The Right Problem, The Wrong Way To Fix It: Five Lessons On Building A Company From Founder Jason Ray
Two failed startups. No software experience. Nearly running out of money.
Despite the bad optics, Jason Ray was a success story waiting to happen.
Today, Jason’s the CEO and co-founder of Boston-based startup, Paperless Parts. Designed to help manufacturers buy and sell parts, Paperless Parts’ software organizes quotes, measurements, and communications—increasing efficiency and raking in revenue for both buyers and sellers. As a result, the company has made some serious gains:
- Raising $30M in a Series B funding round led by OpenView
- Growing from 50 employees in 2020 to 130+ in two years
- Processing over $500 million in parts
But his company’s seemingly-overnight success is only a fragment of the story—perhaps even the least compelling part.
A success story years in the making
Born a tireless entrepreneur, Jason always dreamed of building the next big business. As a senior in undergrad, he even wrote a business plan for building an ethanol plant in Hawaii.
“I spent the last half of my senior year of college trying to start that business,” Jason said, “We [even] had board members.”
But according to Jason, it didn’t exactly pass muster. In his words, “It was a joke. Looking back at the business plan, I was like, ‘No wonder that didn’t work!’”
Then 2008 happened—and the market recession shut down any lingering doubts.
This crash course in failure wasn’t all for naught, as it left him still hungry to grow a business. On the advice of his ex-board members, Jason joined the Navy.
During his years in the Navy and while getting an MBA, here are some of the lessons he shared about building a startup, finding your support base, and providing the right solution to a problem.
Lesson #1: Find the problem you want to solve
Jason’s stint as a supply corps officer in the Navy involved a lot of waiting. He spent days and weeks sitting outside Bahraini customs facilities, waiting for parts ordered by the U.S. military. While on the job, he found himself reading a book on 3D printing. It sparked an idea, namely, how the technology could solve some of the supply chain delays he saw firsthand.
Upon returning to America, Jason bought his own 3D printer and realized quickly that the technology had a long way to go. He had to reframe the problem he was trying to solve.
“I needed to figure out procurement, and why it’s so challenging to do what we need to do in the military,” said Jason. “[It] wasn’t going to be a silver bullet.”
Working at Naval Sea Systems Command, he found that communication between buyer and manufacturer was lacking. When parts did get procured, first article inspections were not clearly assigned, leaving end users waiting to receive the parts they needed. As these communications broke down, the delays rippled up and down the supply chain.
Lesson #2: Get a grasp on your market through networking
Jason’s first approach at solving this problem was to network as much as he could. He set a goal to connect with 100 people on LinkedIn and to have a conversation with 10 of them, every single day.
Through his efforts, he met Jay Jacobs—and knew he had to get him on board, literally.
“It took me six months to get him to actually interact with me. I’m super persistent,” Jason said.
Eventually, Jason convinced Jay to join his board of directors.
Together they started a search fund. One of their first steps was to visit and evaluate 100 businesses to improve and iterate within an established company.
“Rather than [starting a business from scratch], let me buy existing businesses that already have revenue, that already have cash flow, that are already providing parts to good customers—and let me take all my MBA voodoo magic and go in there and make them even better businesses,” he said.
These initial meetings exposed Jason and Jay to hundreds of potential customers and other businesses in the industry. They also proved to be foundational for Paperless Parts’ future success.
Lesson #3: Learn from experience, not just from school
The search fund ended up being a non-starter. But it wasn’t for lack of capital.
About nine months in, Jason realized his MBA education wasn’t enough to provide tangible value to business owners who had been running operations for 30 years.
“We would’ve made it work, but it wasn’t going to live up to the promises that I had made to all the folks that invested in the search fund, so I gave all the money back,” Jason said.
A week after Jason officially closed the doors, Jay called him. He told Jason that he should write a report explaining everything he learned from the search fund. “I spent about a month writing out what I thought all the problems were. [When] I presented it to him, I remember he said, ‘This is a business plan for a software company.’”
It was Jay who had the idea for the name Paperless Parts. With Jay’s unwavering support, he, Jason, CTO Scott Sawyer, Matt Sordillo, and Steve Lynch co-founded the business.
“Hell or high water, Jay’s always said, ‘Keep going. I’ve got your back, keep going.’ Because he believes that what we are doing is really important for the country and for manufacturers, and he wants to see this work and he wants to give back to our customers,” Jason said.
Lesson #4: Scale down your idea to scale up your business
As before, the team focused on the buyer and supplier connection. However, building a viable marketplace for manufacturers became more like a pipe dream. The reality was that estimating custom components is really, really hard—not to mention incredibly risky.
That said, Jason and Scott were able to get 40 manufacturers in the marketplace. They got their pricing configured, got buyers, and had transactions flowing within eight months. But it wasn’t a model that Jason could scale.
Customers agreed that the marketplace wasn’t great, but they loved the idea of being able to upload parts and have the software calculate appropriate pricing. They were the ones who initially suggested that Jason shut down the marketplace and build a quoting tool instead.
“At the time, we didn’t have money to do it. We were kind of at the end,” Jason said. “But these customers, about six out of the 40 said, ‘We’ll pay for this before it exists.’ So we ended up getting about $250,000 upfront to build out the first really gross iteration of the Paperless Parts quoting tool.”
Lesson #5: Don’t iterate to complicate
In 2018, while developing the quoting tool, Jason fielded calls from customers about their needs, and went back to Scott, asking him to add yet another pricing variable. After three or four rounds of this, Scott got fed up.
“He’s like, ‘Every time you close a customer, we have to go write code…It’s not going to work. Just sell what’s on the bus,’” said Jason. But Jason wanted manufacturers to feel like Paperless Parts understood the pricing variables and was able to validate their needs.
Two weeks later, Scott came back with the solution that made Paperless Parts into what it is today.
His code allowed manufacturers to account for any business-specific variable they need, and have it show up right in the user interface.
The pricing engine detects the precision required to make the technical data. It extracts and analyzes information from all different sorts of assets, like PDFs, 3D models, model-based definition files, and more. According to Jason, this technical data helps customers make three key decisions:
- Should I make this based on all of the information I know? Is it possible? Do I even want it?
- What manufacturing steps should I take to make this based on the rules? For example, if it’s really big, it goes on this machine. If it’s really small, it goes on that machine.
- And then, based on what each of those machines is capable of doing, how long is this part going to take to run, and what are the inputs I need from a bill of materials perspective?
“Those three key automation points are what makes Paperless Parts a valuable tool for our customers.”
The hardest part about being a CEO
Jason recalled Toast CEO Chris Comparato saying that the hardest part of the job is reinventing himself every six months. As Jason started navigating the startup world as CEO of Paperless Parts, he began facing this challenge firsthand:
“If you knew what you needed to reinvent into, it would be an easier problem. But having to both juggle figuring out what to reinvent yourself into, what the business needs at a given point, and going through that reinvention fast enough…That’s really hard.”
Even after reinventing himself time and time again—building his business from the ground up—Jason has come to realize that a CEO’s influence is a double-edged sword. There are no “casual suggestions” from the CEO in a more mature company.
“I have to be very careful about the questions I ask and the things that I say, and I have to preface it,” he explained. “Intentionality is really important—it’s one of our core values here, but it requires a lot of thought.”
He’s also intentional about how his energy impacts his teams. He mentioned that on tough days, he’ll walk around the office and high-five as many people as he can.
“I have to give them good energy and I have to get things back on track,” he said.
Five key takeaways from Jason Ray’s journey to CEO
- Find the problem you want to solve. In the Navy, Jason saw how muddled the procurement process was for manufacturing parts. His initial idea was to supplement it with 3D printing, but the technology proved to be too new as a solution. He stuck with the idea, even though the solution changed over time.
- Get a grasp on the industry by networking. Jason made it a goal to speak to 10 new people a day, and was relentless in his goal of finding new board members. It led him to finding Jay Jacobs, a fellow co-founder and the company’s biggest supporter.
- Learning from experience makes you a better business leader. No matter how many degrees you have, nothing can replace the years of experience running a company. Jason, while hungry for success and dedicated to running a great business, would not bring the same level of success like that of a CEO who ran his business for 20 years.
- Scale down your idea to scale up your business. Even after finding interested customers, Jason and Jay went about solving the problem of procuring parts committed to the idea of building a marketplace. But the answer was to develop a tool, rather than an entirely new place for manufacturers. Their pricing engine had the answers, not the marketplace.
- Don’t iterate to complicate. Sometimes in wanting to solve customers’ problems, you think you need to keep adding their specific needs to the product iteration. But there are other technical ways to make something easier to use, and ultimately answer everyone’s potential questions. Not all variables are that specific.
Interested in connecting with founders like Jason? Reach out to Casey Renner to join the OpenView network.
Note: Paperless Parts is an OpenView portfolio company. For a full list of OV portfolio companies, visit our Portfolio page.