The Story of Tesla's Founding Feud

For any entrepreneur that’s lived through a vicious feud between a startup’s original team members, here’s a must-read for you. Our buddy Michael Copeland over at Fortune just wrote a sweeping piece on the dispute that went down between the founder and former CEO of electric car startup Tesla Motors, Martin Eberhard, and Tesla’s chairman and prominent investor Elon Musk. The story goes into excruciatingly awesome detail, with R-rated quotes from both sides. Here’s some of the bits that stood out for us:

Musk’s Investment: Musk has invested $55 million of his own money into Tesla, so more than a third of Tesla’s total $145 million in funding.

How It Started: The original technology came into being when Al Cocconi, an engineer of GM’s EV-1 and founder of AC Propulsion, created an electric sports car called the “tzero” that used 1,000 pounds of lead-acid batteries. Eberhard invested $150,000 into helping Cocconi switch out the tzero’s lead-acid batteries with thousands of lithium-ion batteries. Eberhard then decided to create a business that licensed AC Propulsions technology, so along with partner Marc Tarpenning, incorporated Tesla Motors in July 2003. At the same time, Musk was trying to buy a tzero from AC Propulsion, to no avail. AC Propulsion’s CEO suggested that Eberhard and Musk should meet.

Bad Feelings: Eberhard regrets letting Musk have “disproportionate control of the board,” and while he doesn’t take issue with Tesla the company, he says he has “problems with Elon and the way he treats people. As for Musk: “I have never met someone who is as capable of creating such a disinformation campaign as Martin Eberhard.” Harsh.

What Went Wrong: Tesla at one point estimated that it would cost $65,000 to build the car, with lower costs as production grew. But a short time later the company’s VCs realized that it would “cost $100,000 for the first 50 cars and would decrease only slightly as more cars were built.” Eberhard reportedly told a colleague in a meeting: “If this is true…you and I are both fired.”

Interim CEO Marks’ Action: Interim CEO Michael Marks had a list with the most important priorities for Tesla that included the battery pack, the battery cooling and the transmission. Upon taking the job he ordered a six-month delay and shut down plans for the WhiteStar factory in New Mexico, and he killed plans for a side business producing battery packs in Thailand for other car companies. So the much-touted New Mexico plant was shuttered waaay before the company likely looked to Cali to manufacture its now-named Model S. And Tesla has claimed that moving battery production to the U.S. away from Thailand was a way to cut down on logistics and distribution expenses — not necessarily because the company had shelved a side business.

The Founders Series: There are only seven, and guess who gets them — not you. They are “Musk, his brother, board member Antonio Gracias, investor Jeff Skoll, Google’s Larry Page and Sergey Brin, and Martin Eberhard.” (Though Eberhard’s is currently back in the shop).

Musk Determined that Tesla Not Be DeLorean: Musk tells Fortune, “Why did DeLorean fail?…Because it was a shitty sports car. It may have looked cool, but it had the acceleration of a Honda Civic. That’s what our car would have been with the motor we had and the power electronics we had connected to a single speed.” So not big news, but we like thinking about the DeLorean.


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