How Two Brothers Bootstrapped a $300m Tourism Vertical SaaS

Colin and Brent discuss Colin's breakdown of FareHarbor and Peter Attia's $150,000 longevity playbook.

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[00:00:00] Colin Keeley: All right. Hello and welcome back. This is Colin Keely here, and I'm Brent Sanders and we have two guys buying and building wonderful internet companies.

[00:00:10] Brent Sanders: Yeah. And this week it's funny, I, I was listening to a, a different podcast and you shared something with me that was kinda sharing the same subject about a pretty cool company that, I'm trying to think of the best way to preface this cuz it's kind of twofold.

One. The way this kind of came up was naturally in our weekly meeting and I'm just diving right into it, but it was naturally in our weekly meeting kind of talking about, we're really struggling with we're looking at churn. And that's what we do every week. So, okay. What are the, the reasons And on, on Scout, what we're seeing is there's a pretty sizable number of companies that are just getting started and they, the price point that we're at, it's like a little too much for them.

It's, it's hard for them to stomach. I know it sounds crazy, but 39 bucks a month when you know you're only walking dogs maybe a couple times a week. Let's say your total volume's 150 bucks a week, and 39 bucks is a big chunk of that. And you're like, eh, I could probably do this. I don't need software, really.

And so to preface this, we started talking about, okay, well, well, maybe we can come up with a free plus transactional model where it's. We add transactional fees or it's free up to a number of walks. And so we started talking about this, and then both of us had, or were kind of familiar with or had heard about this company called Fair Harbor, which has been talked about on a bunch of podcasts recently.

And you kind of did a deep dive. What, I guess what precipitated this and, and what made you, you look into it?

[00:01:35] Colin Keeley: Yeah, I mean, same as you. , I founded on Invest Like the Best initially a recent podcast episode. And he was just given examples of really good vertical software companies and now I'm looked intriguing.

So I look back through in my general process for writing these as like Googling and trying to find old articles that were written when the company was more operational. And then good podcast episodes. And so sometimes they get 'em transcribed, you can throw 'em through Otter and get like the nice text readout of it.

And that's how I got this story. But like usage based pricing. Yeah. And pricing experiments is probably worthy of its own episode on Scout. So I think we'll talk about that another time. But for Fair Harbor. Sure. So this is an awesome bootstrapped vertical software story. So in 2011, they created a booking software for like boat tours.

And , they bootstrapped it all the way and they sold for 250 million in two 18. So that's just, seven years. Nice. It's kinda wild. And it's just two brothers. So. Backstory is these two brothers, Lawrence and Zach Hester, they grew up in actually Minnesota.

One of them went to school in Hawaii and then Lawrence visited Zach in Hawaii and they were trying to reserve like a surfboard in a kayak and they just couldn't do it. And like it's, back then it was easy to book like flights and stuff online, but it was super hard to book any, like, tourism related stuff.

And so they figured out there's no way to accept online sales for these companies. They had like big players, but no one for like a little individual. And so they decided to build it. So they got their first customer just by pitching these, like little tourism businesses. They didn't have a product or anything at that time.

And then over the course of the next year, they got 25 Hawaii based customers. And this was everything from Paris sailing, snorkeling, horseback riding companies. And they met with every single prospect. So not even customer prospect in person even if it meant like hopping on a plane to go to another island or something like that.

And it worked and they took kind of a unique approach to it. They didn't try to do like we're doing with Scout which is maybe a mistake. We'll decide like charge a $30 software fee. To each of these operators, they actually charge nothing. They charge a 6% transaction fee to the customer, the end customer who is booking, a boat, sailing tour or something like that.

And this meant instead of getting, 39 99 from each operator, they were getting hundreds or thousands per month from each operator just in these like usage based transaction fees. And this worked great here because, Hawaii, it's all visitors for the most part. It's a tourism industry and they're only gonna book this boat tour once, so it's not like a recurring relationship and mm-hmm.

If they have to pay an extra 6%, it really doesn't change anything. So very effective business model. There were other VC backed competitors, a few that raised like 20 to $30 million, and some of 'em had transaction fees that they were crammed down to zero. Some of 'em had software fees, like is a whole different experiment, but it turns out this was by far the most profitable approach, kind of in the space.

And as they were kind of starting up, right, it wasn't like they were reaching out and saying, Hey, you should probably have a website. This internet thing is probably gonna get bigger and bigger. They would go to them and actually build their website and say, Hey, we got it all set up for you.

This is how you take orders. Congrats. Here's your brand new website. And they're super aggressive with that. So they would hire these young salespeople right outta college and they would pay 'em, nothing effectively as a base salary. And, but they would pay him 50% of the first year bookings that, were actually very lucrative.

So there's stories of like, one guy would just sleep in a van and he would drive around Hawaii and book every single operator in that geography and not come home like until it was done. One kind of cool thing that happened, cool for them, not cool for the, the other company is one of the VC back competitors.

All of a sudden sent an email out to all their customers that they were going outta business within like seven days. And this was over the 4th of July weekend, which is the biggest weekend in like the tourism industry. And so 90% of Fair Harbor's employees stayed voluntarily. Over the weekend.

They brought all these air mattresses and I'm posting it to Twitter, but there's like air mattresses all over their office. It's kind of a cool photo. But what they realized is like they had to do. Demos reach one. So they stand up at 2:00 AM slamming Red Bulls and all that stuff. But they just didn't have enough time.

So they actually reached out to the failing company and said, Hey, just keep the lights on for seven days. Like, we're not trying to buy you. Another person tried. It was really difficult. Just, we'll pay, you'll pay your employees stay alive for seven days. And so they did. They gave 'em a hundred thousand like no strings attached, and it kept 'em alive for another seven days.

And this ended up, they got 340 of Z's 549 customers. And that was 90% of all the transaction volume. And just as far as how it went, like they ended up selling the for 250 million, all cash. The brothers never raised any money, so they gotta keep basically all of it pretty awesome outcome for a Boots shopper

[00:06:22] Brent Sanders: love it.

[00:06:23] Colin Keeley: So yeah, that's that kind of the story. What do you wanna take from it?

[00:06:27] Brent Sanders: . I guess my main takeaway, the bootstrapping part is great because of the outcome, but the part that I really like is it just, stay alive. It's another story in my mind. I mean, obviously there's a bunch of other interesting parts of this. The pricing is a big one, and like you said, we can talk about that.

As it relates to Scout and as it relates to our customers across portfolio. But I think the thing that's really cool is, is, a competitor, being in the position to pounce on that and keeping their lights on and realizing like, wow, if we can just easily transition or not even easily, if we can transition those customers that were, I think you, you mentioned there was 340 of 'em or something like that.

It's 90% of their volume, like, Just a matter of staying alive, the cockroach game. And I think there's there's always something to be said for that, especially in the early stage world.

[00:07:14] Colin Keeley: What's kind of cool about these vertical software companies, and I read this, I didn't include it in a little writeup, is you could basically identify every one of your potential customers.

Like they had a huge database of like, these are the tourism operators. You could scrape it from Google Maps or whatever, and they knew who belonged to competitors. So as soon as this news came out, they could reach out to like the 500 customers that they knew were kind of up for grabs. And that's probably something to think about is like with these vertical market software companies, just build that database.

It's like, of all these dog walking companies, 50% are with these competitors. And we should, keep tabs with them, stay friendly with 'em. If ever anything comes up, like that's our opportunity to pounce. It's basically how, constellation buy software companies, they have this, database of 50,000. I think all our acquisitions that we did were in their database. So they're on top of, all of 'em basically.

[00:08:07] Brent Sanders: Yeah. That's, that's cool to see. And I think like having that intelligence of your competitors, I mean, that's, It's one thing if they go broke, but it's also like, just having a better sense of, hey, who are our, who are our, our main competitors? And, and then like, who are, I should say our prospects, like who are these prospects?

Who are they on currently? Cuz most of the prospects we have are not, not using software. They're usually using someone else right now and they're some degree of happiness around it that like, hey, there's a 5% chance maybe that we can, can peel one of these out. Every year and, continue to year after year, win that that business because it's like, there's, these are verticals, right?

The, there's, they're not endless, the tam's not huge. I mean, it's growing. That's part of why we like it, but it's still, it's it should be quantifiable and should be able to know, like, okay, for, and there's a, there's so many small operators that this might be too hard, but. There should be a way to inventory, right?

Like who are the, the players, what platforms they're on, and if we can get in front of them on a regular basis and say, Hey, consider, consider this, consider switching, consider changing. We'll make it easy for you. We'll build the features you want. Like, I think that's a great opportunity to, like they did would, I would sure would.

Like, Hey, we're gonna come to you with something that's complete the website. The full offering, we're just gonna make more money for you. That's all. It's like, it's a win-win. It's so easy to, to make that case if it's like, oh, you're gonna have to do this and you're gonna have to do that, and you're gonna have to change how you work.

It's like, no, we'll, we'll come to you and just, just bring you money.

[00:09:41] Colin Keeley: Yeah. This is something another takeaway that we have to use for Scout is just like, make everything easy. So we could throw bodies at it if it means like, Hey, your pricing structure is this, these are the services you offer. Like, we'll just set up your whole account.

And then we'll set up a meeting and we'll walk you through how it works. And I think we throw too many people at it kind of cold. And other people have like an implementation fee or something. I mean, ours isn't like a crazy complicated thing. I think we could just customize it, over like five minutes or something and just have it ready to go for everyone.

Just increase that conversion rate. Yeah, I mean, the other thing to think about in this like vertical software space is like, some of them are growing, some of them aren't in just realistically only, some small percentage are kind of up for grabs every month or every year. And so just kind of being ready and being like present when that opportunity arises.

Because I like people aren't switching software every year. It's pretty deeply ingrained, which is awesome for churn, but it's also like the opportunity to grow super fast is not quite there as much.

Yeah. Yeah.

[00:10:39] Brent Sanders: Well, cool. I think it's like some good, good learnings definitely is inspirational, to see obviously a success, but then also yeah, I think there's a lot of learnings to, to be taken away. One, the main one, I mean, we've already talked about a couple. The main one is like, don't be afraid to get gritty and throw bodies at it.

I think there is an element of that, that, that makes a lot of sense.

[00:11:01] Colin Keeley: Yeah, it's kinda interesting. They actually required a meeting for every single new customer or even new prospect. I would think this should be somewhat self service. It's not that different than like Shopify or something. But that's why it was so hard for them to just onboard all these people in a short period of time.

It's because you had to, book an hour for each one. Yeah. Well, do you wanna talk about longevity?


[00:11:23] Brent Sanders: So you've been becoming viral on, on longevity. Is that what I'm hearing?

[00:11:28] Colin Keeley: Yeah, it's kind of random. And they'd say, everyone's like, you got niche down on Twitter. You gotta be like, you're the writing guy, or you're like the self storage guy. I was reading these books and I was like, I'm just gonna throw a book summary up there.

And it's completely unrelated to software and turns out super well received. I don't know if it's like a huge overlap or it's just, Elon gave us a new algorithm that. It likes this kind of stuff. So what, what

[00:11:50] Brent Sanders: has it been on? Like gimme the, the high level, just a book that you're reading and here's like the summary from it and, but it's, it's on aging or health like, or just the cross section of those

[00:12:01] Colin Keeley: two.

So Outlive is the name of the book by Peter Tia, who's kind of the number one longevity doctor. And so it's a mix of like lifespan is just how long you live and then health span is like how long you're healthy enough to kind of do the things you like to do. And so the idea is you wanna maximize both.

Yeah. And you wanna be a hundred years old and skiing, and then the next day you basically drop dead and, fall off a cliff effectively. And that's what you're kind of building towards. And so, Atia is a famous kind of guy in this space. He charges $150,000 a year to be his patient. And you can't even get in cuz there's like a huge wait list.

And he only accepts so many people. Mm-hmm. But he wrote this book about everything he does with his patients. You'll highly recommend it. Kind of goes through everything. I mean, the takeaway is nothing completely mind blowing. It's like exercise is basically our best prevention and our best medicine for everything.

You wanna sleep well, you want to eat very cleanly. He likes the Mediterranean diet for the most part. And then like all the things that could potentially kill you are pretty well-defined outside of like avoiding car accidents and stuff. It's cardiovascular disease, cancer, Alzheimer's, and neurodegenerative disease, or type two diabetes or metabolic dysfunction.

And so you wanna identify those and you wanna start preventing 'em now. It basically, he views those as like icebergs in the distance, and it's way easier to navigate around the icebergs, when you're 35, 40 than it is to when you're like 70 and you have, a number of these things kind of on the horizon

[00:13:28] Brent Sanders: before the check engine light comes on.

[00:13:30] Colin Keeley: Yeah. So any any takeaways? Did you read that one? I didn't read that one. I

[00:13:34] Brent Sanders: mean, I, I didn't read the, the specific one that went viral per se, but I did I, I've been following this space a fair amount and obviously like with our own lives, like we all kind of make choices and I'm also like observing my dad. I gotta talk about my dad for a second.

We're talking about longevity. So he is 83. Still skis still. Does a lot, a lot of things his, he doesn't run anymore, but that was like his thing. He was a big runner. He went to Vietnam in the army in the, sixties and was a smoker through from grade school, I think like fifth grade. He started smoking and then we went to Vietnam, went to bootcamp and couldn't cut it, and he eventually like, got through it, but he started running and ever since then he stopped smoking.

And ran, miles and miles a day. I mean, I think he did three to five miles every single day, if not more. Ran marathons and, he's never been, like super healthy. Like he eats whatever he wants, but he always exercises. Both my parents have been very strong on that, and that's been an interesting thing to see as he's aged.

He's like aged really. Well now he still drinks from time to time. He's still. He will eat like a whole medium Lum Maltis pizza and Chicagoans know that's, that is no small feat for one, one sitting. Like he will overeat, he'll kind of do these things, but always, actually every single day there's physical activity.

So the thing that I think about when you talk about longevity is like One Genes genetics. You kind of get a set of cards, but then number two, it's just like consistent exercise. And I'm not gonna split hairs with cardio and whatever else diet like he. He's eaten well, but like, we'll, we'll splurge on some, stuff that probably shouldn't, shouldn't be consumed by somebody who's 83.

But, and the funny thing is now he is like, this is my lifestyle. It's not gonna change. And the chips fall where they may kind of thing. It's like he's taken great care of himself and is mobile is, Probably gonna run into one of these things in the next 10 years. Who knows? And, and kind of one of the icebergs.

Those are the odds. That's kind of where his head's at. But it's funny, it's, it's to be with somebody who's exercised religiously, like literally religiously, it does seem to pay pretty strong dividends.

[00:15:56] Colin Keeley: Yeah. As far as what AIA says on exercise, he says it's by far the most potent longevity drug. And he actually gives like a protocol to use. Yeah, he says weight training three days a week. Zone two training three hours a week. And zone two is like the hardest level at which you could go, that you could still carry a normal conversation on.

So it's supposed to be like a really difficult thing to sustain for the whole day. And what it often looks like is like walking uphill or biking or like walking with a weight fest on is roughly the difficulty level of things. And then he says VO two max training, which is like kind of sprinting I think he'd said it for like 10 minutes one day a week or something along those lines.

Niche in his whole idea. Yeah. That's

[00:16:39] Brent Sanders: rough. I mean, but it, it's fun. I mean, the, it sounds, it sounds like a good way to take care

[00:16:44] Colin Keeley: of yourself and feel good. His whole idea is to prepare for that marginal decade. So in theory, we all have this like kind of last decade of life, and you wanna intentionally train for the activities that you care most about con continuing on at those like later years.

So like your dad, if you want to be skiing at 80, you gotta be kind of in the top 1% condition at 50 as far as like strength and balance and stamina, because you're gonna predictably decline at this certain rate every year. For the next few decades. And you have to maintain enough that you could still, credibly ski and not get horribly, horribly injured.

[00:17:18] Brent Sanders: Cool. I think let's wrap it up. I can't hear anything you're saying. Okay.

[00:17:24] Colin Keeley: I'm sorry. We seem to be having it's so

[00:17:26] Brent Sanders: glitchy that it's like I got none of that.

[00:17:29] Colin Keeley: Yeah, no worries. We seem to be having some technical difficulties. So we'll, we'll pick it back up next week. Take care everyone.


[00:17:39] Brent Sanders: Thanks for listening, Colin. Best of luck editing this.

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