Lawrence Hester is the co-founder and CEO of FareHarbor, a vertical SaaS company that provides booking and reservation software to tour and activity companies. He raised a small seed round early in the company’s journey and bootstrapped it to a successful exit, selling to Booking.com in 2018.
His journey to FareHarbor was circuitous, from trading stocks on Wall Street to baking his own line of gourmet croutons. He eventually realized that the key to entrepreneurial success is having a real passion for your idea: "It doesn’t matter how smart you are; if you don’t have the passion to want to live, breathe, and do it, then the minute you start to run into obstacles it’s going to fall by the wayside."
FareHarbor started out as a way to digitize bookings for activity companies in Hawaii. Bootstrapped companies are special in that they can do things their own way. A brief list of unusual things Fareharbor did to expand from Hawaii to all over the world includes:
- Almost everybody who was in a senior management position by the end was somebody hired directly out of college.
- Implementing “unscalable” sales strategies like making a custom website for each customer so all they had to do to get started was say “yes.”
- Taking a 6% transaction fee, versus the per-seat pricing of their peers.
- Doing full-cycle sales where one rep owns an account from start to finish—no SDRs or blanket cold call campaigns.
Their unique approach of providing turnkey software, onboarding, and pricing separated them from competitors and helped them land and grow accounts rapidly. Despite running on a shoestring budget for years, Lawrence attributes FareHarbor's success to a GSD culture and the hustle of their scrappy early team.
We hope you enjoy our conversation with Bootstrapped Legend (and Tidemark Fellow), Lawrence Hester.
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Dave: Lawrence, it’s great to catch up. I’m really excited for you to share the FareHarbor story. FareHarbor was always the white whale. I chased you guys hard, and made absolutely no progress, other than our friendship. [Laughter] Which I value.
I’m so excited to explore the story. Maybe, before we start, just give a bit of your personal background. How did you become an entrepreneur, and this enigmatic founder of a bootstrap company I chased for years?
Lawrence: My first job out of college was at Credit Suisse as an equity trader. That company now seems to be on its way out, but it started in 2006. It made a second coming after the internet bubble, when it was all fun all the time. When Levin Brothers happened, the trading desk no longer had proprietary risk on their books. We became, in a way, just execution monkeys: take an order from someone like Fidelity, type it into an algorithm, and then go back to reading ESPN.com.
After winning my Fantasy Football league for two years in a row, I thought, I don’t seem to be gaining any more skills. I’m going to be unhireable in the future. Also, it’s getting a little bit boring. I’m going to quit my job. So I quit my job and moved up to Boston, where I had some friends from college.
After a little while, I realized that gourmet-ifying food categories was becoming popular. There was a company called Food Should Taste Good, a potato chip company, that had just raised a hundred million dollars and was going nationwide through Starbucks. As that was happening, my mother called me up complaining about croutons. I bought every crouton within a 20-mile radius, tried them all, and realized, wow, croutons is my category. I could be the Crouton King. I could be the one to gourmet-ify croutons.
I learned how to bake, had four wonderful recipes, and sold into 40 stores—all at price points where they would sell a bag and I would lose a dollar. I was thinking, because I was a former finance guy, that the Excel Model says that at one point I’ll get to scale. The cost of goods sold will drop, and the price might stay the same, but I’ll start making money.
After making my way into 40 stores and having a conversation with Costco, I realized this is not for me. I didn’t want to bake anymore. I don’t really like baking enough to want to bake all night. I was hand-cutting my croutons at the time!
Lawrence: We’d bake all night, my ex-girlfriend and I. We’d bake all night, I’d package them in the morning, and then I’d go to sampling shows at Whole Foods and other places. It was fun, but it was my first time doing outbound sales in my entire life. I’d have to walk into a grocery store and sell my product. I think that was a big thing later when we started FareHarbor.
I ended up getting a job as a consultant at a fertility biotechnology company called OvaScience, which went public and is now no longer around. It was at that point that my brother called me up with the idea for FareHarbor. He went to school at the University of Hawaii and was working at the activity desk where they were renting out kayaks, snorkel gear, and other things to students. They were managing all their reservations within a physical book, writing down names. He said, “I think we can digitize this.”
I flew out to Hawaii and met some business owners that he had come to know through the sailing community. We thought, well, maybe instead of activities, we could be doing Airbnb for boats. That was the original thought process: Airbnb for boats. I’m sure you’ve seen at the marinas near you. The marinas are almost always full. The boats sit there all the time. They’re very rarely out. [Laughs]\
Dave: There are a couple of real companies that have been built on that idea.
Lawrence: Yeah. We really hammered on it. I don’t know how they’re doing it today, but we talked to some insurance people and were told that the insurance premiums to rent out your boat—especially in Hawaii, to go out into the wild Pacific Ocean—were going to be too expensive. We pivoted, mentally, and said, “Well, what if we work with established charter companies and just sell their seats?”
In January 2013, we brought on three guys, one of whom rode the bus with me in eighth grade, another engineer, and a designer whom he had previously worked with, and we hammered out the initial product for FareHarbor. We launched that month with a company called Sailingcat.com as their online reservation system.
At the time, I was actually still working for the fertility biotechnology company. From January until June 2013, I would get up at 2 o’clock in the morning and work for them from 2 until 6 a.m., outside in my brother’s car, because I didn’t want to wake up him or his roommates or his girlfriend. I’d sit in his car with the windows that wouldn’t roll up, so there would be cockroaches running around, and then I’d go back inside and start doing my FareHarbor work.
FareHarbor was a reservation and business management platform for tour and activities companies. We launched with Sailingcat.com in January and February 2013. That first client, I’ll never forget—they went live on a Friday, and we didn't hear from them until Monday. We thought for sure we’d been fired.
That next week we did hear from them, and they were firing us, because of the way they managed their reservations back then. Their reservationist would go sit at the beach, in a place where there wasn’t great data service—this is back in the 3G days—and they would have written down the number of seats left on the boat. They’d take the call, write down the credit card number on a piece of paper, and then input it into their system when they got back home.
They weren’t previously taking online reservations, but with us, suddenly people were booking online while the reservationist was at the beach. They would get home and find out that, wait, we just oversold the boat because people booked while we were at the beach! The company called us up to say it wasn’t working; their reservationist liked to work at the beach.
My brother and I instantly said, that’s just not going to work for us. We’ve got an idea: Why don’t we become your reservationists, and she can become your marketing person? You pay her to do whatever it is you want her to do, and we’ll take all the calls. Within a week of launching FareHarbor, my brother and I were actually our first client—managing it completely.
Dave: This is awesome. You start in international finance, then to croutons, then to fertility. And then into leisure travel or activities. Super linear path. [Laughs]
Lawrence: Makes a lot of sense, right? [Laughs]
The croutons is a great story, because something I always tell entrepreneurs I meet is that you should never do something you’re not absolutely passionate about. It doesn’t matter how smart you are; if you don’t have the passion to want to live, breathe, and do it, then the minute you start to run into obstacles, it’s going to fall by the wayside.
When I think about croutons, it all worked on paper. I knew if I worked hard enough, if I ran hard enough, I could get there. But the energy of wanting to push depleted over time, because I didn’t like baking that much. I love making my kids chocolate chip cookies and pancakes in the morning, but I don’t like baking full-time. I’m not going to be figuring out the coolest croissant recipe. I wasn’t following a passion—I was following a spreadsheet. You’ve seen a lot of spreadsheets, a lot of models. Every startup spreadsheet leads to a pot of gold at the end of the rainbow.
Lawrence: The truth is that it doesn’t matter how great of a model it is. If you don’t have the passion for it, it’s not going to work. That was croutons.
My father had been an investment banker; I didn’t want to be an investment banker. Trading seemed fun—this was before the Wall Street movie had come out. I of course had read Liar’s Poker. But in the end, from a long-term life-strategy standpoint, I wasn’t building a skill set. Pricing risk on the fly sounds like something ChatGPT can definitely take off your hands! [Laughs] AI is going to figure that one out. It wasn’t real deals. We were trading stocks and doing block trades. There was no skill set there.
OvaScience was the name of the fertility biotech company. It was just an opportunity to work in some sort of technology. I’d never worked in tech before, and this company actually raised quite a bit of venture financing. It was an opportunity to understand how venture capital works, from the company’s perspective. How does scaling a business, or hyperscaling, work? The company was five people when I started consulting for them, and nearly 200 when I left, just in a two-and-a-half-year period. It was an amazing learning experience to be there.
Dave: I love it. Sometimes, when I talk to younger investors, I’ll tell them ditch the spreadsheet. [Laughs] That is our heuristic, that’s our compass, but I think you made a lovely comment about following the passion. That’s what creates the energy that gets you over that hump. It’s also great hearing how you took something really powerful away from each experience.
After those experiences, you start exploring this idea around serving tour operators. When did you know that you had something? When did it feel real to you?
Lawrence: I think you probably have heard this before—it’s almost a cliché—but the first day that the website went down and we got a lot of angry calls, that’s when we knew we had had something. And that happened many times over the first few years!
In our first 18 months, we only sold FareHarbor in Hawaii. My brother and I lived in Oahu, and our engineering team lived in San Francisco. There were only five of us for that first year. We did as little research as you could possibly do on starting a company. The thought was that, back in 2013, nobody in the tour and activity industry had software. It was a totally greenfield market! That was true for the majority of the United States—except in Hawaii, where we were launching, there were in fact five reservation software companies, and almost every tour operator was using them. You just didn’t know it, because they weren’t really helping people take online reservations. The software was being used to digitally manage the reservations on the back end. They were inputting the phone orders to the software. When we found that out a few months in, that was the first moment of panic: the “Oh shit, should we have done this?” moment.
But a year and a half in, we were expanding to new markets in the Mainland of the United States, and that’s when I felt like maybe we were on to something. We brought on another sibling of mine and two other people who lived on the Mainland, and it was when we finally left the islands that we started to feel like this thing could be real.
We went from five to eight people in a year and a half. I know for a lot of startups, that’s really slow. That’s as slow of growth as you can have from a headcount standpoint, and sometimes not adding people makes you feel like it’s dying.
We didn’t have much money. We raised $3 million over our first four and a half years. On any given Monday, we were calling up Wells Fargo to ask them to reverse the fee they charged us, because they hadn’t yet cleared our incoming payment, but they’d taken out payroll so we’d over-drafted our account. We ran at zero. We never had savings. [Laughs]
Dave: Let’s spend some time there. This is the crucible, right? How do you attract those first people to jump on board with you, despite those payroll issues?
Lawrence: I’d say the FareHarbor story is fairly different. A lot of times you’re told to recruit senior-level talent. It’s all about recruiting, recruiting, recruiting. You’re looking for your next COO because they previously were the VP of sales or finance somewhere else. I guess today you’d consider FareHarbor a Major League baseball team, but we started as a farm league. Almost everybody who was in a senior management position by the end was somebody we had hired directly out of college. It was a little bit wild. We were forced, from a financial perspective, to do that, because we couldn’t afford to pay somebody with a fancy résumé to come in and run any of our teams. Of course, there are a lot of growing pains that come with that, because you’re constantly promoting people who’ve never managed anybody before. They’re very young, and this is their first job ever. This is a sample size of one.
Dave: So you started out, because of your financial constraints, with younger talent. But even people fresh out of college have some risk profile. They’ve got student loans. How did you get people on board?
Lawrence: You know, we were so passionate about what we were doing. Later we’ll talk about our business model, but we were so passionate, and really believed that we had the best product. Our product was helping our clients so much that I think people could feel that passion.
Still, we had a lot of great stories. One of our first sales hires, Gabriela Quarantiello, before she goes into our sales office in Boston, calls her mom to let her know where she is. She said, “I looked at this office and thought, there’s no way a tech company could be working out of this basement!” [Laughs] She was like, “I’m just going to meet one person. It just seems too sketchy to respond to this ad.” She was right, in a way. She walked down, and the guy who was running that office, Max Valverde, was serving two-day-old coffee. He’d just make a big pot, and if he didn’t drink it all, he would put it in the refrigerator and then reheat it. Also, the office had no running water. To use the bathroom, you had to actually go outside into another building.
I think these people saw the story of a scrappy group of people that were gonna go above and beyond, and could feel the passion. When we showed them our product, they would fall in love with it.
For the first two to three years, any time we recruited anybody, the recruiter would ask to have a video call with as many people from the other offices as possible so that these recruits would feel that this was actually a legitimate company. We had people in Honolulu, San Francisco, Denver, Colorado, and Massachusetts, but we might have only been 25 or 30 people. You’d tell these kids that you’ve recruited that we really only have 30 people, and then you’d have to ask the whole company through Slack, please jump on right now. They need to know! [Laughs]
Dave: I love it. Have a passionate customer value-prop product and just hustle. Your Boston office sounds like my first apartment in North Beach. It was pretty grimy. [Laughs]
So, you get this thing going, and to use the Vertical SaaS Knowledge Project language, there’s already a system of record. There’s already a control point. It sounds like what happened next was the “integrate and surround,” right? You’ll provide the demand, integrate these systems, and eventually replace them.
Lawrence: Exactly. To get off the ground in Hawaii was just different than elsewhere. There are a lot of concierge desks in Hawaii, and they would have to call to make reservations with the tour operators.
Going back to how my brother and I were the reservationists for our first account, North Shore Catamaran (sailingcat.com)—we worked really hard, but we needed to take a break every once in a while so we’d go in the ocean. We wouldn’t alternate going into the ocean. That would be too weird! You go in the ocean, I’ll sit on the call? No. We’d both go swimming or surfing together.
That would always be when the concierge desk would call. They wouldn’t call all day, and then they’d call in that five-minute period. So, being the reservationists, we would call them back and say, actually, I’ve got this product, FareHarbor. You wouldn’t have to deal with two dummies like us anymore. The availability is live; we can give you a login and you can make a reservation.
The way we onboarded new tour operators onto our platform was through these concierge desks, these affiliates’ power to push. I don’t know if you’ve been to Turtle Bay Resort on the North Shore of Oahu? That was the first user of the affiliate login. Roy, the concierge there, hated when we missed his calls. He’d say, “The guest is gone. They’re not going to go on the whale watch. I had to send them to Ko’olina or somewhere else.”
After we went to Turtle Bay and trained them, we asked, “What other companies do you have trouble connecting with?” They’d put us in touch, and then we’d go ask those tour operators, “Which concierges do you have a problem with connecting with?” Before we knew it, we had, in your terms, surrounded the tour operators with this network effect. The only way you could get bookings from these concierge desks was to be on FareHarbor. That’s what really got Hawaii going.
We used a similar model in the United States, the Mainland, but it wasn’t as concentrated. You couldn’t go to one hotel operator and then use them as a springboard as well, but it was the same concept.
Dave: You guys figured out something unique on the tour operator onboarding side as well, right? I recall that when we were talking a couple years ago, you could essentially create a website for them and turn on demand. Tell me more about that.
Lawrence: Yeah. My brother and I had no sales background, so everything we did was not scalable. I’m sure most salespeople would say it was just horrendously stupid. Before we’d go meet a tour operator, we had already spoken with all their concierges, so we knew we could provide live availability to these affiliates. We would take their current website and just re-create it in Weebly, which is a drag-and-drop editor—FareHarbor’s now using something much more sophisticated— and we’d put in a FareHarbor “Book Now” button. We’d have already built the FareHarbor dashboard completely, so when we went into the meeting, all they had to do was say “Yes.” That was the original thesis. It worked really well.
At scale, that became the one thing we did differently than all of our competitors: we did the onboarding for you. If you think about it from a system perspective, we didn’t need to build a product that was so easy to onboard, you could do it yourself. For most people that are in the tour operator business, it doesn’t make sense to spend the time to learn how to set up esoteric products because you’re only going to set that product up one time in your life—you’re only going to change pricing thereafter. You don’t want to do all that hard work at the beginning. We took that off their plates completely, and then we’d build them their website. We had this idea of providing a full, encompassing service, where the only thing you have to do, once users show up and figure out how to make a reservation, is manage the reservation. All the stuff that you needed to build to get live on the software, we did for you.
Dave: Yeah. Every time I think about that approach, it blows my mind. You show up with demand, the product already built, and they’ve just got to say yes.
The other leg of the stool was pricing. Talk about your pricing strategy, because that was super cool.
Lawrence: This is one thing that I think we got incredibly lucky doing. From day one, FareHarbor had the same price, forever. Maybe they’re trying to change it now, over a decade later, but from day one our pricing system was, we charge the end user a 6% booking fee. If you went to buy a $100 activity, your end price would be $106, and we collected the $6.
The reason we ended up doing that was, in 2013 Airbnb was really getting big; it was their first time getting popular, and we thought, let’s copy their booking fee model. It’ll be a 6% to 12% sliding scale fee based on price, and we’ll charge the tour operator a credit card fee of 3%.
As we were building the sliding scale, we also hadn’t yet done confirmation emails for people who booked online. My brother and I were actually copy/pasting and then emailing out confirmation emails using the Stripe logs. For example, we had this feature back then—I still want to kill my brother for this—he told tour operators that at 5 a.m., we will send you a PDF of your manifest for that day’s activities. For months we had to set an alarm at 5 a.m., and when they looked at the email logs, the original tour operators would see that sometimes it was 4:30 a.m., sometimes 5:15, sometimes 5, sometimes as late as 8 a.m.! He also had all these other automated emails he’d promised people, and we’d just forget to send them.
Anyway, the engineer said to us, “We could go do all this automation for you all, or we can build the sliding scale.” We said, “Go do the automation. We’ll circle back to the pricing.” In the end, we never circled back, because it worked.
We got really lucky. Part of the reason it helped us tremendously is because any time you see a sales team with a menu of offerings, the ability to push through a wall is just harder. You’re always going to go to the point of least resistance, which is usually the lowest possible price you can offer. We told our sales team that the 6 is the 6 is the 6. You do what you need to do to get it across the finish line. There aren’t any tricks; the price is the price.
In the end, I think it was tremendously helpful. Also, just from a revenue perspective, it allowed us to make significantly more per account than any of our competitors. That meant, going back to your point on onboarding, that when a $100/month software would be pitching a company that we make north of $250,000 a year on, what kind of onboarding were they going to do? Their payback period would be years. In comparison, we would send 10 people to a location, have them stay there for a month if they needed to, and still break even six months later. That was really a game changer.
Dave: I love it. I mean, you have to convince people that the 6% transaction fee isn’t going to decrease demand, but if you can do that, you now have provided the product, the installation, and the demand, and they don’t really have to pay for it.
Lawrence: Yeah. Nothing comes out of their bank account other than a credit card fee, which was the lowest in the market. We were able, for a long time, to subsidize it.
Dave: I love the fact that you’d built up this pricing model that changes the economics, compared to your competitors. Then, as you get density in the market, it becomes more and more obvious: everybody else is charging this fee, of course it’s not decreasing demand. So the snowball rolls downhill.
Lawrence: Exactly. This story always makes me laugh, but when people are looking up activities to do with their family, they usually don’t have 10 tabs up with all the different snorkel shops. They’re deciding between going snorkeling, going to the beach, going on a whale watch, or just sitting at the pool. We would onboard an account in a market, and then the next thing you knew, their competitor had a big banner at the top of their website that said “We don’t charge 6%.” The only person who knew what that meant was us, and maybe the client we onboarded. No consumer knew what that meant—they didn’t know what they were comparing! And so it never worked. [Laughs]
Dave: I think that’s genius. One quick thing I want to call out: making payments mandatory for your merchants. Why did you decide to make it mandatory?
Lawrence: The number one reason was from a support standpoint. I took many of these support calls myself at the beginning. You’d have a client that had their own credit card terminal, and then there was our credit card terminal. A customer would come in, they would already have paid online, and things would get confusing—they’d get re-charged on the client’s terminal, and then both the charges would be disputed. The person dealing with all of that support for both the end user and the tour operator was us. It was hellish to figure out what was going on and to make sure that, at the end of the day, only one charge got refunded, not both. It was too much work and too confusing. That was one piece of it.
The second piece was that, on the online reservation front, almost everybody back then was using their local bank as their credit card processor of choice. The bank would say, “I understand you’re using this new startup called Stripe, but we’re here for you. We’ve got a much better rate. Don’t use any of their credit card processing at all.” But the only way we could collect the 6% booking fee was if the charge went through Stripe.
We immediately figured out the rate that we can charge that undercuts everybody. We weren’t even thinking about our competitors, we were thinking about undercutting the local bank. From a sales perspective, and a P&L perspective, every dispute was $15 coming out of FareHarbor’s account back then. The amount of effort and support to go recoup those funds was worth probably a thousand dollars. So, just by offering a better rate and making sure everything went through our system, we saved money.
The initial thought process wasn’t about making money on payments. It was really, who are we selling to, and who are we selling against? And how do we not take a call at 4 o’clock in the morning saying I’ve been triple charged? [Laughs]
Dave: Every bootstrapped company that scales does something different. What you described in terms of value prop, product, and pricing—that’s a lot. The dramatic difference between you and your competitors’ LTV as a result is game-changing. But you guys also did sales in a totally different way. Talk about how you guys ran that sales team, how you comped it, and the culture. I also want to hear about the “Wheel of Pain” at some point.
Lawrence: Yeah. [Laughs] The rip master wheel.
The way we did sales was outbound, dial-for-dollar sales. Initially, like everybody does, we did email blasting. My father actually physically typed in our first 21,000 leads. He found out, along with my brother and my college roommate, that if the second line of an email said something that was real from the website, the person was much more likely to respond. My father had a custom field in our sales CRM called Second Line, where he would write things like… He was crazy. He’d say our founders’ grandfather went to the same university as your father. Or that out of all the alligators at your alligator farm, Prince Albert’s my favorite. That would entice people to call us.
Eventually we realized, though, that email marketing didn’t work. It worked just to be in front of people, but we needed to develop a relationship with people. Unlike a lot of traditional models, doing SDR and AE, we realized we wanted to do full-cycle sales. One person owns the relationship from start to finish, and their goal was just to get it to demo. We found there was a much higher likelihood of closure, of course, if you show a demo. It felt like it was a hundred percent.
Given that this is such a small market—there are only 30,000 tour operators in the United States—you can call all 30,000 tour operators multiple times a year with a team of a hundred people. You couldn’t burn leads; you couldn’t have one of those auto-dialers where first to pick up is the one you speak to, and you couldn’t do the pitch every time. We’d have the sales CRM, where we manage just touches, but a touch could be something as simple as texting, “Hey, just want to check in on you, want to see how you’re doing. If anything ever happens or you ever need any help, just give us a call.”
The reason that initial relationship-building sales culture started was twofold. 1) My brother and I started in Hawaii. The culture in Hawaii is that before you do sales, you talk story, get to know people. 2) My college roommate, who was doing sales with us, had come from Heartland Payment Systems, selling credit card processing machines in-person. The way he would do that was, he’d walk into the same bodega every day for a year and buy a coffee, until he felt like he could take the shot.
Now, I will say, in this market, no one else was doing outbound sales, so we were considered incredibly aggressive. We were getting comped to email marketing, and of course, someone calling you 365 straight days is going to be a hell of a lot more aggressive. But if something did actually happen to that client, they knew they could always call our sales team.
One of our competitors, Zerf, went under in 2016. Our entire sales team, almost our entire company, did not go enjoy the Fourth of July weekend that year. We stayed in the office. In fact, the sales team slept at the office for a week. They didn’t go home. Their significant others brought them clothes—though there was a shower there, fortunately. But [because of things like that], people knew that we were going to always be there for them, no matter what. We had this sales culture of relationship building, where you never take the shot unless you know you can take the shot. Most importantly, we’re here to have fun.
These people were comped really well. We paid 50% of our net revenue for the first year. That meant that, going back to that one-hundred-dollar example from earlier, not only would our whole onboarding team show up, but a salesperson would, for a big account, do anything and everything to get that account across the finish line. One of our top performers for a while, this guy Colton Cruz, lived in a van that he bought. He would just go sleep in people’s parking lots until they’d take the time to see his demo. It was really wild.
The wheel you were talking about was back in the good old days of our team, when we were maybe 25 salespeople. Max was running our Mainland sales team, and he came up with this idea called Rip Master. Every day we’d have a Rip Master game, kind of like Survivor. He’d set up certain targets, either closes, touches, demos given, whatever target it was for the day. You would get to wear a Necklace of Immunity if you hit the target. Those that didn’t hit the target, would have to spin this wheel that had penalties on it. There was one where you had to take a shot of vodka from a plastic bottle that was sitting in the sun, right in the windowsill. That one was a little bit painful, but I really liked it. We also had the Harry Potter tattoo. You’d have a permanent marker drawn on your forehead with the lightning bolt, and you had to have the lightning bolt when you arrived back in the office the next day. A lot of these people had to go grocery shopping, or do real-life things after work, and they’d have these permanent marker tattoos on their head.
Of course, there was this giant carrot we were dangling out in front. When you’re doing outbound sales, the number of times you’re told to go to hell, lose my number… It doesn’t matter what the industry is, there’s going to be a door slammed in your face. We recognized that, so the whole purpose of this game was to distract from the pain and make it fun. All the time knowing that if you do make it fun, and you do succeed, you’re going to get paid really, really well.
Dave: It’s amazing when a system kind of comes together: the product, the pricing strategy, the sales comp and culture. You did things differently with incredible results. How much of that was because you didn’t raise money? How do you reflect on your experience as a bootstrap founder? Would you have done it the same way with third-party money? How do you think about venture capitalists?
Lawrence: I think one thing not having money meant was that we were 100% flexible, in terms of doing anything and everything that we wanted. Going back to the credit card rate piece—we went to Key West, Florida, to pitch what was going to become our first big client, Fury Cat. They walked us through their credit card statement, and we thought, wow. This is much lower than we’d ever seen in our whole lives. Why don’t we match it? Or even better, let’s beat it. After we beat it, we got together and said, pretty soon people are going to find out that we’re offering custom credit card pricing. Let’s just give it to everybody right now.
Within three hours of the meeting, we’d emailed all of our existing clients and told them we changed the credit card rate. We were able to do that so quickly because, at the time, my mother was the accountant. It didn’t occur to us that we should go figure out what the bleed is going to look like before we did something so stupid.
On the VC point, we didn’t have a board. The board was the management team in a room just decision-making. We never had quarterly board meetings; everything was always about doing the best you can every single day.
Would I do it differently, would I raise money? I will say this: When we sold the company, my mother had a tax lien on her house because we literally tapped my parents out. We were all in. On several occasions, we were not going to make payroll, and had to call a friend to say, “Hey, we’re doing another FareHarbor round. Wire in 25K today. It’ll be great. We’ll get you documents sometime, and we can talk about valuation later. Just wire it in.” There was this constant stress. I think the reason it worked for the company was that for almost the entire lifetime of the company pre-sale, the only people who knew how close we were to death at any given point were my mother and me. No one else knew.
The rest of the company always thought things were hunky-dory. I’ll never forget the day I sat down Max, who was running our sales team, and said, “I don’t think we’re paying commission on Monday. You have the weekend to figure out a plan to pay commissions at a later date.” And he looked at me like, what do you mean? We have money, don’t we? That was the first time he’d been brought behind the veil.
I think that the reason we were able to function so well with so little was because only two people had the burden of stress of not being able to make payroll, or what the hell we were going to do. We had an incident where one of our clients had a ton of credit card fraud, which came out of our bank account, because we were the underwriters on the platform we used at Stripe. We needed that $100,000. We couldn’t afford to lose a hundred grand, because we had working capital issues. I think it functioned because we could do that.
Looking back, I don’t have a negative connotation with VC. I think part of the reason we didn’t take venture capital was we’d made it so long without it. Owning so much of the business ourselves, when it came to getting these offers to acquire the whole company versus raising money—knowing that my whole family’s finances were in this company, we were at a point where taking everything off the table made the most sense. We ran it so hard for so long, that to go another 10 years and have this additional stress of bringing on these investors, and having to hit a billion-dollar exit target for people to be happy [didn’t work for us]. And, the thought that, by the way, we need to raise more money even though the personal exit is going to be the same, didn’t make sense.
Now that it’s 2023 and we know Covid happened… Had we taken venture capital and gotten to Covid, I think it might have been the end for my mother and I.If she had still been the accountant then, it might have finally killed the two of us. [Laughs]
Dave: Certainly, I think the flip side of it is, if you didn’t sell, having a balance sheet might have really helped get you through that period. Having invested in travel and knowing a bunch of the community, it’s awesome seeing them come out in 2023 after just grinding through 2020.
Lawrence: Oh, absolutely. That’s what we would have done. Had we not gone the exit way, we would have probably been hanging out with you talking about a big check, because that was the point where we knew we could expand. The question was, what were the numbers going to get to? Now we know, but everything’s so convoluted with Covid and Covid recovery. That was the exit math in our head, and why venture capital didn’t make sense back then.
Dave: I think that makes a lot of sense, Lawrence. What a great story. I think we could talk story all day.
To wrap up, I’d love to get your reflection on what you think the FareHarbor legacy is for you. What are you most proud of? You obviously still care deeply about the business, but are no longer active. What is it to you?
Lawrence: I think, from a legacy perspective, the thing that still gets my brother and I excited is when we get an email for a WhatsApp from somebody who has just gone on an activity. It’s not a direct-to-consumer product, so the only way you can find it is booking direct with one of the accounts. It really is mind-blowing—I think the company has 20,000 active tour operators on the product globally. There are a lot of places you can go find those activities.
This is going to sound crazy, but before we did FareHarbor, I’d only been on one tour or activity almost my entire life. My family went to the beach, we didn’t go do activities. Now I’ve had the pleasure to do many. I live in Italy now, and we go do a lot of tours—and run into a lot of FareHarbor clients. I usually don’t say anything, but my wife has a habit of going, “Oh, I saw that you use FareHarbor. My husband started the company!” Then it is honestly really enjoyable to talk to people about how it changed their life. For a lot of people, probably any software would have changed their life, but it was our software that made their life so much easier.
Dave: I mean, you’re powering the businesses that fund people’s lives and careers. This notion of managing a business on the beach—every single small business ad speaks to that. These people work so hard on their business seven days a week, to actually be able to step away physically and manage it creates a massive impact.
Lawrence: The way I look at FareHarbor is, it’s the thing that makes my life easier when I want to go do things now. I found a local surf instructor around the corner from me, and I can book his activities online without having to call him in my broken Italian.
Obviously, it’s also the thing that gave so many people a gift. What’s really amazing, being on the exit side of a story like FareHarbor, is that friends of mine were our investors, and they were able to go buy homes with the money that they made on the investment. That, honestly, is the best part about the entire story, even more so than helping so many tour operators. I’ll say it a little more selfishly, but because these are my friends, I get to live it, see it, experience it.
Lawrence: It’s tough to beat that.
Dave: It’s a great way to end, too. Thanks, man. This is fantastic.
Lawrence: Awesome, I appreciate it.