Most businesses in this world economy are built on OPM (Other People’s Money). There are a lot of ways to get investors or creditors hooked into your businesses success. You seldom get into trouble if you just remember that the money you are using to build your business belongs to other people.
It is possible to get in a lot of trouble if you try to use unconventional sources of financing. Some options are better than others. Desperate attempts to raise money do often hurt entrepreneurs’ chance of success.
It is quite hard to get enough money to build an automobile plant unless you are one of the major auto companies. The following story illustrates the problems related to maintaining enough financing to reach success in the auto industry. Even when you are very sophisticated and experienced starting a new car company is very difficult. John De Lorean tried to get an automobile company going based on building a better vehicle . I never met Mr. De Lorean but I admired him for his fortitude and brilliant design. His car remains a classic today in spite of the failure of his company.
De Lorean had spent his early lifetime learning the automobile industry. By the time he set out on his own in 1975 he had the reputation of a brilliant maverick. His acumen led him to believe that planned obsolescence was a bad idea. He also had some very definite opinions about a lot of the baggage that automobile companies had acquired. By the time he set out to start his own car company he had many admirers and critics in the world of business.
He negotiated a complex deal with the British Government and built a plant in Northern Ireland. That was possibly his first mistake. The British Government turned out to be a bad partner as most governments eventually will. Going into business with a government, any government; is a risky tactic for any entrepreneur. It is always extremely risky to partner with a government unless you are very well connected with the people who are in control of that government.
De Lorean built his factory but ran into problems with his untrained work force, his creditors and both the British and US governments along the way. The SEC eventually forced him to cancel a stock offering in the 27 million dollar range because of questions about his company’s viability. That led him to a mistake that cost him everything.
Mr. De Lorean apparently discussed a drug deal large enough to raise a lot of capital with two FBI agents. Thee agents were posing as possible investors. They taped a conversation with De Lorean and arrested him on international drug charges. The charges were thrown out when his attorney proved that the agents had coerced De Lorean into participating in that conversation. Even though the government’s case was thrown out of court De Lorean was ruined. His company went bankrupt in 1982 and he spent the rest of his life fighting one battle after another related to that failure.
There is a lot of money out in the world that is available to entrepreneurs. Everything from Venture Capital to private equity funds to individual investors can be tapped for funds. If you know how to raise money you can get some. If you don’t know how find someone who does and work with them. Do not ever become desperate enough to even listen to an illegal scheme.
John De Lorean died in 2005. His car and story live on. Unfortunately his story is a cautionary tale instead of the brilliant beacon it might have become. There is more about John’s life and story on the Internet in Wikipedia and other places.
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