Twelve years ago, in order to help prevent bankruptcy, American electric vehicle (EV) maker Tesla received $40 million in additional funding. After Tweeting out the news recounting the incident, Tesla’s CEO chimed in and gave some additional texture to a certified do-or-die situation that seems to have forever changed the company’s trajectory.
Founded in 2003, Tesla included Elon Musk as the fourth employee to join the team as co-founder and board chairman. Because of his vision of Tesla’s first EV, the Roadster, Musk led the design of various components and declared the goal of mass producing affordable EVs for all very early on. Musk continued to lead round after round of raising additional funds to build the Roadster for Tesla. Musk took over as the company’s CEO in 2008 to oversee the official launch of its first EV. Although it seemed like Tesla was (literally) finally on track, things were still very grim behind closed doors.
Bloomberg anchor Jon Erlichman noted in a Tweet how today marks Tesla’s anniversary of raising an extra $40 million from investors to bail it out of financial trouble, despite losing in arbitration in a case against fellow EV maker Fisker. Tesla had entered into an agreement with Fisker a year earlier to help design its then-unnamed Model S sedan, unaware that Fisker had recently entered into an agreement with another company to build a similar all-electric car. This led to the litigation that eventually ruled in favor of Fisker, which could have spelled the end for Tesla had the additional funding not been secured at the time. That being said, the dedication to the $40 million additional was one win, but it was an even more difficult challenge to actually get all squared away legally and financially.
The Little (Electric) Engine That Could
Elon Musk unexpectedly responded to Erlichman’s Tweet and offered to share more of the story, relaying that at one point, Tesla was three days away from bankruptcy. Although the pledge was made on November 3, 2008, at a time when other American automakers were going bankrupt, the actual financing was not so easy to physically acquire from investors. Musk said that on Christmas Eve, the last possible day before everyone went home for the holidays, the funding round was not done before 6PM.
What was most fascinating was how, after explaining that he put every penny he had into the funding round to escape bankruptcy, Musk himself helped get the funds over the finish line with his own money. He also had to borrow money from relatives, Musk said, just to pay his rent at the time. Whether or not customers accept this bold move, for the Tesla brand and its future, it was definitely a crucial moment, and the rest is history. In May, Tesla secured an additional $50 million in funding and has since been innovating. As of this year, by market value, Tesla ranks as the world’s most valuable automaker.
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