INTRO: 5
people founded Tesla, but only 1 became a billionaire. Today,
Tesla and Elon Musk are synonymous. Elon has led the company since 2008,
and it was under his leadership that the company evolved from being a nearly bankrupt startup to a
trillion dollar automotive giant. This has made Elon the largest shareholder of Tesla owning a
little less than 1/5th of the company which has made him the richest man in the world by far. But,
Elon wasn’t the only key player at Tesla. In fact, he wasn’t even one of the original founders, yet
he’s worth magnitudes more than any of the other four founders. Only one of the other founders,
JB Straubel, has even reached billionaire status coming in at $1.3 billion. But,
that was one year ago when Tesla stock was at its peak. Since then, Tesla stock has sold off 48%,
so it’s unlikely that JB is a billionaire anymore. Obviously, this isn’t to say that the
other founders are not well off given that they’re likely worth tens of millions if not hundreds of
millions. But, when you compare those figures to Elon’s $200 billion fortune, they’re nothing. Elon
literally has daily net worth swings that are worth more than the cumulative net worth of all
the other founders combined. So, why is Elon Musk the only Tesla cofounder that became stupid rich?
MONEY TALKS: Taking a look back,
Tesla was originally founded by two men named Martin Eberhard and Marc Tarpenning on July 1,
2003. Martin served as the CEO of the company while Marc served as the CFO. Their dream was
to create a modern technology based automotive company with a focus on batteries, computer
software, and proprietary motors. But, while they had high ambitions, something that they didn’t
have was money. If this was an internet based company or some sort of app, they may have been
able to get away with bootstrapping it. But, given that this was an automotive company, that just
wasn’t gonna fly. So, they set out to raise money almost instantaneously and they would close their
Series A round of funding in February of 2004. They would actually raise a substantial amount of
money coming in at $6.5 million. But almost all of that came from a single individual investor: Elon
Musk. According to Elon, he invested $6.35 million and Martin invested $75,000. Some other sources
actually report that the initial funding round was worth $7.5 million and that Compass Technology
Partners and a few others threw in the last million. Either way though, Elon was by far the
largest investor and he was far from being done. In the meantime, Martin and Marc were building
out the initial Tesla team. The first person that they hired was Ian Wright, and a couple of months
later, they would hire JB Straubel as CTO. Today, these five men are the ones that are credited with
founding Tesla. Elon was definitely an involved investor from day one as he played an active role
in the development of the original Tesla Roadster. But, he wasn’t quite an employee per se given that
he wasn’t that involved in the companies daily activities. That didn’t really matter though
because by far Elon’s largest contribution to Tesla in the early days was capital, and let’s
just say, he kept the capital flowing. About 2 years after Series A, Elon would lead a Series B
funding round that ended up raising $13 million and added Valor Equity Partners to the funding
team. And just 4 months after that, Elon would co lead a Series C funding round that raised $40
million and got many of his tech friends involved in Tesla. This included the cofounders of Google,
Sergey Brin and Larry Page, as well as the former president of eBay, Jeff Skoll. Elon would finally
round off all the fundraising with a fourth round of funding that raised $45 million. These were all
the funding rounds the Elon happily engaged in, but there was actually one more unexpected round
of funding. The dark days of 2008 would force Elon to put everything else he had into the company and
by the time the company got to the other side, they had raised a total of $187 million. This
marked the end of Elon’s personal contributions and VC funding rounds. Since then, Tesla has
primarily relied on the governments, other car companies, and public investors for capital. And
fortunately, none of these have required too much dilution. This left Elon with a ginormous 28.4%
stake at IPO. Meanwhile, the original founders were essentially diluted into oblivion especially
because they weren’t able to contribute much to these funding rounds themselves. Neither Martin
nor Marc have ever revealed details regarding their Tesla stake during this time period but
it was likely in the single digits. That’s nothing to scoff at though. Even a 5% stake
in the company would be worth $34 billion. So, how did Martin and Marc go from being future deca
billionaires to not even billionaires? Well, that can be explained by the ousting of the founders.
FIRING THE FOUNDERS: Elon
Musk fanboys usually like to pretend that this never happened. Meanwhile, Elon Musk haters like
to frame this as Elon being the greedy investor who wanted more power. But, in reality, neither
of these are what really happened. The truth was that Martin and Marc were hitting some brick
walls when it came to running Tesla, and this was becoming increasingly apparent. Martin had set up
a rather inefficient supply chain that encompassed three continents. First, much of the roadster’s
parts and materials were sourced from all over Asia. Then, it was assembled and safety tested
in England. And finally, it had to be shipped to North America to be delivered. This was obviously
not very efficient and it made the production cost of the roadster far higher than the purchase
price. Martin didn’t really want to admit this, so he allegedly misled investors regarding how much
the Roadster would cost to produce. Elon claims that Martin assured him that the Roadster would
cost $65,000 after the first 100 units. However, knowing how inefficient Tesla’s supply chain was,
Elon was sus of these numbers. So, he ordered a detailed cost breakdown of the car and it turned
out that it was closer to $120,000. Apparently, even that was being generous. By the time they
actually got past the first 100 units, the materials alone were costing them $140,000 per
car. For obvious reasons, Musk was triggered and moved to fire Martin. The right way to approach
this situation would have been to setup a meeting Martin and hash out their differences. Martin
claims that he was well aware of his shortcomings and that he himself had brought up the idea of
bringing in a more experienced CEO to replace him. So, I’m sure they could’ve come to an amicable
solution if they had just set up a meeting. But instead, Elon decided to arrange a shareholder
coup while Martin was attending a business meeting outside the country. And Elon wouldn’t even inform
Martin until after the deed was done. As you would guess, when Martin heard about this,
he too was triggered, and this has led to the great feud between them ever since. Apparently,
Elon offered Martin a position as an advisor, but it seems that Martin took this as more of an
insult than an opportunity. All of this transpired during the summer of 2007, and Martin and Marc
would both leave Tesla altogether at the beginning of 2008. They would turn around and sue Elon for
forcing them out, but they would eventually settle. The full details of the settlement
were not revealed, but one of the agreements that they came to was that all of them would be
credited as co founders of Tesla, and that’s how Elon Musk, JB Straubel, and Ian Wright officially
became co founders. Ian had already left Tesla on his own will just one year after joining,
so he obviously didn’t have a very big stake in Tesla. Martin and Marc likely did though,
and the only reason they’re not deca billionaires today is because they sold the majority of their
stakes, likely out of spite. And that leaves us with just JB Straubel and Elon Musk.
AGGRESSIVE CEO COMPENSATION:
Elon’s aggressive funding rounds no doubt played a massive role in his multi hundred billion dollar
fortune, but that’s not the only ingredient. Something else that has put him far ahead of the
other founders is his aggressive CEO compensation. Musk often likes to claim that his compensation is
only $1 per year and while that may be technically true, it means absolutely nothing. For someone as
rich as Elon, no company can afford to pay him a cash salary that’s worth his time. Even if a
company paid him $200 million per year like Sundar Pichai, it would take him a thousand years to earn
his current fortune, and that’s before taxes. So, the only way Elon can be compensated is stock
compensation, and oh boy, his stock compensation is nuts. His latest compensation plan was created
in 2018 when Tesla was worth $59 billion. The plan entailed Elon getting an additional 1%
of the company for every $50 billion increment in marketcap. To offset for euphoric stock runs like
we saw over the past two years, Elon also has to achieve certain revenue and earnings milestones as
well. For Elon to unlock the entire compensation which is worth 12%, he has to hit a market cap
of $650 billion, annual revenue of $175 billion, and an adjusted EBITA of $14 billion. Tesla has
already achieved a marketcap of $650 billion and an EBITA of $14 billion. So, he just has
to hit the revenue targets. This will definitely take some time given that Tesla still has to grow
their revenue by a $100 billion from where they are today. But, given their current trajectory,
I think it’s reasonable to estimate that they’ll crush that number by the end of this decade by
which point Elon would have grown his Tesla stake by a whopping 12%. If Tesla is worth $3
trillion at that time, Elon’s compensation would have been worth a mind boggling $360 billion.
Not to mention, that’ll just keep growing with time. If Tesla does hit a $10 trillion valuation
like many Tesla bulls are hoping for, Elon’s compensation would be worth $1.2 trillion. Now,
you might be wondering how Tesla’s board approved such a generous compensation plan. Well, while
this numbers are ludicrous from an individual’s perspective, they’re not that crazy compared to
Tesla’s growth. When Elon pitched this idea in 2018, this is essentially what he was asking
for. Would it be possible for everyone to dilute their shares by 12% and give it to me if I 13X the
company in the coming years. Taking such a deal is a no brainer. If Elon doesn’t hit his goals,
you don’t even have pay him. If he does hit his goals though, both of you would have ridiculous
gains. Now of course, there are some shareholders that are mad and have even filed a lawsuit
against Elon and Tesla, but this is definitely the minority. And that brings us to JB Straubel. Even
though JB was a cofounder, he was never CEO and so he never had access to such generous compensation.
WHY ONLY ELON IS RICH: Whether you think it’s fair or not,
the reason that Elon is magnitudes richer than Tesla’s other founders is because he
played his cards extremely well. Elon leveraged his position to the absolute maximum every step
of the way. When he was an investor, he led every single funding round and put in every penny he had
into the company, maximizing his stake. Then, when he became CEO, he slashed his salary to
the absolute minimum so that he could maximize his stock compensation. We should also mention
that Elon’s current Tesla stake only accounts for about half of his net worth. The rest of
his net worth comes from SpaceX and potentially Twitter by the time your watching this. Meanwhile,
the remaining Tesla founders never had the leverage of capital and/or they made some missteps
along the way that pushed them out of the company altogether. Given their situation, they should’ve
started a much cheaper business if getting rich was their goal. But, honestly, I don’t think they
mind too much. While they’re not billionaires and definitely not centibillionaires, they’re still
extremely well off. And though they may not be as rich or as popular as Elon, there’s no doubt that
their real world impacts are far larger than what their net worths may suggest. Do you think Elon
stole Tesla? Comment that down below. Also, drop a like if you’re glad that Tesla is doing well and
electrifying the world. And of course, consider checking out our discord community to suggest
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