Internet-based used-book seller receives $8.5 million investment

Thrift Recycling Management, one of the largest used-book distributors on the Internet, has received an $8.5 million venture-capital investment that could extend the company's reach and help keep millions of books out of landfills.

Based in Lakewood, TRM was started by CEO Phil McMullin while he was working at Bellevue-based Savers, which runs the chain of 220-plus thrift shops known locally as Value Village.

He noticed that every month the company was sending to landfills masses of books that wouldn't sell in the stores. "At the time, it was throwing away nearly a million books a month," he said.

McMullin originally worked with Savers to sell some of those books online, but when the company dropped the program, he left in 2004 to begin TRM.

Since then the company has added seven additional distribution centers around the U.S. and Canada and has sold more than 15 million books.

It now serves primarily as a wholesale distributor to online retailers, with more than 50 percent of its inventory heading toward Amazon.com.

Network of charities

TRM relies on a network of contracts with charities, and it obtains books through donation bins carrying those nonprofits' names.

"They have very powerful sourcing infrastructure with a lot of potential for growth," said Tim Krongard, a partner at Baltimore-based venture fund QuestMark, which got an undisclosed stake in TRM for its $8.5 million investment. "We believe they can go a lot further, and we're here to take the business to the next level."

The investment should help solidify TRM in the book-selling industry, he said.

"What TRM has now is a leadership position and a very scalable business model," Krongard said. "With the right capitalization, we believe they can build significantly."

QuestMark usually invests between $5 million and $15 million in growing technology and consumer businesses, and it has more than $750 million under management.

Bryan Jaffe, a senior vice president at Seattle-based investment bank Cascadia Capital, which advised TRM, said its use of technology sets TRM apart from other used-book resellers, allowing it to interface directly with Amazon to move inventory in large quantities.

"TRM is really about leveraging technology to effect a transaction in an optimal marketplace at an optimal price," Jaffe said. "What really made investors interested in TRM is how they use technology in an area that has traditionally used labor in a labor-intensive manner."

Books by the ton

The company's sorting technology scans each book's bar code and makes a split-second decision about its best use — to be sold through a certain marketplace like Amazon, pulped for recycling or donated — based on data on its sales history, edition, weight and recent consumer demand. McMullin said the system's speed and accuracy allows TRM to process about 30 million pounds of books per year.

In the past three years, the company has donated about 3.5 million books to nonprofit organizations, he said.

A full 75 percent of the books TRM receives are locally recycled for pulp — books with torn covers or mass-market editions that aren't in demand. Those are sold to paper mills and used in newsprint or recycled cardboard products. That amounted to more than 20 million pounds of material last year, McMullin said.

The other 25 percent are resold through online retailers. Last year TRM sold more than 4 million books, accounting for $27 million in revenue. McMullin is optimistic that, with the expansion money, TRM could sell nearly 10 million books annually within two years.

McMullin and Krongard said the investment will help TRM solidify its position in existing markets and slowly expand into new regions.

"The capital will allow us to grow [our] model and really perfect it and grow into a wider arena," McMullin said.

Nick Visser: 206-464-3263 or nvisser@seattletimes.com