Reg Zeller·April 24, 2023

Building a Foundry Holdco to $30m | Reg Zeller Interview

Reg Zeller is a former Fortune 500 general manager with 17 years in corporate (electrical engineering background, roles spanning GM, M&A, and corporate strategy) who left in 2016 to buy a small aluminum foundry near Minneapolis for roughly $2.7m in revenue and ~$500k SDE — a business in an industry that every expert told him to avoid. He bootstrapped the turnaround by operating hands-on for 18 months, doubling profits, then began a roll-up strategy by acquiring a second distressed foundry for just $256k (which came with the $1.5m of equipment he needed and was generating $500k profit within a year of integration). By the time of recording Reg's holdco, Kane Cast, is approaching $30m revenue across seven foundries and targeting $100m via a 10-location, $10m-per-location model. The key operational unlock was hiring Josh Schultz as president/COO, who built a centralized no-code/low-code tech stack enabling remote management of distributed plants — stripping 80% of a plant manager's administrative duties into shared services and leaving only production and people management on-site. Reg is known in the ETA community for coining the 'fetal position' moment — the 3am bathroom-floor crisis most new owners hit around month six — and for his vocal warnings that the path is far harder than social media makes it appear.

Deal facts

sde ebitda: ~$500k SDE/EBITDA (first acquisition)
revenue: $2.7m (first acquisition); ~$30m projected next 12 months across holdco
financing structure: SBA loan (handled by broker-referred SBA specialist); subsequent acquisitions financed by rolling profits; bank relationship with Security Bank
notes: Second acquisition (tuck-in) purchased for $256k; included two needed pieces of equipment that would have cost $1.5m new; was doing ~$1.8m revenue and ~$200k SDE; made $500k profit in first year post-integration. Now acquiring 7th foundry. Reg takes only IRS minimum ($120k/year) and rolls all profits back into acquisitions.

Why this business

Reg had spent 17 years in corporate, the last four-plus as a general manager running near-shoring and domestic manufacturing initiatives. His thesis was US-based small manufacturing — he believed it could be built into a defensible moat precisely because it was hard, capex-intensive, and had key-man risk that he felt he could solve. A foundry 20 minutes from his Minneapolis home came up for sale; he'd never stepped foot in one before but saw good fundamentals. He was also motivated by a desperate desire to stop working for someone else.

What's working

Roll-up thesis validated: buying underperforming foundries cheaply (often for the equipment alone), integrating them into centralized shared services, and rapidly improving profitability
COVID-era reshoring accelerated their growth dramatically — what Reg thought would take 7-10 years happened much faster as domestic manufacturing demand surged
Partnership with Josh Schultz as president/COO: Josh built no-code/low-code operational systems (Airtable, ClickUp, Acumenica ERP, offshore teams in Mexico and Philippines) enabling centralized remote management of distributed foundries
Capital allocation discipline: Reg takes only the IRS minimum salary ($120k/year) and splits each acquisition's cash flow roughly into thirds — loan repayment, equipment upgrades, and next C-suite hire
Building a moat through equipment investment and knowledge: first-mover in rolling up small foundries with centralized ops playbook, now so far ahead that a competitor would need ~$20m and couldn't operate day one
Geographic distribution serves both customer segments: local small customers who want to visit, and large corporate customers who want multi-location redundancy
Centers of excellence: each facility specializes (high volume, large castings, brass/bronze/zinc, permanent mold) creating capabilities no single small foundry can match
Key-man risk mitigation via succession depth: every person must train an immediate backup and a 1-2 year successor before being eligible for promotion

What's hard

The 'fetal position' moment: ~6 months in, a machine breakdown at 3am led to a catastrophizing spiral — convinced he was going bankrupt, wasted millions; the lesson is that new owners hit this wall and need a peer group in advance
Foundries are capital-intensive, non-recurring revenue, high working capital — exactly what search-world orthodoxy says to avoid; Reg walked in knowing nothing about foundries against warnings from 10 industry veterans
Deferred maintenance: the previous owner had stopped doing maintenance for years without telling him; he only discovered this when a machine broke down, costing productivity and causing the near-crisis
Business was declining 5-10% per year when acquired due to no new customer pursuit; took months of relationship-building and investing in the facility to turn around
First acquisition required 18 months of full hands-on operation before Reg could step back — imperative but grueling
No CFO or controller by design choice — they believe they can build a better system but are routinely told by outsiders they're wrong
Finding and retaining a president/COO like Josh is rare — the model depends heavily on giving operators true autonomy, which most owner-operators struggle to do

Notable quotes

I was warned by at least 10 people — Foundry experts tried and true, 10, 20, 30, 50 years of experience in foundries — that told me absolutely in no way shape or form do not buy a Foundry. This is a terrible idea. These are bad places to be. You could not make a worse mistake buying this. You're gonna lose your money, hate your job, hate your life. And everybody told me and I listened to everything they said, the stove was hot, and I said, 'Eh, I know more than they do, I'm gonna go buy a Foundry.'

Fast forward to about 3 A.M. that morning and I found myself literally just like laying on the bathroom floor, like just every negative thought imaginable going through my mind, assuming that we were going to go bankrupt and that I had just wasted millions of dollars of my wife and I's hard-earned money and it was all gone.

Every time we bought this — except for the first one — I've never taken more than the IRS mandated minimum $120,000 a year out of my foundries. Just continue to roll that forward. Every time we go buy another one, we break it up into a third, a third, a third: a third is going to pay for the loans, a third is going to go to equipment upgrades, and a third is going to pay for the next C-suite executive.

I'm not a startup guy. I'm not an idea guy, really. I can take something that exists and go from zero — I always joke, a lot of people take something from zero to one, startups, you know. I kind of one to three, and then the big strategy to get from three to ten or to a hundred.