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.
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).
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.
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 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.
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: