Three Failures
The first SpaceX launch — engine fire. That was it. The second flight made it to space but not orbit. Flight three — still didn't make orbit. Musk burned through the $100 million he had sunk into SpaceX.
Three days after the third failure, Musk announced he knew what was wrong, they'd finance a fourth launch, and it would happen in a matter of months. In the rocket industry, that was a crazy announcement.
Three days after the failure, he announced a fourth launch in a matter of months. In the rocket industry, that was crazy.
The Worst Possible Timing
Musk: Just as we solved those problems, we ran smack into the worst economic recession since the Great Depression. I certainly did not anticipate that we would have the worst economic climate since the Great Depression — and one which was disproportionately bad for cars. General Motors went bankrupt. General f-ing Motors.
We had maybe about a week's worth of cash in the bank, or less. There were two or three business days left in the year to resolve these things. I never thought it was possible for me to have a nervous breakdown. But if it was possible, that was about as close as I was going to come.
We had maybe a week's worth of cash in the bank. I never thought a nervous breakdown was possible. That was about as close as I was going to come.
All In
The fourth launch of Falcon 1 was a huge success. Three months later, NASA gave SpaceX a $1.6 billion contract to resupply the International Space Station. But Tesla was on the verge of financial disaster.
Musk: I had to make a choice — either take all of the capital I had left from the sale of PayPal to eBay and invest that in Tesla, or Tesla would die.
Musk told the board he'd raise a $40 million round to keep the company going. The board wondered how. He said he'd put it all in himself. That confidence catalyzed everyone else — suddenly everybody wanted in.
I had to take all the capital I had left from PayPal and invest it in Tesla — or Tesla would die.
The Last Hour of the Last Day
Musk: It was thankfully a good week. But definitely took its toll from a mental strain standpoint. I think I just burned out a few circuits.
After the emergency cash infusion came a $40 million deal with Daimler for smart car batteries. Daimler later added $50 million for 10% of the company. We closed the Tesla round the last hour of the last day that it was possible to close. We would have gone bankrupt a few days after Christmas if that round hadn't closed.
If I hadn't invested — for sure, if I had not invested everything — there would have been no chance. If we had not succeeded, we would have been used as a counter-example for why people shouldn't do electric cars or shouldn't try private rockets. A double whammy. That would have been really terrible.
We closed the round the last hour of the last day. We would have gone bankrupt a few days after Christmas.