2 minute read
Portsmouth, NH
To understand Jay Jacobs, you have to understand that even as a young kid, he was always interested in making stuff. Whether it was 1/35 scale models of military battles—or complete towns for that matter—he was using his imagination to innovate new ways of seeing things, and then making what he saw. When he took a string of jobs after college, it was all with businesses that had to do with being a maker—sometimes selling manufacturing equipment, sometimes making the actual parts themselves. In a way, he was really getting an advanced degree in being a maker because he was studying manufacturing processes and manufacturing companies which benefited him when he led the digital transformation of his own businesses.
If you think of life as a series of "chapters" like Jay Jacobs the Founder of RAPID Manufacturing does, it's only natural that there is a beginning and an end to the founder's most effective role in the company. Or at least to the founder's ownership control of the company. By viewing life this way, Jay has been able to put his focus and passion into what he is working on one chapter at a time.
Jay started RAPID from scratch after concluding there was a need, and the time was right, to form a different kind of prototype parts manufacturer. Technology had matured enough to create digital tools which reduced set up times, minimized error, increased successful replication of machine shop's output—in short, make better parts at lower costs and most importantly—more rapidly.
From the very first hour, the only goal was to make prototype quantities of parts (small numbers of an item) at high value, low cost, with a very, very fast delivery time. Customers may take a long time creating, innovating, and designing a prototype part, but when they decide they want a working prototype, they want it immediately (usually because they are going to iterate). Starting out, it was just Jay and some coders, so Jay acted as everything from salesman to customer service to Guy Friday—he did what it took to attract customers, keep customers, and keep the lights on.
Jay and I first met in Los Angeles at Abundance360, an entrepreneur business owner's group of which we are both members. As we traded business cards, we agreed to meet sometime back on the east coast. In the interim, Jay read Enterprise Value (McGraw-Hill 2014) and had some aha moments realizing other EOMs had questions like the ones he had. Jay quickly decided the time was right to create a small market for the company and select the best new majority owner.
Being a high-performing Entrepreneur Owner-Manager requires a very different skill set, experience, and capabilities than capturing the Enterprise Value that an Entrepreneur Owner-Manager has worked so hard to build. Developing the go-forward plan, showcasing some non-Jay organizational leadership, and illuminating what made RAPID unique (its Intellectual Property) in such a way that didn't jeopardize its secret sauce, Bigelow operationalized a highly experienced engagement team that understood "staged disclosure": what needed to be revealed or explained at what time. Bigelow worked with RAPID's management team to create the positioning needed to attract not just one, but several qualified, interested, and more importantly, potentially great-fit investor candidates.
For Jay, bringing focus and passion was energizing at the start-up stage more so than in this mature stage. The right answer was to find a next majority owner that would not only shepherd the business into its next configuration, but also be a steward to the business' past.
Ultimately, Proto Labs (NYSE:PRTL) met all of Jay's must-have characteristics for that best new owner. The Enterprise Value ultimately paid was a high-water mark in the industry. His management team continued to run RAPID with some synergistic benefits. He now had a liquidity transaction and was set free from his role at RAPID, allowing him to focus on his new venture Paperless Parts.
Note: You may also be interested in a piece that Jay Jacobs contributed to our Blog in 2019, titled On the Fence About Engaging an M+A Advisor?
What I am Reading / Listening to
Maxims for Thinking Analytically: The wisdom of legendary Harvard professor Richard Zeckhauser (2021)
By Dan Levy with a forward by Larry Summers
I first met Richard Zeckhauser twenty plus years ago after attending one of the early conferences on behavioral economics he created called Investment Decisions and Behavioral Finance: Identifying and Capitalizing on Irrational Investment Practices. I attended a few times, and while I don't remember all the speakers, I do remember lots of learning and entertaining sessions by Nassim Taleb, Larry Summers, Dick Thaler, Michael Mauboussin, Zeckhauser, and others.
As a "practitioner" of behavioral finance not an academic, I was definitely in the minority, but I got a lot out of those sessions not the least, an appreciation for the gifted thinker that Zeckhauser is. He has the unique ability to articulate complex questions in a simple way. Sometimes I think to myself, "I thought that" but what I really mean is I thought that once, and it went in one side of my brain and out the other. Zeckhauser is able to nail it.
So, it seems this little book is a gathering of Richard Zeckhauser's wisdoms and aphorisms imparted to his (mostly Harvard) colleagues and students over the years. It's filled with wisdoms that are then illustrated by real life stories. The Introduction by Larry Summers alone is worth the price of admission as he relates some behavioral finance wisdom Zeckhauser imparted to the health care system while Larry was a consumer of it!
I wasn't asked to relate any of Richard's wisdoms but if I was, my answer would be remembering several discussions we have had about the risk tolerance of Entrepreneur Owner-Managers. I was trying to chunk the information and simplify for the purpose of drawing some conclusions. Richard's intelligence was (paraphrasing), "Pete, let's remember in a fat tail situation (like we live in), averages obscure. The answer may be illuminated in the variation not the average." Good point.
Highly recommended.
Note: This topic of Entrepreneur Owner-Manager risk tolerance is so interesting to us here at Bigelow, that in 2018 we actually conducted a research project on this topic with Richard Zeckhauser and his team at Harvard's Kennedy School, the results of which you can find here.
Entrepreneur Owner-Manager Quote
“My business is more than a spreadsheet and an EBITDA multiple, it's a story. Then we met Rob, our storyteller.”
-Ken Johnson, Founder and Chief Executive Officer of MAS Medical Staffing LLC
