Ins & Outs: Business Trivia - ABC's of Small Business

Got Enough "Skin in the Game"?

What does it mean when an investor talks about an entrepreneur having some "skin in the game?"

Since ancient times, only someone who was very sure of a positive outcome would bet their shirt on whether or not something would succeed. To make this kind of a wager was serious indeed. The unfortunate man who lost was subject to cold, rain and sun.

In modern times, the "Skins Games" in golf have come to mean high risk, high reward. In the "Senior Skins Game," for example, the golfer has to win a hole outright or the money carries over to the next hole. As the golfers progress, the value of the purse for each hole rises, meaning that each hole is "winner-take-all" and the stakes vary from $20,000 per hole to $100,000
for the final hole with a total of $700,000 at stake during a game.

When an investor asks an entrepreneur if he or she has some skin in the game, it means that it's going to hurt the entrepreneur a lot more than the investor if the idea fails and that the entrepreneur sees the potential rewards as being high enough to tolerate that kind of risk.

February 28, 1992, the Callaway Golf Company went public on the New York Stock Exchange. Callaway was becoming dominant in the golf equipment industry with their oversized metal woods named after the World War I cannon, the Big Bertha. The club was designed to result in straighter shots when the ball was hit off center. In the 1999 Oldsmobile Classic, the number of competitors playing with Callaway's Fairway Woods was 75.3% vs 11.4% for the next competitor.

Apple Computer was incorporated on January 3, 1977 with starting capital of $1,300 raised by founders Steve Jobs (who sold his VW bus) and Steve Wozniak (who sold his HP scientific calculator.) In January of 1984, Apple's famous "1984" ad introducing the MacIntosh aired on Super Bowl Sunday. Since that date, Apple has sold more than 31 million MacIntoshes. For more information on the company, go to http://www.apple.com/.

On May 5, 1978, Jerry Greenfield and Ben Cohen opened the first Ben & Jerry's ice cream shop in a converted gas station in Burlington, Vermont. Their investment of $12,000 and a lot of hard work led to a company that now has more than 700 employees and is famous in supermarkets and malls around the world.

If you'd like to take the Pennsylvania State University correspondence class that launched Ben & Jerry's business, call the Department of Distance Education at 1-800-252-3592 and sign up for Agriculture 5150.

For more on the Ben & Jerry's company, go to the official website: http://www.benjerry.com/.

On May 20, 1873, Levi Strauss and Jacob Davis, a Nevada tailor, received a patent on Davis' design of copper riveted denim jeans with stress relief at the picket corners and base of the button fly. Davis didn't have the money to apply for the patent, so Levi Strause paid for the paperwork. In 1998, Levis used enough miles of denim to circle the globe 52 times. Check them out at http://www.levistrauss.com/.

On July 2, 1962, Sam Walton opened the first Wal-Mart in Rogers, Ark. Although Sam was a prosperous small town retailer with 15 stores, he didn't start the company until the Ben Franklin chain of variety stores turned down his idea of getting into the discount business. Today, Wal-Mart has over 900,000 employees and is a favorite of Wall Street investment bankers but remains headquartered in Bentonville, Ark. It's proof that a small town company can grow into BIG business if it gives the customers what they want at a great price. For more information, check out the company website at
http://www.wal-mart.com/ .

On August 12, 1981, the IBM personal computer was released with Microsoft's software. Microsoft had $16,000,000 in sales and 128 employees. The company's sales from June 1998 - June 1999 totalled 18.98 billion dollars. The company now employs more than 27,000 people.

September 1995--The Northern Light Company was founded in Cambridge, Massachusetts. Its service is one of the best search engines available on the internet. Lean on management, most of the company's employees are content experts, librarians, editors and engineers. After two rounds of venture capital, Northern Light is ready for explosive growth. Find this search engine at http://www.northernlight.com/.

The first Gap store was opened in San Francisco in October of 1969. The first products that they sold were records and jeans. The name came from the term, "generation gap. The Gap has more than 2,400 stores throughout the world with 111,000 employees. An initial $18.00 investment in The Gap made at IPO in 1976 was worth $71 on June 4, 1999. Check them out at http://www.gap.com/.