SaaS Scaling Secrets
The SaaS Scaling Secrets podcast reveals the strategies and insights behind scaling B2B SaaS companies to new heights. Dan Balcauski, founder of Product Tranquility, leads conversations with successful SaaS CEOs, exploring their challenges, triumphs, and the secrets that propelled their businesses to the next level.
SaaS Scaling Secrets
Scaling Beyond Steroids with Jason Ray, CEO of Paperless Parts
Dan Balcauski speaks with Jason Ray, co-founder and CEO of Paperless Parts, a Boston-based SaaS company revolutionizing the custom part manufacturing industry. Jason shares his journey from Navy logistics to entrepreneurial success, highlighting the challenges of scaling a SaaS company, identifying real customer pain points, and learning from rapid growth funded by venture capital. Jason emphasizes the critical role of a great CFO, the evolving responsibilities of a CEO, and the resilience needed to persist through difficult phases. Tune in for invaluable insights on scaling a SaaS business, building the right team, and maintaining perseverance.
00:30 Meet Jason Ray: From Navy to SaaS
01:21 The Search Fund Journey
01:55 Discovering the Software Opportunity
05:05 Building the Marketplace
07:34 Pivot to Quoting Tool
14:37 Challenges in Scaling
21:39 The Importance of Financial Outcomes for Employees
22:42 Challenges in Scaling from 5 to 15 Million ARR
26:29 The Role of a CFO in Business Growth
30:40 The Impact of Venture Capital on Business Strategy
34:49 Navigating Financial Constraints and Growth Expectations
39:42 Reflections on Success and Mentorship
41:25 Final Thoughts and Advice for SaaS CEOs
Guest Links
Connect with Jason Ray on LinkedIn
Paperless Parts
Welcome to SaaS Scaling Secrets, the podcast that brings you the inside stories from the leaders of the best scale at B2B SaaS companies. I'm your host, Dan Balcauski, founder of Product Tranquility. Today, I'm excited to speak with Jason Ray. Jason is the co-founder and CEO of Paperless Parts a Boston based SaaS company leading the digital transformation for custom part manufacturers. A Navy veteran with a passion for modernizing traditional industries, Jason has guided Paperless Parts from startup to scale up, successfully navigating the challenges of rapid growth along the way. Let's dive in. Welcome, Jason, to SaaS Scaling Secrets.
Jason Ray:Dan, thanks so much. I really appreciate you having me.
Dan Balcauski:I am Very excited for our conversation today. I'm sure our listeners will get a lot of value out of it. Jason, I gave you the audience a little bit of a taste of your background in the intro, but for those folks who haven't been following your journey closely, can you just tell us a little bit about your journey in the SaaS world?
Jason Ray:Yeah, I, thank you. Appreciate the opportunity. I grew up in the Navy, so I spent seven years on active duty, supply corps focused on logistics, the business end of the Navy. When I left active duty, I had also finished a MBA at Babson and decided to go into the search fund route. I figured, maybe I can go buy one of these traditional businesses. Be a part of the defense industrial base really solve some of the problems that I saw while I was on active duty. And at the end of the day, I realized how hard and how challenging are our industry is to survive in, the manufacturing industry is very unforgiving. It's run by entrepreneurs that have an enormous amount of technical aptitude for what they're doing. And that really is the first time I started to think about software. I witnessed these businesses that were being run by sheer brute force. You had filing cabinets filled with technical drawings. You had Excel spreadsheets shaved, saved in all kinds of different share drive structures. And I mean, it was just a unbelievably complex business to successfully navigate. And I remember explaining to my co founder, Jay Jacobs at the time, I said, Jay, I'm never going to be able to buy a machine shop and run one of these businesses successfully. Like that would be true arrogance to think that I can replace someone who's been running the business for 30 years. And all of a sudden I'm going to step in with my shiny new MBA. And all of a sudden I'm going to make that business as successful or more successful. I just, I didn't see it happening. Right. And so when I went to walk away from it, Jay was the one who said, you should build a software company. There's something here. Manufacturers need good software and there's no one going after this problem right now. Why don't you write a business plan for that? And that's how I got into SaaS.
Dan Balcauski:That's a fascinating story. So, and for folks who maybe aren't aware, could you just give us the very high level on what a search fund is? I it's become pretty hot in the NBA world, but I think relatively recently, so maybe everyone's not quite aware.
Jason Ray:Yeah, a search fund model is a model where an MBA usually goes out and searches for a business to buy. And they either do that with committed dollars where investors will say, Hey, we like your pedigree. We think you've got a good plan for going into a specific industry, buying a business, growing that business. Usually you're buying a business that has Revenue and profits. So it's less risky. And a lot of times MBAs, they want to be entrepreneurs, but they don't really have a particular idea to start the next new thing. You're also seeing a pretty significant change in generational ownership and wealth in this country. And so what's happening there is you're seeing this industry, our manufacturing industry, but you're seeing a lot of industries turn over. So that makes it a really attractive search fund model. The searcher gets equity in the business. They earn that through a lot of sweat equity of searching for a business to buy. Some people will search for up to two years before they end up buying a business. I spent about 11 months and then realized, how much I didn't know about the business I wanted to try to buy. So I was able to, I was able to reverse course pretty quickly.
Dan Balcauski:Got it. So, so if I just tie together those two pieces of the story so basically you are in this search model looking to go buy one of these smaller, manufacturing companies, and as you're in that process of evaluating the businesses, this is when you sort of discover this problem of running these type of shops.
Jason Ray:Yeah. And we didn't even really have a great problem definition when we first started. We initially thought the problem was a lack of technology to connect. The buyers and the suppliers of manufactured products like very high level statement and circa 2016 marketplaces were super sexy. So we're like, let's go build a marketplace. We'll go set up a marketplace that applies a bunch of cool technology and makes it really easy for. A buyer of an industrial component or assembly to come in and find new sources of supply and transact with those sources of supply very easily. And it all sounded really good on paper. And we raced after this. I mean, we spent eight months building the coolest marketplace in the world. And those moments in your life where you expect it to be fireworks, like you are just like, the anticipation is so high. We had spent months preparing for this launch. My co founder Scott Sawyer and I sitting there and like, we click the button to turn it on. And it was like, it was there was soon like fireworks and a party popper. It was kind of like, like, wait a second. Like we had beers. It was, we were ready to go. Like we're so pumped. And I remember sitting there for like, Like an hour before someone actually came to the site. And mind you, we had told thousands of people that the site was launching. So, but we had one and I remember him looking at me and he's like, there's one, Oh my God, there's one. And I mean, for the next couple of months it kind of puttered along, we had dozens of transactions. We had initial, initial people coming in, telling us that it was really cool. But at the end of the day, it wasn't. It wasn't something that was ever really going to scale and it wasn't actually going to solve the problem we wanted to solve. And so stepping back from that we were going to put the whole business to bed. We told Jay, our co founder, we said, Hey, this isn't going to work. We'll give you what money we have left back. And we'll all go on our way. And Jay is, and this is Jay to a core, since we've started this business, has always been the person that's said, don't give up, keep pushing go ask harder questions, go figure out where the problem is, go solve it, I've got your back. And he always has, and I think that's great. A little bit of like, I think we've often gotten to cheat a little bit. Cause not everybody has a person like that has such conviction that what you were doing is necessary for the world and has experience in the industry where you were trying to solve problems. And so Jay was the one who pushed us to go out and try to understand what's the real problem that we need to solve. And everyone that we talked to quoting, quoting, quoting, quoting, it is hard to quote. It's risky to quote. I don't trust anybody to quote. I'm an owner. I'm not scaling, but I'm going to quote because I won't trust another person in my shop to not screw this up. And I think if there's any one thing we did right at Paperless Parts in the last eight years, it was identify something that was actually a real painful problem. a, not a problem that's, a nice to have. I've heard it explained as, are you a vitamin? Are you a painkiller? Are you oxygen? And I think we're somewhere in that, like. painkiller, oxygen category. Probably painkiller killer when you first come, try to buy paperless parts, more oxygen. Once you've really started using it and you realize that there's a completely different way to run your business. But that's, I think that's probably the thing that we've done that I would point
Dan Balcauski:Well, I, I wanna double click on that because I think that's a great point. So, you first of all, I think there's there's some goal to be had even in the disappointment of the party popper versus the fireworks. I once had a business coach when I was being a little bit hesitant about pivoting in a certain direction, say, we'll, go do it. Because if you failed, no one will even notice because it's not gonna be relevant to them. So, so I think that there's some good news there for any entrepreneur's. Like, yeah, don't worry about your big launch. Don't worry about going in this direction. Cause it's not relevant. Like nobody will even remember or care. So, no one will even see your failure. I think we have this big idea some, somewhere we got in our heads that everyone's looking at us and waiting for us to do something and actually everyone's just busy kinda living their own lives so I think there's even in those moments there's a lesson of Of maturity and gold to be had but i wanna double click because, in that arc that you just painted, there was hey we were really focused on this problem we went a whole hog on it for 18 months, we launched, to, little fanfare. And then we, we found this problem around quoting that was super, painful and valuable. What changed, like, what were you, what was the team doing there that allowed you to sort of like in that new world, like, did, I mean, was it just like pure luck you just stumbled on this or was there a method that you were able to sort of figure out what problems that people were actually, willing, see, actively seeking a solution for?
Jason Ray:think. When we went to turn the marketplace off, cause that was decided. We're like, we're going to turn this thing off. It's not working. We went and talked to a lot of the manufacturers to let them know. We wanted to thank them for being a part of it. We'd spent a lot of time with them. And the vast majority of them said, yeah, great idea. Wish it was going to work out better. But there were about a half a dozen folks that said, wait a second, you can't turn this off. And that, this is, I think, where the luck came into play. So these folks, as many manufacturers are, they are super they have high level of ingenuity. I mean, they really figure out how to solve problems, but they do it in a little bit of a roundabout way. And so these manufacturers that we had talked to that said, we can't turn the marketplace off, they were signing in to the buyer side of the marketplace, Loading part files. and looking up their own pricing and they were using the pricing engine we had built as a quoting tool. They were copying and pasting the prices into word documents and sending quotes out. I kid you not, like sheer luck. We never would have seen this in data. And I think that there's a lesson there. A lot of people think that data alone can tell the story. One of the core values that we have at Paperless Parts is that relationships matter. I love the concepts of AI and I love using technology to solve problems. And honestly, Sometimes you just need to have a conversation with people. You just need to talk to them. Like the data is only a piece of the story. And I'm so glad that Jay pushed us to go out and interview all these companies. Cause if we didn't talk to them, we never would have known. We would have just turned the thing off. We would have gone away. They probably never would have reached out. Our emails would have been gone by that time. And it would have been over. And so I, I really encourage people to just, there's a lot to be said for picking up the phone.
Dan Balcauski:So you were able to figure out this sort of hack that they were using your system to use where they were like, well, hold up. Like, I'm actually still kind of using this other thing, even though it wasn't something that you had intentionally built. And from there was the seed of kind of this future direction.
Jason Ray:I remember a specific quote where one of the guys we got on the phone, he says, you can't turn this off. And we said, why? And he said, well, your marketplace is total shit. He's like, but the pricing engine, he's like, now there's something there. If you guys would just get smart and go build a quoting tool. I think you'd really have something that we'd be willing to pay a lot of money for. And I just I remember the conversation was like, yeah, it was yesterday. Cause it was like light bulbs going off and we raced. I mean, we spent the next three months hacking together like the most disgusting looking quoting tool around this really cool technology that we had for analyzing 3d CAD models and drawings and they used it. I mean, that's another big piece of this. I've always been. And probably still am today. And this is not a knock on our engineering team, our design team, but I think founders are always embarrassed of their product. I think that's just a true statement. You're always going to see the warts. You're always going to, if you're close to your product, you'll know the things that you wish you had time to go fix or put polish on, and a lot of people end up waiting too long to like get it out into the wild. And so we had paying customers. They were paying us to keep the marketplace turned on and we had to get them this gross quoting tool. And so we raced and we got it out there and we got a lot of feedback. I mean, it was it was colorful feedback, but I think it made us better a lot faster and it took us a while to find product market fit, I think. I think there's this expectation that has been cultivated in like the VC railroad tracks of how fast you should be able to do certain things. And I've, I have a friend who always says, don't should on yourself. Like there is no real should, like it's, yeah, maybe that's worth looking at benchmarks. It's worth understanding if you're approaching something the right way, but different industries are really, really hard.
Dan Balcauski:I love that. So, so ship it, even if it's gross and don't shit on yourself. I think we could both live better lives if we took those pieces of advices under our wing. Well you and I before we turned on the recorder had a, had an interesting conversation, this very What you've painted is a very interesting story, of sort of that, zero to one journey of finding product market fit and finding that thing people are willing to pay for. But I think you had a really interesting perspective on how sort of, look, every CEO, every company faces challenges along the way, but those challenges can look significantly different, the zero to one journey versus the one to 5 million. In your mind, how do those different revenue milestones, how do the challenges look different as you're trying to grow and scale the company?
Jason Ray:Yeah, I think a mentor of mine told me that depending on your growth rate as a CEO, you'll be trying to reinvent yourself every six months because what you are to the business needs to evolve and change as the business grows and gets more professional and you bring in different teams. And I kind of, I chunk it up, at least our journey, and it may be different for other people. There are companies that turn their software on and they're 20 million in a day. That wasn't us. It took a while. We had very distinct phases in the zero to a million phase, in the million to five million phase. Five to 15 was particularly challenging. And now after 15, it's not that it's gotten easier. I think the foundation is cured, like we've laid a lot of foundation. We have a lot of processes. We have a lot of people rowing in the same direction. And I think the team that you need and the personalities of the team you need changes pretty dramatically based on what stage you're in. That zero to one, you are blazing new trail. Like you need to be okay with rejection and failure. And like, it is also doing things that are completely unnatural, brute force solutions, getting on airplanes, implementing customers that don't look like any of your other customers. Cause you're trying to get revenue. It just, it's a completely different vibe. And that one to five, I think, is largely, you're starting to build some processes and systems around it. But I think the biggest thing to prove there, and it all depends, these are, like I said, our phases, we sell, 35K ACBs B to B, SaaS, it might be completely different for enterprise companies, but what I found is that one to five phase was a critical transition of founder led sales. So I'm the only person that sells the software. I'm the only person that knows how to sell it, communicate the value propositions. It's almost, it's very evangelical selling. Of course I love it. So I'm going to, I'm going to demo the hell out of it every single day. And I was doing five demos a day at least from zero to one. I mean, it was. I can see it in my sleep. It's crazy. It's like an extension of your body. But then going one to five, finding people that can do that, that aren't founders. It's such a transition in the business. Like you get that first person who's able to go out and replicate selling. It's a total game changer. And you get a small handful of people that are able to do it. And then you have to try to systematize it. And I think you still get away with a lot of brute force in the one to five realm. And depending on how fast you grow there the biggest the biggest challenge you can get into is the people that are right for one to five. They're comfortable with brute force. They're comfortable with uncertainty, but they kept maybe a little bit of structure. They're not necessarily the people that are going to go and grow into those executives that build. Repeatable, durable processes that have KPIs that they measure to. And, like, I've always found it so funny and it's a worthwhile exercise regardless of whether you do it well or not, but OKRs. I mean, we talk about OKRs, MBAs, it's like, three letter acronyms, they're our favorite thing. And I'll tell you what, we would go and spend hours in a room working on OKRs and get so, so, so granular. And then we would come back three months later and we'd be like, Oh yeah, we didn't do any of this. Like nothing. We did none of it. Like, it's like the best laid plans go to hell the second you make contact with the enemy. Like it's never going to happen. And so, but the thing that I found really interesting with OKRs is we had created 24 month objectives. So the three months stints, the ability to plan like that,
Dan Balcauski:Mm-Hmm.
Jason Ray:not possible. But looking back at the end of the 24 months, we gotten to the same end point, almost exactly. We want it to be 8 million in revenue. We wanted to have, X number of customers. It's like 450 customers or something. And that was we'd actually got to the destination. So I think there's something valuable in writing down and being really intentional about what you want to achieve.
Dan Balcauski:Hmm.
Jason Ray:That said, the faster you go through those phases. The more quickly you outgrow your team, and it's one thing if you can continue to keep leveling up and you're hiring the next level and the next level and the C level. I think a lot of mistakes, and it's, I wouldn't even call it a mistake, honestly. In order to attract really good people to your startup, you end up giving them titles that maybe they're not there yet. They're great people, they want to grow into that VP title, but they're going to take a pay cut, they're going to come do it for equity, so you give them the VP title. And I think, a little bit, you have to do it, unfortunately, but that, then it becomes a really steep learning curve. And I think if I could do it again, I think there's some conversations that I would have with folks that just say, Hey, look, like I've seen this story before, not that this next story will play out the same way, but I don't want you to, I don't want the company to outgrow you in this title because of how fast we grow. I would rather move you from a director to a senior director. Then start you at a VP and then 10 million in ARR later, we're looking at it. And we're like, we kind of need someone who knows how to be a VP, not someone who's been working 80 hours a week to brute force the business to 11 million in revenue or 12 million in revenue. That's a really, and I'm not talking like a specific person per se. I don't have a specific story in mind, but more just like in a generality. And I think those are really hard conversations to have because there are a few ways to attract people to your company. One piece of advice that I would give folks is don't be stingy with equity. Don't, because you'll get to a certain point in your business. It's either going to be worth a lot or it's going to be worth nothing. And at the end of the day, if it is worth a lot, you don't want to be that person where you've got a few hundred people at your business and it didn't change their lives. Like that's a, like that, I just, the more and more, and the further we go, the more we give out equity to our employees, the more I think about, like, I'm doing the math in the back of my head and saying, Hey, this type of an outcome, this is the tectonic shift. Like, is someone going to be able to put their kids through school? Is someone going to be able to put a down payment on their first house? Like, how do we make sure that this was, Something they look back on and they're actually proud of how hard they worked because that, that produced a meaningful financial outcome for them and their family. So don't, I think a lot of founders, you try to hold it so close to the best 5 percent more in options, 10 percent more in options, change a couple hundred people's lives.
Dan Balcauski:Yeah, for sure. Well, and so, so there's, it was a ton in there. So, you talked about the zero to one story. So, it's, everyone's wearing every hat, real sort of every customer looks different from one another. There's starts to be some processes, one to five. You're constantly sort of, change over the team as the companies, you go from one to two, you just double the size of the company, right. Revenue wise. Right. So, so those are big leaps, even though they may not, may look, relatively small in the absolute sense of the relative sense they're pretty massive. You hinted at like this this five to 15 being quite different. And I, I find a lot of founders, Hit that point and, maybe kind of look it up. You're like, Oh, once we're there, like it's gonna, everything's gonna be gravy. But if a lot of founders find they have so some severe limitations, they'll prevent them, them scaling, I guess, was there a particular challenge that paperless parts faced in that five to 15 million error R range? that was difficult to overcome May it was a crucible moment that, has kind of made you who you are today.
Jason Ray:I mean, everything breaks in five to 15, everything. It just happens. It's you realize one day that you've got 50 times the load that you ever expected to have on your servers. And all of a sudden your site's knocked over by one big customer that you closed or you went out and you closed that first big enterprise deal and you would no business closing a quarter million dollar deal and they just drag you through the mud as a customer. And I mean, I'm trying to think of, I think the hardest crucible, and this is more, I think, time specific for us because we were a fortunate company that raised money in 2021, but we've been going through this five to fifteens phase. And when the, and I think of VC money a little bit like steroids, when the steroids stop, you really have to reconcile how much muscle have I actually built and what can I do with that? And that's where you, that's where you really get to know yourself and how gritty you are, because. We hit that really challenging scale part of the business, this five to 15, turning over executive teams, turning over employees, having to put new processes in place, making the hard decision that, Hey, we don't have the right leader at this piece of the business. And those are all really like kind of, Oh shit moments for a founder. It's like, Oh shit I need to turn over my head of sales. Or, oh shit, like I don't have the right people running marketing or finance. And all of a sudden it is this like, it's this very scary moment where you have to go out and find new people. Now, something that I was fairly stupid about and it's really interesting because in the early days of starting a business, cash is a huge constraint,
Dan Balcauski:Mm-Hmm.
Jason Ray:it's an enormous constraint. And so you're working really hard. to conserve cash as much as you possibly can. Then you get this injection of venture capital and you go and you scale up your business. And when you scale up your business, you have a higher burn rate. And of course, cash is still a constraint, but it's really time that you're racing time as a constraint. And so you need to use cash To meaningfully improve your trajectory to bring that timeline in for hitting specific milestones, right? If I'm burning a million a month, if it takes me six months to get to a really amazing release that increases my revenue, that's six million in cash that I've earned. If it takes me 12 months to get there, Well shit, now I just burned 12 million and I'm at the same point. So understanding those milestones really well. I think one of the mistakes I made is I was pretty cheap when it came to going out and recruiting executives. I'm like, ah, we can do this. We've got networks, we'll find people. And I very much remember sitting down in the backyard of an advisor of mine and she looked at me and she goes, What are you doing? She goes, you guys raised 30 million and you don't want to spend a hundred grand to get the right person to come in and run engineering? She's like, what's wrong with you? She's like, that's, that is stupid. She's like, a week goes by and you burn more than that. Like you've got to get the right people guiding the bus, guiding the ship, whatever analogy you want to use. And I think I was a little penny wise pound foolish there. And I think that a lot of that comes back to, and I would, this is advice I would give any entrepreneur out there, if you raise, Even anything more than 10 million, you need to bring in a really good professional VP of finance or CFO. Like you absolutely have to, like you can get to a certain point. Like I had spreadsheets and models and I understand finance and I'm comfortable with that. It's very much like knowing how to steer a boat and use binoculars to navigate. And maps to navigate, vice having a radar. Bringing in that finance person is your radar on the business. They are going to break down unit economics at an entirely different way. They're going to show you ramp times on account executives that you won't realize until you've already spent millions of dollars. Having folks that are not ramping quickly enough and the process is broken. Like really, truly understanding the unit economics of the business. It's the first thing our CFO did when he came in is he really modeled out all the different unit economics and really broke the business down into chunks. And I think we would be in a different place if I had been able to recruit him, someone of his His experience level earlier, I mean, I remember we brought in our first VP of finance, who's still with us. He's phenomenal, but they tried to turn off the electricity the day he started. So I am not I, my stepfather always told me you, you chase accounts receivable, not accounts payable. So we had moved into this new office and I wasn't thinking about it, like. Pay the electricity bills, whatever. Like they'll send me a bill if they want me to pay it. It turns out they had been sending bills. So he shows up for this interview and this woman is at the door and she's putting this neon orange tag on the door. She's about to turn off the about to turn off the electricity. And I'm like, Oh my God, hold on. Like, here's my credit cards. Like I'll, I will pay these bills right now. So like he stepped into a complete. Founder, brute force led chit show all the way up to, Six and a half million in revenue. I mean, we were doing, we were using QuickBooks where, like we had an outsourced accounting team that like, I was still taking pictures of the checks we were getting for our SaaS licenses at night, because it was the only way I could sleep knowing that we actually had cash coming in. I saved them. I would do like, Oh, one couple of days, just so I had that energy boost, so, I mean, he came in and he had to like completely clean up the business. Bringing more of that resource in, like more of the GNA, more of the FPNA, financial planning and analysis earlier, not just to clean up crew to kind of fix all of the duct tape and bubble gums that you as an entrepreneur put in place. I think that would have been a really wise decision early days. You live and you learn, but
Dan Balcauski:There's so many breadcrumbs you just dropped. We could have probably three sessions and we maybe we should at some point to cover all of these interesting areas you just laid out. But I mean, just a couple of things that I picked up as you were talking were, first of all, everything breaks you painted some really good examples of those different areas, but getting a good CFO to really kind of break out these metrics so you could run the business as things start to move. The whole idea of shifting constraints. I've never heard anyone phrase it that way, but the, I remember back at, back in business school, I dunno if you ever had to read the goal, but the
Jason Ray:oh yeah,
Dan Balcauski:of constraints, was it Herbie? Herbie!
Jason Ray:Where's your Herbie.
Dan Balcauski:Herbie? But it's a, that's a very interesting it reminded me of that where it's like, okay, money's no longer constraint, but it shifts to time. And that's a totally interesting way to look at it, but then it shifts how you think about things like paying for, should we pay a hundred grand to a headhunter to get us the right VP, engineering, CTO cause otherwise, yeah, you're, we're paying all these engineers to sit around and not be effective otherwise. they're like, Oh, a hundred thousand is a lot of dollars to pay a recruiters like, well, so is paying a lot of engineers to not be as effective as they could be, otherwise. So. Really puts a lot of that in in focus. You did drop a little bit something in there too, though, which was that you said like, take it VC money's like take it steroids. Can you elaborate on that a little bit more? Because it it sounded like there was there board to be elaborated on.
Jason Ray:I think. So I think it's fantastic. Like the VC industry is phenomenal in terms of funding innovation in our country. It's one of the reasons our economy is crushing everybody right now. And I look at that though, as you're seeing round sizes get incredibly large. I mean, even in the last decade, call it 15 years, a Series A used to be like a couple million bucks. I mean, we're seeing 10 to 15 million series A's. I mean, that's giving an enormous amount of resource to an organization that largely hasn't had a lot of time for the foundation to cure. And I think that's, it's, it causes you to do a lot of very unnatural things. So you get less disciplined in who your customer base is because you're trying to then meet the expectation of 100 percent growth plus. So do I stay disciplined and take on customers that all look the same, even though maybe that produces a 80 percent growth rate? Or do I take on a lot of different looking customers, grow at 120 percent And then have a massive tax on your engineering and product organization and feel that in churn 18 months later when you can't go meet all the expectations of this diverse customer base. Like I think every action has an outcome and understanding that you're making decisions that You're going to end up paying the piper on, and if the steroids stop, so it's one thing if you go and you raise 10, and then you raise 20, and then you raise 50, and then you raise 150, and then you raise 250, and it's like, okay, you can use money to boil drinking water, lighting dollar bills on fire all day, like you can, if you have enough money to pay for those mistakes, you can go give customers rebates. You can buy an entire engineer, a whole team to focus on some specific problem. But when that spigot turns off, if you don't have a solid foundation, and I think you see this in a lot of public companies where they made it to public, they went through hyper growth, uniform, unicorn phase, and then they get public. And then the spigot turns off. Now it's under a microscope. We can't just go blow dollars on everything. And people start to realize that path to solving problems, which was throwing money at problems, is no longer a path. But they don't have the muscle built to solve problems other ways. This is not to say that those companies fail, but you see a lot of these companies get public and their first couple years are a little rocky. They're a little like, oh, what happened? But then on the other hand, you have these companies that maybe they didn't go from zero to 250 million in five years or even 10 years. Maybe they went from zero to 250 million in 20 years. But they've been growing at 40 percent durably every single year. And that becomes a very repeatable, very measurable process for that business. That phrase that we're starting to hear more about durable growth. That's, I think the counter to hyperscale. Like it is great to grow at a hundred percent for the first five years and then get kicked in the teeth and grow at 20%. I think that's great. I would rather grow at 40 percent a year forever.
Dan Balcauski:well, you hinted at some things there, I love everything you just said, but, I think the problem, has been right. Like we saw those, tech crunch, headlines of, every unicorn getting minted. These this, 20 million Series A, a hundred million, whatever Series B I mean, a hundred million actually 20, 21, 22, that was even small. It would be like 200 million Series B. I'm curious cause you, I mean, you imbibed of the steroids yourself, like, Has your, Kind of definition of the kind of company you're trying to build and your metrics of success changed over time. Like, is that, and how do you think about your trajectory?
Jason Ray:I think the main change is a little more patience. I mean, I remember sitting there in the early days and be like, man, if we're not a hundred million in the next four years, like what do we do? Like we didn't achieve anything. And those numbers are like, not real because you can't even fathom what it would be like. And this is where a really good CFO comes into play because a really good CFO would say, okay, you sell 35, 000 customers. How many do you need to get to a hundred million? Let's think about this. Now let's look at customer acquisition costs. Now let's look at how long that payback period is. Now let's look at all the infrastructure we need. If you get someone who really thinks through it, whereas a lot of entrepreneurs, I can speak for myself, really. I'm an optimist. So I like, I see a target. I'm like, yes, we're going to go do that. We, so we were very fortunate to find a fantastic VC that partnered with us, OpenView. And they gave us 30 million in 2021. And we raised at the absolute height of the market. And then we had to really go grow into that valuation, especially because While the company was growing, the valuations were declining precipitously. And so I think we've been able to do that, and I don't think we would be where we were, or are today, without that investment. But I do think that, It, that big of a check, a 30 million check causes you to do some things that are pretty inorganic and we were chasing that 100 million Series C. I mean, we thought we would raise a hundred million in, call it like March, April, May of 22. So seven, eight, nine months after our Series B, we just, we thought that would be the cadence. So we'd planned for that. So, I mean, we hired, we grew the company to 170 people. Because we knew that if we were going to have this injection of cash, we need to be able to onboard all the customers. We needed to be able to support them. We needed to have the engineers to build all the features and functionality that they needed because we had so many different looking customers. And it's the second that hundred million wasn't there. And maybe I just, I can't tell a good enough story, whatever it is, but we weren't able to raise that in 22. Like that's just rounds like that weren't happening. And everybody was like, no, we want profitable growth. We want, go just flip a switch and go to a different mode, like get, take your business profitable. And it's like, guys, no, like we just, we literally had this thing in motion in a direction. And it was really painful. I mean, we went through a riff, which was really painful. I don't wish that on anybody, especially because. If you do it the right way, you'll look the people in the eye that you're saying goodbye to and you'll look your team in the eye and you'll take responsibility for it. And that sits with you for a long time. Like you'd never want to be that founder that asks people to come get on board and work with you to build something and then have them have to exit before before the time is right. Or, they're doing a good job, but you just didn't build a scalable org.
Dan Balcauski:Yeah, well, 22 was a sobering time for a lot of folks in the B2B software world, both venture capital and entrepreneurs and employees alike and has we've been in that hangover mode from drinking too much of the punch at the party for, I. for too long, so, sorry, it happened to you, I, if a constellation is, of anything, that's, there was shared misery all around but but I did hear, there, I heard some really interesting things, in sort of the, your entirety of your answer there, though, which is also and a couple points, this has popped out to me in our conversation today, which is, I think you said something along the lines of by nature, I'm optimistic. It was really helpful to sit down with that CFO to really kind of sober me up and show me what those numbers mean. And, with your Your advisor, who's telling you about, paying the money to the executive search firm? I heard, it's often the most difficult thing is sort of getting outta your own way and sounds like you found, finding those partners that can help check the instincts that, what's the old Marshall Goldsmith, what got you here won't get you there. Right? Like, what is that? What is that grit, that determination, that optimism, that gets you zero to one. It could blow up in your face and if you're that five to 50. Team and Getting those partners and other people to sort of check your first instinct, right? Maybe you know it in the back of your mind, but it's not your first sort of go-to play as you're going along. Jason, I could talk to you all day and I would love to have you back on to co to touch on some of these other threads. But you know, I wanna be respectful of your, and the audience this time. So I'd wanna wrap us up with some some rapid closeout questions. Is that okay?
Jason Ray:Sounds great.
Dan Balcauski:Awesome. Well, look, we were talking about paperless parts and sort of, what success meant there. How do you define sort of your success today? What does success mean to you personally?
Jason Ray:It means having had a tremendous positive impact on our customers and then also on our employees. I mean, I think if every person that works at Paperless Parts in a decade or two looks back and says, that was the best company I ever worked for, we were doing something really meaningful, I learned a lot, I'm better off for it financially. I think that'll be success. No question about it.
Dan Balcauski:Impact on your customers or your employees? I absolutely love that. Look no one of any success gets there on their own. I think you are successful. Has there been a close mentor, a leader who has really helped you on your journey?
Jason Ray:Yeah, I would say Jay Jacobs my co founder. I mean, he's been, he's a cheat code. No question about it. He has helped us every step of the way. Even, I mean, even conversations like a couple of days ago, he's like kicking my ass on AI. And he's like, come on, like, you got to start thinking about this. And I'm like, Jay, like, I'm trying to hit Q4. And he's like, no. You gotta be thinking about this, and this all the time. He's like, I'm pushing you because you got to do it. And having people like that we wouldn't be here if it weren't for Jay. No question about it.
Dan Balcauski:And is Jay on the the technical side of the house.
Jason Ray:Jay is actually, came from being a customer. He was running one of the world's largest rapid prototyping businesses. And he ended up selling that business to a large competitor.
Dan Balcauski:And he's the one kicking you in the tail on AI. Good for him.
Jason Ray:Always be learning, right? Always be learning.
Dan Balcauski:Well, well, Jay, we appreciate your persistent efforts. I'm sure it's your work has never done. Look if you could, if I give you a billboard, you could put any advice on there for other B2B Sass CEOs trying to scale their companies. What would it say?
Jason Ray:I was thinking about this one. Probably don't give up. I think I think it, a lot of times the breakthroughs happen right in the final moments. Like, you look at SpaceX just catching a rocket midair. I mean, that company would have been out of business if the fourth rocket didn't launch. They'd given up after the third time it exploded. You wouldn't be, like, the world would be a totally different place. So, I don't know, we've pushed all the way to a day. of cash left in the bank before needing to make a payroll that would have said goodbye to the company. Stay gritty and persistent. The breakthroughs, they're there.
Dan Balcauski:I agree that Elon moment was incredibly inspirational. Applause to that whole team. And don't give up. I love that positive way to end the episode. Jason, if I've absolutely loved this conversation, if our listeners wanna learn more about you, about paperless parts where can they follow you on the internet, anywhere you wanna point him to?
Jason Ray:LinkedIn is the best place. Please feel free to shoot me a connection on LinkedIn. Follow Paperless Parts. If there's something I can do to help you, please don't hesitate to reach out. It takes a village.
Dan Balcauski:Well, Jason, I will put those links in the show notes for our listeners. Everyone that wraps up this episode of Sask Scaling Secrets. Thank you, Jason, for sharing his journey, insights, and invaluable tips for our listeners. If you found this conversation as a light anxiety to remember, subscribe so you don't miss out on future episodes. Thank you, Jason.
Jason Ray:Thanks so much, Dan.
