The Business Proposals that Built a Billionaire: Elon Musk Edition

“Failure is an option here. If things are not failing, you are not innovating enough.” – Elon Musk

Elon Musk Laughing @ SXSW 2013

Elon Musk is the billionaire of the moment, a man who’s next move is sure to make news, whatever it happens to be. And it’s with good reason, too. At the ripe age of 42, his successes are already the stuff of entrepreneurial legend. The South African-born tech magnate has always been ambitious, teaching himself computer programming as a child; selling his first coding effort, a video game, for $500 at the age of twelve. He’s one of those stories – the boy with wild dreams who somehow manages to harness enough business savvy and personal charisma to make anything happen.

You might say he’s lucky, too. That’s always something to consider when assessing a success of Musk’s caliber. But there’s a lot to learn from Elon Musk, especially if you’re a business owner or would-be entrepreneur. Namely, there’s the fact that business proposals have helped immensely in helping make him the success he is today. Without wheeling and dealing, nailing down details, and just plain willingness to try, “Elon Musk” would just be a slightly unusual name that no one knows.

In the course of his career, Musk has shown a willingness to make a proposal and nurture it until it happens, as he’s proven time and again. He’s a man who’s had big ideas and went for them, with a refreshing singularity of vision. That’s something that you, as an entrepreneur, can appreciate, right?

Let’s take a look at the awesome business proposals that have made Musk a billionaire, and what all of us Quote Rollers can take from his successes.

Zip2 starts up, goes big

Musk’s first major entrepreneurial success happened in 1995.

Back in 1995, the Internet was new to most people. While most of us were still fascinated by listening to the noises coming out of our fax modems,  Musk was climbing onto the dot-com bandwagon at the height of its heyday.

That year, Musk developed an application that would help newspapers create directory-style websites for cities with online guides. Initially, his only partners in the business were his brother Kimbal and a friend of his mom. The startup was lean to say the least. Musk lived in a small office and tapped the Internet from an Internet Service Provider stationed on the floor below with a network cable strung through a hole in the floor, as Musk himself recalled while speaking at Stanford University in 2003.

A recurrent theme in Musk’s career is that he has a way of getting people to buy into his big ideas, no matter how stratospheric they may seem. Zip2 quickly attracted Venture Capitalists, almost entirely on the strength of Musk’s ideas alone. Rest assured, it was by communicating those beliefs through the business proposals he and the Zip2 were creating on a daily basis.

Even at the time he came up with Zip2, Musk was thinking ahead. In that case, he was thinking about “local” in a way that all the current crop of social/mobile/local evangelists would be right to consider prophetic. Zip2 began to get recognized as a useful tool to help local businesses sell online. That’s what eventually made it a cash cow for Musk.

Musk was good at selling his own charisma, but Zip2 definitely had to send its share of business proposals, first to small newspapers, then bigger ones. Before long, the company had entered into contracts with heavy-hitting news outlets like The New York Times and Knight-Ridder, among others.

As one of those outlets the Times reported in 1999, the first colossal business proposal that would enrich Musk came in the form of a corporate buyout of Zip2 by Compaq, which was looking to bolster its waning AltaVista search engine in order to compete more realistically with the growing field of competitors, by then including the indomitable Google.

As Lisa Napoli wrote in that article in the Times, the “idea of merging revenue from classified advertisements…with the growing online medium” was an important recognition in its day. And behind it all was Musk.

The deal was big, with the final transaction totaling around $300 million in cash and $34 million in stock options. Musk received $22 million out of the deal. Not too shabby for a man of just 28 years of age.

From Zip2 to X

Musk has also shown himself to be a risk taker on the highest order.

Using $10 million of the money he cleared in the sale of Zip2, Musk promptly started his next business, X.com. That business model may sound familiar to you. The idea was for a method of transferring money via email, securely. It was, effectively, a purely online bank.

X.com flailed around the Web for about a year, making some money and growing modestly. In 2000, X.com bought out rival service Confinity and renamed the new company PayPal and shifted its focus from online banking to payment processing. Oddly enough, the company’ s main competitor would ultimately become its savior. At the time, eBay used a proprietary payment system that really precluded X.com from being able to tap into the burgeoning “world’s online marketplace.” The famous auction site and PayPal were by no means fast friends.

That all changed with the successful execution of another business proposal in 2002. This one was a billion-dollar deal.

As a matter of fact, the eBay buyout of PayPal was a $1.5 billion stock transaction. At the time, eBay CEO Meg Whitman acknowledged that, despite considerable rivalry between the two companies in the two years leading up to the buyout, 40 percent of eBay users had adopted PayPal’s online payment methods. eBay had to respond to consumer demand, thus the buyout was proposed.

PayPal has since grown to account for $145 billion worth of transactions, as of 2012. Again, the core idea came from Musk, a man who finds himself innovating and selling by being as much an innovator as a taker of risks.

Musk pocketed $165 million in stock from the sale of PayPal. And his next business proposal was just around the corner…

SpaceX and beyond

Elon Musk Animated Expression @ SXSW 2013Never one to sit around twiddling his thumbs, Musk’s next business venture was perhaps his most outrageous to date. In his heart, he’s an inventor, an engineer, and an idealist. In the middle of 2002, Musk founded SpaceX, a commercial space vehicle company keen on making space travel, and eventual space inhabitance, a reality.

He also once again took a massive risk, eventually investing $100 million of his own money in SpaceX. But he didn’t do it alone. Along the way, SpaceX has issued business proposals that garnered investments from the Founders Fund and private markets. Still, Musk retains a majority stake in the company’s $2.4 billion in revenue.

If it sounds like science fiction, fair enough. But someone has to think of stuff like this.

That’s not to say that SpaceX’s success is any less impressive. As Tom Junod reported in the December 2012 issue of Esquire magazine, Musk’s space venture “co-opted NASA,” trouncing on the public interest once assigned to the recently mothballed space shuttle program, doing so with remarkable successes like that of its and Dragon’s spacecraft, which successfully orbited Earth twice in December 2010.

With the launch of SpaceX, Musk has demonstrated his penchant for thinking big and following through, which is a key takeaway for anyone in business. You have to be able to deliver on what you put in your business proposals, no matter how high the stakes.

Delivering on what he proposes has certainly not been a problem for Musk.

The electric car breaks good: Tesla Motors

Musk’s biggest venture to date, though, is the one that nearly cost him everything.

Tesla Motors seems to have all eyes upon it, from the automotive industry, to Wall Street, and everywhere in between. The company developed its first model, the Tesla Roadster, an all-electric sports car, in 2006. At a price of around $100,000, the company sold 2,400 Roadsters worldwide before ceasing production in 2012.

Musk used the Tesla Roadster as a springboard to launch the Model S, the company’s ambitious all-electric sedan. That model, announced in 2008 and delivered in mid-2012, made a massive splash just by actually coming to market as planned. Many concept cars never see production, and the Model S’s development nearly bankrupted Musk, who in typical fashion, pumped his own cash into the company to inspire others to invest.

While the world waited for the first Model S models to reach buyers, many industry insiders were expecting Tesla to fall short of its stated initial profit goal of 25 percent by Q4 of 2012, the first reporting period after the Model S shipped. Those naysayers were wrong because, once again, Musk delivered on his business proposals.

By May of 2013, Tesla Motors had generated more than a billion dollars in revenue and debt and, as a result, had paid off a $440-million loan to the government, which had helped the company fund conducting research and development for the Model S. That loan was paid off nine years early.

It’s not all been perfect, though. In early October 2013, a viral video showing a burning Model S made the rounds on the Web, attracting a massive wave of negative press for the automaker. In response, Musk delivered the truth. Addressing the incident in a post on the official Tesla Motors website, Musk turned a negative into a positive, explaining that firewalls and other safety features in place in the car had performed as intended, and that the fire was not the result of a manufacturers defect. There’s a lesson in effective public relations and acting timely in a crisis in there somewhere.

Obviously, Tesla stock has taken a hit in the wake of that incident, but in all likelihood, like a veritable phoenix, Tesla will rise from the ashes of that unfortunate Model S that caught fire.

Enter the Hyperloop

Even as Tesla Motors rakes in sales and overcomes its first public challenges, Musk is as restless as ever.

His most recent crazy idea that is certain to come to fruition known as the Hyperloop is a business proposal for a subsonic air travel machine that runs from Los Angeles to San Francisco. It’s a planned to be a vacuum, mind you, said to “suck” travelers from one city to the next at incredible speed.

While it may sound ridiculous, Musk has delivered roughly 100 percent of what he’s conjured up in that boundless brain of his, so look for the Hyperloop (somehow), coming soon.

Even more recently, Musk has stuck a stake through the heart of guys around the globe, buying (initially anonymously) James Bond’s Lotus Espirit submarine. As if that weren’t enough, he’s also announced that he plans to make it function just as it did in The Spy Who Loved Me.

Way to rub it in, Mr. Musk.

Are you delivering on what you promise in your business proposals?

With Forbes reporting his net worth at $6.7 billion, who wouldn’t want to take a page out of the book of Elon Musk? He’s an innovator and business ace who, so far, seems to have the Midas touch. But he’s only promising to do things that are within his visionary reach, it just so happens that he has an insanely far-reaching field of vision.

That’s what I hope you will take from this brief profile of Musk. Here at the Quote Roller blog, we have tons of tips for how you can up the ante when it comes time to write a business proposal, but the lesson from Mr. Musk is quite resounding in its own right. He teaches us how to avoid second-guessing ourselves, how to go for it. That’s why Musk’s business proposals, tall orders that they are, have been accepted and executed over and over throughout his career. He knows his limits, they just happen to be orbiting his body from the distance of the International Space Station, or maybe even Mars.

When you find yourself faced with a highly lucrative RFP or any other opportunity to write a business proposal, think like Elon Musk. If it’s on your desk, chances are its there because you can handle it. So convey that confidence in your proposals, and above all else, make sure you deliver the awesomeness, just like Musk.

What business guru has been an inspiration to you? Do you have a favorite billionaire? Drop the name in the comment space below and we may do a profile on a billionaire of your choice in the near future.

Author’s Note: I couldn’t have made this profile of Elon Musk without the sources referenced above at Forbes and CNET, in particular.
Photos: Flickr Creative Commons

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