With No Capital, MCM Ventures Overseas
It wasn’t coming together at home, so the partners at MCM Motorcycles are taking their first assembly plant overseas. With it goes jobs that could have been in Orange County.
The problem has been financial: After a year of seeking, Costa Mesa-based MCM found it could only get funds from domestic sources at a price the owners were unwilling to pay.
MCM is a start-up company that has designed a powerful new racing motorcycle for off-road use. In a textbook example of how to make something in Southern California without shouldering the crippling costs of building a factory, MCM subcontracted with more than a dozen area businesses in 1994 to get its prototype made for that year’s major European motorcycle show. The bike got rave reviews, the company booked hundreds of advance orders, and company President Bill Kniegge and partners Ove Hasselberg, William Thomas and Bjorn Elvin were as revved up as the big twin-cylinder engine that powers their lightweight motorcycle.
They wanted to begin assembling bikes in Costa Mesa last year, but ran into the money wall. It’s the barrier that keeps many good ideas from being realized--the reluctance of outside investors to pump their hard-earned dollars into businesses that don’t promise a quick return.
Perhaps the partners anticipated too much, business investors say.
“We look for exceptional opportunities,” said venture capital fund manager Charles Martin, laying down a line Kniegge says he and his partners heard often in their yearlong search for funds. “This sounds like a very good business for a few individuals to own, but not for a venture capital investment.
“We listen to maybe 100 pitches a month and do maybe one deal,” said Martin, general partner of Enterprise Partners in Newport Beach. “The companies we invest in need to have exceptional prospects.” Owners also must be willing to cut the investors in for a big slice of the pie, Martin said. “We need a big percentage . . . to make the return worth the risk.”
As for other funding sources, well, Kniegge says, the Small Business Administration and other lenders “don’t even want to talk to you unless you’ve already been in business for two years or so.”
There is some money coming in from private U.S. investors, Kniegge says, but to get enough to set up an assembly facility, MCM is going to Sweden--where its engines are made. Through a business recruiting office in New York--Invest In Sweden--MCM has struck a deal that calls for a government-guaranteed loan from private Swedish banks in return for the motorcycle maker’s promise to build an assembly plant in a community with a high unemployment rate.
Most parts for the MCM bikes still will come from the same Southern California companies that provided the prototype parts. But now they will be shipped to Sweden from MCM offices in Orange County.
Kniegge said the Swedish plant should employ 25 people by the end of the year. Employment could grow to 150 by early 1999 if sales goals are met. Motorcycles assembled in Sweden will be for sale in Europe, where off-road motorcycle racing is a big sport.
Plans for a U.S. assembly facility and U.S. sales haven’t been abandoned, but Kniegge says MCM now is looking at 1999 or beyond before it starts building bikes here. “We really wanted to get started at home,” he said. “But we didn’t want to give up the company to do it.”
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John O’Dell covers major Orange County corporations, manufacturing and economic issues for The Times. He can be reached at (714) 966-5831 and at john.odell@latimes.com
