About 6 a.m. on a Sunday morning in 2001, electrical engineer and inventor Larry Lukis was awakened by a phone call from a guy answering his employment ad in the Star Tribune.
Lukis had started a small enterprise focused on accelerating the mold-and-specialized part process using the Internet and advanced computerization. The technology was working and revenue was creeping toward $1 million.
The caller was Brad Cleveland, a 41-year-old computer scientist who was running a small subsidiary of MTS Systems. Cleveland told Lukis he was interested in talking about becoming CEO of the 10-person outfit that was badly in need of a business plan, management and financing.
“Brad seemed to me to be almost too organized,” Lukis recalled. “We danced around for quite awhile. I visited him at his company and his desk was immaculate. My desk was a disaster. It’s worked out pretty well.”
Under CEO Cleveland, who personally borrowed $600,000 to invest in critical people and technology, Proto Labs is now worth more than $2 billion in shareholder value, employs 735 Minnesotans and others in several countries and this year will earn about $35 million in profit on sales of about $160 million, according to analysts.
Yet last week, Cleveland, 53, told his board that he would leave the company in 2014, after a successor is chosen, and remain a long-term investor. The self-described “organizer’’ said the company now needs a “builder’’ to take Proto Labs to the next level.
Maple Plain-based Proto Labs, which is growing at a 20 percent-plus clip annually, has the potential to be a $1 billion-revenue company, say admiring analysts. Proto Labs is an online, order-driven, quick-turnaround manufacturer of injection-molded custom parts for product development and short-run production.
It’s mantra is “real parts, really fast.” It worked with 7,300 product developers around the world during the third quarter, delivering everything from medical-products components to next-generation kayak paddles to wristwatch components. The company is spending $15 million to buy a third plant in Plymouth that is expected to employ 350 workers.
After the news of Cleveland’s impending departure broke Thursday, there were a lot of envious gulps in business circles around town. After all, Proto Labs, which went public in 2012 at $16 per share, closed Friday at $83.88 per share. It has outperformed the likes of Facebook, the Internet darling that went public about the same time. And Proto Labs has been the best-performing Minnesota IPO in more than a decade.
“I loved the process of taking the company from $1 million to where we are today, well over $100 million in revenue and very profitable,” Cleveland said in an interview late last week. “I’m very proud of this. But to be the CEO of a $1 billion-revenue company, you have to have a passion for organization and systems and processes and procedures. And that’s a different person. Larry was the starter. I’m the organizer. Now, we have to find the builder. I’ve done well enough in this company to take some time off.’’
That is an understatement. Cleveland, who owns about $30 million in Proto Labs stock, has sold stock worth about $50 million since 2012, according to government filings.
“I have more stuff, including a vacation home in Wisconsin, and cars,” Cleveland said. “Most of that money has gone toward our family foundation, charity and my kids. I have security. I can try something else now. I can afford to finance whatever I do myself. That’s a wonderful thing.”
Cleveland told his board that he will remain at Proto Labs and help select a successor. Then he plans to take several months off and pursue one last entrepreneurial dream. He’s interested in alternative energy, but has no definite designs at this point.
Cleveland, who is married to his Golden Valley High School sweetheart, Pat, is the father of two grown children. He describes himself as a pretty boring guy.
“I bring my computer to the lake in Wisconsin,” he said. “I go for walks, like to run and take boat rides. We have friends up. But I don’t idle well. I like to work. I get inspiration from the people at work.”
Dave Cleveland, Brad’s 80-year-old father and a 30-year Minneapolis community banker, said his son isn’t motivated by money.
“He’s motivated by a challenge,” Dave Cleveland said. “I was motivated by helping [borrowers] succeed in business. What really hits him is taking something and making it work well.”
Sven Wherwein, a Proto Labs director, said Brad Cleveland’s success was rooted in his intelligence and just enough ego to drive things without upsetting the mix that gets a fledgling company to a sustainable operation.
“Brad hires good people and lets them do their job,” Wherwein said.
Lukis, 65, retired as chief technical officer but remains chairman of Proto Labs, where he is the largest shareholder with about 16 percent of the stock. He was on a sailboat off the South Carolina coast when I reached him by phone on Friday.
“I will take credit for contributing the technology, and I still stick my nose into a project, but I don’t write computer code anymore,” Lukis said. “But there was no way I could run a company. Brad built a great management team. He’s not intimidated by hiring people smarter than him.”