This is a story about two bankrupt entrepreneurs and the tiny car that brought them back from the edge of ruin after they rescued it from obscurity. A hocked Rolex watch, an angel, a garage full of mothballed machinery and a Czech arms factory also play important roles. 

From these, Steven Singer and Justus Bauschinger fashioned the Lilliput Motor Company in 1990. Lilliput, which began as a very small catalog business, grew steadily until 1996. Then the partners sold it to Genesis Direct, a New Jersey catalogue consolidator. But in March of 1999, not quite two years later, the founders bought it back. 

Their story illustrates some of the great entrepreneurial themes: the power of persistence, the value of a good idea and sheer luck, and the perils of growing too fast. It also shows that even entrepreneurs who have failed time and again can finally succeed if they find the right niche. 

The partners are vivid contrasts. Mr. Bauschinger, "Slim", now 55, may sometimes be gruff-voiced and outspoken. The title on his business card is "Auto Didactic". He is responsible for product scouting, international negotiations, catalogue design and copywriting. Mr. Singer, "Steve", now 49, is friendly, fast talking and eager to please. His card says "Chief Mechanic," and he handles the operations. 

Ten years ago, the two were partners in an upscale toy store called Kinderzimmer. The store went broke in 1989, dragging both men into personal bankruptcy. They had also experienced business failures in the early 1980's when their respective outdoor apparel companies failed. But they had one more idea.

Slim had noticed that men in suits would occasionally wander into their store and gladly pay $50 or more for the small die-cast metal cars, known as Micro-Racers, originally made in the 1950's by the German toy manufacturer, Schuco.

In 1990, Steve and Slim incorporated as the Lilliput Motor Company. They ordered 100 of the VW Beetle Micro-Racers and began a modest advertising campaign on the West Coast. The shipment sold out in days.

But when they were ready to place another order, there were no more Bugs to buy. Werner Nutz, who had been a toolmaker for Schuco in the 1960's and 70's, and who been making Micros in his own workshop after the Schuco bankruptcy, had died.

So Slim hocked his gold Rolex for $6000 to compile an inventory of the Micro-Racer tooling now owned by the Widow Nutz. That's when the angel, Jared Dreyfus, a venture capitalist in the San Francisco Bay Area, saw a Micro-Racer, recognized the toy from his own childhood and agreed to invest enough money so that Lilliput could acquire the original tools and dies and make more cars.

Later that year, the 22 tons of equipment were moved into a recently idled arms factory in what was then Czechoslovakia. Tiny toy cars "Micro-Racers" soon rolled off the assembly line where the product had been tanks and howitzers.

Steve and Slim mailed out fliers, sold hundreds of the cars, and were on the road to success. They both relocated to Yerington, Nevada, a small farm community about 90 miles south and east of Reno. Steve brought along his wife and two sons. Slim was then single, and now married. Steve has since remarried and has a baby girl.

The business was operated out of a one-car garage for several years before being relocated to a turn-of-the-century Victorian home in the middle of town. In December of 1996, the business was sold to Genesis Direct of New Jersey, but Steve and Slim continued to operate it from it's Yerington base. Two years later, after growing substantially, Steve and Slim bought it back. 

The above is excerpted from an article by Jon Christensen that ran in the New York Times on February 28, 1999.