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BIG X / EXCELSIOR HENDERSON
importantly, will work.
Rather than spend all the money on the bike, show the world and tell them to wait five years, they are getting the company structure in place now and getting financing lined up to support the structure.
We have learned through our reading that investors do not invest in a company, but in the people running it. Furthermore, they look to see how much money the proprietors have invested into their own business. I asked the Hanlon's if this was true in their case. Dan got a big smile on his face and told me he was very impressed that I had this knowledge. He said that many investors turned away because the brothers could not put up substantial amounts of their own money. "These people were wanting Dave and I to put in $300,000 each, or more. We just don't have that kind of money," Dan said. There were many investors that walked away due to this funding issue. However, "we knew there were investors out there who were more interested in what we were doing than how much we had invested," Dan and Dave said. Well, they were absolutely correct with that assumption.
The Hanlon's wanted to concentrate on accredited investors. I asked about bankers and venture capital firms as a part of this group. They told me that banks will not come near a start-up like theirs or any other start-up without assets to back up the loan. Venture capitalists have never been involved in a motorcycle start-up, so they really did not have anything to offer to the company. It was much too different for them.
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The accredited investors they targeted must have a net worth of over $1 million or have an annual household income of over $150,000. As of today, the company has approximately 750 accredited investors who have pumped in around $5 million. They recently completed a $11.5 million private placement and plan on going public in the summer of 1997.
(I will be an investor when they go public, no doubt about it!)
Why did they go after accredited investors only? Jay Novak, the MN Department of Trade and Economic Security Commissioner, explained it as such a high-risk venture that "it was just a precaution taken on the part of the company because of the extreme risk."
They almost lost the company [next page]