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a last-ditch effort to raise all the personal funds he could and put them into the company. He took out a loan from SpaceX, which NASA approved, and earmarked the money for Tesla. Musk went to the secondary markets to try to sell some of his shares in SolarCity. He also seized about $15 million that came through when Dell acquired a data center software start-up called Everdream, founded by Musk’s cousins, in which he had invested. “It was like the fucking Matrix,” Musk said, describing his financial maneuvers. “The Everdream deal really saved my butt.” Musk had cobbled together $20 million, and asked Tesla’s existing investors—since no new investors materialized—to match that figure. The investors agreed, and on December 3, 2008, they were in the process of finalizing the paperwork for the funding round when Musk noticed a problem. VantagePoint Capital Partners had signed all of the paperwork except for one crucial page. Musk phoned up Alan Salzman, VantagePoint’s cofounder and managing partner, to ask about the situation. Salzman informed Musk that the firm had a problem with the investment round because it undervalued Tesla. “I said, ‘I’ve got an excellent solution then. Take my entire portion of the deal. I had a real hard time coming up with the money. Based on the cash we have in the bank right now, we will bounce payroll next week. So unless you’ve got another idea, can you either just participate as much as you’d like, or allow the round to go through because otherwise we will be bankrupt.’” Salzman balked and told Musk to come in the following week at 7 A.M. to present to VantagePoint’s top brass. Not having a week of time to work with, Musk asked to come in the next day, and Salzman refused that offer, forcing Musk to continue taking on loans. “The only reason he wanted the meeting at his office was for me to come on bended knee begging for money so he could say, ‘No,’” Musk theorized. “What a fuckhead.” VantagePoint declined to speak about this period, but Musk believed that Salzman’s tactics were part of a mission to bankrupt Tesla. Musk feared that VantagePoint would oust him as CEO, recapitalize Tesla, and emerge as the major owner of the carmaker. It could then sell Tesla to a Detroit automaker or focus on selling electric drivetrains and battery packs instead of making cars. Such reasoning would have been quite practical from a business standpoint but did not match up with Musk’s goals for Tesla. “VantagePoint was forcing that wisdom down the throat of an entrepreneur who wanted to do something bigger and bolder,” said Steve Jurvetson, a partner at Draper Fisher Jurvetson and Tesla investor. “Maybe they’re used to a CEO buckling, but Elon doesn’t do that.” Instead, Musk took another huge risk. Tesla recharacterized the funding as a debt round rather than an equity round, knowing that VantagePoint could not interfere with a debt deal. The tricky part of this strategy was that investors like Jurvetson who wanted to help Tesla were put in a bind because venture capital firms are not structured to do debt deals, and convincing their backers to alter their normal rules of engagement for a company that could very well go bankrupt in a matter of days would be a very tough ask. Knowing this, Musk bluffed. He told the investors that he would take another loan from SpaceX and fund the entire round—all $40 million—himself. The tactic worked. “When you have scarcity, it naturally reinforces greed and leads to more interest,” Jurvetson said. “It was also easier for us to go back to our firms and say, ‘Here is the deal. Go or no go?’” The deal ended up closing on Christmas Eve, hours before Tesla would have gone bankrupt. Musk had just a few hundred thousand dollars left and could not have made payroll the next day. Musk ultimately put in $12 million, and the investment firms put up the rest. As for Salzman, Musk said, “He should be ashamed of himself.” At SpaceX, Musk and the company’s top executives had spent most of December in a state of fear.PDF Image | SpaceX and the Quest
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