When they were young

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When Tesla was young: the early years

Tesla was founded in early 2003 and unveiled its first car, the Tesla Roadster, in 2006

Innovation series by Steven Loeb
December 11, 2017
Short URL: http://vator.tv/n/4a96

As our readers know, Vator has started a series called when they were young.

It's a look back at the modest days of startups, what traction they had in their first few years, and how they evolved. In the end, we hope to provide a glimpse into what great startups looked like in their first few years.

Stories like these are always well received because it reminds us that anyone, regardless of pedigree and environment, can rise above the noise and have great influence. They show us the value of being resilient, persistent, and committed. If we can follow their footsteps, maybe we too can have similar success.

This segment is on Tesla.

— Tesla's First Year —

Founders (ages at the time): Martin Eberhard (42), Marc Tarpenning (38), Ian Wright, Elon Musk (31), JB Straubel (27)

The name Tesla, from the investor Nikola Tesla, is suggested by Eberhard to his future wife while on vacation at Disneyland in January 2003. 

Founded: On April 3, 2003, Tarpenning buys the domain name Teslamotors.com. Tesla Motors is incorporated on July 1, 2003 in Delaware.

Initial company description: "Tesla Motors will build high-performance electric sports cars. This sounds impossible - both the idea of building cars in the first place, and further, the idea of building a high performance electric car," the company writes in its original business plan.

"But key technologies have recently been developed that make electric cars suddenly very attractive, and the international business climate makes it now possible to build a 'fab-less' car company - a car company without a factory."

tesla business plan executive summary

"As a electric engineer, I know you can make an electric car that rocks, if you want to and I looked around and said, 'Isn't somebody making that car?' and the answer was really 'no,'" Eberhard, then CEO of Tesla, says in 2006.

"As far I'm concerned, I could not manage to buy a car from any of them. None of them were actually making cars one could buy. Otherwise I would have just bought one and been a happy customer, but, since it didn't exist, I said, 'Can I start that company?' I know how to start companies, I've done that before. I've done it successfully a couple of times now and I thought, 'If I can figure out how to take Silicon Valley know how, Silicon Valley know how about how to fund a company, and apply it to this problem, then we have something."

 
— Tesla's Second Year — 

First funding/personell, at one year from founding: In April, 2004, Tesla raises a $6.5 million Series A investment, of which $6.35 million comes from Elon Musk, who joins the board of directors as its Chairman. Eberhard invests the other $75,000. 

Straubel first meets Musk at a lunch in late 2003, where he tries to pitch him on the idea of an electric airplane, which does not interest Musk.

"Through the course of discussion, and failing at that first discussion, we realized that we both had an incredible passion for electric cars. He understood and got the opportunity ahead of us, with advances in lithium ion batteries, better than anyone I ever talked to," says Straubel in 2016. 

"We really hit off after that and it was only a few months later that we connected with the other early co-founders at Tesla. He ended up basically funding our entire Series A round and joining the team."

 

Musk later meets with Eberhard and Wright. He copies the SpaceX articles of incorporation and bylaws for Tesla and has the same people who created the SpaceX logo also create the Tesla logo.

"At the time, 'Tesla Motors, Inc.' consisted of Eberhard, Tarpenning and Wright, plus an unfunded business plan and they were looking for an initial round of funding to create a more advanced prototype than the AC Propulsion Tzero. While there was a basic corporation in place, Tesla hadn’t even registered or obtained the trademark to its name and had no formal offices or assets," Musk later writes.

Musk asks Straubel to join the company.

Revenue, at one year and eight months from founding: For the full year 2004, Tesla sees a net loss of $2.4 million.

Second funding, at one year and 10 months from founding: On February 1, 2005, Tesla raises it's Series B round of $13 million from Musk, Compass Technology Partners and Valor Equity.

— Tesla's Third Year —

Product at two years and three months from founding: On July 11, 2005, Tesla signs a production contract for Lotus Cars to manufacture complete cars for what would later become the Tesla Roadster.

Revenue, at two years  and eight months from founding: For the full year 2005, Tesla sees a net loss of $11.6 million.

 

— Tesla's Fourth Year —

Third funding, at three years and one month from founding: On May 31, 2006, Tesla announces it has raised a $40 million Series C round led by VantagePoint Venture Partners and Musk. Other institutional investors include Draper Fisher Jurveston and JP Morgan Bay Area Equity Fund, along with individuals including Sergey Brin, Larry Page, Nick Pritzker (through his investment partnership, Tao LLC), and Jeff Skoll (through his investment company, Capricorn Management LLC).

The company also announces that Jim Marver, managing partner and co-founder of VantagePoint Venture Partners, will join Tesla's Board of Directors. 

"By leading the technology change from gasoline to electric vehicles, I believe Tesla has the potential to be one of the great car companies of the 21st century," Musk says in a statement. "The starting point is a high performance sportscar, but the long term vision is to build cars of all kinds, including low cost family vehicles. Tesla is one of those rare opportunities to change the world in a positive way and build a valuable company in the process."

Launch, at three years and three months from founding: On July 19th, 2006 Tesla's first production vehicle, the Roadster, is unveiled by Eberhard and Musk at an invite-only event at the Barker Hanger at the Santa Monica airport.

Traction, at three years and four months from founding, one month from launch: Within two weeks of the unveiling, Tesla sells 127 cars.

Accolades, at three years and six months from launch, three months from launch: In October 2007, Tesla Motors is named a recipient of the Global Green USA Product/Industrial Design Award for the development the Tesla Roadster.

Press coverage, at three years and eight months from launch, five months from launch: In December 2006, the Tesla Roadster is featured in Time Magazine as one of the Best Inventions of 2006. 

"What goes from zero to 60 in 4 sec., tops out at more than 130 m.p.h. and appears to be missing a gas tank? The Tesla Roadster 100. It's pure California: a hot sports car that doubles as a statement against pollution and oil dependence. Its massive lithium-ion-battery array can power it for up to 250 miles of highway travel, and even though it will fatten your electricity bill, the Roadster is still twice as efficient as a Toyota Prius," Time writes.

The Roadster is also chosen by Forbes as one of the best cars of 2006, which labels it as the "New Car That Best Lived Up to the Hype."

"Perhaps this year’s most-discussed car, the Roadster from California’s Tesla Motors proves that electric cars need not look like science experiments, and can in fact be as sexy and capable as race cars. The Roadster sold out in four months; the most you can do if you want one is reserve a 2008 model," Forbes writes.

Revenue, at three years and eight months from founding: For the full year 2006, Tesla sees a net loss of $30 million.

 

 — Tesla's Fifth Year —

Fourth funding, at four years and one month from founding, 10 months from launch: On May 11, 2007, Tesla reveals that it has raised a $45 million Series D round of funding. The round is co-led by Technology Partners and by Musk. An additional investment is made by Capricorn Investment Group. All major investors from prior rounds of financing fully participated in this round, including Vantage Point Venture Partners, Draper Fisher Jurvetson, JP Morgan Bay Area Equity Fund, Valor Equity Partners and Compass Venture Partners.

Ira Ehrenpreis, leader of Technology Partners' Cleantech investment practice, joins Tesla Motors' Board of Directors, as does Antonio Gracias, founder and CEO of Valor Equity Partners.

Traction, at four years and one month from founding, 10 months from launch: By May of 2007, over 400 reservations have been taken for the Tesla Roadster.

Business model, at four years and one month from founding, 10 months from launch: In May 2007, Tesla announces the launch of Tesla Energy Group, which is created in late 2006 to allow the company to design and sell Energy Storage Systems to other companies, specifically large lithium ion battery packs made from small, commodity cells.

"More than any other subsystem on the Tesla Roadster, the ESS has required fundamental invention and clever solutions to tricky problems. Nobody makes anything like the Tesla Motors ESS; it’s impossible to hire people with 'prior experience,' so the ESS team is dominated by bright, young engineers with a lot of creativity and enthusiasm. Together, they have filed more patents than any other group at the company. Impossible is a word that has no meaning for them," writes Eberhard.

Bernard Tse, the former founder and CEO of Wyse Technology, step down from Tesla's board and lead Tesla Energy Group.

Personnel, at four years and four months from founding, one year and one month from launch: In August 2007, Musk calls Eberhard to tell him that he has been fired as CEO of Tesla by the company's board of directors. Michael Marks, an early investor in the company, becomes interim CEO.

Eberhard asks that the board have another meeting and he officially resigns on August 8, 2007, becoming President of Technology. 

Personnel, at four years and seven months from founding, one year and one five from launch: In November 2007, Ze'ev Drori is named CEO and President of Tesla.

Revenue, at four years and eight months from launch, one year and five months from launch: At the end of 2007, Tesla sees $73,000 in revenue for the year, along with a $78 million net loss. 

Product, at four years and 10 months from founding, one year and seven months from launch: On February 1, 2008, the first production Tesla Roadster is delivered to Musk at his house.

Fifth funding, at four years and 10 months from founding, one year and seven months from launch: On February 19, 2008, Tesla announces it has raised $40 million in a Series E round. The round is co-led by Valor Equity Partners and Musk.

Product, at four years and 11 months from founding, one year and eight months from launch: In March 2008, regular production begins on the Tesla Roadster.

"While this is an important milestone for the company and a watershed for the new era of electric vehicles, we still have a lot of work to do. Our key focus with the Roadster will be on gradually ramping up our production in a deliberate and controlled manner reaching a rate of over 100 Roadsters per month early next year," Drori writes in a blog post.

 

 — Tesla Today —

In June, 2008, Tesla announced the Model S, and Musk took over as CEO of the company in October of that year. Between 2008 and March 2012, Tesla sold more than 2,250 Roadsters in 31 countries.

In June 2010, Tesla became the first American car maker to go public since Ford in 1956; it raised $26 million at $17 a share. It is now trading at $306.53 a share.

(Image source:


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