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Elon Musk Chose $70M Over $50M From the Right VC. It Almost Killed Tesla.

By Elon Musk · Investing · 1 min read

John Doerr offered $50M and a board seat. Musk chased a higher valuation. He calls it a mistake.

Key Points

Always take a lower valuation with a VC you trust over a higher one with a question mark
Musk compared choosing a VC to getting married
The Tesla Series C decision was one of Musk's biggest regrets

If you have a choice of a lower valuation with someone you really like or a higher valuation with someone you have a question mark about, take the lower valuation.

The $20 Million Mistake

Tesla needed money. Two firms competed for the Series C. Kleiner Perkins offered $50 million. VantagePoint offered $70 million.

Musk wanted John Doerr on the board. He told Kleiner he would take $50 million if Doerr joined personally.

Doerr said he had too many obligations. Another partner wanted the deal. Musk walked away from Kleiner.

Musk wanted the right partner. He settled for the higher check.

Choosing the Wrong Partner

A 40% valuation difference is hard to ignore. Musk chose the money.

He compares picking a VC to getting married. You will be stuck with this person for years. Maybe a decade.

When you optimize for price instead of partner, you get a bad marriage.

Choosing a VC is like choosing a spouse. Optimize for the person.

The Lesson Musk Shares

Musk calls this one of his mistakes. The full story, he says, is even worse than what he reveals publicly.

His advice is blunt. Take the lower valuation with the partner you love. Every single time.

The extra money feels good on signing day. The wrong partner haunts you for years.

The extra money feels good for a day. The wrong partner haunts you for years.

What This Means for You

If Elon Musk can make this mistake, so can you. Valuation is seductive. It feels like validation.

But your board member is your partner through every crisis. Choose someone you trust with your company's life.

Take the lower number. Get the right human.

Take the lower number. Get the right human.