Elon Musk – a Resilient Entrepreneur

Background

Elon Musk is a resilient entrepreneur who is consistently changing the business world with every opportunity he takes on. He was born on June 28, 1971, in Pretoria, South Africa. Musk ranks high on the adversity quotient due to his terrible upbringing. At the age of 10 his parents divorced which led to Elon living with his reportedly tough father Errol Musk. Errol was tough to the point of abuse, which made his life at home terrible. Not only was being home already hard for Elon but he was also brutally bullied in school. Although his life in high school and home were both equally atrocious, Musk found his passion to help him escape from it all- technology. By the age of 12, Musk was a self-taught programmer and built his very first product Blastar, a video game that you can still play today. He later sold the BASIC code for the game to an established magazine called PC and Office Technology for $500. This was just the beginning for the visionary and revolutionary- Elon Musk. 

At 17, Musk faced another challenge which was the South African military- whose sole purpose back in the 1980s was to enforce apartheid. To avoid the South African military, at 17 Musk decided to move to Canada where he could later obtain Canadian citizenship through his model and dietician Canadian mother, Maye Musk. He continued his studies in Canada, attending Queen’s University initially before he transferred to the University of Pennsylvania where he graduated with a Bachelor of Science in Psychics as well as a Bachelor of Arts in Economics.

Information on the Industry:

Zip2 and PayPal

In 1995, Musk dropped out of the PhD program at Stanford after only two days demonstrating a great internal locus of control. He went through the entrepreneurship process and launched a software company at the inception of expansion of the internet, with his brother Kimbal Musk called Zip2. Zip2 was a company that provided a searchable business directory- an internet version of the yellow pages with maps included (Bauer, 2018). Musk identified his key contacts in his network to fund this company in where he needed $28,000. He collected money from his father and funds from angel investors and successfully launched Zip2. Shortly after the launch Zip2 had won multiple contracts with major players including The New York Times and the Chicago Tribune. After some tension at Zip2 and the tech bubble fast approaching the board sold Zip2 to Compac in 1999 which resulted in Musk receiving 7% of the sale- $22million.

In the same year he sold Zip2, he perceived an opportunity to meet an unmet market need which was a one-stop shop for sending email transfers of money, this later became the value proposition of his next company- x.com. Musk made the opportunity actionable and co-founded x.com, an online banking company which he funded utilizing some of the money he made from the Zip2 sales that quickly went from a start-up to his new business. Later the business merged with its competitor Confinity and before long, it took over the online financial services industry (Dodds, 2017). In 2001 x.com renamed itself PayPal, which quickly became the online payment system of choice, and before you know it mass adoption of the product came into play. With thousands of users that turned into more than 1 million users in a few months. Part of the growth among users was due to this marketing campaign Elon Musk made, he knew he needed access to customers and this campaign skyrocketed. To give $10 to every referral of PayPal recruiting new customers daily, this is also called the cost of customer acquisition.

Although all was going well and business was booming, tension arose again when Musk was ousted from the CEO’s chair which again led to another sale, eBay in October of 2002. Through altercations Musk has had with the board of both Zip2 and PayPal Musk continues to show resiliency and continue to strive through, onto the next project. The transaction between PayPal and eBay was enormous, for his 11.7% stake in PayPal, Musk received $165 million from this sale which was more than enough to pursue his other interests including space engineering and alternative energy sources. Musk had no issue when it came to ideation when one door closed his next venture was ready. 

SpaceX

Musk is futurist. He doesn’t just look at current market trends he goes above and beyond and sees the unmet needs for the future. He wanted to conceptualize mars, which was a plan to commercialize space travel and colonize marks to avoid the inescapable reality of extinction of humankind on earth. After many trips to Moscow to shop for Soviet Intercontinental Ballistic Missiles that would be refitted to deliver payloads into space, and after many rejections of Musk’s proposal, he moved on to his next venture- launching of SpaceX in 2002. The company’s mission was to create a “true space-faring civilization” (Dodds, 2017). Before long in 2006 NASA gave SpaceX a contract to develop another vehicle named the Falcon 9, this later led to another contract totaling $1.6 billion in 2008.

SpaceX continued to beat the odds and became the first commercial company to dock with the International Space Station in 2012 (Dodds, 2017). This was the best start-up because all good start-up ideas have three things in common: it’s something the founders themselves want, which Musk felt strongly about space-faring civilization. That they can build, and that few others realize are worth doing. This is how SpaceX started on the cusp of an opportunity and passion.

Tesla

Tesla Motors was originally founded by Martin Eberhard and Marc Tarpenning whose dream was to free the customers from oil burden (People, n.d). This was a dream that Musk believed in, this was the foundation of his decision when he came into the project in 2004, with a personal contribution of $70 million. The start-up was in the position where the market that was still new and left consumers with many questions and doubts- but that never stopped Musk. He then became chairman of the board of directors. Although there were many doubts in this industry there was one thing that enticed consumers, a good looking electric car that satisfied all of their needs. Knowing the unmet market need, Musk was actively involved within the company and participated in the designing of their first electric car. After many modifications by 2006, Musk received Global Green 2006 product design award for Tesla Roadster design. Tesla Motors continued to scale at an incredible rate and now the pool of investor in Tesla Motors consist of the creators of Google, totaling an investment of $100 million.

On the peak of success within Tesla Motors, Musk hit a roadblock in 2007 as the Tesla Roadster was about to hit production. Management failures led to massive selling price increases equaling almost twice as much as the original price of $92,000. In addition, there were strategic miscalculations on Martin Eberhard’s behalf, prolonging the release date of the car. Once again when surprised with adversity, Musk rose above it and demonstrated critical management skills and fired everyone who had a hand in stalling the development of the project (People, n.d). Subsequently, he headed the company by himself. During this difficult time, the cash flow within Tesla Motors was not positive - costs exceeded revenues, leaving Musk with having to vigorously cut costs efficiently and effectively. It wasn’t until Musk invested his last $20 million in Tesla Motors that the company was finally saved from bankruptcy. 

Musk saw an opportunity to build an electric car that was not only appealing but affordable to consumers- that was the beginning of the Tesla Model S. This new model outlines the four characteristics of an opportunity; timely, the market was ready. It was durable, the affordable selling price will last long enough to generate a return on investment. Taking timely and durability into consideration, the attractive profit potential within the market was there. It was also made to bring value to the customer and environmentalists of the world, satisfying the customer-centric element of an opportunity. Tesla Motors was creatively destructing] not only the electric car industry but the entire automotive industry. Musk continues to work towards growing the company globally and ensure that supercharger stations to charge the cars will follow the same trend.

Learning from Elon Musk

Elon Musk is one of the greatest entrepreneurs and innovators. He is a risk taker, as he believes it is one of the secrets to success. What I learned from Elon Musk is that anything is possible with hard work and passion. Musk was incredibly passionate about every venture he took on and that showed within the company’s success. I also learned that following current and near future trends is not enough, you need to go beyond what everyone else is doing and look at what the future needs. Not many people are thinking about the extinction of the human race and if they are, they aren’t coming up with a solution for it - but Musk is. He is an agent of change, consistently turning his ideas into opportunities and making them actionable. 

The strategies implemented by Elon Musk throughout his career in my opinion, were extremely effective and imperative to his success. It was his passion and drive to constantly improve and make his dreams a reality that makes him one of the greatest. His resilience till this day continues to go on strong, and I can’t wait to see what he comes up with next.

References

1. Dodds, C. (2017, December 28). Elon Musk: Early Life and Education. Retrieved from https://www.investopedia.com/university/elon-musk-biography/elon-musk-early-life-and-education.asp
2. Bauer, P. (2018, March 15). Zip2. Retrieved from https://www.britannica.com/topic/Zip2
3. Elon Musk. (2019, January 17). Retrieved from https://www.biography.com/people/elon-musk-20837159
4. Elon Musk Biography: Success Story of The 21st Century Innovator. (n.d.). Retrieved from https://astrumpeople.com/elon-musk-biography/