PCGS founder ignores advice, starts firm
- Published: Jan 24, 2016, 5 AM
If Professional Coin Grading Service co-founder David Hall had listened to the advice of a business consultant three decades ago, there would be no PCGS.
On the eve of PCGS’s 30th anniversary, Hall revealed little-known facts about the company’s early days, including a startling revelation about a consultant’s advice to forget about starting a coin grading service, according to an announcement from the firm.
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Since the company’s founding on Feb. 3, 1986, PCGS has certified more than 31 million vintage and modern coins with a combined market value of $29 billion, according to the firm. PCGS now has offices in Southern California, Paris, Hong Kong and Shanghai.
Yet, looking back at 30 years of success, PCGS co-founder David Hall recalls that, in the early days of planning the company, he was advised not to do it.
“I had a very high-power, private, personal business consultant sit with me at all the initial PCGS launch meetings in 1985. Afterward, he told me I shouldn’t do it because ‘you spent your entire career specializing in the best coins and positioning yourself that your coins were better than everyone else’s. This will make everyone’s coins the same.’ Obviously, I didn’t follow his advice against starting PCGS,” Hall said.
Almost a nonprofit
Another surprising revelation is that there was early consideration about making PCGS a nonprofit organization.
“We were incorporated by an attorney specializing in non-profits because at first our idea was to make it a non-profit. We decided that non-profits weren’t efficient, and we wanted to do it right and be able to afford to pay for the best graders available,” Hall explained.
Today, PCGS is a division of publicly held Collectors Universe Inc., and Hall serves as president of the parent company.
“We funded PCGS with $100,000 cash 30 years ago. Van Simmons and I put up $50,000. The other owners put up $10,000 each. Bruce Amspacher was the last person to put in his check. He hemmed and hawed, and just wasn’t sure that the idea would work. Finally, his friend Steve Mayer said to him, ‘Bruce, if you don’t want to put in the $10,000 then let me do it.’ So, Steve’s enthusiasm got Bruce off the fence. Now Collectors Universe has a market cap of over $100 million, and that initial $100,000 has turned into over $100 million,” Hall said.
He further revealed that the founders of PCGS underestimated the coin market’s desire for independent expert third-party authentication and grading backed by a guarantee from the firm.
“We thought we would receive and examine about 3,000 coins a month, and we planned our operations accordingly. But 18,000 coins were submitted during the first month. The second month 35,000 coins were submitted. Within nine months submissions were over 100,000 coins a month,” he recalled.
Hall admitted the huge popularity of Professional Coin Grading Service became a problem.
“About a year after we started, the backlog for regular service had a 10 month wait. You sent in your coins and got them back in 10 months. We had an express service at the time and everyone marked their express orders with an ‘X’ on the box so we would open those orders first. At one point we couldn’t even open all the boxes we were receiving and we stored the non-express orders unopened, off premise with Loomis [an armored transport and cash storage company],” Hall said.
“We had a 30-day backlog in just opening the boxes we received. Since we required payment in advance, every one of those boxes had a check made out to us, but we couldn’t even open the boxes to put the checks in the bank.”
One of the other co-founders, Gordon Wrubel, was living in Kansas City and planned to fly to California one week a month to help with grading. Within a few months he moved to California permanently, “and has been in the grading room ever since,” Hall said.
Wrubel recalled how Hall sold the PCGS concept to him and another co-founder, John Dannreuther.
“He said, ‘Gordie, if you and J.D. agree that a coin is a [Mint State] 65, do you think the marketplace will accept it?’ J.D. and I immediately replied, ‘Sure!’ But one thing we had to think about was when David said we could put the coins in sealed plastic holders and guarantee the grade. It sounded crazy at first, but he had the whole concept thought out, and that was the only way PCGS could work,” Wrubel recalled.
In addition to disclosing he was advised against starting PCGS, Hall has one more surprising 30th anniversary revelation: “We never imagined someone would send in a coin more than once,” he admitted.
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