Elon Musk

by Ashlee Vance

  In reality, the third launch was a disaster with cascading consequences. Since the second stage of the rocket did not fire properly, SpaceX never got a chance to see if it had really fixed the fuel-sloshing issues that had plagued the second flight. Many of the SpaceX engineers were confident that they had solved this problem and were anxious to get to the fourth launch, believing that they had an easy answer for the recent thrust problem. For Musk, the situation seemed graver. “I was super depressed,” Musk said. “If we hadn’t solved the slush coupling problem on flight two, or there was just some random other thing that occurred—say a mistake in the launch process or the manufacturing process unrelated to anything previous—then game over.” SpaceX simply did not have enough money to try a fifth flight. He’d put $100 million into the company and had nothing to spare because of the issues at Tesla. “Flight four was it,” Musk said. If, however, SpaceX could nail the fourth flight, it would instill confidence on the part of the U.S. government and possible commercial customers, paving the way for the Falcon 9 and even more ambitious projects.

  Leading up to the third launch, Musk had been his usual ultra-involved self. Anyone at SpaceX who held the launch back went onto Musk’s critical-path shit list. Musk would hound the person responsible about the delays but, typically, he would also do everything in his power to help solve problems. “I was personally holding up the launch once and had to give Elon twice-daily updates about what was going on,” said Kevin Brogan. “But Elon would say, ‘There are five hundred people at this company. What do you need?’” One of the calls must have taken place while Musk courted Riley because Brogan remembered Musk phoning from the bathroom of a London club to find out how welding had gone on a large part of the rocket. Musk fielded another call in the middle of the night while sleeping next to Riley and had to whisper as he berated the engineers. “He’s giving us the pillow talk voice, so we all have to huddle around the speakerphone, while he tells us, ‘You guys need to get your shit together,’” Brogan said.

  With the fourth launch, the demands and anticipation had ratcheted to the point that people started making silly mistakes. Typically, the body of the Falcon 1 rocket traveled to Kwaj via barge. This time Musk and the engineers were too excited and desperate to wait for the ocean journey. Musk rented a military cargo plane to fly the rocket body from Los Angeles to Hawaii and then on to Kwaj. This would have been a fine idea except the SpaceX engineers forgot to factor in what the pressurized plane would do to the body of the rocket, which is less than an eighth of an inch thick. As the plane started its descent into Hawaii, everyone inside of it could hear strange noises coming from the cargo hold. “I looked back and could see the stage crumpling,” said Bulent Altan, the former head of avionics at SpaceX. “I told the pilot to go up, and he did.” The rocket had behaved much like an empty water bottle will on a plane, with the air pressure pushing against the sides of the bottle and making it buckle. Altan calculated that the SpaceX team on the plane had about thirty minutes to do something about the problem before they would need to land. They pulled out their pocketknives and cut away the shrink wrap that held the rocket’s body tight. Then they found a maintenance kit on the plane and used wrenches to open up some nuts on the rocket that would allow its internal pressure to match that of the plane’s. When the plane landed, the engineers divvied up the duties of calling SpaceX’s top executives to tell them about the catastrophe. It was 3 A.M. Los Angeles time, and one of the executives volunteered to deliver the horrific news to Musk. The thinking at the time was that it would take three months to repair the damage. The body of the rocket had caved in in several places, baffles placed inside the fuel tank to stop the sloshing problem had broken, and an assortment of other issues had appeared. Musk ordered the team to continue on to Kwaj and sent in a reinforcement team with repair parts. Two weeks later, the rocket had been fixed inside of the makeshift hangar. “It was like being stuck in a foxhole together,” Altan said. “You weren’t going to quit and leave the person next to you behind. When it was all done, everyone felt amazing.”

  The fourth and possibly final launch for SpaceX took place on September 28, 2008. The SpaceX employees had worked nonstop shifts under agonizing pressure for six weeks to reach this day. Their pride as engineers and their hopes and dreams were on the line. “The people watching back at the factory were trying their best not to throw up,” said James McLaury, a machinist at SpaceX. Despite their past flubs, the engineers on Kwaj were confident that this launch would work. Some of these people had spent years on the island going through one of the more surreal engineering exercises in human history. They had been separated from their families, assaulted by the heat, and exiled on their tiny launchpad outpost—sometimes without much food—for days on end as they waited for the launch windows to open and dealt with the aborts that followed. So much of that pain and suffering and fear would be forgotten if this launch went successfully.

  In the late afternoon on the twenty-eighth, the SpaceX team raised the Falcon 1 into its launch position. Once again, it stood tall, looking like a bizarre artifact of an island tribe as palm trees swayed beside it and a smattering of clouds crossed through the spectacular blue sky. By this time, SpaceX had upped its webcast game, turning each launch into a major production both for its employees and the public. Two SpaceX marketing executives spent twenty minutes before the launch going through all the technical ins and outs of the launch. The Falcon 1 was not carrying real cargo this time; neither the company nor the military wanted to see something else blow up or get lost at sea, so the rocket held a 360-pound dummy payload.

  The fact that SpaceX had been reduced to launch theater did not faze the employees or dampen their enthusiasm. As the rocket rumbled and then climbed higher, the employees back at SpaceX headquarters let out raucous cheers. Each milestone that followed—clearing the island, engine checks coming back good—was again met with whistles and shouts. As the first stage fell away, the second stage fired up about ninety seconds into the flight and the employees turned downright rapturous, filling the webcast with their ecstatic hollering. “Perfect,” said one of the talking heads. The Kestrel engine glowed red and started its six-minute burn. “When the second stage cleared, I could finally start breathing again and my knees stopped buckling,” said McLaury.

  The fairing opened up around the three-minute mark and fell back toward Earth. And, finally, around nine minutes into its journey, the Falcon 1 shut down just as planned and reached orbit, making it the first privately built machine to accomplish such a feat. It took six years—about four and half more than Musk had once planned—and five hundred people to make this miracle of modern science and business happen.

  Earlier in the day, Musk had tried to distract himself from the mounting pressure by going to Disneyland with his brother Kimbal and their children. Musk then had to race back to make the 4 P.M. launch and walked into SpaceX’s trailer control room about two minutes before blastoff. “When the launch was successful, everyone burst into tears,” Kimbal said. “It was one of the most emotional experiences I’ve had.” Musk left the control room and walked out to the factory floor, where he received a rock star’s welcome. “Well, that was freaking awesome,” he said. “There are a lot of people who thought we couldn’t do it—a lot actually—but as the saying goes, ‘the fourth time is the charm,’ right? There are only a handful of countries on Earth that have done this. It’s normally a country thing, not a company thing. . . . My mind is kind of frazzled, so it’s hard for me to say anything, but, man, this is definitely one of the greatest days in my life, and I think probably for most people here. We showed people we can do it. This is just the first step of many. . . . I am going to have a really great party tonight. I don’t know about you guys.” Mary Beth Brown then tapped Musk on the shoulder and pulled him away to a meeting.

  The afterglow of this mammoth victory faded soon after the party ended, and the severity of SpaceX’s financial hell became top of mind again for Musk. SpaceX had the
Falcon 9 efforts to support and had also immediately green-lighted the construction of another machine—the Dragon capsule—that would be used to take supplies, and one day humans, to the International Space Station. Historically, either project would cost more than $1 billion to complete, but SpaceX would have to find a way to build both machines simultaneously for a fraction of the cost. The company had dramatically increased the rate at which it hired employees and moved into a much larger headquarters in Hawthorne, California. SpaceX had a commercial flight booked to carry a satellite into orbit for the Malaysian government, but that launch and the payment for it would not arrive until the middle of 2009. In the meantime, SpaceX simply struggled to make its payroll.

  The press did not know the extent of Musk’s financial woes, but they knew enough to turn detailing Tesla’s precarious financial situation into a favored pastime. A website called the Truth About Cars began a “Tesla Death Watch” in May 2008 and followed up with dozens of entries throughout the year. The blog took special pleasure in rejecting the idea that Musk was a true founder of the company, presenting him as the moneyman and chairman who had more or less stolen Tesla from the genius engineer Eberhard. When Eberhard started a blog detailing the pros and cons of being a Tesla customer, the auto site was all too happy to echo his gripes. Top Gear, a popular British television show, ripped the Roadster apart, making it look as if the car had run out of juice during a road test. “People joke about the Tesla Death Watch and all that, but it was harsh,” said Kimbal Musk. “One day there were fifty articles about how Tesla will die.”

  Then, in October 2008 (just a couple weeks after SpaceX’s successful launch), Valleywag appeared on the scene again. First it ridiculed Musk for officially taking over as CEO of Tesla and replacing Drori, on the grounds that Musk had just lucked into his past successes. It followed that by printing a tell-all e-mail from a Tesla employee. The report said that Tesla had just gone through a round of layoffs, shut down its Detroit office, and had only $9 million left in the bank. “We have over 1,200 reservations, which manes [sic] we’ve taken multiples of tens of millions of cash from our customers and have spent them all,” the Tesla employee wrote. “Meanwhile, we only delivered less than 50 cars. I actually talked a close friend of mine into putting down $60,000 for a Tesla Roadster. I cannot conscientiously be a bystander anymore and allow my company to deceive the public and defraud our dear customers. Our customers and the general public are the reason Tesla is so loved. The fact that they are being lied to is just wrong.”*

  Yes, Tesla deserved much of the negative attention. Musk, though, felt like the 2008 climate with the hatred of bankers and the rich had turned him into a particularly juicy target. “I was just getting pistol-whipped,” Musk said. “There was a lot of schadenfreude at the time, and it was bad on so many levels. Justine was torturing me in the press. There were always all these negative articles about Tesla, and the stories about SpaceX’s third failure. It hurt really bad. You have these huge doubts that your life is not working, your car is not working, you’re going through a divorce and all of those things. I felt like a pile of shit. I didn’t think we would overcome it. I thought things were probably fucking doomed.”

  When Musk ran through the calculations concerning SpaceX and Tesla, it occurred to him that only one company would likely even have a chance at survival. “I could either pick SpaceX or Tesla or split the money I had left between them,” Musk said. “That was a tough decision. If I split the money, maybe both of them would die. If I gave the money to just one company, the probability of it surviving was greater, but then it would mean certain death for the other company. I debated that over and over.” While Musk meditated on this, the economy worsened quickly and so too did Musk’s financial condition. As 2008 came to an end, Musk had run out of money.

  Riley began to see Musk’s life as a Shakespearean tragedy. Sometimes Musk would open up to her about the issues, and other times he retreated into himself. Riley spied on Musk while he read e-mail and watched him grimace as the bad news poured in. “You’d witness him having these conversations in his head,” she said. “It’s really hard to watch someone you love struggle like that.” Because of the long hours that he worked and his eating habits, Musk’s weight fluctuated wildly. Bags formed under his eyes, and his countenance started to resemble that of a shattered runner at the back end of an ultra-marathon. “He looked like death itself,” Riley said. “I remember thinking this guy would have a heart attack and die. He seemed like a man on the brink.” In the middle of the night, Musk would have nightmares and yell out. “He was in physical pain,” Riley said. “He would climb on me and start screaming while still asleep.” The couple had to start borrowing hundreds of thousands of dollars from Musk’s friend Skoll, and Riley’s parents offered to remortgage their house. Musk no longer flew his jet back and forth between Los Angles and Silicon Valley. He took Southwest.

  Burning through about $4 million a month, Tesla needed to close another major round of funding to get through 2008 and stay alive. Musk had to lean on friends just to try to make payroll from week to week, as he negotiated with investors. He sent impassioned pleas to anyone he could think of who might be able to spare some money. Bill Lee invested $2 million in Tesla, and Sergey Brin invested $500,000. “A bunch of Tesla employees wrote checks to keep the company going,” said Diarmuid O’Connell, the vice president of business development at Tesla. “They turned into investments, but, at the time, it was twenty-five or fifty thousand dollars that you didn’t expect to see again. It just seemed like holy shit, this thing is going to crater.” Kimbal had lost most of his money during the recession when his investments bottomed out but sold what he had left and put it into Tesla as well. “I was close to bankruptcy,” Kimbal said. Tesla had set the prepayments that customers made for the Roadsters aside, but Musk now needed to use that money to keep the company going and soon those funds were gone, too. These fiscal maneuvers worried Kimbal. “I’m sure Elon would have found a way to make things right, but he definitely took risks that seemed like they could have landed him in jail for using someone else’s money,” he said.

  In December 2008, Musk mounted simultaneous campaigns to try to save his companies. He heard a rumor that NASA was on the verge of awarding a contract to resupply the space station. SpaceX’s fourth launch had put it in a position to receive some of this money, which was said to be in excess of $1 billion. Musk reached out through some back channels in Washington and found out that SpaceX might even be a front-runner for the deal. Musk began doing everything in his power to assure people that the company could meet the challenge of getting a capsule to the ISS. As for Tesla, Musk had to go to his existing investors and ask them to pony up for another round of funding that needed to close by Christmas Eve to avoid bankruptcy. To give the investors some measure of confidence, Musk made a last-ditch effort to raise all the personal funds he could and put them into the company. He took out a loan from SpaceX, which NASA approved, and earmarked the money for Tesla. Musk went to the secondary markets to try to sell some of his shares in SolarCity. He also seized about $15 million that came through when Dell acquired a data center software start-up called Everdream, founded by Musk’s cousins, in which he had invested. “It was like the fucking Matrix,” Musk said, describing his financial maneuvers. “The Everdream deal really saved my butt.”

  Musk had cobbled together $20 million, and asked Tesla’s existing investors—since no new investors materialized—to match that figure. The investors agreed, and on December 3, 2008, they were in the process of finalizing the paperwork for the funding round when Musk noticed a problem. VantagePoint Capital Partners had signed all of the paperwork except for one crucial page. Musk phoned up Alan Salzman, VantagePoint’s cofounder and managing partner, to ask about the situation. Salzman informed Musk that the firm had a problem with the investment round because it undervalued Tesla. “I said, ‘I’ve got an excellent solution then. Take my entire portion of the deal. I had a real hard time co
ming up with the money. Based on the cash we have in the bank right now, we will bounce payroll next week. So unless you’ve got another idea, can you either just participate as much as you’d like, or allow the round to go through because otherwise we will be bankrupt.’” Salzman balked and told Musk to come in the following week at 7 A.M. to present to VantagePoint’s top brass. Not having a week of time to work with, Musk asked to come in the next day, and Salzman refused that offer, forcing Musk to continue taking on loans. “The only reason he wanted the meeting at his office was for me to come on bended knee begging for money so he could say, ‘No,’” Musk theorized. “What a fuckhead.”

  VantagePoint declined to speak about this period, but Musk believed that Salzman’s tactics were part of a mission to bankrupt Tesla. Musk feared that VantagePoint would oust him as CEO, recapitalize Tesla, and emerge as the major owner of the carmaker. It could then sell Tesla to a Detroit automaker or focus on selling electric drivetrains and battery packs instead of making cars. Such reasoning would have been quite practical from a business standpoint but did not match up with Musk’s goals for Tesla. “VantagePoint was forcing that wisdom down the throat of an entrepreneur who wanted to do something bigger and bolder,” said Steve Jurvetson, a partner at Draper Fisher Jurvetson and Tesla investor. “Maybe they’re used to a CEO buckling, but Elon doesn’t do that.” Instead, Musk took another huge risk. Tesla recharacterized the funding as a debt round rather than an equity round, knowing that VantagePoint could not interfere with a debt deal. The tricky part of this strategy was that investors like Jurvetson who wanted to help Tesla were put in a bind because venture capital firms are not structured to do debt deals, and convincing their backers to alter their normal rules of engagement for a company that could very well go bankrupt in a matter of days would be a very tough ask. Knowing this, Musk bluffed. He told the investors that he would take another loan from SpaceX and fund the entire round—all $40 million—himself. The tactic worked. “When you have scarcity, it naturally reinforces greed and leads to more interest,” Jurvetson said. “It was also easier for us to go back to our firms and say, ‘Here is the deal. Go or no go?’” The deal ended up closing on Christmas Eve, hours before Tesla would have gone bankrupt. Musk had just a few hundred thousand dollars left and could not have made payroll the next day. Musk ultimately put in $12 million, and the investment firms put up the rest. As for Salzman, Musk said, “He should be ashamed of himself.”