Paperless Parts recently raised $30 million of Series B venture funding led by OpenView Venture Capital. Jason Ray, co-founder and CEO of Paperless, says ahead of the deal was about a year of relationship building with OpenView during which he got to know some of the team.
"It made it really easy to want to do a deal with them and at the same time we had already laid a lot of that foundation that I think people try to rush in deal cycles," Ray says. "I think folks try to say, Well we're going to go raise capital and we're going to do it in 60 days. And they do speed dating and then it's kind of like being on The Bachelor."
Ray says he's built relationships with every company Paperless has worked with, and every investor that's invested in the business he's known for years. That, he says, sets a strong foundation for a partnership.
The primary focus of this round, he says, is increasing the company's engineering capacity and its product team capacity to continue to deliver solutions that are impactful for both the company's partners and its customers. That means continuing to scale the sales team.
"It's an interesting phase when a company grows into a real — it's almost like Pinocchio becoming a real boy. We're starting to build these formal processes and have formal divisions and people who are managing those divisions, so it's definitely a hardening of the armor of the company," he says.
But Ray has had some entrepreneurial stumbles along his path to building Paperless into what it's become today. He says initially he thought the company would build a marketplace and make it the KAYAK of manufacturing. However, there were some fundamental flaws.
"We always wanted to be transparent with the buyers so they knew who they were buying from," he says. "And buyers are pretty crafty, so they go and they look up the price and they would go to the manufacturer separately, and if those prices didn't match, someone ended up looking bad. So ,the idea of a marketplace wasn't going to work in the in the sense that we thought it was."
So Ray stepped back and looked at who was using the marketplace the most because people were uploading a lot of parts. It turns out that the manufacturers on the platform that were supposed to be the supply base were uploading more parts than anybody else. So, he asked why they were uploading parts and they said they liked the pricing engine, so they would copy and paste the price out of that into their pdfs and send the quotes.
"And we said, what if we built you a quoting solution? And they said that would be amazing. So we did," he says.
Ray spoke at the Boston Smart Business Dealmakers Conference about getting Paperless Parts up and running and the company's recent capital raise. Hit play on the video to catch the full conversation.