As we move into the final few episodes of the Entrepreneur Series on the Be Epic Podcast, Matt sits down with Scott Holley, President of Eddyline Kayaks. In the episode they discuss how Scott came to Northwest Arkansas through serendipitous connections to grow Eddyline’s production capacity and obtain new investment in the company. They then dive deeper into Eddyline itself and discuss the various type of kayaks in the market and what sets Eddyline apart. They finish by discussing how Scott got interested in entrepreneurship in college as the first student director of the Pierre Lassonde Entrepreneurship Institute at the University of Utah and how that led him to the world of search funds and ultimately acquiring Eddyline Kayaks from the original founder.
Learn more about Eddyline Kayaks.
Scott Holley 0:00
I funded the search myself and then once I found the company then I went and found investors to help support the buyout, then that company ultimately turned out to be Eddyline kayaks.
Matt Waller 0:10
Excellence, professionalism, innovation and collegiality. These are the values of the Sam M. Walton College of Business explorers in education, business and the lives of people we meet every day, I'm Matt Waller, Dean of the Walton College and welcome to the Be Epic podcast. I have with me today. Scott Holley, who's president at Eddyline Kayaks, thank you so much for joining me today. Appreciate it
Scott Holley 0:36
Oh, thank you. It's a pleasure to be with you today. I appreciate the invitation.
Matt Waller 0:40
Scott, I'm really impressed with your career and your accomplishments. If you wouldn't mind, I'd like to start more current. So I'd like to know how did you get involved with Northwest Arkansas?
Scott Holley 0:57
You know, it's it's really interesting, and I love telling the story, because it is pretty serendipitous in reviewing it, in hindsight, just seeing how so many different things lined up. As you mentioned, I'm the president of Eddyline Kayaks. I've been with that company since 2017. And we have been in growth mode pretty much since the the moment that I joined the company, in fact, preceding that. We were a 50 year old growth company, which is kind of a unique story. But we have a great product. And we had a growing recognition in the marketplace. But what we didn't have was capacity for production and importantly, capacity for distribution. Eddyline is headquartered in the other northwest, the Northwest United States, Northwest Washington. And as you can imagine, a great place to kayak but a difficult place to build and distribute from when you're talking about distribution across the United States. So as we grew, we recognized that the greatest opportunities that we had were in the Eastern US, the Upper Midwest, the New England states, the Mid Atlantic, the Southeast, and then, of course, the Heartland. So as we began to grow, we focused first on our production capacity. We doubled our production capacity in Northwest Arkansas, and then we made a move to expand our production capacity internationally by opening up a facility in Mexico. What we came to realize that was that until we had a distribution center, somewhere within the Eastern US that we were always going to be at a competitive disadvantage to our competitors who many of whom actually manufacture in the southeast United States. So in talking with our distribution partners, our logistics providers, they recommended a general area of the country to begin to look for warehousing space for for cross docking and distribution. And one of those areas that they mentioned was Northwest Arkansas. Over the period of a handful of days, a number of really serendipitous, serendipitous events happened. I called a friend who was a commercial real estate broker, who who mentioned to another friend who was a kayaker that we were looking for space. That person had just happened to have bought an Eddyline kayak. And so was already a fan of our our product and brand. That person was actually Gary Vernon, who runs the personal philanthropies for the Family Foundation, the Walton Family Foundation, and was actually looking to grow water trails and water access in the same way that they've done over the last decade in bikes. So literally, within hours of that conversation, he's calling me on my cell phone and inviting me to Northwest Arkansas. And about a week or two later, I'm biking with with Gary, I like to joke with him that he told me he was going to take me on an easy bike ride. And I've since learned that Gary benchmark's easy bike rides a little bit differently than maybe other people would. So we we had a great day out on the trails. And ultimately, that event led to conversations that culminated in Eddyline accepting a an investment in partnership with RZC the family office of Tom and Steuart Walton and then beginning in earnest to look for ways to grow our connection with and our presence in Northwest Arkansas. And that's been earlier this year. Obviously, there's there's a lot going on in the marketplace. There's a lot going on with our company and with supply chains, and we're taking a deliberate approach, but we're very excited about the possibilities and the ideas that are beginning to come together around what this might ultimately look like but Northwest Arkansas is just a tremendous place in and of itself, but just from, you know, shared geography, it makes a lot of sense as a location for us to have distribution and logistics capacity.
Matt Waller 5:14
Wow what a story, it is amazing. You know, so many guests I've had, I think we've published over 185 podcast today, but I'm always surprised how many serendipitous relationship stories there are. That really is, if and it's something, you know, you relationships, open up opportunities, but you've got to have something ready to leverage against that.
Scott Holley 5:41
Matt Waller 5:43
You know, and but your and we're gonna get to your background in a minute. You have such a broad background in consulting and finance. First, I'd like to also talk about Eddyline Kayaks. Can you tell, I love water sports, kayaking, canoeing, and I've had different kinds of kayaks and canoes over the years but love to hear what makes Eddyline Kayaks unique and and special.
Scott Holley 6:15
Yeah, absolutely. Well, that's my favorite question to answer. Eddyline has been around since 1971. It was founded by Tom Derrer, who was an avid sea kayaker, and a self described hippie who, for whom business was a four letter word. He started making kayaks with the legendary Werner Fear. And at the time, the only way to do that was to buy a mold out of Europe have it shipped over and then to defray the cost, you built one yourself, and then you built one for five or six friends. So that's what Tom did. And then after he built four or five, he had other people coming to him hearing that he had a mold and knew how to make fiberglass kayaks for for whitewater at the time. And so he continued to do that, and enjoyed it so much that he he accidentally fell into business. The company was privately held by the founders for 46 years. So in terms of what makes the company unique, there is no other company in the industry like that, where you have a 46 year legacy of heritage have a focus on design, service and quality. There's a lot of brands that have been around that long, but most of them have been become part of larger platforms, where there's been an increased focused on distribution and chasing after fads and frankly, chasing the market downstream towards lower quality lower price point votes. So Eddyline is unique in that we are a single brand, we continue to be privately held. And we are continued to focus on preserving the legacy and heritage of the founders, which is to make premium quality kayaks for the touring and recreational markets without ever sacrificing quality or service or our design and
Matt Waller 8:10
What does touring market mean?
Scott Holley 8:12
Yeah, so it's it's interesting. There's a lot of different ways you could break it up. But generally speaking, that would mean open water, ocean, large lakes, multi day expedition, longer kayaks, so think sea kayaks that you would take for three to four days on open water in the ocean or in the Great Lakes. That's that's generally what the touring market refers to.
Matt Waller 8:36
Okay. So recreational might be like going floating in a river?
Scott Holley 8:41
Yeah, I was out in Arkansas a couple months ago, and I took three of our 10 foot sky 10 boats, which are our entry level recreation boats. And I did a four hour float down Sugar Creek, literally right out of the downtown area. So that was, yeah, that would be an example of our recreational boats and a recreational use case.
Matt Waller 9:05
You should try Buffalo River next time you're here.
Scott Holley 9:10
I have had that on the calendar and and have missed out on a couple of great opportunities to do that. But absolutely, within the next 12 months that is very high on the list.
Matt Waller 9:23
It really is a beautiful river. Beautiful bluffs, waterfalls, just lots of wildlife very, very pretty. In fact, when we moved here in 94, that actually I guess it would have been May of 95 When I went for the first time and we had a good rain. And I was just shocked at the beauty of the Buffalo River. Here being in the Mid South. I just I didn't think there was any landscape like that here and really, really enjoyed it. So one question I had for you about kayaks maybe more specific technical. So most of I've done kayaking and canoeing. But with kayaking, I've seen people use kayaks on the lakes around here, I've never done that. It's always been floating the river. But I noticed one of them had a rudder on the back of it. And I looked at your website, and I saw that you maybe recommend something other than a rudder is that right?
Scott Holley 10:34
You know, that's interesting. If you if you go to a paddle sport industry conference and you want to start a brawl, you just go up to someone and and say that a rudder is good or a rudder is bad or a skeg is good. And
Matt Waller 10:48
is that right? I never knew that.
Scott Holley 10:50
Yeah, it's but but the fact of the matter is that the rudder on a boat, and again, so a rudder is helps for steering and control the vessel. And generally it can be fully deployed or not deployed and sits on top of the stern of the boat and then is deployed from the cockpit. Rudders absolutely have use cases there. And depending on the design of the boat and the type of water, it's absolutely a tool for a job. Eddyline has designed the majority of their boats around what's called a skeg system, which is a fixed rudder that can be deployed in degrees. So you can deploy it halfway or a quarter way or three quarters. And it's it's basically a fixed rudder that sits under in a compartment underneath the kayak. And then through an adjustment from the cockpit, the kayaker can can choose to have it fully deployed, not deployed, halfway deployed, etc. So Eddyline to has taken the position with the designs with a particular designs that we use, that a skeg tends to work best for those designs. So I want to be a little bit, you know, cautious in in having too much religion against rudders, because they're absolutely a tool that gets the job done. And we also produce boats that come with rudders as well.
Matt Waller 12:13
So with the skeg, I guess if you want to go straight, and you're in really calm water in a lake, you could put it down further, right?
Scott Holley 12:21
It helps with tracking Absolutely. And then it does avoid some of the drawbacks of a rudder, which is when when a rudder isn't deployed and sitting on top of the boat, it can catch wind. It's something that gets in the way of rear re entry. There's some reasons that you want to have clean ducks on on the bow and the stern in a kayak, but but there's some drawbacks to a skeg as well, the housing itself takes up some of the storage compartment and the rear bulkhead. So I don't want I want to make sure I'm giving giving since I had the question. And this will sit out there that I'm given a fair approach here.
Matt Waller 12:59
Well, I didn't know I would be picking on something that was controversial. But that that is very interesting. So Scott, I would like to know how you got interested in entrepreneurship. I know what happened early like, right when you're in college, I believe.
Scott Holley 13:17
Yeah, so I attended the University of Utah as an undergraduate. And I was fortunate enough to be in the business school during the time where they were developing an Entrepreneur Center, which is since become the Pierre Lassonde Entrepreneurship Institute at the University of Utah, which I understand has a great relationship with your college, and has served as as in some ways, a template for some of the programs that you've built as well. I was very fortunate to be the first student director of the Pierre Lassonde Center, and helped work to get that set up. And through that, I got to know a lot of entrepreneurs that were very helpful in putting together our business plan competition, and our technology commercialization program. And I was just incredibly impressed with what entrepreneurship could look like. Through that exposure. I did coming out of college embark on a rather traditional career path. At first, I'd say that I was an entrepreneur and an embryo without any great ideas, and also without necessarily much of an affinity towards or proclivity towards technology. So a lot of times when you look at and think about traditional entrepreneurship, especially coming out of out of college, you're thinking about tech based entrepreneurship. And that just wasn't something that appealed to me directly. That was a little bit of a challenge in that I had this desire to be an entrepreneur, but I didn't have a drive towards technology. So when I did embark on a path where I went into strategy consulting in investment banking. When I was working at my first job, which was a strategy firm out of Boston called Monitor Group, which is now Monitor Deloitte, I was one of the individuals that I worked with was a graduate of the Stanford Graduate School of Business, Stanford GSB. And I remember one day, I walked into his office and I saw a stapled photocopy book on the corner of his his desk, and it said, Search Fund Bible, do not copy do not distribute. And of course, you see something like that, and you're gonna say, okay, I want to know what that is.
Matt Waller 15:40
Now, I gotta tell you, so I happen to know what a search fund is, but most people don't know what a search fund is. So tell keep keep going with the story. But also make sure you explain what a search fund is.
Scott Holley 15:54
Yeah, so I asked my friend, what is this, can I look at it and he said, I'll let you take it to your desk and bring it back, because I'm not supposed to let anyone see it. Since then, of course, they've changed their tune. And you can go on to Stanford's website, and you can download, they call it the search fund primer. Now they've they've fixed that problematic language. And it's, it's, it's now available to anyone who wants to read about it.
Matt Waller 16:19
Well, and there's there's several search funds out there. Now.
Scott Holley 16:23
There are it's it's grown quite a bit in awareness and popularity as a career path. And as a path towards entrepreneurship. Basically, what a search fund is, is, you know, there is at any given time, about $10 trillion in value in the US that's held in small privately held companies that are owned by founders who are looking to retire. And they have two outstanding needs. One is to find a trusted successor. And another one is to find someone to buy out the value that they have stored in the private company. A lot of these companies are too small for private equity firms, although that's changing as private equity tends to go down market as that asset class gets bigger and bigger. However, there still are companies that are too small for that. But that are a great size for an individual who has some experience some training some talent, and is willing to step into that role as a trusted successor. So I became aware of this model, and I said, this is great. This is entrepreneurship without technology. It's also de risking, because obviously, entrepreneurship has a high failure rate, you've got market risk, you've got technology risk, you have team risk. And when you're talking about buying an established company, they have a track record by which you can see, is there a product market fit already there, is their team that's already executing. And so from that perspective, you can, if you do it right, and and buy well, you can lower your odds of failure, increase your odds of success. Now, obviously, like the massive home run of Google's, you know, a Facebook startup, or Snapchat or whatever is, is probably off the table if you go that direction. So you're kind of narrowing your band of outcomes when you go through entrepreneurship through acquisition. So I took that back to my desk, I read it front to cover and I was sold, that's what I was going to do. So when I went to business school, I was actually going down the path of doing a traditional search fund. In a traditional search fund, a prospective searcher, which is what they call the young entrepreneur raises a small amount of capital that's used to support him, he or she, during a process by which they look for a company to acquire, the people who invest in the search, then get the right of first, right of first refusal to invest in the company that they ultimately find. And the the capital that they invested in the search process rolls into equity in the new company as well. So that's a traditional search model. And that's what I was looking to do when I went into business school in 2007. Obviously, we know what happened in 2007, the great recession happened, equity values plummeted, deal making kind of froze, and so did investments in in pure traditional search funds. So I put that on hold, which I'm very glad that I did. And I went out and went back into to investment banking, did that for several years, had some success, built up some of my own capital and matured a little bit and felt a little bit more comfortable moving into that next phase. And so that's when I decided to launch a search fund but rather than going and raising outside capital, I, I funded the search myself and then once I found the company then I went and found investors to help support the buyout then that company ultimately turned out to be Eddyline Kayaks.
Matt Waller 20:00
What a great story. That is really good. So you've been running Eddyline for five years. And you recently took on a new partner. What does that mean for you in terms of where you see yourself going with this company next?
Scott Holley 20:17
One of the reasons that we were really excited to bring on RZC is because we had a very strong alignment of philosophies. What I didn't want to do was find a partner who was looking to immediately sell, because I believe that that changes how you run a business. We're looking to build and grow Eddyline well into the future. For me, one of the things that I absolutely love about Eddyline is that we're helping individuals create life defining memories with their friends and family on the water. And it truly does feel like a calling. We've got so much opportunity in front of us with what we're doing on the innovation side and production and distribution, that for me, it's an absolute absolute privilege to go to work every day with the people that I work with, and find ways to continue to change our industry to push our industry forward in a way that ultimately I think is going to benefit so many people's lives benefit the environment. And that's something that just gets me really excited and it's and it's a passion and I'm excited to be in a position where we now have the resources that we can continue to move forward with that vision.
Matt Waller 21:33
Well, Scott, congratulations on your amazing career and your tremendous success and now your your leadership at Eddyline Kayaks is very impressive. So thank you for for joining me today. I really appreciate it.
Scott Holley 21:50
Thank you. I appreciate the invitation. It's been great chatting with you.
Matt Waller 21:54
On behalf of the Sam M Walton College of Business, I want to thank everyone for spending time with us for another engaging conversation. You can subscribe by going to your favorite podcast service and searching. be epic. B E E P I C