How Tesla Was REALLY Created | Founder Marc Tarpenning

Very good. I'm doing... I'm going to put my feet down so my socks aren't showing in the shot.

You know, really bad day to wear a sock with a hole in it. I should have considered that. I said, 'You know what? There's no way he's going to see my socks.' I wore the nicest pants and shirt. Also, very inconvenient time for the sorority living next door to throw a party last night, so I had to stay up and listen to Nicki Minaj for like 7 hours.

You know, when you're interviewing the founder of Tesla, you kind of get your priorities straight. Girls become a distraction, not a thrill.

That worked out.

Well, there was lots of small times that, you know, we failed or I failed. Before I started any companies, I would get parachuted into these projects where the projects were completely, you know, off the rails. And then my job was to fix it. Those didn't always work out. I had one where I actually fired the client. I mean, it's the only time I've ever walked off a job. Basically, the guy who was running it said, 'Well, I agree. You just don't have what it takes to ever start a project.'

I know. I was thinking about that years later. I thought, you know, like I was such an idiot.

No, it does. I never considered a chip on my shoulder. It was like I was so glad to get out of there. I just thought, you know, my life is too short to be dealing with this. Good. Good.

It was super fun. We're in the dorms, which was a big deal. We got super lucky because...

Unit two? Maybe one of the dorms in unit two. I can't remember.

They were terrible at the time. They're much nicer now. But at the time it was like an incredible housing crisis. They had set up tents in the basement of some of the dorms for people who just could not find any housing anywhere.

Well, right. Exactly. So, people did. It was a thing. One of the funny things though is I get to Berkeley and I'm from Sacramento where everything is flat. It's like tabletop flat, right? So, I get to Berkeley and I'm on the fourth floor of the dorm and you know they have this rickety old elevator so everyone's just walking up and down the stairs and then you know my classes are all over the campus and they're all up and down. And about day three I could hardly walk and I thought this is so unfortunate I get to start college and I'm dying of some weird disease. And then I realized oh no it's just that I'm having to go up and down hills for the first time in my life.

Okay, that's sad. Thankfully, Uber wasn't an option, you know, in the 80s.

So, I had always done random projects for people. So it seemed very natural. So my first job was some random project for a company in Sacramento when I was 16. And you know at that time if you knew something about computers, people would come up to you all the time. In fact I got my first job by standing in line in a 7-Eleven, you know, and I was talking to the guy who ran the 7-Eleven who was part of the computer club basically in Sacramento. And that's why I was at the 7-Eleven was talking to him and the guy in line goes like, 'How do you know all this stuff about computers?' And we started talking and he's like, 'Can you come work for us?' I'm like, 'I'm 15 dude, I can't.' He says, 'When you turn 16 call me.' So I did and that was my first job anyway. So it was always these projects to do certain things and I would get approached all the time to do things for people. Yeah. So I was very used to this idea of kind of piecing together a job. In fact, it never occurred to me I would have a job job. I just never thought that far in advance.

Exactly. And I can shop them around and do only the things I want to do.

I like to be doing stuff, you know. So I kind of stopped working years and years ago and then immediately became a local politician within...

It's a very small, I mean like tiny tiny local politician. I was on the school board here in Woodside for nine years, two terms. And then literally I went to my last school board meeting, then spoke at a startup conference, you know, like two weeks later. And the person on the panel next to me said, 'Hey, you know, what are you doing now?' I said, 'Nothing.' And she says, 'Why don't you come hang out at our VC office for just come by?' Anyway, I'm still there. And that was, you know, six years ago or whatever.

Uh, Sparrow Ventures. We're a $125 million fund.

Excellent. I'm not going to act like I know that. I totally looked that up.

The reason why I was so intrigued by it is they only invest in things that make the world better in some dimension. So we don't invest in advertising. We don't invest in guns and there's a whole bunch of things we don't invest in but otherwise it's a generalist fund. So we look at robotics because we believe robotics makes the world better because it automates tasks that people don't want to do really ultimately. I find being on the venture side of the table after having begged for money for so many years in various projects along my lifetime, I now understand why I never understood actually really when we would pitch a VC fund and we clearly had an awesome idea and like why they wouldn't just say yes. Well, I now get it because, you know, we see so many ideas and it's not only do you have to have the best idea or a good idea at least, but you also have to have one that's better than anything that you've seen recently or that you're likely to see in the near future. So, you know, we say no. VCs say no almost always. You know, it's one in a 100 or whatever they say yes to. And being on that side of the table has been super interesting that way. And I love seeing all these different companies not being an operator, being, you know, not being at the company. When you're part of a company, you make decisions all the time and the decisions give you feedback right away, right? And that's just not the case with VCs. You do all this research and then you say, 'Okay, great.' And you write a check and seven to 10 years later, you'll know whether that was a good idea or not. And that's like, you know, the feedback loop is just terrible that way. Yeah. So...

Most startups fail. So, when a startup succeeds, part of that is just luck, you know, it's just the timing and the people and, you know, you like to think you create luck, which you do to some degree, but a lot of it is just you get kind of lucky, right? So, but you know, oh, we got funding. Okay, great. What you don't see is, to get funding for Nuvo Media, we approached dozens and dozens of firms that said no. I mean, it's just the way funding works, right? And then you finally get a lead and you finally fill out the round and you do all this stuff and every round is like pulling teeth and it's always this thing and there's all these disasters along the way. And then hopefully, the product comes out and people like it, which was the case. But in the end, you look back and the narrative is always, oh, and then we did this and then we did that and we did this marketing campaign that worked and it was great. But that's like the successes of this field of disaster that goes on all around it, right?

My co-founder Martin Eberhard, between us we make like a whole person. And I think that's very useful and we've seen that in other companies where the founding team is especially strong that way. Just personality-wise it's not necessarily the skill and the skill sets are shifted and really complimentary. So I think that's important. Not that we don't invest in solo founders all the time, but there is some data from the VC world that co-founded companies are slightly more successful, slightly more likely to exit well than single founders. And I think that's just why because you get kind of the whole brain assuming the founders don't kill each other, which is also, you know, that's the flip side is that there's a risk for that. We had seen lots of things that were super dysfunctional. That really didn't work. So when you look at that and you think, well, I can do better than that. You know, we'll screw up in different ways. We'll become totally dysfunctional in these other ways, but we had at least some idea of a bunch of the disasters that we would come and help fix in these other companies. And I think that having some operational experience is useful that way. And that's one of the reasons why the VCs don't necessarily think that having a failed company is a disaster because those people tend to have learned lots of lessons from that more so than a success because a success everything kind of works out.

Yeah. And hopefully have learned a lot from the last disaster. Hopefully the correct lessons. Sometimes they learn the wrong lessons. They blame lots of external things on their failure, which may be somewhat true, but a lot of times it's internal.

Sold it. And they, you know, when someone buys your house, they can paint it any color they want. Exactly. They killed it. Well, Rupert Murdoch took control of the company shortly after they acquired it and then he famously said, 'No one's ever going to read on screens.'

He's technically extremely good, but there are things that he doesn't do very well. You know, time management perhaps is one of them. And there's a bunch of operational things that he's just, you know, that's not his thing, right? And those are things that I can do pretty well. Yeah. So that combination and then I'm much more skeptical in a sense for a lot of his ideas. And therefore he has to really justify them and sometimes as he's justifying them he's like, 'Oh yeah right, not a good idea.' So that helps. And then we're both relatively positive. We both kind of believe we can do stuff that doesn't... and you know you have to be a little bit delusional and optimistic to be an entrepreneur. So like we both have that and that's kind of important.

Well, so this is part of having a co-founder, I think, because there are days when you're sure that the skeptics are right and that this is the stupidest thing you've ever done. And ideally, at that same moment, the co-founder comes back from some meeting and said, 'You know, we're going to be bigger than Microsoft.' You know, like it's so, ideally, it's sort of manic depressive, you don't synchronize, you're a little bit out of phase, and it keeps everything running. But there is, you know, when you have people who are smart and have arguments against your vision, that's a time when you really have to sharpen the pencils and make sure your vision is right. Yeah. And we did that, you know, at the beginning, with Tesla, we did that. We changed the way we were going to sell the cars really early on. I mean, before we raised money because we got hit by people saying, you know, that's a bad idea. The way you were going to do it, with these dealerships and stuff, that's not going to work. And the more we researched that, we're like, 'Oh, shoot. They're right. They really know that market really well.' And they're absolutely right. So, those are examples where the people attacked the vision, but then it caused us to modify what we're going to do in a beneficial way.

Relatively quickly, we decided that it was possible to make the thing that makes the car go, the drivetrain, and that that drivetrain would be the most efficient drivetrain ever. So, the question was, how can you actually make the car? After a bunch of research, we figured out there were contract manufacturers that screw cars together. We then presented that to some people we knew couldn't invest for a variety of reasons. We told them, 'Hey, we've got this idea and we know that your fund can't invest in it.' And it turns out that if you call up some vague acquaintance and you say, 'Hey, we have this crazy idea for an electric sports car, we want to pitch you. Can you give us feedback?' The whole partnership will show up because they're so starved for seeing anything that's novel. It was great. And then we went out and pitched after refining our pitch to investors that we hoped would invest. And we got two early stage investors, SDL Ventures and Compass Technology Partners to say yes, but they don't lead. So you have to find a lead, right? So we had their money, we had some money from friends and family, angels, but we needed to find a lead and we had heard through the grapevine that Elon was interested in electric cars. So we went down and pitched him and he peppered us with questions over like a long weekend. We flew down again and met with him. And one of the great things about pitching Elon was that, you know, we went down to his rocket company which at that time was only a year old. They were just building their first rocket motor. And to somebody building a rocket ship in a big garage, electric sports cars just don't sound that weird. Like you're not going to be thrown out because, oh, that's a crazy idea. Like, he's building a rocket ship, right? So, and he agreed to lead and he was going to write a bigger check and could lead. Then we were off to the races. Then once you had that, everyone came together. Now, we had seen lots of other firms that had said no in that interim because almost always VCs say no.

You know, he was not super well known at the time, right? But he still had the PayPal success and was building rockets. Yeah, he was building rockets which everyone thought he was crazy. Completely crazy. So it was not... and people still think that today. Demonstrably differently crazy now, but you know I don't think building rocket ships was a real improvement of his image in the bigger picture at the time. Now it turns out it was, SpaceX is the most amazing company in the US I think but that was a long, that was also an overnight success that's like 15 or 20 years in the running. But it did help with a couple of investors that had invested with him before, that had invested in him before.