Koenigsegg: A Lesson For Startups

I am a car guy. If it has means of propulsion and a go pedal, I love it. Recently, I’ve been astounded by Koenigsegg. They’ve just released the Regera, a mind-blowing hybrid “Megacar” with 1,489 horsepower. And no transmission. With plush seats and Apple CarPlay. How can they produce cars like this at such low volumes and still turn a profit? They’ve been in the business for over 20 years, which is a heck of a long life for a small-volume car manufacturer. And, to grow through that time is even more incredible.

The lessons that Koenigsegg is quietly providing are applicable to more than developing cars. Some of the development ideologies they follow parallel with the tech world, and by proving them out with carbon fiber and aluminum, they fortify those ideas. Let me share with you what I think is making Koenigsegg so successful.

Technical Leadership

Christian von Koenigsegg, I’m certain, has never counted a bean in his life. He espouses the technical details of his cars wherever possible and never once does he mention shaving pennies off of production costs. In-chassis fuel tanks, “triplex suspension,” “wg precat systems,” and the showstopping “Dihedral Synchrohelix Door Actuation System” are just some of the innovations that Christian loves to bring up whenever possible. Invisible to customer eyes, there is honeycomb aluminum sandwiched between the door sills for strength. Every Koenigsegg has a removable roof because, well, if your chassis is already that stiff there is no downside to lopping off the top. There are videos of Koenigseggs braking from 150 mph without the driver touching the wheel. These cars are mechanical marvels.

It goes without saying that a startup’s CTO shouldn’t merely be a tool used to build the CEO’s dreams. It is convenient to hand-wave technical details away as the means to an end, but those means are the very basis for success and should be put on a pedestal. Sometimes, the Minimum Viable Product needs to include a certain level of quality.

A user story of “Users will want to enter car” could have led to Ford Festiva hinges. But, there was a much cooler and arguably better answer out there. Just check out the robotized openings on the Regera and tell me that doesn’t make the car desirable (and it doesn’t add much weight, by the way).

 

Resiliancy

In 2003, a fire burned Koenigsegg’s factory to the ground. Thankfully, most of their cars and equipment were saved. This kind of setback has drowned lesser companies, but Koenigsegg got back on the horse. Enough said.

Charge What You’re Worth

Freemium is quite the trend these days, but the dredge of free apps have lead to slave development. A similar trend emerges from the supercar world. As Jolopnik puts it, “for every Ferarri, there are a dozen bankrupt companies that have tried, unsuccessfully, to enter the supercar game.”

Every backyard mechanic dreams of shoving high horsepower engines in lightweight cars and beating the big boys, but often the place where this dream falls apart is making the leap from fun one-off to production. You, me, and the guy down the street can plunk $50,000 down at the tuner shop to create a tube-chassis Subaru-powered mongrel. And you might even use it once to beat a Ferrari once, before it catches on fire.

The fun stops when you realize the details of making a real production car: crash testing, insurance, import fees, switchgear, R&D, accountants, marketers, the building, this all adds up. Suddenly, that $50,000 is gone, you’re left with a one-off piece of junk rusting away in the annals of history, and you still have to pay the dry cleaners to get the gas smell out of your trousers.

This could all be avoided by facing reality and charging $1.9 million for your premium supercar. Rather than figuring out how little they could charge, Koenigsegg  figured out how much they had to charge to turn a profit. In the world of development, leave freemium volume to the Facebooks and Googles of the world. The person who really, really needs your application will happily pay $9.99 for it. Or $1.9 million. Or whatever it is worth.

Manageable Growth

At Koenigsegg, they have much higher overhead than an average tech startup and are in a relatively slow-growth segment. Despite this, they have survived and thrived for 20 years. How?  It took them from 1994 to 2013 to build 100 cars. In fact, they produced their first customer car eight years after starting the company, in 2002. They’ve ramped up slowly over time, and if my napkin calculations are correct they are on pace to make about 30 cars this year alone. At over $1 million a pop, that’s not chump change. You’d be ecstatic if you saw that trend on a chart without any dates attached to it.

Life in the startup culture demands a quick return. However, quick growth can come with cancer – dilution of culture, slower iterations, dilution of shares, mismanagement, loss of control, lack of cash flow. If your aim is to bootstrap without outside capital, these problems are compounded. Koenigsegg teaches us to think long-term.

Founder With A Mission

The company, Koenigsegg, that I founded, it’s pretty much all I am and all I do. I spend all my energy, all my time, all my passion creating the cars together with the employees that feels like my family, and the cars are like my children together with my two sons.

I guess to me, Koenigsegg is pretty much everything.

— Christian von Koenigsegg

Christian credits the animated film Flåklypa Grand Prix, which focuses on a bicycle repairman who creates his own race car, for igniting his drive to create his own car when he was just five years old. He’s not looking for a buyout, he’s looking to continue to build the best cars he can. This is lifestyle entrepreneurship at it’s finest, a founder who is doing something he would do if no one paid him and is managing to make a living from it. There’s nothing wrong with starting a company just to make money. Nobody in the import/export business watched a pivotal film in their youth that made them study the complex dynamics of a changing global transportation economy. However, there is something truly special about a founder who manages to make money doing something they love.

Conclusion

While there are a ton more individual lessons to learn, these all stem from Christian von Koenigsegg’s single-minded focus to make the best cars possible. I’ll let him say it in his own words:

Bridging The Management / Programmer Gap

When I read comments from programmers on the internet, one thing that stands out is how much management matters. Good management makes the difference between people staying and people leaving, people being productive or people being smothered. Essentially, it can be the difference between a department that works and one that drags on the company’s bottom line.

Unfortunately, a large portion of managers just don’t get it. They don’t understand the process of programming and have to rely on the information their own programmers feed to them. If you are a programmer, you probably have been there: it’s the 9th hour on a project, and the boss comes in and asks for just one more teensie weensie feature. It sounds so simple! So, you try to explain technical debt, or babies being born in 9 months, or the architecture revisions required, or that you’ll need to test it. And the manager nods, smiles, says it will be “just this one time,” and in a few weeks does the same thing again.

In my life, I’ve had the fortune of having excellent managers. But even so, not everyone I’ve worked for and with always empathized with the programmer. “You estimated 20 hours and it is taking you 40. Explain yourself!” How many times have we all heard that? Programming estimation has become a fine art or perhaps a horrible science to some. Multiply by pi, use planning poker,  weekly sprints, or just give in to the religious tribe that is Agile and never talk to those Waterfall heathens again. Some of these approaches work better than others, but there is always the moment when a project feels like it should be going faster and management is wringing their hands.

Having stepped out from my role of a pure programmer to the founder of Upward Pixel, I’ve had to juggle many roles. It’s a one-man shop, but perhaps I’m too proud to call myself a freelancer. In any case, I’m more ambitious. But, the reality is that I’m currently performing all the roles in a business: bookkeeping, marketing, selling, building. I’m my own janitor, and believe me, my employee is messy.

The funny thing is, some of the frustrations I’ve had as a developer with a W2 are the same frustrations I deal with as a manager of myself. I would love to know at the beginning of the project how long it will take, I would love to shove features in left and right, I would love for deadlines to be always met. But, the programmer side of me knows that development is inherently a tough cookie to crack. Fortunately, these two needs – to make the client happy and to take the time needed to write what’s needed – are easily resolved in my own mind and more easily communicated clearly to the client.

But for those out there who have a manager, now that I can see the other side, please cut them some slack. Just as you wish you could truly educate them on why “just use a library” isn’t always the answer, they would love to sit down with you and explain the sales funnel and why we need to stop you in the middle of working to give them some info on a future project. The best management-developer relationships have this mutual understanding, but it’s rare to develop naturally. This understanding and empathizing on both sides of the table usually has to be molded from the hellfire of projects going wrong and the shared attitude to learn from missteps.

As one programmer to another, this is the message I’m trying to share: your manager is not your nemesis. They are not out to get you (unless they are, in which case please find another position). They are trying very hard to balance the needs of the client or other stakeholders with your needs, and sometimes they might not understand why unit testing can save time in the long run. Give them some slack, because you may not have client retention rates in the forefront of your mind all the time, either.