Source: Sprout

Startup That Shuns Banks Soars 100% on Simplest of Green Ideas

  • Disney, Ikea, Bank of America among Danish firm's customers
  • Venture capitalists now lining up ahead of U.S. expansion

It’s about as far removed from a technology startup as you can get. The company sells $2 pencils that can be shoved into soil, after which a plant will sprout. Revenue is set to double this year to about $1.5 million. Customers now include Disney, Ikea and Bank of America, with new orders consistently exceeding budgets, by a lot.

Welcome to Sprout, a two-year-old Danish company determined to grow without bank funds.

Sprout pencils

Source: Sprout

“We can continue to double our revenue for quite a few years to come,” Michael Stausholm, Sprout’s 46-year-old chief executive officer, says from the company’s headquarters in Taastrup, a commuter town outside Copenhagen.

But in 2013, finding investors was hard. “We were still at the back end of the financial crisis, it would have been impossible for a startup to get funding," Stausholm recalls. So he arranged a long-term credit facility with suppliers and got clients to pay him up front.

“I prefer not to have to rely on banks. During the first year and a half I never heard from any banks,” he said. “Now, I get invitations all the time.” The experience made him feel that banks will “be there for you when you don’t need them,” he said.

Last week’s landmark climate-change deal in Paris promises to change the landscape for companies boasting a green profile. Several large investors have already signaled they want to step up their focus on environmentally friendly assets and as recently as this month, Norway’s sovereign wealth fund -- the world’s biggest -- said it wants to expand into renewable energy infrastructure assets.

"In the beginning I didn’t see any commercial aspect to this,” Stausholm says. “To me it was a great way of showing my clients what sustainability is all about.”

A former Maersk trainee who spent 15 years in Indonesia with suppliers that sold to Armani and Calvin Klein, Stausholm founded Sprout after acquiring the European distribution rights. In 2014, he bought the patent from its inventors, three engineers at the Massachusetts Institute of Technology.

Michael Stausholm

Source: Sprout

Stausholm says he would have been happy selling 5,000-10,000 pencils in the first three months. He ended up selling 70,000. "It snowballed from there."

Sprout was soon getting requests from European and American multinationals. And when Italian energy giant ENEL placed an order for 400,000 units, Stausholm started to sense his little startup had more potential than he first thought.

"We are now receiving inquiries for 2.5 million Sprout pencils," he said.

Sprout’s production is based in Minnesota, the Czech Republic and Poland. Disabled workers, paid at market prices, help with the packaging in Denmark. The CEO says corporate social responsibility is proving profitable.

Stausholm has surrounded himself with an executive team from some of the world’s best-known companies. His chief of commercial activities has worked at Nokia, L’Oreal and Christian Dior, while his chief financial officer was also finance head at Chr. Hansen, the Danish bioscience multinational. They both settled for much smaller salaries to work at Sprout because of the potential they see, the CEO said.

Sprout now gets almost weekly approaches from banks and venture capitalists interested in investing, according to Stausholm. He says he would only be interested in long-term investors that represent “a good fit.”

"Without funding we will double sales for many years to come, but with more funding we might be able to triple them or more," he says. There are “still 6.5 billion people out there who haven’t heard of Sprout pencils.”

Video Source: YouTube/Sprout World

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