This is part of my operating manual series opening up the playbook of private equity and company building luminaries. Check out past ones with Mark Leonard, Andrew Wilkinson, Robert F. Smith, Joe Liemandt, Felix Dennis and Mike Speiser.
If you are interested in buying, growing, and selling small companies, check out my course & community on it at IndiePE.com.
Want to hear the craziest startup story?
A penniless 14-year-old landed in the US and started selling rotting fruit.
He turned that into an empire that toppled governments.
This is the story of Sam Zemurray, "The Banana Man".
Buckle up 👇
In 1897, a young Sam was on the dock in New Orleans watching the United Fruit Company ship land from Jamaica.
This is the first time he saw a banana.
It was a rare exotic fruit back then.
Sam had a weak grasp of English and no formal education.
Sam watched as workers unloaded the bananas and examined them for defects.
One freckle and they were "turning".
Two freckles and they were "ripe".
Ripe bananas were tossed in the street because they wouldn't make it to the market in time.
Where others saw trash.
Sam saw treasure.
If he could get the ripe bananas to customers before they turned, he could sell them.
But how to get to the customers fast? Trains.
He rented out containers on the Illinois Central Railroad and sold bananas right off the train.
For marketing, Sam went to the telegraph office and offered the operator a percent of his sales if he radioed ahead to local merchants.
The operator agreed and Sam bought all the ripes he could get his hands on.
Importers were happy to get money for what they considered garbage.
He loaded up the bananas on the trains.
The extra ripe ones were destined for nearby markets.
Others could travel a hundred miles away.
He lived by the clock. Any delay could kill his little business.
In 1899, Sam sold 20,000 bananas.
In 1903, he sold 574,000.
In a decade, he would sell more than a million bananas a year.
The penniless immigrant was a multi-millionaire in today's dollars by the time he turned 21.
"Sam the Banana Man" was born.
His suppliers were starting to realize the value of ripes.
So Sam had to vertically integrate.
Sam bought a steamship, sailed to Honduras, and bought 5,000 acres in the Cuyamel River.
The Cuyamel Fruit Company wasn't just in the ripes business anymore.
Sam then went on a buying spree.
Borrowing money from questionable people, he bought as much banana growing land as he could.
He built plantations, railroads, and bridges.
Sam was right there working in the fields alongside the Jamaicans.
"The Gringo" he was called.
Building an empire in Honduras required bribes. A lot of them.
He struck many special deals with the Honduran government.
But the US government got in his way.
They restructured Honduras's sovereign debt & put JP Morgan in charge of collecting customs taxes to repay the debt.
This wasn't going to work for Sam.
More taxes on an already over-leveraged slim-margin business would ruin it.
He tried lobbying the US Secretary of State, but they just told him to stay out of it.
Instead, Sam devised a plan to overthrow the Honduran government.
While being tracked by federal agents, Sam recruited 100 mercenaries and bought an old US Navy warship.
They set out to install exiled former Honduran president Manuel Bonilla as the new president.
Upon landing, they recruited local rebel soldiers to overthrow the government.
With some luck and successful bluffing like threatening to send reinforcements when there were none, it worked.
In 1912, Bonilla was inaugurated as the new president.
Sam got the favorable tax and land concessions he wanted for his company.
Cuyamel continued to grow.
They began to cultivate beyond bananas.
Competition with United Fruit was brutal.
It almost broke out into violence a number of times.
By 1929, United Fruit and the US government had had enough.
It was endangering American interests.
A deal was struck.
Sam sold Cuyamel to United Fruit for $31.5 million in stock (~$500m today).
Making Sam one of the richest people in the United States.
Sam also agreed to a non-compete and to retire from the industry.
United didn't want to deal with Sam again.
A few years later Sam became concerned with the poor performance of United Fruit.
He was a major shareholder and took his concerns to the board.
They blew him off and laughed at his accent.
Sam didn't appreciate that.
He gathered proxy votes from the other big shareholders.
And went back to the board and threw the proxies on the table.
"You've been fucking up this business long enough. I'm going to straighten it out."
He fired most of the board and took control of United Fruit.
That's how "Sam the Banana Man", a penniless immigrant, came to be the owner and operator of one of the most powerful businesses of the day.
If you want to learn more this is all from the book "The Fish That Ate the Whale".
It is worth a read.
If you are interested in buying small companies, check out my course & community on it at IndiePE.com.
If you know of anything I should add to this please reach out @ColinKeeley or Colin@ColinKeeley.com. I’ll continue updating as I learn more.