“That’s the problem with vacations,” Elon Musk deadpanned after PayPal’s board ousted him as CEO while he was off on a break in Australia. The 6’1” South African entrepreneur and co-founder of Zip2.com (where I succeeded him as CEO in 1999), was out of a job.
After eBay acquired PayPal, Musk took his $100 million-plus and invested it in Tesla, SpaceX and SolarCity. It was like a gambler cashing in his chips only to turn around and build a casino. He lives for the challenge of a big idea.
He also doesn’t know how to keep a secret. Musk had a “Secret Master Plan” for Tesla, then he went and told the world:
1. Build a sports car.
2. Use that money to build an affordable car.
3. Use that money to build an even more affordable car.
4. While doing above, also provide zero emission electric power generation options.
P.S. Don’t tell anyone.
The reason behind this urge to share was to inspire Tesla for the journey. He was the primary funder of an automotive company with no dealer network and no advertising, and that meant the ride was going to get bumpy.
Sure enough, by the summer of 2008, the company had yet to produce its first car, and GM was heading towards bankruptcy. The financial markets fell apart in the middle of Tesla’s round of fundraising.
Once-daring venture investors were now looking for sure things, and Musk admitted, “Trying to raise funding for a startup electric car company in the face of GM going bankrupt was a very challenging endeavor.” According to Business Insider, Tesla was on the brink of bankruptcy. Musk put the options in front of his investors.
When the term sheets came back, he noticed one of his leads, VantagePoint Capital, forgot to sign a page. According to Bloomberg, the firms’ managing partner, Alan Salzman, was coyly trying to derail the funding round. When he confronted Salzman, as Musk later recounted, “The only reason he wanted the meeting was for me to come on bended knee begging for money so he could say, ‘No.’” Musk concluded, “What a f — -head.”
In Ashlee Vance’s biography of Musk, he quotes Antonio Gracias, one of Musk’s closest friends, as saying “Most people who are under that sort of pressure fray. Elon gets hyperrational.”
Hyperrational was what Tesla needed. Musk convinced his investors that if they didn’t pay, he would cover it and dilute their holdings. They handed over $20 million. “Because I was willing to invest everything that I had, the other investors were willing to keep Tesla alive,” said Musk.
The deal closed at 6 p.m. Christmas Eve, 2008, and Tesla produced its first car that year, the Roadster, with an engine based on Nikola Tesla’s 1882 design. The company went public in 2010 at $17 per share. If not for Musk’s determination, Tesla could have ended up a battery unit of a post-bankrupt GM.
Tesla will face more challenges as it fulfills its founder’s vision, as Musk’s 7 percent recent headcount reduction indicates. But his willingness to devote “extreme effort and relentless creativity” is what matters most as Tesla’s market value propels past GM, Nissan, Subaru, Ford, Chrysler and Mercedes (Daimler). You could call it a feat of endurance.
Read more: Asleep At The Wheel: What Tesla’s Board Musk Do Now
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