Unlocking Wealth Case Study, How Elon actually built (and bought) Tesla

Dear ,

Welcome to week two of Unlocking Wealth Weekly! As part of our newsletter we will be alternating between actionable steps to sell your company and case studies of others who achieved this (and what they did with all the money).

These case studies are meant to be a combination of lessons and inspiration so you won’t need to do as much trial and error on your path to exit(s).

It’s so easy look at the world today and assume the main players have always been in the position they’re in today, but the origin stories are rarely straightforward. Ever wonder how Tesla really got started? You’re probably thinking I’ll say every story has its start, but actually my point in the following is that most success stories have several starts that converge into the final outcome.

What happens when high growth meets perfect timing for capital markets?

Elon Musk’s first business out of college was Zip2, an online city maps company described as bringing newspapers online. There’s really not as much information about Zip2 as you would expect. There’s a lot of vagaries about what the business actually did, that they had contracts with 160 newspapers such as the New York Times and such (to make maps for a global newspaper? Only about 20 of the companies used the service they bought) and even less about the nebulous $307m valuation that the Compaq corporation agreed to purchase the company for several years after founding. 

The main point here was that Musk was, as we all should aim to be in business, in the right place at the right time: The dot com bubble was exploding valuations of anything that was internet related and traditional companies wanted in. Any public company could see that a little bit of accretive dot com M&A could double their valuation on the stock market.  

Given the market sentiment it was a reasonable gamble at the time for Compaq, even though it later proved to be a blunder. The acquisition was made to enhance Compaq’s Altavista search engine, which was later abandoned.

Elon then rolled this money into his next business, a payment processor called X (sound familiar?) and after learning about the equity power of M&A from his last deal, merged with his main competitor Paypal instead of fighting them. Later the combined company was bought by Ebay for $1.5 billion and Elon was now a wealthy man who could pursue whatever projects he wanted.

While many see Elon Musk as the founder of Tesla, most people miss that he actually entered the company as an investor in 2004, when he put in $6.5m. Tesla’s growth was only possible because of a previous business exit - specifically, PayPal's $1.5 billion sale to eBay in 2002.

Tesla wouldn't have survived its early years without Elon's continued investment. 

The lesson here is profound: Successful exits don't just create wealth - they create opportunities to build even bigger companies. Musk's journey from Zip2 to PayPal to Tesla demonstrates a critical principle: Sometimes, selling your current business is the key to building something exponentially larger. Giving up the good to go for the Great. 

Consider this path, which we’re looking at for our portfolio right now:

1. Build and sell a smaller company

2. Use that capital as your "business building fund"

3. Take bigger swings with reduced personal risk

4. Leverage your exit experience to raise additional capital

Today, Tesla's market cap is over a trillion dollars - over 500 times larger than the PayPal exit that made it possible. Yet without those initial exits, Tesla might never have existed.

For entrepreneurs, this raises an important question: Are you holding onto your current business too tightly? Sometimes, selling at the right time can unlock resources for an even bigger opportunity.

Next week, we'll explore how to guarantee you’re in ‘the right place at the right time’ through positioning your company through the buyer’s eyes. Until then, consider what your next big move might be after a successful exit.

To your next deal,

Unlock Wealth Weekly Team

P.S. What's your current exit strategy? If you have one I'd love to hear your thoughts.