Billionaire Elon Musk is an innovator, engineer, inventor, explorer, entrepreneur and philanthropist. But what do we know about the man himself?
Turning science-fiction into reality
Elon Musk was a multi-millionaire by the time he reached the age of thirty-one thanks to his creation of the company that became PayPal, the popular money-transfer service for Web consumers. Musk has become one of a new breed of what the New York Times called "thrillionaires," or a class of former high-tech entrepreneurs who are using their newfound wealth to help turn science-fiction dreams into reality.
Sells homemade video game…
Musk is a native of South Africa, born in 1971 to parents who later divorced. His father was an engineer and his mother—originally from Canada—was a nutritionist. Musk was fascinated by science fiction and computers in his adolescent years. When he was twelve, he wrote the code for his own video game and actually sold it to a company. In his late teens, he immigrated to Canada in order to avoid the required military service for white males in South Africa. It was still the era of apartheid, the South African legal system that denied political and economic rights to the country’s majority-black native population. Musk was uninterested in serving in the army, which was engaged at the time in a battle to stamp out a black nationalist movement. Thanks to his mother’s Canadian ties, he was able to enrol at Queen’s University in Kingston, one of Ontario’s top schools.
Musk had planned on a career in business, and he worked at a Canadian bank one summer as a college intern. This was his only real job before he became an Internet entrepreneur. Midway through his undergraduate education, he transferred to the University of Pennsylvania, where he earned a bachelor’s degree in economics and a second bachelor’s in physics a year later. From there, he won admission to the prestigious doctoral program at Stanford University in California, where he planned to concentrate on a Ph.D. in energy physics. He moved to California just as the Internet boom was starting in 1995, and he decided he wanted to be in on it, too. He dropped out of Stanford after just two days in order to start his first company, Zip2 Corporation. This was an online city guide aimed at the newspaper publishing business, and Musk was able to land contracts with both the New York Times and the Chicago Tribune to provide content for their new online sites.
Musk was just twenty-four when he started the company, and he devoted all of his energies to see it succeed.
At one point he lived in the same rented office that served as his company’s headquarters, sleeping on a futon couch and showering at the local YMCA, which "was cheaper than renting an apartment," he explained in an interview with Roger Eglin of the Sunday Times of London. Still, the company struggled to fulfil its contracts and meet the payroll and other costs, and he looked for outside financing. Eventually a group of venture capitalists, investors who provide start-up money to new businesses, financed Zip2 with $3.6 million, but he gave up majority control of the company in exchange.
Is Elon Musk the rea-life version of Iron Man?
ValueWalk put together an infographic (below) of the two men – one real and one fictional – to see just how similar they may be. Once you get past the basic stats such as height and weight, you really have to start to wonder. Elon Musk hasn’t created an armored suit (yet), but there are some interesting similarities.
Starts online bank…
In the end, Musk’s decision was a smart one. In February 1999 Compaq Computer Corporation bought Zip2 for $307 million in cash, which was one of the largest cash deals in the Internet business sector at the time. Out of that amount, Musk was paid $22 million for his 7 percent share, which made him a millionaire at twenty-eight.
In 1999, he used $10 million of it to start another company, which he called X.com. This was an online bank with grand plans to become a full-range provider of financial services to consumers. The company’s one major innovation was figuring out how to securely transfer money using a recipient’s e-mail address.
Musk’s proven track record from Zip2 helped it gain serious attention and generous investors right away.
Two important executives signed on with him: investment banker John Story and Bill Harris, the former chief executive officer of Intuit Corporation, the maker of the best-selling Quicken accounting software as well as TurboTax, a tax-preparation program. Harris was appointed president and chief executive officer of X.com, with Musk serving as company chair.
The company received a generous infusion of $25 million in start-up capital from Sequoia Capital, a leading venture-capital firm in California.X.com went online in December 1999 with a bold offer for new customers: those who opened an online checking account with X.com received a $20 cash card that they could use at an automatic-teller machine (ATM). If they referred a friend, they received a $10 card for each new member who signed up.
Within two months, X.com had one hundred thousand customers, which was close to the number reached by its major competitor, Etrade Telebank. But consumer skepticism about the security of online banking was X.com’s biggest obstacle to success, and there was a setback when Musk and the other executives had to admit that computer hackers had been able to perform some illegal transfers from traditional bank accounts into X.com accounts.
They immediately started a new policy that required customers to submit a canceled check in order to withdraw money, but there were tensions in the office about the future of the company.
In March 2000, X.com bought a company called Confinity, which had started an Internet money-transfer presence called PayPal. PayPal was originally set up to let users of handheld personal digital assistants, or PDAs, transfer money. It had only been in business a few months when X.com acquired it, and Musk believed that its online-transfer technology, which was known as "P2P" for "person-to-person," had a promising future.
He and Harris did not agree, and Harris resigned from X.com in May 2000. Five months later, Musk announced that X.com would abandon its original online bank and instead concentrate on turning itself into the leading global payment transfer provider. The X.com name was dropped in favour of PayPal.
PayPal grew enormously through 2001, thanks in part to its presence on eBay, the online auction Web site where person-to-person sales were happening in the hundreds of thousands. When PayPal became a publicly traded company with an initial public offering (IPO) of stock in February 2002, it had an impressive debut on the first day of Wall Street trading. Later that year, eBay bought the company outright for $1.5 billion.
At the time, Musk was PayPal’s largest shareholder, holding an 11.5 percent stake, and he netted $165 million in valuable eBay stock from the deal.
By then Musk had already moved on to his next venture. In June 2002 he founded SpaceX, or Space Exploration Technologies. He had long been fascinated by the possibility of life on Mars and was a member of the Mars Society, a nonprofit organisation that encourages the exploration of the red planet.
Filmmaker James Cameron (1954–) is one of several notable Mars Society members. Musk wanted to create a "Mars Oasis," sending an experimental greenhouse to the planet, which in favourable alignment of the planets is about 35 million miles distant from Earth. His oasis would contain a nutrient gel from which specific Mars-environment-friendly plant life could grow. His plan had a cost of $20 million. But then he learned that to send something into space with the standard delivery method, a Delta rocket made by the Boeing Corporation, would add another $50 million to the cost.
Musk even tried to buy a rocket from Russia, but realised that dealing with the somewhat suspect international traders who dealt in such underground, or illegal, items was just too risky. So….(continued below)
Musk: “Space is pretty far out of the comfort zone of just about every VC on Earth,”
Musk thought that maybe he might be able to build his own rocket instead. He began contacting innovators and technicians in the American aerospace industry, and he managed to lure some experienced engineers and technical specialists away from companies like Boeing and TRW to come and work for him at SpaceX’s headquarters in El Segundo, California.
He had a much more difficult time attracting venture capital for this idea, however. "Space is pretty far out of the comfort zone of just about every VC on Earth," he admitted to Matt Marshall of the San Jose Mercury News. Instead, he was forced to put up his own money to build what would become the first reusable rocket in the private sector.Musk and his new SpaceX team began to build two types of Falcon rockets. The name came from the "Millennium Falcon," the spacecraft in the Star Wars movies. The plan was to build a rocket by using existing technology and at the lowest possible cost.
The Falcon I, for example, uses a pintle engine, which dates from the 1960s. It has one fuel injector, while standard rockets used by the U.S. National Aeronautics and Space Administration (NASA) generally use what is known as a "showerhead" design that features several fuel injectors. The company also needed a theodolite, which is used to align rockets, and instead of buying it new, they saved $25,000 by finding one on eBay!
There are other, equally expensive costs associated with rocketry. Since Musk’s design would be reusable, the company needed to get back the rocket’s first stage, which the rocket sheds as it leaves the Earth’s atmosphere. The part usually falls into the ocean, according to safety plans, but retrieval at sea is expensive.
How to Think Like Elon Musk
How is it even possible that Elon Musk could build four multibillion companies by his mid-40s — in four separate fields (software, energy, transportation, and aerospace)? Fortune Magazine spells out the thought processes of the man who can do all these things. Imagine what you could do if you thought like Elon?