For work, I’ve traveled to many interesting locations over the years: Indian villages; experimental kitchens; dusty library archives. But I never expected to report from the inside of a Czech fighter jet. And to be honest, I’m starting to feel hot under the collar of the full-body, khaki-colored, flame-retardant flight suit I have just put on.
At only 32, Jared Isaacman, who is why I’m here, happens to own the largest fleet of privately owned former military tactical jets in the world. Four years ago, he founded Draken International, a company staffed by highly skilled fighter pilots who train members of the Air Force, Navy and Marine Corps for combat missions. He also happens to be grappling well with Square in the payment-system business–but more on that soon.
For now, Isaacman, who is a certified transport, acrobatics and instructor pilot, is about to give me a taste of his work by taking me on a spin on an Aero L-39 Albatross, a Czech light ground-attack fighter jet. When Isaacman is in flying mode, he goes by his pilot nickname, “Rook,” which is emblazoned on his uniform and helmet. Code names are apparently a big thing in this world: Draken’s chief pilot is dubbed “Snort” and the flight operations supervisor goes by “Bloke.”
As of now, I am without my own handle.
But before we can take off, Isaacman needs to explain to me how the ejection seat works. “There’s a very powerful rocket under that seat that will blow you into the air and launch a parachute,” he explains. “But there are a hundred other things we are trained to do before we resort to activating it, so remember: there is a one in a million chance you’ll use it.” I think this is meant to be comforting, but it occurs to me that I am not fully aware of what I have signed up for.
An hour later, though, the two of us are in the air, floating gently at cloud level. The cockpit is entirely surrounded by glass, so I can see everything above and around me. The world below appears to be passing by slowly, with blue lakes and lush farmland hovering beneath us, as if we weren’t shooting through the sky at 375 miles per hour. Isaacman occasionally checks in with me through the microphone in my helmet, but it soon becomes clear that we are quite alone in the sky: there is not another human for miles in any direction. And then, I suddenly understand why Isaacman loves flying. There is a surreal kind of serenity up here. You have no choice but to focus on what is immediately in front of you: the cloud formations; the controls; the way your body reacts to gravity.
For Isaacman, flying has always been a way to escape–quite literally–from the stresses of the world. Aviation is, in fact, only one half of Isaacman’s life; the other half is consumed by the complexities of the payment industry. Besides running Florida-based Draken, Isaacman is also the CEO of Harbortouch, a Pennsylvania-based point-of-sale payment company that, much like Square, allows merchants to quickly set up a credit card processing system. But unlike Square, which has not yet been profitable (favoring growth over profitability, as the company has noted), Isaacman tells me that Harbortouch has been profitable for over a decade, and currently processes $11 billion a year from 60,000 merchants, generating $300 million in revenues.
How exactly does a 32-year-old manage two successful businesses in highly complex industries located in two different parts of the country? A big part of the answer is that Isaacman has been running businesses since he was very young–14 years old, to be precise. And we’re not talking about a lemonade stand or mowing the neighbor’s lawns.
As a ninth grader, Isaacman discovered that he and his best friend, Brendan Lauber, had a knack for fixing computers. They figured they should monetize this skill, so they started a company, Deco Systems, offering services to hapless computer users. As a means of recruiting clients, Isaacman took a summer job at the now defunct CompUSA; when customers came in with particularly severe issues, he would give them his personal business card and make money fixing the computers himself. “I grew up in a very middle-class background,” he tells me. “It was a place where if you wanted something, you worked to get it.”
One of Deco Systems’ clients was a payment company called Merchant Services International (MSI), whose CEO, Mario Parisi, was deeply impressed with Isaacman’s skills and offered him a job. Without a second thought, Isaacman took the GED, left school and went to work as MSI’s in-house IT expert. “I hated high school,” he explains. “I watched my older siblings out in the world and they seemed to be having a much better time than me. I could not wait to be an adult.”
At 16, Isaacman became fascinated with the intricacies of the payment world, learning about all the nuances and the many parties involved. But from the start, he could already identify massive inefficiencies in the industry.
Over Cuban sandwiches and Doritos, sitting in a corner of the hangar, Isaacman breaks it down for me. From his perspective, the entire payments business had been built on meeting the needs of consumers, not merchants. Large payment processing companies–like Chase or Bank of America–assumed that since consumers want to pay by credit card, merchants will put up with anything to accept credit cards at their store. “For a pizza joint to open up a credit card account, there was as much paperwork as signing up for a mortgage,” Isaacman recalls. “The sheer amount of inefficiency in the industry was ridiculous. There was no innovation, no streamlining, nothing was being directed towards improving the merchants’ experience.”
Six months into his job at MSI, Isaacman hatched a plan in his parent’s basement to improve the payments system; he recruited his friend Lauber as his second in command. Setting up a payments business is no small feat. For one thing, they had to get a bank identification number to be able to process Visa or Mastercard payments, and even large companies struggled to get one. The two teenagers, still living at home, had to convince the barons of the finance industry that their business was legitimate. “There were a lot of things that could have unraveled at that point,” Isaacman tells me, between munching on Doritos and drinking Red Bull. “But it didn’t work out that way.” Isaacman used knowledge and personal contacts from working at MSI to navigate the process. Eventually, with no small measure of luck, the stars aligned and Isaacman got his precious bank identification number. Everything was in place to blaze a trail in the payments industry.
He incorporated under the name United Bank Card, Inc., which eventually was renamed Harbortouch. He took the role of CEO, while Lauber became CTO–titles that they hold to this day. And pursuing his original vision, he created a merchant-focused payments business. At the time, merchants were forced to buy expensive credit card readers to become operational: Isaacman gave the hardware away for free. Instead of making merchants sign 30-page documents, Isaacman reduced the paperwork to two pages. The industry standard was to set up a payments system in a month, Isaacman cut that time down to a single day.
And then, his piece de resistance: Isaacman created a lucrative package for salespeople to have an incentive to work for him. In the payments industry, there are legions of salespeople who work as independent, non-exclusive contractors for different payments companies, getting merchants to sign up for credit card processing systems. “When the salesforce realized there was less paperwork, they could turn things around in a day and they would get paid better, they were sold,” Isaacman says. “It was all I needed to do.” Thousands of salespeople started working for him, leveraging their relationships with merchants to set up Harbortouch systems in stores across the country. “In two years, we went from signing up three hundred new customers a month–which is still very large by today’s standards–to 2,800 new customers a month,” Isaacman remembers.
Harbortouch has always been in the business of serving small to mid-sized merchants. Isaacman was strategic about hitting the sweet spot of targeting merchants who were underserved by the payments industry, but who still brought in a reliable revenue stream every month. Given how miniscule margins are in the payments industry, Isaacman needed to acquire thousands of merchants to be profitable, but those merchants also needed to be making enough money to be worth the effort. Harbortouch’s clients consist largely of neighborhood restaurants, coffee shops, and boutiques that collectively process billions of dollars worth of payments.
Isaacman points out that this is in direct contrast to Square, which allows anybody to do credit card payments on their phone or what the industry describes as micro-payments. “Square essentially targeted consumers who were doing peer-to-peer transactions,” Isaacman says. “They made it easy for personal trainers to charge their clients or for a guy to sell his golf clubs to his buddy. Given the incredibly low margins in this industry and the inherent cost of payment fraud, this means they’re taking a loss with these small accounts they’re going after; I’ve been considered borderline insane for saying this for years now.”
A Square spokesperson told me that contrary to popular belief, 40% of the company’s payment volume comes from sellers bringing in over $100,000 a year and that these larger accounts tend to be brick-and-mortar businesses. She also pointed out that Square is providing larger merchants with tools to manage their businesses. Last year, it added CRM features to help businesses manage large customer bases. (Update: due to a misunderstanding, this was not accurate in our original report–the CRM features were added last week, not last year. And Square says that Isaacman’s statement on its peer-to-peer functions is not accurate, citing deals with Blue Bottle, Uniqlo, and Whole Foods.) Open Tickets, which launched earlier this year, allows restaurants and bars to open and close tabs electronically. In other words, Square is rapidly developing its point-of-sales tools for upmarket brands. (Update: the Square rep also pointed to this Fortune story that said that on a transaction of $100, the company earns a profit of $1. )
Still, Isaacman doesn’t consider Square a competitor, since he doesn’t see it as a viable business model. His believes his real competitors are companies like Total Merchant Services, First Data and Mercury, which offer comparable merchant-focused product offerings for mid-sized business for years now. Harbortouch has managed to hold its own in a competitive marketplace: it is now used in 150,000 merchant locations around the country.
Most of these businesses are corner pubs or local hardware shops, but there are also regional chains like Cici’s Pizza and Fox’s Pizza Den in the mix. He has a staff of 400 people, not including the thousands of salespeople who work on commission. And in a twist of fate, Isaacman acquired MSI, the company where he learned the basics about payment, for $200 million last year.
But he’s not content to coast along. He believes that Harbortouch has succeeded because he was willing to keep innovating, and the company needs to keep evolving to stay at the top. “We’ve always been blessed with competitors who lacked creativity,” Isaacman says with a smile. “All we need to do is stay one step ahead. We always had first-to-market advantage.”
He has been keen to keep his salespeople happy, investing in developing software for them to use at no cost, allowing them track to sales and manage their relationships with merchants. He is constantly building point-of-sales hardware for merchants, which he continues to give them for free. “We have so much Apple influence in what we do, because we love Apple,” Isaacman says. “We don’t want to use their products necessarily, but we want to think in design terms the way they do. If Apple ever built a point-of-sales system, it would look like the versions we’ve made.”
The most recent iteration is a sleek, flat-screen terminal to process payments, but they can also be customized to allow merchants to input complex orders–like removing the broccoli from the beef stir fry or replacing the chicken in the salad with shrimp. With this kind of equipment, Isaacman is aggressively going after the high end of the mid-sized business market like the big restaurants with six server stations, while still maintaining strong relationships with smaller merchants.
In many ways, Isaacman has accomplished more at 32 than most people will achieve in their entire lives. But this also came at a cost. As we finish the last bits of our sandwiches, I cannot help but wonder what Isaacman thinks when he looks back at his late teens and 20s, when most of his peers were off in college, broadening their horizons, finding meaning in life, and enjoying a few moments free from responsibility before the struggles of life set in. While I was off at prom or graduation, Isaacman was saddled with the burden of paying the salaries of growing workforce.
“From the beginning I was keenly aware that everything is about the company: it’s what sustains life, family, employees, everything,” he says. “When I was 19, I had a hundred employees working for me, which meant I had a hundred families depending on me. I simply couldn’t get drunk on a weeknight or do fraternity level crap–which is what I would probably have been doing had it not been for Harbortouch. That would have been more than putting my own life at risk, it would be jeopardizing the livelihoods of so many other people.”
It is also clear that Isaacman’s family is an integral part of this story. He does not speak about them a lot, but when he does, it is full of warmth. His father, for instance, was very supportive of him as he grew his business, coaching him about how to manage people with compassion and empathy. “He was an important mentor,” he says. “He believes there is always a peaceful solution to a problem and everybody deserves the benefit of the doubt.”
Isaacman has also had the support of his wife, Monica Chacana, whom he has been with for 13 years; the two were married three years ago and have a 15-month-old baby named Mila. The two grew up in the same town and attended the same middle school. She was the 12th employee at Harbortouch and romance blossomed soon thereafter. “Monica gets it,” he says. “She knows exactly what I do in life: I work.” After our interview, Isaacman will fly himself from Florida back to Pennsylvania, kiss his daughter goodnight and watch Netflix with his wife.
And then, of course, there is the flying. In his early 20s, Isaacman began to feel the early signs of burnout, so with a sizable fortune amassed in the bank, he started studying at Embry Riddle Aeronautical University and begin pilot training. In 2009, at 26, he set the world record for an around-the-world flight, completing 22,893 miles in 61 hours, 51 minutes and 15 seconds. “It was always a passion of mine growing up, but I ultimately turned to flying as an escape, as therapy,” he says. “When you’re flying a fighter jet, you are physically detached from the world. There is only so much room in your head to worry about the problems of everyday life.”
In my zooming moments on board with him, I think I know what he means.