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Henrik Fisker: Building a New Car Company, From Scratch

Henrik Fisker says people still have a hard time believing he has started an independent car company. Now that business, Fisker Automotive, is worth $1 billion.

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In 2007, Henrik Fisker embarked on something no one had managed in a generation: He started a new car company in the United States. In 2011, that company, Fisker Automotive, became worth a billion dollars. As part of our series on start-ups that have achieved the billion-dollar milestone, Inc.'s Jeremy Quittner spoke with Fisker about investors, the Karma, and falling in love with cars.

My motivation for starting Fisker was simple: I thought there must be a market for beautiful, exciting, fast, environmentally friendly cars. The car is probably the only product you can still fall in love with and have a relationship with. Pretty much everyone, even if he or she doesn’t like to admit it, is somewhat emotionally connected to cars. 

When I think about reaching the $1 billion mark, amazement comes to my mind. It is not something I thought we would be able to do so fast when I started the company. But not everything is predictable when you create a new company, especially a new car company. We took a huge step to develop a brand-new car from the ground up. That, of course, is extremely capital intensive. But it also sets you apart and gives you the possibility of building a very strong brand. You can create an iconic car by spending the right amount of money.

I don’t think there is another industry in the world where we are just so used to established brands. If you think about jeans or phones or television, we are used to new brands popping up right and left. But in the car industry, we grew up with Mercedes, BMW, General Motors, and Ford, and nobody can remember during his or her upbringing a new car brand coming to life.

In Anaheim. Really.

There is something kind of historical that people who work at Fisker realize they are part of, and people who are buying the car realize they are part of. People will stop me in the street or coming out of a restaurant and ask, "Who makes this car?" And I say, "Fisker Automotive, out of Anaheim, California."  And they say, "Yes, but who is behind it?" They don’t realize it is actually possible to start a new car company. They are suspicious. They think it must be a special version from Maserati or BMW or someone else. That is when you realize how unique and extraordinary it is to start a new car company these days.

Now that we have the first product out, the Fisker Karma, we know what the technology costs, and we have improved several areas, and now we can start to take cost out of it. All of these factors take a lot of the risk out of it. That really is where the ultimate valuation comes in, because obviously investors who decide to become part of the company now have a lot less risk than earlier adopters did.

Once you have done your first round, it is in the interest of those first investors to help get a higher valuation. That way, they lose less of the company when you get more money in. After each round, it is really a discussion with the investors and the bank.

One thing that affects valuations is how many [financial] milestones you’ve made and how well you are doing. Another is the appetite for further investment.

If it's a billion dollars, is it still a start-up?

I am not the receptionist and the design chief anymore. I used to have to pick up the phone and talk to people who placed orders for the car. When you reach a certain size, you need to have processes in place. Now you have hundreds of different people working in an environment with more than 100 suppliers worldwide, which you also need to fit into the development process and sales process and ordering process and everything else.

It is very exciting, in the early days, to have the chaos and excitement and innovation and everyone out everywhere in the company, everyone wearing all the hats, but there is a time when that does not work, and the chaos becomes nonproductive. It's hoped that what you take with you from the start-up days is some of the energy and less bureaucracy. 

You go through many different stages as you grow, and I wouldn’t say there is always a clear process. There have been various financial meltdowns worldwide. We have had some financial difficulties in the last year that have come out of Europe. That can have a serious effect on valuations, although they may have nothing to do with the company.

You need to focus on creating the actual value of the company, not just the theoretical value. The actual value comes from a great product that sells well and is ultimately profitable.

IMAGE: fiskerautomotive/Flickr
Last updated: Jan 8, 2013

JEREMY QUITTNER is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.
@JeremyQuittner




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