American serial entrepreneur Merlin Kauffman started working life at age 11. Now, he is on-track to conquer the world by bringing a digital solution to an unlikely industry.
Soothe may only have been established in 2013, but already the business operates in 53 cities across the North America, the UK and now Australia.
Visiting Australia recently to launch the massage therapy platform in Sydney and Melbourne, Merlin took some time out to chat with My Business about his approach to launching a business into international markets, leveraging the sharing economy to boost growth, his experience raising nearly US$50 million in capital and why hiring the right people is only part of the team building journey.
“I used $10,000 of college loan money to start that, one domain at a time. I turned it into a seven-figure annual profit business.”
A true entrepreneurial spirit
The UK’s Richard Branson is often held up as the ultimate example of a successful entrepreneur. Having spent just 30 minutes with American Merlin Kauffman, it’s clear this wonderkid may soon be joining the same league.
Merlin was fascinated with technology as a child, so much so that he landed a job with AOL at the tender age of just 11.
“I said I was 18 on a job application and got hired remotely!” Merlin says with a chuckle.
“I was fascinated by the computer, by technology, by the internet, and I wanted to be involved in a more intimate way with that whole ecosystem.”
His lie was quickly discovered, and his employment in that role was terminated owing to child labour laws. Yet determined not to kill the youngster’s initiative and drive, AOL moved him into a volunteer-only position at a forum known as Youth Tech.
“I feel like there were parts of my childhood that I kind of didn’t pay as much attention to as many of my peers. But at the same time, it was really what I was passionate about and what I wanted for my life,” says Merlin.
From there, Merlin went on to co-found a wireless internet company at age 17, achieving phenomenal success for someone so young.
“I used $10,000 of college loan money to start that, one domain at a time. I turned it into a seven-figure annual profit business, passive profit business. It still exists today, and still performs well,” he says.
Finding profit in something you enjoy
Fast forward to 2013 and Merlin again found a gap in a market, this time within the massage sector.
“My mum is actually a spiritual healer, does hands-on healing, guided meditation, energy work and so I grew up with a bit of an eastern philosophy to health and wellness, and I was getting massages from a very young age.
“It’s my form of meditation, it’s where I go to [reflect] and balance myself and recharge. My mind is very active, and so for me, I don’t sleep a lot – so a forced nap or forced meditation is laying in a massage bed for an hour-and-a-half and just getting stimulation of my muscles but at the same time relaxing my mind.”
It was his reliance on massage and its benefits on physical and mental wellbeing that led him to establish Soothe – an online platform that connects pre-vetted and registered massage therapists with clients that may or may not be accustomed with massage.
And, in an example of a job that many people would kill for, each therapist’s skills are put to the test before they are enlisted to gain work through the platform.
“We have a very stringent screening process when it comes to [the] therapists [we work with]. We do a 30-minute demo message for each person who applies, and we turn down about 30 per cent of all applicants who come through the door,” says Merlin.
“We only let people join the network who we’d want in our own homes, people with good communication skills, good hygiene, and people who have great massage technique.”
“We focus mainly on English-first markets, so for us we focus on having our economies of scale, so we didn’t have to add different layers of multi-lingual customer service, different versions of the app in different languages, and that’s made it really simple.”
Scaling a business
Scale, scale, scale – business owners are told. However, the ‘how’ is much more difficult and less tangible than the ‘what’ and the ‘why’ in this instance.
Merlin says that any business owner looking to scale their business should look at the online world.
“Anything in the real world takes a long time and is very expensive – it’s hard to quickly scale any physical construction or any deployment of say, people installing servers,” he notes.
“Anything you do virtually is much more scaleable. Any time you estimate time in the real world, multiple by two or three, and then run your business model and see if it still works.”
It is a philosophy that forms a core part of Soothe and its growth strategy today.
“We focus mainly on English-first markets, so for us we focus on having our economies of scale, so we didn’t have to add different layers of multi-lingual customer service, different versions of the app in different languages, and that’s made it really simple,” he says.
“I think our product is not really creating a new mousetrap – this is a better one. People will always be getting massages – in America [alone], massage is a $12 billion annual market; we’re just making it more accessible and we’re democratising massage, basically allowing more people to access it who have never had a massage before.
He adds: “Imagine all the guys who are embarrassed to go to a spa who can now sit at home, touch a couple of buttons and get instant relief for the strain of their muscles after a workout.”
“I don’t think that five years ago in any country, people would be very comfortable getting into a stranger’s car. But Uber came along and really paved the way.”
Opportunities in the share economy
We are hearing more and more about the share economy, and increasingly businesses – both new and established – are finding opportunities in virtually every industry imaginable to allow a more efficient flow of services for the benefit of owners and users alike.
“I don’t think that five years ago in any country, people would be very comfortable getting into a stranger's car,” says Merlin.
“But Uber came along and really paved the way, making people feel more comfortable interacting with strangers.
The impact, as Merlin suggests, is not only that people have an alternative option to taxis, but that business people and entrepreneurs can tap into this increasing trust in vetted service managers and digital platforms to engage providers they previously never would have considered.
In doing so, there is a huge scope to boost profitability and increase customer networks.
“I think people are, oftentimes if they are vetted, not too much different from your friends; you just don’t know them yet. And I think people are much more comfortable in general with interacting with each other because of Uber,” says Merlin.
The problem of raising capital
As fairly common among players in the tech world, Merlin sought external investment to grow Soothe into a national and then international business.
Yet he says that even having established businesses previously, capital raising was much harder than he ever imagined.
“Raising money was more challenging than I expected it to be,” admits Merlin.
“I put the first $400,000 in for the first 13 months of the business.”
However, Merlin explains two key aspects that helped him to eventually find success in raising funds for expansion.
The first is old-fashioned tenacity. The second, however, is to ensure you are pitching to right individual who understands and is passionate about your core business just as you are.
“It was a partner who saw the promise in what we were doing, who recognised that this is a stable industry: 18 per cent of Americans get at least one massage every year,” he says.
“So realising that this is a blue chip industry, this company is capable of acquiring and expanding the market to own at least 10 per cent of that $12 billion market within a course of time; and the fact that the principals of this investment fund love massage.”
And with the eventual results Merlin achieved, it’s clear that his words are anything but hollow.
“By about month 15, we raised $1.7 million seed-round [funding],” says Merlin.
“And then we went out to raise our series A, call it about eight/nine months later, and it was a process that took time, but eventually we raised a $10.5 million round. And then by February 2016, the same investors came back and invested an additional $35 million into the business.
“We hire only people who are willing to roll their sleeves up and get dirty too, and that’s what it takes I think – people who are doers, not just commanders.”
Hiring the right people, and allowing them to excel
For Merlin, the biggest lesson in business has been the power of people – not just in hiring the right ones for your business, but really empowering the people who have brought on board to excel in their own right.
The right team, for Merlin, are people who willing to step up and do what is needed, not simply read from the operating manual.
“We don’t hire middle managers. Our organisation is very flat; we hire only people who are willing to roll their sleeves up and get dirty too, and that’s what it takes I think – people who are doers, not just commanders,” he says.
Then once you have effectively brought them into your team, Merlin says it is just as important – if not more so – that you don’t become a hindrance to them in advancing their skills and performing at their best.
“You’ve got to find and build a team, people who you trust, and then you’ve got to get out of their way,” explains Merlin.
“You maybe micromanage a little bit in the first six months of your relationship, until you really trust that they are capable of doing what they need to do.
“Once the trust is there, then get out of their way, because they know what to do better than you do, because you hired them to do it in the first place.”
According to Merlin, this can become a significant stumbling block for many business leaders, particularly as the company grows, who believe they are indispensable.
“It’s like separation anxiety – a baby starts to walk, and if you hold it’s hand too long, it won’t ever run,” he says.
“As a CEO, you can have big ideas, but you should never overestimate the importance of your own involvement. Once the business starts to crawl, then it walks and then it runs. It doesn’t need you as much as many CEOs think that it does.”
Fast facts: Soothe
Industry: Massage therapy; technology
Partners: Around 9,000 massage therapists in four countries
Location: Headquartered in West Hollywood, USA
Customer base: Sydney and Melbourne in Australia, as well as over 50 cities across the US, Canada and the UK