A tech startup is developing a new product to verify trustworthiness among traders of recyclable materials.
Scrap Connection plans to offer reports on companies in the scrap materials trading industry, using information gleaned from confidential reviews from former customers. Scrap Connection will assign companies an overall “trade score.”
“The problem in our industry really has to do with you don’t know who to trust,” company founder Chris Yerbey said. “There’s no clear way to evaluate the reputation of another company that you’ve never done business with before.”
The company is currently running an investment crowdfunding campaign.
‘I lost a lot of money to fraud’
Scrap Connection draws on the experiences of Yerbey, a scrap metal broker and trader. He got into the scrap materials import and export industry, coming from a background in recycling consulting and tech development.
When he moved into the business, Yerbey ran into an unexpected recurring problem.
“I lost a lot of money to fraud,” he recalled. “We did quite well, but we really lost a lot of money to about three or four different transactions, where people just got our trust and broke it one way or another.”
He discovered other scrap traders were running into similar hurdles.
“I have my story, but what we learned over the years working in the industry is that almost everybody – and I dare say everybody – has a story of losing money,” Yerbey said.
Drawing on his tech background, he founded Scrap Connection with the aim of solving the problems he’d experienced in the marketplace.
Trade reputation reports
Scrap Connection initially launched in 2012. At first, the Amsterdam-based company aimed to create a marketplace for companies to do business. But as it moved forward, Yerbey said it became clearer what was really needed was a way to verify potential trading clients.
So the company changed direction, making its goal to create a product that completes due diligence on companies and provides that information to potential customers via what it calls trade reputation reports.
In those reports, a checklist section notes whether a company’s tax registration, trade organization, ownership and other information can be verified. Yerbey described the meat of the report as the trade score and reputation of the company. Based on recent registered transactions, the document reports on payment processing, communication, claims processing, cancelled contracts and unresolved claims. A markets analysis section examines the company’s monthly trades versus the industry average per company. Also included is publicly available data on imports and exports.
‘Focus on the big picture’
Although Scrap Connection began by specifically targeting scrap metal, it has broadened its focus to include plastics and electronics, as well. With the trade reputation reports, Yerbey said the company may expand its range to include paper and other recycled materials.
Whether the trader handles post-consumer or post-industrial materials, Scrap Connection aims to “connect companies that collect and process scrap with buyers and brokers both regionally and internationally,” Yerbey said.
“What’s unique about us, I believe, is the focus on the big picture,” he said. “Ultimately, we want to create this very safe trading environment where trustworthy companies can do business with each other, where banks feel more comfortable loaning money to fund these types of transactions because they can verify the trustworthiness of the company.”