How Elon Musk Took Control of Tesla: Interview with Original Founder (Marc Tarpenning)

If you wait too long, then everyone can do it. We spent nine months coming up with a business plan, trying to figure out exactly how you're going to make a car, and then we went looking for money. One of whom was Elon Musk.

Oh, sure. So Martin and I decided to start a company, and we were kicking around a bunch of different ideas. Martin was really into this electric car idea for a variety of reasons. We were both environmentalists, and also the physics basically says that electric cars are just better in all ways. We had a lot of consumer electronics background, and we had seen batteries get better and better, cheaper and better. As technology people, as entrepreneurs, we frequently look for things that have been one thing for a long time and the pricing or the capability has been changing and suddenly that's enabling something else using it. When that happens, if you're too early, it's too hard. If you wait too long, then everyone can do it. So you're looking for that sweet spot where the technology is just going to be good enough that you can get a product out there, knowing that every year everything's just going to get easier and better, and hopefully you'll have a dominant market position by then. We analyzed batteries because we knew a lot about batteries, and it was clear to us that it had just crossed over the point where you could make a compelling car using lithium ion cells. The great part is that it's the most expensive part of our product, and every year that component gets cheaper and better because it's driven by this enormous market force of wanting lithium ion cells to be cheaper and better. That means your product just gets better and cheaper even if you did nothing else, which is super powerful. That tailwind is great. So we looked for that kind of thing in electric cars. It was clear to us that it was the right time. We spent nine months coming up with a business plan, trying to figure out exactly how you're going to make a car, what the technology that really matters, what we're going to have, what the car thing is, what we're going to outsource, how we're going to have them built, and then we went looking for money. We found a bunch of investors, one of whom was Elon Musk. Elon led the round for our first outside series of money. He was a great investor; he participated in each subsequent round throughout until our IPO. He ended up being the CEO in the end, but he's the fourth CEO of Tesla. He grew it really well and then destroyed its brand, which is what he's doing right now. But before he destroyed the brand, he grew the company incredibly well.

Yeah, there are a couple of questions there. One is did we ever anticipate it to be as big as it got? We had a couple of goals. What we really wanted to do was completely change the image of electric cars because when we did the engineering analysis, it was so clear that they were going to be higher performance and vastly more energy efficient. The most efficient internal combustion engine is about 17% efficient converting energy into motion, whereas electric cars are well over 90% efficient at that same thing. So you're going to win in the end, and you can do it really fast. The performance of electric cars crushes anything else for physics. The great thing is having physics on your side because it's not going to change. So we wanted to change that perception of what an electric car was because we figured even if we weren't successful, that would change the world. We would all be driving electric cars in the future, and they would be fun. It came up in the conversation: this can potentially change the world. It was one of the reasons we wanted something that was sexy, beautiful, and aspirational so that people would say, 'If I get rich, I want one of those beautiful fast electric cars,' not, 'Oh, it's a golf cart.' That was at the very beginning. Did we think Tesla was going to be as successful as it was? We believed the first product was going to sell well, otherwise we wouldn't have done it. We knew the next product, which had to be a sedan, was going to be a hard lift, but we believed it was possible and it would sell pretty well. Of course it sold much better than we had hoped or imagined. You could always imagine it taking over the world, but it ended up being vastly bigger than we realistically believed. But there is an important thing: the company always had this growth potential, this path. It wasn't like, 'Oh, there's this little niche and we're going to consume it and we have no idea what else is going on.' We always believed we had the next car, and we always knew the market could be very large, and we hoped to get as much of it as possible.

It feels great. Unfortunately, the brand is tarnished at the moment because of Elon's antics, but I love seeing both Teslas—of course I drive a Tesla and they're all over Silicon Valley—but I also love seeing the electric Porsches, electric Kias, electric Volvos, because those wouldn't have existed without us. We forced them into doing that. I'm not thinking of doing another giant thing. There is always a bunch of luck involved. We had a successful first company, Martin had a successful company before that, then we had a successful first company together, and a really successful second company. I'm totally happy investing and advising other companies to help them be successful without trying to do it myself again. It's an enormous amount of work, even if you try to compartmentalize family time. I have other interests.

I'm not an expert in that. One thing is that Tesla up until recently never ran an advertisement. All our sales for the first 10 years were organic, word of mouth. We did PR and press events, but it was all customer-driven, customer-love-driven. We delighted the customer, and that's how I think real brands get established. You can only buy so much brand loyalty; you have to be delivering, and Tesla did that for a long time. The other car companies were years and years behind—they're still years behind in many ways. Storytelling is super important in brand, and being brand consistent matters. Icons, colors, supporting the right things, getting your banner out—that playbook is well understood. PR and brand people know how to do that. It's not my expertise. We worked with a guy who was quite good at it, and the things he cared about, to me as an engineer, seemed trivial, but actually it mattered. I totally understand it now. Brand is important, and you build it deliberately.