Scott Duffy is the prototypical serial entrepreneur. In his late 20s, he was on the startup team of an Internet site that eventually became CBS’s Sportsline.com. Then came another tech startup later bought by NBC, and then he helped launch Fox-Sports.com. He made his first million at 28. Today, he is at the helm of the Virgin Group’s Virgin Charter, an online travel agency for private aviation. The site, scheduled to go public in February, is in its testing stage, servicing about 100 corporate travel departments and travel agents with more than 800 aircraft. Its goal is to become the private aviation version of what LendingTree.com is for mortgage companies where consumers can compare the quality of a service, rate it, and book it online. Raised in Brentwood, Duffy moved to Silicon Valley in 1994 with money he got from selling his belongings at a Third Street pawn shop in Santa Monica. He slept in his car, and then got his first break by delivering pizza along with his resume to tech startup executives. Duffy met with the Business Journal recently at his office overlooking the airstrip at Santa Monica Airport to discuss his career, writing his first business plan in eighth grade, and a recent flight his six buddies took back from Las Vegas on a private jet.
Question: How did you end up heading Virgin Charter?
Answer: My company Smart Charter launched in 2006 and we were out raising money. At the time, the Virgin Group was also looking to get into private aviation. Through their research, they discovered that the biggest problem in the industry isn’t that there aren’t enough aircraft, but that it’s too hard to buy and sell charters where they already exist. So they decided that the smartest thing to do would be to create an online marketplace that would connect people with jets. While they were coming to this conclusion, I had a team in place already building the solution. They ended up investing in the company.
Q:
Have you always been entrepreneurial?
A:
Yes. Ever since I was young. I remember the first business plan I wrote was actually with my dad and it was why we should do the play “Peter Pan” at my grammar school. I was in the eighth grade. When I was in high school, I had a little hot dog stand. I was selling hot dogs at Century City Mall before they had any food. Hot dogs and knishes. Freshman year in college, I started a painting business where we’d paint people’s houses. I had about 20 student employees.
Q:
What was your first break?
A:
A company called Quote.com. We were the first company in the U.S. to get permission from the Stock Exchange to put stock quotes on the Internet, and we were the first investment made by Mike Moritz from Sequoia after he invested in Yahoo. I was on the startup team, and that was hot.
Q:
How many businesses have you launched since then?
A:
This is my fifth startup.
Q
How did you end up in aviation?
A:
After doing one startup after another, I crashed and burned. I needed to recharge the battery. During that time, I looked around to do other things, and a friend introduced me to private aviation. And I fell in love with the business because of its high growth potential. I got involved with a company called Blue Sky Jets, one of the bigger charter brokers, and began to see all kinds of problems in the industry, the same type of inefficiencies we solved using technology in other industries.
Q:
What were these inefficiencies?
A: About half of the 3,000 charter operators in the U.S. have only one or two planes. They are mostly family-owned, very passionate and very entrepreneurial, which is great. But since they’re small businesses, they also don’t have the financial or the operational resources to market themselves, build sales teams, and invest in their companies. So you have a highly fragmented market where there’s not a central place where people buy and sell. What we are doing is filling that need creating one place online, where people can come together.
Q:
Why is the private aviation industry experiencing robust growth right now?
A:
It’s estimated to be a $10 billion industry, growing more than 25 percent a year. Since 9/11, more and more people are starting to look for alternatives to the long security lines at airports and delays in flights. Businesses, especially, are no longer looking at flying private as a luxury item, but as a productivity tool. This week, I have six people flying from Santa Monica to Las Vegas. If they went through LAX, the whole trip would take anywhere from four to five hours. Through Virgin Charter, they can come to our office, get on a golf cart and be on the airstrip within an hour and 20 minutes. And the price for grouping everyone together makes it just a little bit more than flying commercial.
Q:
If your technology solves inefficiencies in the business, then why is it still more expensive to fly private than commercial?
A:
In the long run, it won’t be more expensive. The cost of flying private is already starting to come down. There will always be a premium flying private, vs. flying commercial. But the market correction will lead to a small price difference. This is because right now, there is a total lack of transparency in terms of price in private aviation. There’s a kind of Yellow Pages that lists who owns the jets, but it doesn’t provide any information about the availability, cost, safety or quality of the plane. On our site, which provides all those things, price transparency will lead to competition and that will ultimately lower the price.
Q:
What is the greatest challenge that the industry is facing today?
A:
Higher taxes, user fees, government regulations the same things commercial aviation is facing. The things we don’t face are air traffic delays, because while there are only about 500 commercial airports in the U.S., there are about 5,000 private airports.
Q:
Where was the last trip you took on a chartered flight?
A:
I flew to Las Vegas recently on Southwest with six guys for a bachelor party. On our way back, we had our own private jet, but we paid about the same price we would have paid on Southwest. I knew that in private aviation, you buy four legs of a trip because the plane flies to the destination and drops me off and doesn’t wait for me. It flies back empty. In 2006, 40 percent of all private flights in the air were empty. So I called a few private aviation operators and asked if they had an empty leg from Las Vegas to Santa Monica. Since the operator had already been paid for the empty leg, he was willing to sell the seats for a much lower cost. It would have normally cost us a couple thousand dollars, but they took our offer of $600.
Q:
What in your past experience has most aptly prepared you for the seat you’re in today?
A:
The things that prepared me the most have been some of the tougher experiences and failures I’ve had in business. One of the things I’ve done outside of technology was to invest in a storage business, which didn’t go too well. It’s a highly inefficient and fragmented business. But it was through this experience that I was able to identify the same problems in private aviation. Someone once told me that in life, you’re going to have good times and you’re going to have bad times. But you won’t know which is which until sometime later down the line. I found that to be so true.
Q:
Was there a defining moment in your career?
A:
When I was 19, I got into a really bad car accident and I had to drop out of school. I was at the University of San Diego at the time. While I was recovering from head injuries, I couldn’t watch TV or read anything and basically had to lie in bed all day. I started to listen to motivational books on tape. And I really think some of that helped me get better. I was exposed to Tony Robbins, one of the highest-paid business consultants in the world. When I got better, I applied to be an intern, but he offered me this great job. He said, “You won’t be able to go back to college right now, but we’ll teach you all the stuff you were listening to and we’ll make you one of those guys who teach it.” So at 21, I traveled all around the country and Canada promoting Tony’s programs. I met people who overcame really incredible challenges, in some cases tragedies, and they had turned them into opportunities. This experience really shaped my idea of what was possible.
Q:
What are the most salient memories of your childhood?
A:
It’s growing up in Brentwood with deep roots in the community. My great grandmother, Edalene Anson, planted the original trees in Brentwood. For 25 years, she ran the Parasol bakery, frequented, I hear, by Cary Grant and Gary Cooper. It’s the present- day site of Pepponi’s Restaurant.
Q:
Who most influenced your career?
A:
It was my stepdad. He was very successful at starting and building companies and taught at Stanford for a while on how to write business plans. The best advice he gave me was to write the last page first when you write a business plan. Start with the financials. Most entrepreneurs get caught up in the idea and by the time they get to “How do I make money?” they run out of steam. If you can figure out how your business will make money, then the rest of the plan will figure itself out.
Q:
What do you do to unwind?
A:
I am a big fan of going to sporting events. I love college football. Love going to watch the Lakers, traveling the world to go to sporting events. I went to the Euro soccer finals in Holland, last summer I went to Tour de France. I also love magic. There’s something about watching magic. It’s almost hypnotic. Trying to figure out how they do it helps me forget everything else.
Q:
What is your proudest achievement?
A:
Marrying my wife. Somehow, I found the guts to ask her to dance with me at a salsa class at Club Med and that was it. That was three years ago. We got married last summer.
Q:
What was the highest point of your career?
A:
Partnering with Virgin. Every time I talk about it, it’s one area where I kind of go speechless. There’s been so much I’ve gained by being a part of the company. Most companies take care of the investors, vendors, and employees come last. At Virgin, the management flips the model. They believe that by creating a great work environment, everything else will fall into place.
Q:
Lowest point of your career?
A:
When I made my first million dollars. I always wanted to make a certain amount of money by a certain age. My entire life was built around that. I see a lot of entrepreneurs do this. But when I got there, it was like, now what? I learned then not to lose sight of what’s really important in life, things that don’t just bounce back when you drop them. Namely your relationships and health. I wasn’t taking care of those things back when I was 28.
Scott Duffy
Title: Founder and chief executive
Company: Virgin Charter
Born: 1970; Santa Monica
Education: University of San Diego; did not receive a degree
Career Turning Point: Instead of joining a family business, he decided to move to Silicon Valley at the dawn of the dot-com era in 1994
Most Influential People: Stepfather, who taught him to write the last page of the business plan first start with the financials
Personal: Lives in Brentwood with wife Rachel and baby on the way
Hobbies: Attending sporting events
