Tesla chairman and investor Elon Musk explained in a blog post this afternoon that, in an attempt to become cash-flow positive within 6 to 9 months, he has taken over as CEO of the electric vehicle startup and will soon be conducting layoffs. While the moves are hardly unusual, they have particular significance for the cleantech industry in Silicon Valley.
Basically, the message is this: The green party is over, or at least suspended. Companies creating carbon-reducing technologies that aren’t able to bring in revenues, or keep costs down, over the next 6 months look like they are going to have more trouble than in the past raising needed funds. Tesla seemed to spend somewhat freely over the past year as the company wanted to ensure it had the best designed electric vehicle, and was fixing its transmission issues. The CEO before Ze’ev Drori, Martin Eberhard, reportedly was partly ousted for letting finances and cost of the car get out of hand.
In the process of that development, Tesla was turning into the poster child for how a Silicon Valley startup can disrupt an established industry in the green space. But disruption takes a lot of money. And now is the not the time to be spending large amounts. Companies will have to start acting very conservative – if your blue-sky, capital intensive biofuel, solar, or battery company is burning through cash trying to move into production, it’s time to rethink this strategy for the time being and wait out the downturn.
Last quarter, cleantech startups received a record $2.6 billion in venture investment. That amount of funding could look eye-opening by the end of next quarter – most venture capitalists I’ve talked to are now moving cautiously, trying to find ways to stretch their dollars. For while this economic malaise could blow over in a few months, we could also be looking at just the tip of the iceberg. For the time being, the cleantech industry needs to sleep one off after a some extensive partying.