From the March 2012 issue of Entrepreneur

Trailblazing motorcycle designer Erik Buell followed up a disastrous collaboration with Harley-Davidson by launching a new company, a showcase for innovative racing bikes.

Now his lightweight, high-style "crotch rockets" are riding away with international competitions and legions of global fans. But can a tiny American producer of a premium product get the funding it needs to survive in a mass-produced world?

A powerful sport bike is like a Ferrari on two wheels--a symbol of freedom, danger, beauty. For Erik Buell, it stands for something else, too: rebirth.

Last summer at the prestigious American Motorcyclist Association Superbike series in Lexington, Ohio, Buell debuted a pro racing version of the 1190RS, the first offering from his second motorcycle startup, Erik Buell Racing (EBR). The rider finished a respectable 10th. A few months later, at the German Superbike Championship, an early customer entered with an EBR bike and won, beating out established competitors on Ducatis, BMWs and KTMs.

It was a coup for EBR, a company of fewer than 20 people with an extremely limited 2011 production run of just 100 exotic street racers, priced between $37,499 and $43,999. And it was a real triumph for Buell, who'd spent the previous year and a half recovering from the crash of his first startup, Buell Motorcycle Company (BMC).

The story of BMC's rise and fall was 26 years in the making. In 1983, Buell left an engineering gig at Harley-Davidson to start the very first American sport bike design and manufacturing company. Harley was king when it came to cruiser bikes, but as a racer, Buell was passionate about the more athletically minded "crotch rockets" and had ambitions to compete in a market that was--and still is--dominated by Japanese and European brands. (Sport bikes represented 15 percent of total U.S. motorcycle sales in 2010, according to the Motorcycle Industry Council. Total motorcycle sales were valued that year at $5.87 billion, with an estimated 560,000 units sold.)

Erik Buell
Erik Buell

Harley-Davidson, looking for ways to break into new consumer markets, took an interest in Buell's early sport bikes, designed in the garage-turned-workshop of a rented farmhouse in Mukwonago, Wis., about 40 miles from Harley's base of operations in Milwaukee. The motorcycle giant bought a minority share in BMC in 1993 (Buell got a headquarters and factory buildings in East Troy, Wis., on a street named Buell Drive), and five years later went all in, purchasing 98 percent, ostensibly providing Buell with everything he would need to become a worldwide phenomenon: access to a tremendous marketing budget and a deep network of distributors and suppliers. Success seemed just around the next hairpin turn.

But BMC never really gained traction--due, it seems, to apathy from Harley's cruiser-focused dealer network and traditional fan base, as well as what would turn out to be halfhearted marketing support for the sport bike line. BMC's sales peaked at approximately 15,000 bikes in 2008. Then, disaster struck. Harley was hit hard when the economy tanked, with third-quarter 2009 sales down 21.3 percent from the same period in 2008, and year-over-year revenue down by more than one-fifth.

Management's solution was to shut down non-core divisions such as BMC.

At the time, Harley-Davidson CEO Keith Wandell noted in a prepared statement, "The fact is we must focus both our effort and our investment on the Harley-Davidson brand, as we believe this provides an optimal path to sustained, meaningful, long-term growth." What wasn't said was that Buell had lost it all--even the rights to the Buell Motorcycle name.

"I suddenly had a lot of time on my hands," Buell jokes, leaning back in his seat in a conference room at EBR's offices, in the one building on Buell Drive he managed to salvage in the sell-off. "I had to turn to my guitar for a creative outlet."

Feel the rush
Buell designed the 1190RS for sleekness and fleetness, using computational fluid dynamics to develop the aerodynamic shape. Here are some key features.
1190RS VIEW LARGER IMAGE »

(Incidentally, that was no joke. He released a blues-influenced rock album, Anthem, under the band name Erik Buell and The Thunderbolts, which hit the top spot on the ReverbNation charts in his category and state. By Buell's own admission, the tracks are a front-row seat to his angst after Harley liquidated BMC, and his ultimate decision to give things another go.)

These days, Buell's mood is much improved. He is stocky, with squarish features accented by trendy black plastic eyeglasses and slicked-back hair. When he's excited, he talks quickly and assertively, and he fidgets like he's overflowing with energy. The goal with EBR, he declares, is to become a serious motorcycle manufacturer, with a production chain supporting domestic and international suppliers, and design and assembly in the U.S. "We're a diverse country, and Americans have a broad scope of thinking and a pioneering mindset," he says. "EBR is going to stay focused on invention and intellectual property, and do radical things that the rest of the world isn't doing. That's how we're going to bring some American flavor to the sport bike industry."

Extreme Design
First and foremost, sport bikes are about absolute performance. "It's like a great pair of skis," says Tony Stefanelli, head of EBR's product development. "All you should be thinking about is how you want to get from one place to the next. If you flick a good bike, it should just do what you want it to do."

Since EBR is still building out a dealer network, many of the bikes that have been produced remain at the company's headquarters in East Troy. From Milwaukee, it's a leisurely 40-minute ride on the I-43S, past Sawyer's Farm & Meat Plant and the East Troy Electric Railroad, to where EBR's operations are housed. The building is unassuming--a blue-trimmed cement facade--but the distinct smell of oil and machines assaults your nose the moment you clear the glass doors, and in the carpeted lobby area, there's a fleet of a dozen Buell-designed bikes from various decades.

Erik Buell Racing

On the left is the 1190RS. It's an undeniably beautiful machine. Buell's signature styling elements are there, including the sporty, upswept lines from handlebar tips to tail; exposed technical elements; Buell's innovative Zero Torsional Load (ZTL) brake, which lightens wheel weight by eliminating the need for hubs; and the underslung mufflers, placed under the engine to limit noise and maintain a lower center of gravity.

"Our design DNA is radically different," Buell says, noting the fuel tank integrated within the bike frame (available in a light carbon-fiber version), which reduces vibrations and shaves off even more weight from the frame. In fact, all these elements combined make the 175-horsepower, 389-pound 1190RS a full 50 pounds lighter than some competing bikes.

The bike is also eco-friendly, producing just one-quarter of the allowable tailpipe emissions listed by the Environmental Protection Agency, and about a third of the minimum required in California. "You can have both performance and meet environmental standards," Buell asserts. "You just have to stop whining and fix it."

This can-do philosophy likely stems from his time at BMC, when he was attempting to build bikes that would appeal to both racing enthusiasts and traditional Harley-Davidson fans (in other words, a virtually nonexistent customer base). It was difficult to design a bike that handled like a crotch rocket but utilized Harley's heavy, air-cooled V-Twin engine--a shiny, loud device perfect for a badass American cruiser but not appropriate for a sleek racing machine. The awkward match was probably another reason for weaker sales than Harley had hoped.

Buell, however, likes to stay positive about his corporate experience, and notes that it sowed the seeds for EBR's design philosophy. "Compromise might have kept me from doing my best work, but it drove me to extreme innovation. I made wild inventions, and squeezed every drop of potential out of our designs," he says, noting that he even figured out how to build city, cross-country and training bike models off a single platform.

Glynn Kerr, co-founder and president of the Motorcycle Design Association, says Buell's designs at BMC were never mainstream enough to drive big sales. "They were very interesting and clever technologically," Kerr says, "but I think Erik wanted his bikes to look very unique, and if you deviate more than 10 percent from the norm, well, there's only a certain level of newness that a customer will accept."

Kerr concedes that Buell is fueled more by passion and persistence than by hopes of commercial success--a formula that is both his greatest strength and his greatest weakness. "Most people would have thrown in the towel after Harley took him over, trashed his vision. He must have been destroyed, watching his company being sold off piece by piece … but Erik's never been scared to push the envelope of what could be done to a motorcycle," he says.

"He was always less yoked to conventional thinking than engineers at other companies," says Cycle World magazine editor in chief Mark Hoyer, who notes that some of the design elements Buell introduced for sport bikes, such as underslung mufflers and ZTL brakes, have been adopted, years later, by other companies.

Meanwhile, the 1190RS continues to win accolades. It was Cycle World's pick for 2011 Best Superbike; Motorcyclist magazine named it "Best Dreambike" and named Buell "Motorcyclist of the Year." After a ride on the track (during which he used turn signals as he blew past other riders), Motorcyclist reviewer Aaron Frank praised the 1190RS as "gorgeous, fine-handling and remarkably fast … everything we ever wanted an American superbike to be."

On top of that, the 1190RS has been a hit at international motorcycle shows, and Buell has secured one- and three-year sponsorship agreements for two riders to race in the American Superbike Championships. By the end of this year, EBR plans to up its production level to 900 bikes and will be close to coming out with a mass-market offering in the range of $10,000 to $20,000.

"With Harley, our bikes were good, but we didn't hit people's hearts," Buell says. "They didn't make anyone go, ‘I gotta have that.'"

Slow Ride
Harley remains a big part of Buell's story. There are two BMC bikes on display at the Harley-Davidson museum, a two-story monument to gleaming chrome and vintage memorabilia just outside of downtown Milwaukee. The first is the 2001 XB12R Firebolt, on which racing legend Craig Jones set the record for longest "stoppie," or front wheelie, in 2006 (305 meters at a speed of 120 mph). The plaque in front of the second, a 2003 FXB9R, diagrams Buell's "trilogy of technology," his design philosophy promoting chassis rigidity, low unsprung weight and mass centralization.

Timothy McLean, a retired police detective who works at the museum, lights up when he talks about his old Buell, an aerodynamic 1997 S1 Lightning that had "instantaneous response on the throttle and handled really well on the curve--very fast, very powerful." But what impresses McLean most is Buell's story. "He was this individual guy who did his own thing so well he was able to convince Harley to buy into his business. He came out with a good machine, and he kept things at home," he says. "It's phenomenal, and it's nice to see things happening for him."

The only real obstacle to EBR's growth has been sluggish investment--surprising, given that Buell has 30 years of experience designing championship-winning bikes; owns rights to about $40 million worth of tooling; and has produced a critically acclaimed product in a booming industry that could be leveraged as an export while exchange rates are favorable. (More than 50 percent of his sales thus far have been to overseas customers.) And he wants to do all this in a region that could use more high-paying jobs.

The fact is there are plenty of interested customers, but EBR can't reach them until a dealer network is established, a lengthy process that requires a huge legal investment. Setting up international distribution is even more expensive, not to mention the wait to match up production timelines with cash flow.

"We had the potential to do 1,500 bikes in 2012, but we had to revise that down to 900. I didn't think it would be this hard to raise $20 million," Buell laments, pointing out that the total he needs isn't much more than what many less-established tech and service companies are getting every day from banks and venture capital firms.

"I think there's a lack of interest and understanding in this country about what we're trying to manufacture. We're not trying to be like Jesse James' West Coast Choppers," he says, referring to the small-volume, custom-built bike brand. "We're trying to be BMW and produce, in volume, hundreds of millions of dollars worth of sport bikes."

Buell has thus far kept things going at the fledgling company with a combination of small private and personal investments and an early move into design consulting. "I wanted to wait until we were strong and had a product line in place," he admits, "but you have to be flexible and tenacious if you want to survive when things aren't going the way you want."

Project details are confidential, but Buell says EBR has been contracted by several companies, including one of the largest Asian motorcycle manufacturers, to do customer research and conceptual projects. It's forced him to "stretch," learn new things, test processes, build superfast and look for opportunities. (Buell says he just finished a consulting project in eight weeks that might have taken others in the industry close to eight months--a process he likens to a "lap of terror" in a qualifying race).

Buell says he has been able to accomplish so much with so little because EBR has a tremendously talented team, and almost everyone is a racer. "We're brave when we make decisions, because we all want to be first. To be first, we have to get there fast, and we can't make mistakes."

Expect a good showing when EBR heads to Daytona for the 2012 Superbike Championship in early March. "We found an additional 10 mph in the post season, and the bike can reach 213 mph in race trim," Buell says, beaming. If true, this would officially make the 1190RS the fastest thing on two wheels manufactured in the U.S.