My guests on this episode are Caroline Matthews and Connor McCarthy, a husband and wife team running an investment firm called Canyonlands Funds that acquires youth summer camps from Maine to Florida. Both are extremely passionate about the outdoors and met on a trip to Bhutan while getting their MBAs at Stanford. After working in private equity for a few years after graduating, they decided to become entrepreneurs in the outdoors and have acquired two summer camps to date.
Their strategy is one of the most unique and interesting I’ve maybe ever come across as I haven’t heard of anyone else investing in used summer camps. Their business model is pretty interesting, and naturally we spend a lot of time diving into how it works.
We also talk about challenges in running summer camps, how they decided to raise capital and find great investors, strategies for finding and building great teams, and why Levain’s Bakery in New York City makes the best cookies in the world.
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Alex Bridgeman: Yeah, your strategy was one of the most, I think, interesting that I’ve come across so far. It was interesting hearing about this whole strategy around acquiring youth camps. It’s definitely one of the most unique I’ve ever seen. I’d love to hear, of course, all about that but would love to start also just with both of your backgrounds and how you met and decided to go through starting Canyonlands. There’s a big story here I imagine.
Caroline Matthews: We met at Stanford when we were both getting our MBAs. Connor was a second year, and I was a first year, and he actually was leading a global study trip, which it was a requirement of Stanford MBA students to do at least one while they’re a student. And the trip was to Bhutan, and the focus was the business of happiness because the Bhutanese economy is measured not by GDP but by gross national happiness. And so, Connor somehow pitched that to Stanford and led a trip to Bhutan. And we met while on that trip. And I think because of the nature of the theme of the trip, everyone who was participating ended up having kind of probably more deeper conversations about what they envisioned their life to look like and what they wanted it to look like and how they were using their time in business school to craft that life. And pretty immediately, Connor and I started talking about our love of the great outdoors and also the experiences and relationships we built by being out in the great outdoors. And when we got back to campus, we started going on like jogs around Palo Alto together and would talk about the idea of building a business together and how exciting that would be. And at the same time, we started dating. So, partnership in many ways. And one business we kept coming back to was the summer camps industry and the summer camps business. I grew up going to camp in Santa Cruz. I went for 10 years. I met some of my closest friends there. One of them ended up being a bridesmaid in my wedding. And Connor grew up going to camp as well, from camper to counselor at camps in Alabama as well as in Northern California. And intellectually and sort of emotionally, we love the business, and then we’re like, okay, let’s actually start digging in, seeing what actually allows these businesses to survive and thrive. And that’s sort of where it all came together initially, I think.
Connor McCarthy: I think that’s where it all came together. I mean, we took a little bit of a different approach. I think most searchers start by looking at industries and businesses and taking a really analytical approach there and then figuring out, once they have a company under LOI, could I see myself here for a decade? And we did a little bit of the opposite and said what are the 10 or 15 industries we could see ourselves in for 10, 20, 30 years and let’s identify what those are and then let’s really dig in. And as Caroline mentioned, camps was always at the top of the list. And then once we started understanding the industry much better, we were like, oh my gosh, this is an incredible place for us to be.
Caroline Matthews: And there was a chapter between that. We both graduated from business school and both joined a private equity fund where we were running two of their businesses. And when Connor sold the business he was running, that’s when we realized, okay, let’s revisit this. Let’s actually take this big leap. We don’t have a mortgage. We don’t have kids. We have the flexibility of where we can live. This is the opportunity to take a big risk and build a business together in a space we really care about. I actually also think one of the fun criteria we had for an industry was what would be easily explainable to our grandparents, because I think we’d both been in roles in prior lives where we felt like after three or four conversations with parents and grandparents, it was sort of, huh, so what do you actually do? And we loved the idea of being able to be in an industry that was absolutely accessible, recognizable, and also loved by our families.
Alex Bridgeman: That’s a great one. I remember the different jobs that I’ve had or even just the podcast, like explaining it to parents, especially grandparents, it always takes a few years. And by that time, it’s usually changed to something else. So, one question I was thinking about during our previous chats but also just now is why not start building the business straight out of school? What made you decide to go to private equity for a little bit before doing so?
Connor McCarthy: I think both of us really wanted hands-on operating experience. I remember going through my job interviews, and the interviewer asking so what do you want? And I said I want P&L ownership, I want management responsibility, and I want decision-making authority because I want to have an opportunity to understand what those look and feel like. In our previous jobs, I started my career at McKinsey, then I went into Google and was doing a lot of strategy and ended up doing a lot of M&A stuff there unexpectedly. And both of those are huge organizations, and it’s much harder to understand what it looks like to run a small business if you haven’t run a small business. And so, it gave us an opportunity to do that, at least for me.
Caroline Matthews: And prior to business school, I was at Google for four years, the first two doing SMB sales and the second two on the policy and communications team. And I think sort of during the latter part of my time at Google, I was spending a lot of my time advising executives in Google about how to prepare for interviews, how to think about speeches. And I just kind of had a shift in my mind during that time, which was I no longer want to be the advisor, I want to be the one who’s actually making those decisions and really went to business school with that motivation. And then I think truthfully, I wanted to have the opportunity to test that out where I wasn’t focused on fundraising and then also finding a business but had the ability to jump right into an already operating business as a senior leader and really test out my skillset, test out what it really means to manage a big team. And then Connor’s sale process allowed us to revisit, okay, let’s actually go and do this on our own.
Alex Bridgeman: What were some key lessons or skills you walked away from that experience with, and how helpful do you think they were to Canyonlands? Like, do you think you could have done what you’ve done so far without that experience? Or do you think that experience was pretty crucial to what you’ve done today?
Caroline Matthews: I think both of us would say that those two experiences, we both were running two different businesses. Those experiences were invaluable in terms of building out Canyonlands. I think our ability to understand what it means to actually look for attractive investments, what actually means to gain the trust of an owner, gain the trust of a team that’s an existing team that you’re absorbing or you’re trying to work with for someone that you’re hiring solely from scratch. I also think, and Connor and I talk about this a lot and it’s definitely an area that we continue to refine and try to get better at, but it also required us to really prioritize and think about where are we going to actually drive value in this business? Where are we actually going to make progress? How do you differentiate between activity and progress? And I think those roles really forced that, which has made us a lot more deliberate and planful and I think effective and efficient in building out Canyonlands.
Connor McCarthy: Yeah, I would add to that that there are a huge number of relationships that you never consider managing until you’re sitting in the CEO seat. There are a huge number of systems and processes that you don’t realize exist until you’re the first person creating them. And when you join a small business, you inherit those relationships and you inherit those systems and processes. And by relationships, I mean everything from your board members and investors to the bank that you might work with, to your vendor for food services, and for systems and processes, it’s everything like variance reporting or what’s our data privacy protocol, things like that, that most of the time, these small businesses don’t have. And having been at a portfolio company of Alpine Investors, like we got to see a lot of these created, but we also got to see a lot of these implemented fully to best practice. And as a result, there are a lot of experiences that we have that we can lift and then bring to bear at Canyonlands.
Alex Bridgeman: And so, when you’re thinking about Canyonlands and the different models you could use to build a business around youth camps and youth businesses, what models did you consider, and how did you decide on the one you’re using?
Connor McCarthy: Yeah, so we had three really good models, actually, that we looked at. We looked at aggregators of software businesses, we looked at MSP, manage service provider consolidation strategies, and we looked at multi-site healthcare providers. And I actually helped out with Alpine Investors in the very early days with the multi-site healthcare consolidation in the Midwest. And so, it really gave us a sense of what does it look like to build a platform, and then what does it look like to tuck in other businesses that are geographically dispersed and maybe have some form of cap one way or another on how much they can scale in terms of the customers that they can bring in. And so, we ended up looking at a ton of those models and trying to understand what are the commonalities to the summer camp space, and what are the common threads between those different models. And what we really landed on was programming, summer camp programming, and the family relationships and the teams matter so much. They matter so, so much, and they have to stay local. They have to be really local, and they have to honor and respect the culture that has been created over the last, in some cases, over a century. Whereas the more administrative work, whether it’s insurance, legal, finance, and accounting, all of that stuff can be scaled. And that stuff’s the stuff that generally camp directors don’t enjoy doing as much as they do building great teams and finding wonderful camper families. And so, we decided that we were going to build a back-office platform, lift that entire burden off the teams that are on the ground and then entrust them and resource them to develop amazing programs and fill the camps with amazing families.
Alex Bridgeman: And then can you also share a little bit about the financial model that’s backing all of this, whether it’s the traditional search fund or holdco, or more of like a ten-year PE fund? Like what does this kind of look like? If you’re willing to share of course; you don’t have to, if you don’t want to.
Caroline Matthews: When we initially set out, we knew we were going to take a creative approach to the search fund model. So we raised money with the pursuit of going and finding not just one camp but multiple camps over the next several years. Once we acquired our first camp or once we had our first camp under LOI, we then re-engaged our investors and shared we wanted to raise additional money to be able to do those acquisitions every year. So, we raised a committed capital fund in tandem of acquiring our first business. In many ways, we are structured like a holdco. So, we are building out, as Connor said, this back office platform as well as actively acquiring great camps every year.
Connor McCarthy: And I think the way that we thought about how much money we needed to raise is we ultimately wanted to get to a finance flywheel where we could fund all future acquisitions through cashflow generated by our operating companies and debt. So, we had to model out at what point do we no longer need to draw down on equity? And on top of that, we had to layer in the administrative cost of the overhead back-office platform. And so that ultimately defined how much money we raised. We don’t hold all that cash in the bank, because if we did, then our clock would be ticking. And so instead we draw down capital as needed. And we’re generally pretty communicative with our investors. We’ve got an amazing, amazing group of investors who have just been so supportive and behind us all the way. And so, we’re pretty communicative with them and try to engage them in the process.
Caroline Matthews: And we have a terrific board. It’s three very seasoned, tenured investors. And in many ways, Connor and I were very deliberate about building out our board in terms of making sure we were enlisting the support and guidance of individuals who had seen a lot of reps, whereas Connor and I are sort of newer investors. I wouldn’t say we’re seasoned operators, but we are definitely operators at heart. We are constantly trying to become better investors. And so, we were very planful and thoughtful about having a board that was made up of great, really sharp investors who really push us to think more critically as we look at opportunities. We also often get the question asked does your investor base care about camps? And what’s remarkable is there’s absolute alignment there, and we were really deliberate about that. When we were fundraising, we wanted to make sure that we weren’t just doing a broad search and going to go find a business or one to five businesses and were industry agnostic. We were incredibly decisive and deliberate out the gate that we wanted to invest in this space and invest in camps, in the future felt youth development within camps. And what’s remarkable is most people can relate to the camps business because they either went to them, they either send their kids there, or they’re familiar in some capacity. And one of our board members, his mother was the head camp counselor for girls, his father was the head camp counselor for boys, and they met at camp and got married. And he is the product of that marriage and that meeting at camp. Another one of our investors, he’s on the board of a Y Camp in Washington state. So there’s a real mission alignment. And there’s a belief in the business and the business model and the fundamentals. And there’s a real belief in the actual service and experience we’re providing for camper families every year and a real emotional connection there, which is awesome and I think really important.
Alex Bridgeman: What are some ways that you’ve leaned on your board for guidance or help within certain issues? How do you go about kind of structuring that feedback?
Caroline Matthews: In early days, I think we were- we just over-communicated, we really engaged them on sort of all big decisions. As we’ve evolved over the last year, I think we’ve really dialed it into really be thoughtful about how are we iterating on what we think is a great business to invest in and what are we looking for, and how are we becoming more decisive in that process, so we can get to yes or no more quickly before we kick off a diligence process. And they’ve been great thought partners on that. And truthfully in many ways, asked very sort of, I think we’ve described as first principles questions around the strength of a business and in many ways have helped us see the forest through the trees when you get sort of too into the weeds and get too much information, and you’re trying to suss through what’s actually really important here. And the truth of that at the end of the day is we are partnering with high-performing, strong camps that have the potential to continue to grow into the future and have a team in place that is excited about the next iteration, the next phase of the camps industry. I mean, many of these businesses, as Connor mentioned, have been around for a hundred plus years, they’re often family owned, often it’s the third or fourth family generation that’s running the business, and they are excited as well as a little scared about what the future is going to hold in terms of what is going to be required for them as camp owners and operators, and loved the idea that Connor and I have the absolute respect and awe of their history and culture and also are so thoughtful and like so committed to making sure that camps are going to survive the next hundred years.
Connor McCarthy: Yeah, I think I want to build on two things she said, specifically areas that we’ve leaned on our board. I remember in July, two months after we acquired our first camp, we were looking at our second camp and had a camp under LOI and spoke to our investors about- or our board about our scorecard. And one of our board members was like, “This is really complicated, like what’s the one thing that matters? What is the actual- just give me the one thing that matters.” And that clarity of thought has been huge for us. We had another example where we were considering what is our sales marketing platform going to look like? How are we going to help enable and provide resources to our camp directors on the ground? And one of our board members said, “I’m so glad you’re thinking about that. You don’t know enough yet to try to answer that question. Give yourself a little bit more time, understand the business, do really in-depth market research. And then it’ll be time to start building a sales and marketing platform.” So, I think that they provided us a lot of clarity and thought. I think that they have helped reign us in when we need to be reigned in. And I also think that they’ve really unleashed us when we said we think this is an amazing investment opportunity, they said go for it, let’s go get it. On the part of summer camps themselves, Caroline talked about how they were- many of the summer camps that are out there are third and fourth generation businesses. We spoke a little earlier about how summer camps might be a nontraditional investment thesis, but in many ways, it hits a lot of the hallmarks of a traditional search business. And I think the biggest one is that these businesses have been around for over a hundred years. They’ve survived two pandemics, they’ve survived two world wars, they survived every recession since Teddy Roosevelt, and they are still growing. And for us, that was really attractive, not only for the security that it meant for us and de-risking our careers and our time, but also because they’re enduringly profitable and this is a product, this is a service, this is an opportunity that we can provide families that so many families need and they’re realizing more than ever after the pandemic that their kids are in major need of social and emotional development and especially during the summer season. And that’s what we do.
Alex Bridgeman: Yeah, certainly. I want to spend some time now on walking through exactly what the business model is for a summer camp. Obviously, there’s a real estate component, there’s a business component. I imagine it’s seasonal, but let’s walk through, like explain it like I’m five, what is the business model of a summer camp? And what are some nuances you’ve started to discover within that model as you acquired your first one?
Caroline Matthews: Traditionally, they are seasonal businesses where families enroll their campers generally in the fall or winter for the subsequent summer season. Most camps are between seven to nine weeks in terms of duration over the summer. And the length of stay at camp really depends. There’re some camps in the Northeast that are full summer or half summer, other camps in the Mid-Atlantic and Southeast that are more one week or two week sessions. When we partner with a camp, we’re partnering with them not only to acquire their operating entities, so the operating business, that actual camp business, but also the real estate. Not every camp owns the real estate, but today, we’ve partnered with camps that own their real estate. And generally, it’s a full-time team of three to ten people. It can vary depending on the size of the camp. And then there’s the heavy lift of every spring of onboarding a hundred plus seasonal employees for the summer. So, it definitely is a Herculean effort to go from that full-time team to the seasonal staff required. There’s a huge range in terms of the actual real estate of the business and also based off obviously it’s location and acreage, but also in terms of the actual infrastructure. So, some camps have tents and cabins and are more like safari tents. Others are much more built out and have two to three indoor basketball and turf soccer fields. So, there’s a huge range. We’re generally focused on camps that have seen- historically have grown year after year steadily. They have a really strong camper family base. So, from 6 to 16, those families want to come back and send their kids to those camps. And we’re also very thoughtful about where we can help support those camps as they grow into the future. So, is there an ability to open the camp up to more camper families every year, or to extend the season? So that’s the primary sort of camps business. Some camps have been really successful in terms of building out their off-season business, whether it’s through weddings or corporate retreats or school retreats, it really depends on their geography, but there’s an opportunity to really build out that business to sort of de-seasonalize the operating entity.
Connor McCarthy: Yeah, I think, I mean, I guess the way that I think about the core of the business is the parents care about nothing more than the development of their children. And we have great educational programs for nine months of the year in the United States and a lot of those are very academic focused and they do wonderful things. But most kids need some supplemental education when it comes to their social development and to their mental and emotional development, and that is the core of what we do. I think a lot of what we focus on right now when we look at summer camp is who has amazing programming? Are they able to actually measure outcomes of kids? Are they able to understand whether- are we able to promote an environment where kids communicate better, where they collaborate, where they try something new, maybe they take on a leadership position, and ideally, are we able to build in programming that’s progressive, so a six year old comes in and has a different experience than a seven year old where they stretch themselves just a little bit further. And I think what we find is that that’s what parents want. And so, we’re not looking for cookie cutter camps. We’re looking for camps that are really distinctive in the outcomes that they can provide to kids and actually make it on those commitments and those promises. Caroline mentioned some of the idiosyncrasies of the business model being highly seasonal. It’s open really for three months of the year. And we can think about shoulder season programming, but that’s never going to drive the same amount of value as those three months do. Or the idiosyncrasies of our labor force. We have five employees at each camp year-round, roughly, and then we have a hundred or so college kids for the summer. And as Caroline mentioned, we have to, in a period of two weeks, we have to onboard and set those college kids loose. And we have to make sure that they are not only maintaining the values of the camp that we have, but also the safety standards, which is our number one goal or number one priority. And then lastly that the other major idiosyncrasy is real estate. The type of real estate that we acquire is not- we’re not real estate investors. We’re not in Midtown Manhattan. It’s a totally different type of real estate, and its highest and best use is for recreation.
Alex Bridgeman: Yeah, onboarding a hundred college students in two weeks sounds terrifying. That sounds like it could get messy really quickly.
Caroline Matthews: I guess the truth is though, obviously every camp we partner with has incredibly high standards for the labor force they have in the summer. And it’s college students, but it’s also professional nurses and doctors and social workers to support all the needs of the campers onsite. Generally, the camps we found have been the most successful in terms of attracting and retaining and training great summer staff are those that were former campers. So, people have a real deep connection to their experience in that physical space and emotional space who want to come back as young adults, which is really terrific. When Connor and I think about the future of camp, we spend a lot of time thinking about what the workforce is going to look like and what it needs to look like moving forward. Part of that I think is driven by camper families and sort of the ask they have on how their kids are being supported while on site. But part of that also is our belief that there’s a way to really professionalize the industry and make it really have the respect it should have, which is in one given day, a camp director who leads an organization, he or she has to be an accountant, has to be a general contractor, has to be a social worker, has to be a lead salesperson. It’s an incredible job. It requires a lot of hats and a lot of incredible skillsets. And in many ways, I think that we, in the United States, have a lot of respect for those who work in the education system, but for some reason haven’t made that transition for those who work in the camps business when we think of many ways, it solves a lot of the same needs, and actually, it does so in an incredibly impactful way. So, we think a lot about it. How do we think about being a camp counselor or being an assistant director or director? How do we really demonstrate publicly but also internally that those are really big jobs that should be highly attractive and I think are just going to become bigger and more exciting and interesting work moving forward. So, a lot of this workforce development is something we think about a lot because it’s not just hiring the staff you need to get the job done. It’s hiring great staff members who want to stick around and who are going to help us create an incredible organization and, as a result, really redefine the industry.
Connor McCarthy: And that point we feel really strongly about, really, really strongly about, in part, because we spent nine weeks on the ground helping run summer camp – we were not running it, the director was there. And it is a hard, hard, hard, intensive job that they have. I don’t think we would have appreciated or understood or respected all of the different hats that they wear had we not been on the ground alongside them. They do really good work. Camp directors have a hard job, and they do really, really good work.
Alex Bridgeman: How do you look for a good camp director?
Caroline Matthews: That’s a great question. We think a lot about what is sort of the characteristics that make a great camp director. And it’s really a people leader. It is a people leader and a business operator. So especially if you think about the workforce that you’re- the seasonal workforce that you’re employing during the summer and then also the team you have to keep motivating during the year who- truthfully a lot of folks go into the camps business because they love camp. They’re less excited about sitting in an office in the winter and filling out registration forms and filling out insurance paperwork. And so, it’s somebody who’s really a real cheerleader and champion of the work that they’re doing and can really be captivating for their team. It’s someone who understands how to manage a P&L and manage a budget, and someone who understands how to- has a general sense of- I said general contractor earlier, but it’s someone who understands, has a vision for what you could make a property look like and can help support the build of that and oversee the teams that have to build that. And I think it’s, as Connor mentioned earlier, it’s someone who prioritizes the safety of the families that the camp is being entrusted to protect over the summer and also someone who really is service oriented. Like we often talk about the concept of like a servant leader, but also sort of a service-oriented individual who’s excited about talking about camp and the power of camp and also recognizes at the day what they’re really delivering is a life-changing experience. Andthat’s a big way to try to hold in how you actually deliver on it.
Connor McCarthy: Yeah. I think we could both confidently say that summer camp changed our lives, otherwise we wouldn’t be where we are today, and I don’t know how you quantify that, but that’s certainly something that we look for in camp directors – are they capable? Are they capable of building a team and programming that can actually change kids’ lives for the better and develop 21st century leaders?
Caroline Matthews: Yeah. And who thoughtful about that mission. It’s not just a camper leaves camp and thinks I had a great time, I had so much fun, I ate 20 s’mores in one night at campfire. It’s also someone who’s really focused on the outcomes. And so, what we did at one of our camps last year was every week ask campers did you make a friend this week? Did you try a new skillset? Did you feel more confident trying something new? Did you learn a new skill? Those types of questions help us really understand, okay, what are we actually delivering on? Are we stretching our campers in a comfortable and supportive way? And what are the real outcomes of their experience on site? And to see that someone said, oh, I made a new friend- I came here not having any friends, I made a new friend. Well, that’s a skill set that’s going to translate into them entering college or entering high school to them going off to college and moving into a dorm for the first time by themselves, to starting a new job. Same thing with did I develop a new skill or try something new? I think those skills, as Connor mentioned, translate throughout one’s life and to build that sort of familiarity and comfort with being a little bit uncomfortable at camp is great and I think really powerful. And if we think about sort of workforce development and what’s going to be required for the future of work, a big part of that is those leadership skills, those sort of interpersonal development and dynamic skills when often we kind of overlook those and think, okay, what are the hard skills someone’s walking away? We’re not necessarily trying to come up with- we are not trying to create necessarily the next future Olympian archer, but I think if we can find the next CEO or government leader, that would be a big win.
Alex Bridgeman: Yeah. How do you take some of this qualitative data you get from campers as they’re going through your programs and start to measure results? So, if there’s a kid who gets like eight new skills and makes ten friends and is really excited about different things and then goes on to do cool stuff, how do you kind of measure that success for that kid but also across your entire group of campers over the course of a summer or two?
Connor McCarthy: We’re a very data-driven organization. We strive to be. Last year we collected about 1500 surveys, each of which had probably 40 questions on them. And we were able to slice and dice it by what weeks were you around? Who was your counselor? Who was your co-counselor? How many weeks did you stay? Which cabin were you in? Which activities did you do? And that helps us understand- one insight that we had is that campers who come for two weeks naturally score much higher on all outcomes than campers who come for a single week, which helps us think through how do we change our programming and how do we change our marketing and how do we change how we communicate with families? Or another example, there were a couple staff members who had a perfect score throughout the summer, which is wild to think about the number of campers who were in their cabins, and every single one of them gave a perfect score on all 10 dimensions that they were to rank them. And so, we ask ourselves what do these different counselors have in common? What are the bright spots that these counselors have that we can now bring in to our recruiting and hiring process? We’re really early days, so we have limited data right now, and we’re not the only camps that collect data, but our goal is to be as data-driven as anyone in the industry and hopefully more so. I hope we’ll have a better answer for you in the future, but I think, for us right now, it is those things about how do we staff, how do we think about programming, and how do we also think about making sure that we have the right campers who are a good fit for our camp itself? Because every camp is different, and some might be a great match for one of our camps while their sibling might be a better match for another camp.
Caroline Matthews: I think the pandemic in many ways also reiterated the importance of trying to capture this information and also seeing really, truly measuring impact of camp on individuals. So, the ACA, which is the American Camping Association, is an organization that accredits camps. It has certain high standards of how you can get accredited, as well as puts out some great research about the camp industry. And we’re proud both our camps are ACA accredited. And they’ve done some great research as well as some other bigger camping groups have done some research about the impact of camp, I guess, post their first year of the pandemic, and its ability to support youth development. And I think we’re really excited about working more closely with those partners as we further evaluate how our camps are doing and what they could be doing. And I think in many ways, absent the pandemic, I think camps would have kind of continued to operate as is and would maybe be a little bit less deliberate or thoughtful about the impact that they play in individuals in camper families’ lives. Part of that is because most camps didn’t operate in the summer of 2020 but then returned in###-###-#### And so that sort of- that year gap allowed for some- surfaced some major challenges to the industry obviously, but also presented an opportunity to rethink, okay, what’s really the role we play in young families’ lives?
Alex Bridgeman: What have you found is the hardest piece of data or information to track over the course of your different programs?
Connor McCarthy: Believe it or not, I think it’s the lead source for the families. And it’s because we track this and I want to say well over 50% of families say it’s word of mouth, and word of mouth is the most powerful form of communication and marketing. It’s also the least measurable. And particularly when you’re talking about one parent speaking to another parent, maybe at the sports field or at the park, something like that, or at a birthday party. So, it’s really challenging for us to understand what message resonates best and what do families actually value the most. And so, one of the areas that we’re dedicating some resources to over the next nine months is really trying to put on a pen what do young parents value the very most and how do we make sure that we upgrade our programming to include those things?
Caroline Matthews: Or to ensure how we highlight them, how we reinvest in them.
Alex Bridgeman: For the word of mouth piece, could you have or do you have referral codes that folks can use? Have you found that that’s an effective way to track a little bit, or is there still some issues there in trying to gather that information?
Caroline Matthews: Referral codes and referrals are very helpful. It’s been helpful to kind of figure out who’s actually spreading the great word about our individual camps. I think in terms of what we’re trying to better suss out is what language are they using? Are they saying, oh, my kid had a great time at camp? It was only a two hour drive from our house, which is fantastic as a parent, an easy drop-off and pickup plan. And they came back with all their socks, like they didn’t lose any stuff at camp. Like, I don’t know if that’s what’s compelling, or is it my camper came back and I felt like- My child came home and I felt like they were nicer to their sibling or they were maybe more engaged in the classroom. So those are like the specific words, we were figuring out who the mounts are, or we’re trying to figure out what the words are.
Alex Bridgeman: Is there a follow-up that you could have with those parents like a year after the camp or something like that, just to see how they are doing?
Caroline Matthews: I think there’s some opportunities to do even more sort of follow up after the camp experience. I also think that the immediate impact of camp is not always- I don’t think it’s a, okay, they leave camp on a Friday, and Saturday, they’re making their bed. I think it’s also sort of a multi-year transition. And in many ways, I don’t think until I reflected on it in my early thirties that I recognized that actually I went to school as a freshman in college much more confident in being away from home because I’d already been away from home before. Like, I don’t think as a freshman, I could’ve articulated that, but I’m now looking back and thinking, wow, that actually was great preparation for like setting my own alarm and like getting organized for the day and self-soothing when I felt a little bit homesick before the holidays. I think that’s what we’re having to figure out is how do you actually ask probing enough questions that help prompt those thoughts and reflections. And how do you also recognize that those are not going to be as immediate, obvious implications.
Alex Bridgeman: One thing you’ve mentioned a few times or just throughout our conversation is that these camps have reputations and have been around for many decades and perhaps even a hundred years. If a camp doesn’t have the set of values that you want or doesn’t have the programming you want, how difficult is it to buy a camp like that and then add in the programming and try to rebuild that reputation? Is it pretty flexible, or is that reputation over decades just set in stone and it’s really hard to change a camp that hasn’t been already doing those things?
Connor McCarthy: Well, I think the short answer is that we’ve decided not to pursue that approach, at least for our first couple of years. We’ve decided that culture, programming, team are really core elements of what we look for and are some of the most important parts of our scorecard. Traditionally, when there was a transition between owners in the summer camps industry, it happened off market. It doesn’t happen very often. And when it did, oftentimes it was more the style that you’ve described. Our approach is ideally to keep the team in place, is to keep the camp director in place, is to keep the culture and the programming, and as we mentioned, to lift off the administrative burden, maybe add some more marketing resources and add some additional ability to collect some data and analyze that data and inform programming and other aspects of the camps. But it’s hard is the short answer; it’s really hard to change a culture that’s over a hundred years old when there are alumni that send their kids and grandkids and great grandkids there. And the last thing that we want to do is disrupt something that’s working well, or maybe in some cases, take on the burden of something that’s not working so well but is so steeped in such a long culture.
Caroline Matthews: At the core of camps, it’s a such a people business, such a- it’s a service business. You’re providing an incredible service and experience to camper families. It’s highly people intensive in terms of operating the business. And so, I think when we think about where we have the capacity to really help support and grow an organization and usher into this next phase, the culture is such a key component of that and the willingness and excitement around what the future looks like. And it requires a lot of buy-in from both the camper family base as well as the full-time team and the seasonal team.
Alex Bridgeman: Yeah, speaking of growth, what are some levers and options you have for growing a camp? Does it include building new buildings, just expanding capacity, new programs? Like what does that kind of- what does your option set look like for growing a camp?
Connor McCarthy: Yeah, I think you look at the core summer camp season, and then you look at the shoulder season, which is outside of summer camp. Our focus really is entirely on the core summer camp season right now. And our primary metric is camper nights or camper weeks. So that’s how many campers there are times how many weeks each camper comes on average. And therefore, we can think about it in terms of increasing the number of campers per night or increasing the number of nights a camper could be onsite. I think what’s most important for us is that whatever growth decision we make does not impact culture detrimentally in any way. So, our second camp is on the smaller side, it’s longer cohorts. So, the last thing that we want to do is build new cabins and shove in a bunch of new campers because that’s going to be really detrimental to the camper experience. With this camp, however, there is an opportunity to expand the number of weeks. And so, we’ve thought about either adding another session that is shorter length or the same length as the current sessions, or we’ve thought about adding specialty programming. So, could we have a family camp or parent-child camp? Could we have some type of college prep week? Or could we have an equestrian focus camp for a week? These are all opportunities that we actually explore and vet with the owners of the camps before we would acquire them because we want to make sure that they are totally on board with any of the changes that we would potentially make to the camp and ideally that they’re there hand-in-hand with us leading some of those. With our first camp, it is one-week sessions, and there is much more capacity to grow. And the former owner and the current director are builders. Like they love building new cabins. They love new infrastructure. They want to build a great new, big ropes course. And so, for them, there’s a huge opportunity on the hundred available acres to add cabins in a way because it’s one week camp that it wouldn’t actually detrimentally impact culture or community that’s created. So, we have a whole spectrum of levers that we can pull, but it really, really depends on the current camp’s programming culture. And it also depends on the alignment with the seller of the camp.
Alex Bridgeman: How does pricing come into that as a growth option? Like what are some insights and lessons you’ve learned around properly pricing a camp trip?
Connor McCarthy: I think the truth is that, at the high end of the market, especially the demand curve for parents to invest in their children’s development is relatively inelastic. And I think what we’ve seen, we have a whole pricing map with plots and everything outlined for a bunch of peer and competitor camps of ours and camps that are in our hopeful pipeline. And I think what we found is that if you deliver an exceptional product, then parents are willing to pay for it. And one of the reasons that we’re so focused on camps, camp programming, camp culture, especially ones that measure the outcomes right now is because we want to make sure that they’re delivering exceptional products, at least early days. That way we can adjust pricing upward to reflect the quality of the programming that the campers get. At the same time, we want to acquire really great programming because at some point in the future, we probably will acquire camps that aren’t performing to the same standard, and we’ll be able to take the lessons that we’ve learned from the camps that we currently have in our family camps to upgrade their programming.
Alex Bridgeman: Yeah, hence all the data-driven piece to find out what works now so you can use it later. I also imagine at somewhere around maybe eventually you’ll have 10 camps or 15 camps, or what have you. Do you have any like long-term ideas or plans for passes? So a kid could go to a different camp every month, or there’s like some discount if they use all your different camps or go to more than three of them or something like that. I imagine like a punch card for like a chain of breweries or something like that, maybe that kind of model. Is there something like that that could be interesting or you’ve seen other folks do?
Caroline Matthews: I think we think less about like punch cards or subscriptions or passes, but more thinking about how do you make sure that each camper ends up at the camp that’s perfect for them? And so, we’re really excited about our camp directors becoming really great thought partners and feeling very highly motivated to refer campers to other camps within the Canyonlands camps family. If they recognize, hey, this camper actually really loves sailing, and my camp only has it offered one day a week or once a day, but there’s another camp within the Canyonlands camps portfolio that has basically 50% of their activities are aquatics and a lot of it’s on the water. So how do we really make sure that there’s real great cross-communication between our camps? I think we see that as being a great way for the directors and their teams to collaborate and work together and feel really like, to stay on the sailing component, like rising tides lift all boats. And so, one camp doing well within the Canyonlands camp family also makes others do well as well. I think where we also see some cross-collaboration is really on the hiring and staffing side. So for example, if you’re an ambitious young college graduate who eventually would love to be a camp director and the camp you grew up going to and maybe are working at as a counselor and doesn’t have any open roles that are full time, how do you then be able to maybe tap into the network of the Canyonland camps family and look at open roles within that organization, recognizing that maybe down the line you might return to the camp you initially went to and were a counselor at, but in the meantime, get to develop that skillset within this camp of families, family camps.
Connor McCarthy: One thing that I will say is that we don’t want to change the brands of any of the camps in the Canyonlands family. We are probably not going to brand them in any way as say Camp Hidden Meadows at Canyonlands camp because their kids aren’t going to Canyonlands. They’re going to Camp Hidden Meadows. And so that’s super important for families to realize. And we’ve talked a lot about programming and distinct programming and different programming and the right fit. We don’t want a cookie cutter. We don’t want a stamp that we’re just applying to all of our camps. And so, I actually think it could potentially be detrimental to the experience if we promoted other camps when a camper has already started to build community and already started to progress in certain skills at a camp that they’re comfortable and familiar with.
Alex Bridgeman: Can you share a little bit more about how you go about sourcing these camps? I imagine it’s a very specific business that’s probably pretty easy to pinpoint them all and reach out. So, I would love to hear about just sourcing these different companies, but also, what is your process like? And in what ways does it differ from more of a traditional searcher LOI to close process?
Caroline Matthews: In the early days of our search, Connor and I were so thoughtful that while we grew up going to camp and were camp counselors, we had taken basically a 10 year hiatus from the camps industry. And we’re very humble about the fact that we’d never owned or operated our own camp. And so, we spent the early months really reaching out to great thought leaders in this space. So, I know I mentioned the American Camping Association. We reached out to the president of the ACA, just trying to really learn more about not only just the industry, but the players within it and people who will also be great thought partners and folks who would eventually be able to make introductions for us to owners who might be doing some succession planning. And so, a lot of that, those early days, was really just having informative informal conversations with leaders within the space, those who own camps, but those who were part of the ACA. And then we made the bold decision to start doing cold outreach. I think for an industry where there’s very few transactions, most transactions are inter family since it’s really a sort of generationally family run business or organization and industry. And then we also really leaned on players in the space, really highly respected, whether it’s there’s a couple of insurance teams and firms that really support the camps industry, some real estate brokers who are very familiar where there’s high density of camps and really looked to them to be our sort of informal river guides and to make introductions for us. I think having that happen was very helpful in terms of just getting some initial trust.
Connor McCarthy: Yeah, I would say that this last phase is hopefully the like steady state phase going forward, where we have amazing partners. Our insurance partner, AMSkier insures so many summer camps, and they’ve been such a wonderful partner to us over the last year. We have an amazing bank partnership. There’s a bank called the Dime Bank which finances a lot of summer camps. And so, they actually understand the industry really well. They’ve been really helpful in shaping our perspective and understanding on financing summer camps. One of our investors is a former chair of the American Camp Association. So, he joined us right before we closed on our first summer camp. And so just their networks of people and the trust that we’ve built in them and also their clarity of our vision is really going to propel us forward in terms of our future sourcing.
Caroline Matthews: In terms of the actual process of embarking on this partnership, often we have sort of an initial conversation to really gather as to whether an owner’s really emotionally ready to sell their business. Where I think Connor mentioned this earlier, but we are at an inflection point really in the camps industry where a lot of third or fourth generation family members who’ve been within the camp space for a long time realizing maybe that the next generation is less excited about taking on the family business. And so, there’s an opportunity for us to have those conversations. And the truth is, Connor and I are a family business. And so, while we might not be the children or grandchildren of the initial owners or the initial owning family, I think in very many ways, we’ve been able to show that, hey, this is just another family taking on the business to usher it into the next phase of its life. So, once we have those initial conversations around whether the owner really is looking and excited about the concept of selling, we then dig really into if we weren’t having these conversations, what would they be doing with the camp? Would they be reinvesting in it? Would they be growing the camp? And I think that just helps us better align with what we hope to do with the camp and make sure there’s really kind of buy-in from the seller, even if they’re not going to be part of those- sort of that evolution, at least they have that- we have their support. We then, I guess, talk about valuation and move into the LOI phase.
Connor McCarthy: And I would say one of the early conversations I had with a searcher buddy of ours when we decided that we were going to acquire multiple businesses, was, gosh, how lucky are you because you’re developing a skillset and most searchers use that skillset once and never use it again. And we’ve developed, and are developing I would say, tightness around our process. We’ve got a lot of templates and structures in how we communicate to potential sellers to make sure that they’ve got a super clear idea of how long the process should last and how we stage out the process, what documents are needed from them and when, when they should expect to engage an attorney, when we will be engaging our attorney, how they should think about finding a tax advisor. And so, we really think about this as a partnership process with them because the first seller that we had was just amazing. He was an amazing partner to us. And the second has been equally an extraordinary partner to us. And we realized that because we’re going to be in the industry and acquiring multiple businesses over and over again, we need to be really good partners to make sure they’ve got a good experience. And we also have a lot of perspective and information that we’ve now gone through twice, we’re about to go through hopefully for a third time. For them, it’s the first time. And so we can help hold their hand through along the way, all the way to close. And for our most recent acquisition, which we’re not disclosing until the fall, we went down there, and we did it in person. We were signing all the documents at UPS together. Then we went to the Wells Fargo together and wired money, and we popped a bottle of champagne. And it’s really fun to build relationships because you really are- you’re coworkers for a period of four months or so, three months, four months. While you’re actually going through the deal process, they are your closest coworkers, and you might be on different sides of the table at parts of the time during negotiations, but for the most part, these are your business partners. And we’re lucky that for us, in both cases, they’re going to continue on in one form or fashion to be a business partner going forward.
Alex Bridgeman: And speaking of being a family business, being a married couple through all of this must make things really interesting in a couple of different dynamics. Can you talk about how your journey has been different being a married couple versus some other searchers or investors that you’ve gotten to know?
Caroline Matthews: We were joking around earlier this week and just kind of discussing how we just felt a little exhausted and then it kind of dawned on us, oh, in the last year, we have acquired two businesses, raised a fund, bought a house, and got married. And so, it’s remarkable to think about and a happy, positive reflection. And also, it was a lot last year. And I think we’re so thankful that we were able to do it alongside each other. Both of us started- I started my career at Google, Connor was there prior to business school. We worked one floor away from each other, but never met. We then met in business school and then both joined Alpine Investors. We were running two of their businesses and so have gotten some similar training, I think having had exposure to sort of excellence at Google, having gotten trained at Stanford, getting our MBAs and learning how to just sort of- kind of have shared communication and language and messaging. I think it really helped and it’s helped us throughout this process. And then similarly, while we did not run a business alongside each other at Alpine, we ran two different businesses, we had the same board, same board member. And so really knew how to kind of have this conversation. So indirectly in many ways, worked together, even if not necessarily side-by-side, which I think was great practice for starting Canyonlands camps together. We’re in the early days of this, but we’re constantly trying to think about how do we further functionalize our work and make sure that we really are able to kind of run the business forward together alongside each other, but also do so independently as well. And like everyone, it is always working on work-life balance. It’s never not a challenge. We joke around that like you wouldn’t send your coworker a text message at 10 o’clock at night before you go to sleep about a meeting the next day. But when we are standing next to each other in the kitchen, it’s a little bit easier to have those conversations. And so, we also thought about as we build out our team, how do we make sure that our team feels really part of the journey and part of the vision? Because obviously we’re constantly talking about it and want to make sure that they really feel like they have their input heard and incorporated.
Connor McCarthy: I think it’s amazing working with my wife. It’s got its highs. It’s got its lows. But I think in general, we’re building a pretty amazing foundation for a marriage. And I hope that future years are not as intense as the last year has been, but it’s been incredible what we’ve accomplished, and it’s something that I’m really proud of what we’ve accomplished together. It’s also just amazing to know that because we work together and because we work for ourselves, we have an extreme amount of flexibility over our time and over our location. And especially during the pandemic when I think a lot of people experienced that for the first time, we were able to build, I hope, a foundation for that that we can carry going forward, which is really nice. And related to that, there’s work stuff that has to get done. There’s also life stuff that has to get done. And the other day, Caroline was on a work call with our insurance company, and I was doing the dishes and it was like one in the afternoon. And it’s really nice to be able to like have a separation of responsibilities and understand that maybe she’s carrying more of the workload at work today, but I’m carrying more of the workload at home or vice versa because I think we just have probably a more comprehensive and holistic understanding of what’s going on in the other person’s life, which is really nice.
Caroline Matthews: To put it succinctly, we do a lot of check-ins.
Alex Bridgeman: Yeah, that sounds like a lot of check-ins. Absolutely, I love that. Moving into some closing questions. What college class would you teach if you could pick the subject and it could be anything?
Connor McCarthy: I think I would teach philosophy through the eyes of science fiction, really in the concept of how large the universe is and, therefore, how does that impact the way we make decisions? So, I just finished the fifth book of Isaac Asimov’s Foundation series. We had a Carl Sagan quote at our wedding actually. And my favorite books are probably The Three-Body Problem by Cixin Liu. And they’re all largely about individuals over the course of time and the life decisions that they make understanding their space and their place in the universe.
Caroline Matthews: I took a class in business school that I wish I’d taken as an undergrad. It was taught by Lori Arriaga at Stanford, and it was all about the concept of women in leadership and women in power. And one exercise you had to do was write a letter to yourself in 20 years about what you achieved in your career. And I still reread that letter, and I wish I’d written that as an undergrad, as well as gotten exposure to some of the speakers she brought in of strong, empathetic leaders in various different sort of industries. I think if I’d gotten that exposure as an undergrad, I think I would have been even more highly motivated to take different twists and turns in my own career.
Alex Bridgeman: Those are both great answers. What strongly held beliefs have you both changed your mind on?
Caroline Matthews: I originally thought that you could only make a terrific s’more with Hershey’s milk chocolate, and I’m now convinced that actually a dark chocolate Reese’s peanut butter cup is actually the best for making a s’more.
Connor McCarthy: That’s true. I think I introduced you to that too. I would say like early in my career, I used to think that I could do anything. And now that I’m further in my career, I realize there are a lot of things that I cannot do. There are a lot of people who are way better than me at almost everything. And so, I need to relinquish some of my hands-on attitude.
Caroline Matthews: And continue to surround ourselves with great team members.
Connor McCarthy: We’ve got an amazing team and we need to keep hiring great people like them.
Alex Bridgeman: These are also great answers. What’s the best business you both have ever seen? And it can’t be Google or any summer camp.
Connor McCarthy: It’s hard not to say Google, to be honest, especially having seen it from the inside.
Caroline Matthews: Okay, I think I have mine. And this is totally purely from a consumer related process. I think it’s Levain cookies.
Connor McCarthy: I was thinking the same.
Caroline Matthews: Levain cookies, which is a bakery. It’s a brand that started in New York and has recently developed a product that now can be sold in grocery stores. And I think just like their product, their branding and their distribution is pretty remarkable for what should seem like a really sort of niche boutique type of cookie, they’ve really figured out how to commercialize in a way that still maintains its allure, but also gets it more accessible.
Connor McCarthy: I’ll agree to that. I’m going to say Nintendo, and I’m going to say Nintendo for three reasons. First is because they’ve got the best content and they’ve got continuity of content, everything from Mario to Zelda has stayed continuous, and it’s amazing how they build on that content to really draw in generations of people who like video games. They’re also the mostinnovative. So, if you think about the consoles that they’ve created, particularly with the Switch, it’s modular and it’s constructed in a way that can be used in pretty much any format, which is wild. I won’t get into the details of it. And the last piece is that I think they are one of the most data-driven companies out there. And yet at the same time, they use that data to inform fun, which I absolutely love. So, I think Nintendo would be mine.
Alex Bridgeman: So, I’d never heard of the cookies one. I’m from Oregon and living in Omaha, never spent any substantial time in the East Coast, besides Pittsburgh, which that sounds like- I’ve heard some New Yorkers say Pittsburgh is technically the Midwest to them. But how would you describe the cookie business to someone who’s never been there before? Like, what is the cookie? What’s the recipe? How do you get them traditionally? Like, I know absolutely nothing about it.
Caroline Matthews: So, they have one location. They have numerous locations in New York, and now in various cities across the east coast. But they’re basically cookies that I think, what do you think? They’re like half a pound?
Connor McCarthy: there’s six ounces.
Caroline Matthews: There’s six ounces. So they’re like basically the entire size of your palm and very heavy. The ratio of like cookie to butter to flour to sugar is just remarkable. And you immediately feel amazing after consuming one and equally as awful after consuming one because they are so rich and so dense, but they’re incredible. They are our go-to thank you gift at an incredibly fast pace. And now you can buy them I think in places like Whole Foods, they have frozen versions of them that are equally as good.
Connor McCarthy: I would say like above all, they have the highest quality like cookie in the world, and we’ve eaten a lot of cookies in a lot of places, and this is the highest quality cookie. And one of the reasons for that is because they’re perfectly fudgy on the inside, but they’re perfectly crisp on the outside. And the outside layer has like an equal crispness. They don’t overdo the bottom. And it’s consistent every single time. You know when you’re getting a Levain cookie, you’re getting happiness.
Caroline Matthews: What we’re failing to mention is if you’re trying to build a business during a pandemic that is based on in-person activities, as well as get married and move houses, they will power you through that year. And that’s what powered Connor and I through 2021.
Connor McCarthy: The founders of Levain developed the recipe when they were Iron Man training. And every Levain cookie has roughly 800 calories in it.
Alex Bridgeman: 800 calories in a cookie is mind-blowing. That is amazing. Thank you both for coming on the podcast. This has been, I think, one of the most interesting and also fun episodes that I’ve done in the last year or so. So, thank you both for sharing a little bit. And especially as it sounds like there’s not a lot of competition, so I hope we don’t send any searchers your way. But thank you both for sharing. It’s been super fun.
Connor McCarthy: Thanks for having us, Alex.
Caroline Matthews: It’s been great. Thank you.