The Cleverness of an Entrepreneur Seeking Capital

As Israel Kirzner has explained, part of the skill set of an entrepreneur is to know where to find the money to launch an entrepreneurial project.

Johnson Products Co., a company that provided hair-straightening potions for blacks, was founded on $250 and eventually for a period was the biggest supplier of hair-care products for the African-American market, according to The Wall Street Journal.

As the afro became popular in the 1960s, the company launched Afro Sheen, which ended up being an even bigger hit than the straightener.

The company was sold to Ivax Corp. for about $70 million in 1993.

So how did George E. Johnson, the founder, get the $250 to launch the company? Through some entrepreneurial street savvy. The Wall Street Journal reports:

Working on the side with a hair stylist, Mr. Johnson came up with an ointment containing lye and petroleum, designed to make it easier for barbers to straighten hair. [In 1954] when he tried to borrow $250 to start a company, a banker turned down his loan request as too risky. A few days later, Mr. Johnson went to another branch of the bank, said he needed $250 to take his family on vacation, got the loan and used it for his new business.

-RW