Laramie Company With UW Origins Sells Its Business to Autodesk
April 5, 2013 — Firehole Composites, a Laramie-based company whose origins sprung from the University of Wyoming’s Department of Mechanical Engineering 25 years ago, was recently purchased by Autodesk Inc., which focuses on 3-D design, engineering and entertainment software.
The multimillion-dollar sale, which transpired March 12 with the San Francisco-based Fortune 350 company, represents one of the most successful outcomes of an initial technology transfer at UW. But it was a long, hard journey -- with the work of many people along the way.
Located at 203 S. Second St., Firehole Composites develops innovative software tools designed to significantly improve structural design and analysis with composite materials, which are materials made from at least two different materials. The company’s mission is to help engineers create lighter, stronger, safer and more efficient composite designs through superior analysis capability.
“It’s really exciting. Part of it is validation of what we’ve done and being able to take the technology we’re proud of to the next level,” says Jerad Stack, former Firehole CEO and now product manager for composite software for Autodesk. “We’re playing in the major leagues now.”
The Big Time
Stack likened the evolution of Firehole’s sale to previously being a member of a pretty good Division III football team, like University of Mount Union, and suddenly waking up one day to realize you’re playing for the University of Alabama.
“We currently have more than 1,000 in our customer base, which is big,” Stack says. “Autodesk has well over 12 million customers for their design engineering software. We don’t have to get a big percentage of that (base) to show growth.”
Firehole’s customers include manufacturers of golf clubs, hockey sticks, airplanes, racing yachts and championship Formula-1 vehicles. Firehole has provided Red Bull Racing Team with software that allows that company to explore how different and lighter materials will fare if used on a race car. Other signature clients include Bangor Hydro Electric Co., Boeing, NASA and Air Force Research Laboratories.
Stack says he wasn’t shopping to sell the company. Rather, Autodesk was looking to buy. The more the two companies talked, the more Stack realized there was a shared vision and a culture fit -- with plans to keep the business in Laramie.
“We were doing great as a start-up. But the more they (Autodesk) talked, the more excited we got,” says Stack, who received both his master’s and bachelor’s degrees in mechanical engineering from UW. “Emmett (Nelson, Firehole’s chief technology officer) and I said if we’re going to do it, now’s the time.”
The sale price was between $10 million and $40 million, according to Rob McIntosh, a senior director of corporate development at Autodesk, who was quoted in a March 19 Wall Street Journal article about the deal.
“Through the acquisition of Firehole Technologies, we are now better positioned to provide our customers with solutions to help them produce the next generation of lighter, stronger, safer and more energy-efficient designs,” says Ian Pendlebury, senior director of simulation at Autodesk. “ … As manufacturers move to more complex materials, such as light-weight composites, simulation expertise is required to predict and optimize the performance of these materials. This acquisition will enable Autodesk to deliver this expertise to a broad spectrum of design and engineering industries.”
According to its company website, Autodesk customers -- from architecture, building, construction, manufacturing, and media and entertainment -- use Autodesk software to design, visualize and simulate their ideas before they are built or created. Best known for its AutoCAD software, the company has created a variety of apps for the iPhone and iPad, among others. The last 17 Academy Award winners for Best Visual Effects use Autodesk software, according to the company website.
Firehole’s product names, such as its Helius: MCT software, may stick around a while. But the Firehole name will disappear and the company will be assimilated as part of Autodesk, which has 108 similar offices nationwide that became acquisitions of the company, Stack says.
“I think the Firehole name Is going to be a legacy,” Stack says. “Our coffee mugs and hats are going to be collectors’ items pretty soon.”
The existing Firehole office space appears primed for expansion, as evidenced by drywallers and painters working in a space on the downstairs floor of the Firehole offices. Pendlebury says the Firehole team will remain based in Laramie as part of Autodesk’s Design, Lifecycle and Simulation (DLS) product organization. However, he says the company is not sharing its specific expansion plans at this time.
From Humble Origins
While recent business headlines heralded the nuts and bolts of the sale, the concept for what eventually became Firehole began as an idea back in the late 1980s -- and was a long, slow and difficult evolution to reach this point.
“It is a UW success story, by any definition,” says Andrew Hansen, UW’s associate provost for Academic Affairs and a professor of mechanical engineering. “It’s the kind of thing the state of Wyoming and the College of Engineering should be aspiring to do, promoting that activity.”
Hansen arrived at UW in 1985 and was what he termed “a snow scientist by training.” He quickly realized that UW had a substantial composite materials research program, which was run by then-professor Don Adams at the time.
“The big challenge in composites is predicting when they will fail. I came up with the idea to predict failure of composite materials, what’s going on at the fiber and matrix levels,” says Hansen, who held up a roll of strapping tape as an example of an everyday product derived from a composite material.
With that initial idea in 1988, Hansen went about figuring out how to translate that concept into something tangible “in a way the person out in the street can use it.” Hansen says he saw the potential cost-savings for companies that could eventually use digital software to determine composite material strength rather than build time-consuming and costly models.
After some years of experimenting with software concepts on the computer, the idea emerged, in the mid-1990s, to launch a company. But it wasn’t until 1999 or 2000 that the research group could actually generate composite material test results in a way that was viewable for potential customers, Hansen says.
Going back to 1988, a number of UW undergraduate students, approximately 15 all told, played vital roles to help Hansen inch from just a concept to eventually starting a business. Stack, a UW graduate student from 1998-2000, was one. Mark Garnich, who eventually became a UW associate professor of mechanical engineering, was another.
“All of the graduate students involved made contributions, even those whose work panned out to be nothing,” Hansen says. “That’s part of the research process.”
Bill Gern, UW’s vice president for research and economic development, agrees.
“There are many people who were important in this outcome,” Gern says. “Each had an important role at a specific time and, if they did not act then, there would have been failure.”
Forming a Company
In 2001, the creation of Firehole as a company became a reality. And it happened during a stroll across Prexy’s Pasture.
“I was walking across campus with two graduate students (Randal Six and Chris Key) and said, ‘How would you like to start a company and just run it?’” Hansen recalls. “Before we got the student union, they said, ‘Sure.’”
Once a decision was made to create the company, a spin-out agreement with UW was developed. The agreement licensed the university-owned copyright of the source code -- the heart of the Multicontinuum Technology (MCT) first envisioned by Hansen -- to the new company.
With Six and Key at the helm and the initial help of three other graduate students -- Steve Mayes, Garnich and Stack -- Hansen founded the company, which took its name from a river that originates in Yellowstone National Park. Relative to the business, Hansen describes himself as “a cheerleader.” While the graduate students actually ran the business, Hansen, who originated the MCT software concept, periodically provided technical advice.
The company applied for and received an initial $100,000 Small Business Innovation Research (SBIR) grant from the federal government. Firehole later received a Phase II SBIR grant in the $600,000-$700,000 range, Hansen says.
For a number of years, Firehole relied on continued SBIR funding to stay afloat as the company refined its software and sought customers to use it. In the early years, the company had a number of office locations, starting with a second-floor room in the Engineering Building, this time under the auspices of a space and equipment rental agreement with UW.
“It was about the size of this office,” Hansen says, peering around at his Old Main digs.
Firehole later shuffled to office space in the downtown Wagner Building. IDES, another business start-up that originated at UW, was located there and provided Firehole a couple of offices, IT support and business advice during 2001-2002.
“We kind of helped nurture them along a little bit,” says Mike Kmetz, owner of IDES, which, in 1986, was the first start-up business emerging from UW. “We sympathized with their struggle, absolutely.”
Kmetz himself is no stranger to big sales, as he sold IDES to UL in July 2012. The company, which remains in Laramie, is now called UL-IDES.
Firehole was one of the first companies to come under incubation by the Wyoming Technology Business Center and actually occupied offices in the Bureau of the Mines building while construction of the new WTBC building was under way. From 2006-2008, Firehole resided in the new incubator building, which serves budding business ventures. Firehole was one of four or five original WTBC clients, according to WTBC CEO Jonathon Benson.
“I knew their software had a lot of potential,” Benson says. “I know Jerad was a great CEO. They made that business work.”
Firehole moved out of the business incubator sometime in 2008 and relocated to space on Third Street in offices owned by Falcon Technologies, another company that started in the WTBC, Benson says.
“Companies like Firehole are important for Laramie, and they serve as a real example of the process somebody goes through in creating a company,” Benson says.
Firehole’s trials and tribulations extended far beyond the continued search for a permanent home.
Hansen recalls a lot of long years, frustration and changing of faces who were involved. At one point, during 2006, Nelson was Firehole’s sole employee.
“At one point, it came down to a conversation with Emmett of whether he should just pack it in,” Hansen says. “He, Mark Garnich and myself went out to Vedauwoo, sat on a rock, drank a beer and Emmett decided what he wanted to do. He (Nelson) decided to carry on."
Shortly thereafter, Nelson hired Don Robbins as chief engineer in August 2006. Stack was hired as Firehole’s CEO in 2007.
“When they wrote the job description, I couldn’t think of anyone in the country who would be a better fit,” says Robbins, who was a professor of finite element analysis and composite materials at the University of Maryland at the time. “The job at Firehole allowed me to fully utilize my expertise in both of these areas.”
From a business perspective, Hansen credits Stack and Nelson, Firehole’s chief technology officer, with really moving the company forward. Hansen referred to Stack as “the straw who stirred the drink.”
Here We Go
While Firehole was incorporated as an actual company in 2001, it wasn’t until late 2009 that it garnered its first product sale.
“I’ll never forget the first time they (Firehole) sold something. It was the day of the office Christmas party 3-4 years ago,” Hansen says. “They get a call from a company and were asked, ‘Can you invoice this for us?’ They didn’t even know how to do that. But they figured it out.”
Stack, too, remembers that day in 2009 well.
“It was a little bit of, ‘Here we go.’ I was Googling Excel invoice templates,” he says with a chuckle.
From 2010-2012, Stack says Firehole got on a roll, with 50-100 percent growth in the company’s customer base year after year.
Stack admits it took time to realize business wasn’t just about Firehole having grant support and the best computer algorithms. Firehole had to have a software product that worked and, more importantly, was one that companies could use and count on to be reliable.
As a result, Firehole began its hard push into sales and marketing. The company conducted numerous training sessions, hosted web conferences and traveled all over to present demonstrations of its software, Stack recalls.
“That fundamentally changed our business,” Stack says. “We thought we had a good product. But it wasn’t until we could listen to our customers that we could really succeed. We learned to go build it and meet their needs.”
Robbins credits much of that growth to Firehole’s customer service reputation. For example, Robbins says he recently spent four hours in one work day assisting one client with its needs.
Firehole has primarily stuck to filling its positions with folks close to home. Currently, 14 of 18 employees are UW graduates, and many interns are UW students.
“It’s fantastically satisfying. It’s a neat story,” Hansen says. “There are a lot of really happy people down there who have their own dreams and ambitions that are all wrapped around Firehole and Firehole’s future right now. I’m happy for a lot of people.”
“Understanding how technology businesses start and grow; understanding their needs and how they differ from retail or service businesses is something that Laramie and Wyoming must learn,” Gern says. “These companies are different, but what we saw take place with Firehole is no different from what occurs in other technology business-rich communities like Austin, Texas; Palo Alto, Calif.; Boston, Mass; or Boulder, Colo.
“Laramie’s technology sector is growing, and the addition of major U.S. companies like Autodesk or UL in our community is another signal that Laramie’s business sector is changing with technology-based business occupying a greater and greater overall sector piece,” Gern continues.
If the planned Cirrus Sky Technology Park had been in place in Laramie 10 years ago, Stack says Firehole would have located there. He foresees a bright future for technology businesses for the Gem City.
“It can happen here,” Stack says of Laramie’s potential to be a tech hub. “We’re starting to show the validation that this community’s commitment to technology is starting to pay off.”
Jerad Stack, former CEO of Firehole Composites, poses next to the company sign. Firehole was recently acquired by Autodesk. Stack’s new title is product manager for composite software. (UW Photo)