In 1913 the American automotive industry was booming largely thanks to Henry Ford and the city of Detroit, to which the modern automotive assembly owes much. Tesla, therefore may be the greatest anomaly that the vehicular sphere, and arguably the world of modern business has seen in over a century.
Following the launch of the Roadster in 2008, the company has only grown in worth and reverence. It now boasts an ever-expanding waiting list and has a growing range of electric vehicle models under its belt.
Now that another round of funding is underway we look at the minds, the money and the momentum that have driven the brand to where it is today.
An Unprecedented Notion
Tesla started life in Californian tech mecca, Silicon Valley. It was founded by product designer Malcolm Smith and engineer Marc Tarpenning, with the help of hardware supplier Martin Eberhard.
Though commonplace now, during the prototype stages of Tesla’s ‘Tzero’ the concept of an electric sports car was incredibly novel even by the standards of established car manufacturers.
Smith and Tarpenning’s decision to dismiss fuel in favour of a more sustainable electric propulsion system was virtually unheard of, but the major selling point of the Tzero when compared to other hybrid vehicles, was its performance and aesthetic.
Despite initial teething problems, like the car’s tendency to short circuit when exposed to rain, the founders continued developing and improving upon their prototype.
Money makes the wheels go round
The first injection of capital that Tesla received came in 2004 following the development of the Tzero. Eberhard and Tarpenning accepted funding from various sources including friends, family and a handful of venture capitalists, but due to the relative obscurity of the business in a market that was already saturated, these investments were minor.
Later that year, the founding members sought funding from Elon Musk who many now recognise as being the face of the brand. At the time, however, Musk was heading PayPal.
An indisputably divergent thinker, Eberhard believed that Musk might have shared their vision for the future of electric vehicles so they presented the South African entrepreneur with a business plan to alleviate the same scepticism that may have discouraged previous investors. As hoped, Musk displayed a mutual enthusiasm; so much so that he went on to assume the title of Chairman of the Board shortly after confirming funding.
Musk led the $7.5 million round with personal funds and his vision of commercialising hybrid motoring to make Tesla a mainstay in the field of automobiles..
On The Road
Three years on, Tesla would begin working on their new model, the ‘Roadster’. At this stage the team were also able to recruit Malcolm Powell, a former Project Manager at the esteemed British vehicle manufacturer, Lotus.
The Roadster would differ from the Tzero in various ways and Powell’s expertise brought increased streamlining, better performance and more informed engineering, ensuring it would be the car that shifted perceptions of electric cars.
On the strength of Lotus’ endorsement Musk was able to lead further rounds of funding, seeking private financing from contemporaries like Google co-founders Sergey Brin & Larry Page amongst others, bringing the total amount of investment to $105 million in just three years.
The Musk Era
Gearing up for the release of their flagship vehicle, Eberhard decided that early investor and then CEO Michael Marks should be relieved of his duties. He was succeeded by Ze’ev Drori, a prominent figure in the automotive arena who would oversee the release of the release of the Roadster. It went on to outsell comparable models in the US from industry goliaths such as Mercedes and BMW.
This definitive triumph for the underdogs led to further financing in the form of a low interest loan from the United States Department of Energy Technology Vehicles Manufacturing Loan program. This provided Tesla $465 million to expand their business as it continued to blossom.
The success of the Roadster was a statement of Tesla’s intent. However, when Drori was replaced by Elon Musk, it marked high expectations for their follow up, the Model S.
With a growing waiting list and their intention to make their sophomore model even better than its predecessor, in June 2010 the motor company launched an initial public offering (IPO).
Tesla proceeded to offer up over 13 million shares of common stock to the public, being the first car manufacturer to do so in over half a century. Like the Roadster, stocks were proving popular amongst car enthusiasts and the public. Tesla shares debuted at $17 and gained over $226 million market capitalisation in just four years, allowing the company to increase their production, selling nearly 600,000 units of the models ’S ‘ and ‘X’ to date.
Musk is gaining notoriety as one of the most auspicious business leaders of our time, and Tesla continue to captivate the minds of their following – but what could possibly come next for the visionary Californian brand?
The Next Generation
Earlier this month, Tesla stated that they are seeking to raise $1.5 billion to fund production of the Tesla Model 3.
Tesla are not only dedicated to further advancing the quality of engineering in their vehicles, they have also stated that they would like to expand production, estimating that by 2018 they will be producing 10,000 Model 3s per week.
In a recent announcement the CEO said the company would be pursuing debt financing for the release of their forthcoming coupé. However, Tesla still face a self-described ‘manufacturing hell’ as the backlog of reservations grows.
We can only speculate as the jury is still out on this chapter of Tesla’s ongoing funding stage but based on their remarkable history to date, we think they’ll be ok.
Tesla is a prime example of how successful a business can be with the right leadership team in place. If you are looking to source the best executives to drive your organization forward then talk to us. We are an executive search firm practicing in many sectors from automotive to industrial. Our sector knowledge combines with our understanding of great leadership to identify and secure the right executives for your most important leadership challenges.