BECOMING THE WORLD'S COOLEST RECYCLER

In Business, September-October, 2006, Vol. 28, No. 5, p. 14

Managed by co-CEOs, IceStone LLC manufactures decorative surfaces from recycled glass and cement, finds investors in social venture circles and creates markets that reach green builders.

Molly Farrell Tucker

ICESTONE LLC is keeping tons of glass out of landfills and transforming it into high-end countertops and vanities. IceStone® surfaces look like modern-day terrazzo, the faux marble flooring made from marble chips set in clay. But instead of marble and clay, Ice-Stone is a mosaic mixture of recycled glass and cement.
The process for manufacturing IceStone surfaces was developed by Tim McCarthy, who opened Great Harbor Design Center (GHDC) in 1998 in a 55,000 square foot factory in the Brooklyn (NY) Navy Yard to commercialize the product. McCarthy died of cancer in 2001 before being able to fully launch the company or the product. His wife, Carol McCarthy, put GHDC's assets and equipment up for auction in November 2003. Peter Strugatz and Miranda Magagnini purchased them.
Strugatz and Magagnini first met in 1995 at an Investor's Circle conference. Both were investors in social purpose companies (between them, they have been involved in 15 private equity deals.) They formed a limited liability partnership, Magagnini-Strugatz Ventures, so they could buy a company in Brooklyn where they both live. “We knew that we would be working a 70-hour-week and didn't want a long commute from our families,” explains Magagnini. They heard about IceStone from two sources, Investor's Circle, who the previous owners had approached for funding, and a friend who was on the board of the Brooklyn Navy Yard.
“I looked at IceStone from a marketing standpoint,” says Magagnini. “I saw that it could be a fantastic triple bottom line company that could be good for workers and for the environment and still return money to investors.” They started a new company, IceStone LLC, renegotiated the lease for the factory used by GHDC at the Brooklyn Navy Yard, and filed for a patent for the IceStone® manufacturing process.
Since 2003, Magagnini and Strugatz have raised $6 million for their company from a group of angel investors including Ben Cohen, cofounder of Ben & Jerry's Homemade, Inc.; Greg Steltenpohl, one of the founders of Odwalla juice company; and Dal La
Magna, founder of Tweezerman Corporation. “Dal is our largest investor and the first person to write us a check, for which we're very grateful,” says Magagnini. “We haven't accepted any venture capital funding so far,” she adds. “All the investors have been progressive angel investors who believe in our social mission.”
The angel funding was used to expand the factory, increase production capacity, begin branding IceStone, and improve the product. “We made it stronger, less porous and in more beautiful colors,” notes Magagnini. “We did a tremendous amount of R & D with world-class scientists. Making the world's sexiest concrete is not the easiest thing to do. You have to keep the glass and cement from breaking apart.”
Investors in IceStone LLC are also partners and receive quarterly reports on the company's activities. “When Peter and I were private investors, we sometimes didn't get updates on the companies we invested in, so we make sure we let our investors know what we're doing,” says Magagnini. Some of the investors serve on the company's Board of Advisors.
The company has received $500,000 in grants from New York State, including $200,000 in research and development funding from the Environmental Investment Program (EIP). That money was used to streamline the manufacturing process, purchase equipment, increase production capacity and accelerate the sales cycle. Other grants have been for waste reduction and to train employees in “lean” manufacturing.
A number of local organizations also helped launch IceStone LLC, including the Brooklyn Economic Development Corporation, Brooklyn Chamber of Commerce, New York Industrial Retention Network and Brooklyn Navy Yard. “Those people really did want us to be successful,” says Magagnini. “They helped us find sources of grant funding, renegotiate the lease for our facility, and help us find good workers. It takes a lot of people to get you started in a new business.”

SOCIAL VENTURE BACKGROUNDS
Prior to IceStone LLC, Strugatz was president of Strugatz Ventures, a private equity investment firm that funds alternative transportation, natural and organic food enterprises, consumer products and education. The venture fund invested in several companies including Stonyfield Farm Yogurt, Hypercar, Wild Planet Toys, Zipcar and Utah Ventures. Strugatz is a former board member of the Social Venture Network and the ALS Association. He is an advisory board member of Underdog Ventures, a venture capital fund that links investors with socially responsible companies, and Verite, a nonprofit organization that identifies worker exploitation or health and safety violations in the workplace, and develops programs to correct them.
Magagnini is a native of Brooklyn, where she lives with her husband and two children. She is the former chair and a current board member of Verité. She has more than 25 years of sales, marketing and business turnaround experience. During the 1980s, Magagnini helped expand sales of Häagen-Dazs Ice Cream and Soho Natural Soda, which led to the acquisition of Häagen-Dazs by the Pillsbury Company and Soho by Seagrams. Since then, she has directly invested in a number of companies including Stonyfield Farm Yogurt and Lipton Corporate Childcare. Strugatz and Magagnini serve as co-CEOs of Ice
Stone LLC, and are equal partners in the company.

PRODUCT SPECIFICS, FABRICATION
IceStone® surfaces are a mixture of 75 percent recycled glass, 17 to 18 percent white Portland cement, pigment and proprietary ingredients. IceStone surfaces are marketed as a sustainable alternative to mined natural stone such as granite and marble, and engineered stone made from quartz and polyester resin. The company's website, www.icestone.com, states that 85 percent of mined natural stone is imported from other countries, requires significant amounts of fossil fuel to transport to the U.S., and is often mined under dangerous working conditions.
The recycled glass used in IceStone is already presorted according to color and size. “The glass has to be very clean in order to adhere strongly and tightly to the cement,” says Magagnini. “If there are bits of debris in the glass, we reject it.” The company pays ten times more for its glass than glass tile manufacturers who can buy broken glass with dirt in it. “They can put it in a glass furnace and burn off the dirt,” she explains. The clean glass required is not available in New York State, and is sourced from crushing and sorting facilities elsewhere. “Over time, we would like all of the glass to come from New York,” she adds. At most, 25 percent of glass in the United States is recycled, she says, compared to 90 to 95 percent in Europe. “We're in the dinosaur days here.” The company purchased 385 tons of postconsumer and postindustrial recycled glass in 2004, 750 tons in 2005, and expects to purchase 2,000 tons in 2006.
IceStone is manufactured by an emission-free and chemical-free process. The glass is first mixed with cement and poured into molds. The molds are then vibrated and put into curing chambers to increase the strength of the slabs and decrease their porosity. When the slabs are cured, they are popped out of the molds and polished on a large Italian stone-polishing machine. The finished slabs are 52.5-inches wide by 96-inches long by one and one-quarter inches thick and weigh 500 pounds. They are polished to a high gloss before being shipped out of the factory. Stone fabricators cut the slabs to the desired sizes using standard stone cutting equipment and edge, seal and install the product for the customer. The fabricators can also customize the finish of the product by sandblasting or honing the surface.
IceStone surfaces come in 24 standard colors including neutrals, earth tones, pastels and bright colors such as green, blue, yellow and orange. Ice
Stone LLC also creates custom colors for large commercial installations, such as the colors (light green tea pearl and cayenne pearl) for the hundreds of tabletops being installed in new Starbucks retail stores. “We can make Ice
Stone surfaces in almost any color by adding pigment to the background mix and then selecting from a variety of sizes and colors of glass,” says Magagnini.
IceStone LLC has a long-term lease with the Brooklyn Navy Yard for the 55,000-square-foot “daylit” factory. “The building has 35-foot high cathedral ceilings and natural light streams through the skylights,” she says. “We can run a full day shift without using a single light bulb.”

CUSTOMERS AND MARKETS
According to a November 2005 study by the Freedonia Group, Inc., the annual market for residential kitchen and bath countertops in the U.S. is $12 billion. The study predicts even greater growth in the countertop market because of increased interest in home remodeling and homeowners' desires for larger kitchens, more bathrooms, and high value materials.
Customers cannot buy the product directly from IceStone LLC, but can find showrooms and stone fabricators in their area on the company's website. IceStone costs $90 to $145 per square foot installed, depending on the color, type of installation and size of the job. “Its price is similar to mid-to high-priced granite,” says Magagnini. The company's primary markets are in the New York metropolitan area, the Bay Area, Boston, Washington D.C., San Diego, Seattle, Chicago and Denver. It also has sales in Florida, North Carolina and Arizona.
Higher profile projects where Ice
Stone surfaces are or have been installed include the Durst Organization's Bank of America/One Bryant Park Tower, Whole Foods grocery stores, Equinox Fitness Clubs, Starbucks coffee shops, Liberty Mutual insurance offices, and Rosa Mexicana restaurants. The restaurant chain selected pink surfaces with orange glass. “That's not a color combination for everyone,” Magagnini adds, “but it looks really great in the restaurants.” At the Bank of America/One Bryant Park Tower building, located on Sixth Avenue and 42nd Street in Manhattan, IceStone is the sole source for the Alpine White bathroom countertops. The $1 billion, 51-story skyscraper is scheduled to open in 2008. “The significance of that building is that it is going to be the greenest office building in the United States,” says Strugatz. “The developer and architect are attempting to obtain platinum LEED certification. It would be the first time that a major office building obtains that status.”
According to Magagnini, demand for IceStone surfaces has increased so much this year - 300 percent - that the company has pulled back on marketing and is building a new, faster, $2 million production line. “We didn't anticipate the demand. The lead times were too long and we don't want unhappy customers. With the new production line, we will have much more explosive growth next year.”
Although the majority of IceStone LLC's sales to date have been for countertops, the product can also be used for backsplashes, tabletops, vanities, bathrooms, bathroom dividers, interior walls, shower surrounds, bathtubs, wall cladding and commercial flooring. The slabs also can be cut into tiles for outdoor use by sandblasting the surface to add slip resistance. Magagnini says the company's next focus is to expand sales for sinks, showers and tub surrounds.
IceStone has also been known to give away its product for free. The company donates surfaces to Habitat for Humanity and museum exhibits, including flooring in a “green” dollhouse exhibited at the Brooklyn Children's Museum and a green building project at the National Building Museum in Washington, D.C. It also provides free materials for college and graduate students studying sustainable design.
IceStone® qualifies for the U.S. Green Building Council's LEED points because of its high recycled content. In August 2006, the company received MBDC (McDonough Braungart Design Chemistry) Cradle to Cradle silver certification for its products. “This took a lot of time, and is an honor and a huge achievement for us,” notes Magagnini. “We are the first countertop or durable surface ever to receive Cradle to Cradle certification.” The Mother of Pearl used in IceStone materials is also certified as sustainably harvested by the National Terrazzo and Mosaic Association.

THE COMPANY PHILOSOPHY
Magagnini and Strugatz raised a few eyebrows in the traditional business community when they announced that they would be co-CEOs of IceStone LLC. “They wanted one of us to be CEO, and the other to be president,” she says, “but we knew that the tenure of the CEO of a Fortune 500 company is only about three years.”
Magagnini says that sharing the helm has worked well. Strugatz splits his time between overseeing manufacturing and fundraising. Magagnini is in charge of marketing and the company's day-to-day operations including human resources. “With a start-up company, everything has to be built from the ground up - the mission statement, employee manuals, marketing materials, you name it,” she says.
Even though each has their own sphere, Magagnini and Strugatz work closely together. “We strategize together and use each other as a sounding board,” she notes. “It's not without its challenges, but collaboration works best for us.”
Since 2003, the business has grown to 35 employees, (37 including Strugatz and Magagnini). IceStone LLC hires many of its employees from the Brooklyn area, which has a high unemployment rate for people of color. “There is incredible diversity in the company, which creates a dynamic and rich culture,” says Strugatz. “We have managers and technicians with advanced degrees from prestigious universities, and some of our employees were formerly incarcerated.”
Employees speak 18 different languages and more than 20 percent are Tibetan. The company offers free ESL (English as a Second Language) classes and translators are provided for Tibetan and Spanish-speaking employees at the company's “town meetings” (company meetings are usually held once a month), as well as classes in Toyota Lean Manufacturing and fork lift safety training.
IceStone LLC pays its unskilled entry-level employees $10 per hour plus medical benefits. “A lot of employees tell us they were making minimum wage at their previous jobs and couldn't even afford to buy groceries,” says Magagnini. “We start them out at $10 and move them up from that once they are trained.” The company also provides GED tutoring and immigration assistance. Magagnini and Strugatz are in the process of putting together an employee stock appreciation plan. “Hopefully by next year, our employees will become our partners,” she adds.
ENVIRONMENTAL INITIATIVES
The company works at having an environmentally friendly workplace. A new wastewater recycling system is being installed at the factory, and food residuals from the employee cafeteria are being composted and used in the company's vegetable and flower garden. “People are amazed to see cucumbers, basil and tomatoes growing in the Brooklyn Navy Yard,” laughs Magagnini.
Employees are encouraged to use real plates and cutlery instead of disposables, and plastic, paper, metal and glass are recycled. IceStone LLC sourced a business to reuse the broken plastic pallets that the recycled glass is shipped in, and another company collects nonsaleable panels and grinds them up for road surfacing. The cleaning service uses nonchemical cleaning products. Indoor bike racks, showers and lockers inspire employees to ride their bicycles to work instead of driving. “It's not perfect, but we do what we can,” says Magagnini.

FUTURE PLANS
The company is raising another $4 million to get it where it wants to be, which includes becoming a global brand and building factories overseas by 2009. “We want to be in the best possible position to meet the company's explosive growth,” says Magagnini. “I wish that we had raised a lot more money in the beginning, instead of in increments along the way. It always takes two to three times longer and costs two to three times more to build a company than originally thought.”
She expects that the company will get part of the next $4 million from the socially responsible investor pool that provided the first $6 million, but the company already has one new investor, who recently invested $1 million. “I expect that there will be other new mission-driven investors who believe in our leadership and the growth of green building,” she adds.

Copyright 2007, The JG Press, Inc.