity because they had signed nondisclosure agreements or feared retribution—as well as competitors, business partners and industry experts. By their accounts, Rubicon has consistently overstated the impact its technology is having on its business, which more resembles a conventional waste brokerage than a sophisticated Silicon Valley startup. Nearly a decade into its crusade to increase sustainability, Rubicon declines to release any statistics that would make it possible to compare its recycling rates to the broader industry, citing non-disclosure agreements with its customers.
Rubicon’s challenges follow a familiar path in Silicon Valley and the broader tech startup world. Investors write large checks to impressive yet unproven entrepreneurs with seductive stories. But those founders often find it surprisingly complicated to apply high-tech solutions to old-fashioned problems.
Morris’s charms have masked the gap between Rubicon’s rhetoric and its reality, said many former employees. They describe him as a charismatic pitchman with a taste for his own Kool-Aid. Before launching Rubicon in 2008, Morris raised money for President George W. Bush and Kentucky’s junior Republican senator, Rand Paul. Investors and former employees said their attraction to Rubicon was largely based on faith in Morris. Two former employees said people around the office would joke that it was exciting to work for the future U.S. president.
But the company Morris described publicly hasn’t always jibed with what Rubicon has said in private. In the summer of 2015, he gave numbers to Fortune that cited significantly higher rates of growth and the number of locations Rubicon was serving than did a presentation shown to investors at the same time. A Forbes article published earlier this year, based on an interview with Morris, reported that Rubicon had $300 million in annual revenue, a number 60 times higher than the 2015 revenue number it gave to potential investors.
Bloomberg spoke with four current Rubicon executives, including Morris, though only Morris wanted to be quoted. In an interview in late September, Morris declined to comment on Rubicon’s finances, including to clarify statistics provided in previous press interviews. He dismissed criticism about the company’s progress on its technology and recycling rates. “We’re playing a very long game,” he said. “If it takes us 20 years to get there, so be it.”
While home in Kentucky during a break from graduate school late in 2008, Morris met with Marc Spiegel, a childhood friend whose family was in the garbage business. Spiegel explained how the industry was technologically backward and structured around making it as profitable as possible to fill up landfills. The conversation hit home for Morris. He was interested in politics, but the prospect of Barack Obama’s Washington held little appeal for a young, ambitious Republican. So the two men decided to disrupt trash.
Morris and Spiegel—now Rubicon’s chief of national sales and mid-market sales—based their business on Oakleaf Waste Management LLC, a waste management broker that signed national contracts, then convinced local hauling companies to bid on each location. It was a big enough idea that Waste Management paid $425 million to buy Oakleaf in 2011. But Morris had even larger ambitions. He saw the potential for a sustainable, tech-savvy garbage company to turn trash pickup into a prestige customer experience. “I tell people all the time that we built this business for the millennial generation,” Morris told Waste Dive, an industry newsletter.
Rubicon declared Waste Management, Republic, and Waste Connections—the Big Three—as its villains. A central point of Morris’ pitch is that because these companies own their own landfills, the most profitable thing they can do is drop trash at the dump. This means the Big Three are incentivized to throw it away, even if recycling could be profitable. Rubicon’s economics were different because it doesn’t need to maximize its own infrastructure, according to Morris. Rubicon became a B-Corp, a specific distinction for businesses that incorporate social goals into their strategy, in 2012. In interviews with Bloomberg, investors, customers and former employees all cited Rubicon’s sustainability goals as a reason they wanted to work at or with the company.
Yet Morris acknowledged to Bloomberg that in some markets, Rubicon’s trash service is more profitable than recycling. This dynamic has led to sales strategies that ran counter to Rubicon’s stated priorities. Two former salespeople said they pitched customers wholly on price—and recycling increased the price. One former salesperson said employees were instructed not to pitch recycling in many cases, because the additional cost might scare clients away. “When you join the sales team you’re like, ‘I’m doing something great! I’m helping small businesses recycle,’” said the former sales worker. “Then, if you add recycling to their service, their bill goes up 200 percent. So you’re told not to pitch recycling.” Morris said he had not heard of this strategy. “The core mission of this company is rooted in sustainability,” he said. “We could always do a better job of communicating our values and how we work as a company.”
Because Rubicon doesn’t own trucks, it relies on companies that do. In the past, this has meant working with the Big Three. One former employee said there have been times when as much as 35 percent of Rubicon’s business was handled by haulers for Waste Management, Republic, and Waste Connections. Rubicon also lacks control over what independent haulers do. Haulers and multiple former employees said that after Rubicon takes over a contract, many haulers lug the trash to the same landfill they were already taking it to—usually the cheapest, closest one. Haulers associated with the Big Three currently handle 15 percent of Rubicon’s business, according to the company.
Rubicon said it handles recycling in about 60 percent of the locations it serves. These locations include businesses, as well as every house in several cities in which Rubicon is running pilot projects whereby government-owned garbage trucks use its technology. Such major clients as Waffle House Inc. signed deals to handle landfill-bound garbage only. (Waffle House is no longer a client.) And as Rubicon increasingly switched focus from national accounts to small businesses, the economics of recycling got even harder. The company declined to provide any overall data about the percentage of trash it picks up that ends up being recycled, citing non-disclosure agreements.
As more clients such as Dollar General Corp. and 7-Eleven Inc. signed on, Rubicon struggled to keep up. According to financial documents from 2015 viewed by Bloomberg, the company became less profitable as it grew. Rubicon expected annual losses of $19 million that year, up from $4 million in 2012, a nearly fivefold increase. Its revenue over the same period grew about 3.1 times.
The main factor driving Rubicon’s losses was its willingness to buy customers out of their existing contracts, according to the company. Former employees and analysts described the practice as risky. Switching service saved clients a lot of money in the short term, but there was no guarantee they’d stay on. In a letter to investors in September, Morris said that customer acquisition costs were “meaningful,” though the company said that those numbers for small and medium businesses have decreased 20 percent so far this year.
Jason Tipton, a former Rubicon customer, is the CEO of a food truck business in Washington, D.C. Tipton said his hauler stopped picking up the trash earlier this year because Rubicon hadn’t paid the hauler in six months. He said that after struggling to get Rubicon to schedule an emergency trash pickup, he ended up paying the hauler directly to have the overflowing dumpsters emptied—even as Rubicon continued to auto-debit his account. Tipton said he now just contracts directly with the hauler. “We’re looking into the specifics of this situation, but clearly, we failed this customer,” said a Rubicon spokesperson.
At times, Rubicon has struggled to keep its internal tech running. In 2014, when it overhauled its customer-payment software, the entire thing crashed. In the ensuing chaos, payments to haulers were interrupted and three big national clients cut ties with Rubicon, though Rubicon won’t say which ones, citing non-disclosure agreements. Spokesmen for Papa John’s International Inc. and Waffle House said they stopped working with Rubicon in 2014, but didn’t specify reasons for leaving. Dollar General and 7-Eleven didn’t respond to questions about their experiences with Rubicon.
Rubicon describes the system crash as a single unfortunate episode, and Morris discounts the impact it had on the business. Rubicon executives and investors are more interested in talking about the apps it builds for haulers. Morris’s concept of using software to build a platform that functions similarly to the operations of a single, large company is potentially revolutionary, said Vanessa Indriolo Vreeland of Fifth Third Bancorp., which has been an investor since 2014. “He’s been able to replicate the national scale without investing in trucks,” she said. “I think that’s pretty unique.”
If there’s an ideal version of how Rubicon’s tech can work for independent haulers, it’s Ramco Environmental Services, a hauling company in Arkansas. Lannis Nicholson, Ramco’s director of business development, said its trucks have mobile devices running Rubicon software. By analyzing routes and suggesting changes, Rubicon has made Ramco’s operations more efficient, he said, and Ramco is more likely to bid on new jobs Rubicon brings its way.
Other haulers see Rubicon as a traditional trash broker. Jilliann Lopapa, the owner of Thoroughbred Waste Services LLC, a hauler with six trucks in the Fort Lauderdale, Florida, area, says she works with at least four brokers, including Rubicon. Each secures new contracts, then sends spreadsheets to haulers asking them to bid against one another for each location. “They all do the same thing,” said Lopapa. She’s never seen Rubicon’s app.
Some haulers that Rubicon asked to use its app say they declined because they are wary of how Rubicon would use data they shared. Rubicon declined to say how many haulers now use its app, saying instead that 75 percent of its pickups are handled by a truck that uses Rubicon’s technology. But that number says little about the traction Rubicon’s tech is gaining with privately owned haulers. A significant portion of its pickups come from the pilot programs with local governments—the municipal fleet of Columbus, Georgia, alone services 56,000 households. The company declined to break out its adoption rate among private haulers.
“Our culture is a work in progress. We have a long way to go to get where we want to be”
Former employees who spoke to Bloomberg described a company roiled by internal conflicts, with Morris and other executives tussling over strategy. Three chief operating officers have left since 2014. (The position remains unfilled.) Rubicon has cut jobs on several occasions, with the largest number coming at the beginning of this year. Rubicon described those as the result of a shift in strategy.
Three Rubicon investors and advisers said they are not bothered by the turnover. But when asked why so many former employees had described a chaotic workplace, Morris became agitated. “Our culture is a work in progress. We have a long way to go to get where we want to be,” he said. A few minutes later he added, “I’ve been on a journey with a wonderful team.”
Morris likes to refer to Rubicon as a journey. His use of the word tends to ramp up whenever he’s treading in difficult territory. By this interpretation, it’s still too early to call in the bets on whether the company is improving recycling rates or hitting on its tech. But at nine years, Rubicon is old by startup standards. And its current timeline is slower than what it laid out in the past.
As early as 2015, Morris said he was planning to take the company public in the near future. Now Rubicon declines comment on plans for an initial public offering. According to Securities and Exchange Commission filings, Rubicon opened a new, $100 million round in August, almost immediately after closing a previous round it began raising the year before. In a filing on Aug. 28, Rubicon said it had raised $19 million toward that total. The company told Bloomberg it has raised $48 million.
Rubicon has also grown quiet about perhaps the flashiest version of its product and the origin of its nickname. In the summer of 2015, Morris revealed that Rubicon was testing an Uber-esque app for residential customers in several markets. The company was also attempting to build a similar model for business customers, according to people who were there at the time. The idea was to allow people to push a button to schedule garbage pickups in an on-demand service that, just like Uber Technologies Inc., would get speedier as it grew in scale. Morris told Wired its goal was to be able to pick up garbage within a half-hour of any request. He said that the app would launch publicly “in the coming months.”
It’s been over two years, and the launch still hasn’t happened. Many industry insiders said the idea was doomed from the start. Customers receiving regular trash pickup have little incentive to switch to an on-demand service that might be more expensive. Morris waved off the setback. While Rubicon is still testing aspects of the plan, it said any deployment is far in the future. At this point, Morris discourages comparisons to Uber. “We do so much more than Uber,” he said. “It undercuts what Rubicon is really about.”