One is Elon Musk (duh), and the other is JB Straubel. But there were three more—and there’s a cautionary tale in why they aren’t billionaires too.
Electric car upstart Tesla gathered reporters at a Santa Monica Airport hangar on a July afternoon in 2006 to unveil its battery-powered roadster, an audacious, $100,000 two-seater for which few automotive experts saw much hope of success. The company’s brash, tech-savvy CEO, Martin Eberhard, declared that Silicon Valley ingenuity would teach Detroit’s auto giants how to make compelling zero-emission cars. Tesla’s first effort, a modified Lotus Elise chassis packed with 7,000 tiny lithium-ion cells, was a high-end concept that would soon be followed by a lower-priced family sedan, the chief executive said. The vision he laid out that day ultimately came to pass, but not with him in charge.
Tesla this month became the first carmaker to hit an astonishing $1 trillion valuation, but the CEO who introduced the company to the press 15 years ago didn’t become synonymous with the brand. And he certainly didn’t wind up as the wealthiest person in history. That’s Elon Musk, of course, Tesla’s earliest investor and the company’s current CEO. Musk was also present at Tesla’s debut in 2006, but he assumed a lower profile that day, mainly arguing for the need to shift cars away from gasoline power as quickly as possible.
Tesla’s original CEO, Eberhard, and another early executive named Marc Tarpenning, who in 2003 dreamed up the idea of naming the company’s vehicles in honor of inventor Nikola Tesla, are Tesla’s original shareholders — the first men to claim ownership of the upstart brand that would go on to shake up the Detroit establishment. But neither of them retained enough Tesla stock to achieve billionaire status, much less Musk’s current net worth that Forbes estimates at $282 billion as of Nov. 10. It was Musk’s seed capital—the result of an early payday investing in payments processor PayPal—that turned Eberhard and Tarpenning’s vision into a reality. Ultimately, it also set Musk on a path to take full control of Tesla by steadily raising his ownership stake in a series of nine funding rounds prior to the company’s 2010 IPO, each of which further diluted the stakes of Eberhard and Tarpenning. Even today Musk’s stake grows as he continues to receive quarterly stock awards, in lieu of salary, worth billions of dollars.
In an interview, Eberhard says he retains a “relatively small” stake in the carmaker, while declining to be specific. “I sold a good chunk of my stock a long time ago,” Eberhard, 61, says from his home in Washington state’s San Juan Islands. “People somehow have the idea that I was a zillionaire when I started Tesla. I was not.”
Had Eberhard been wealthier from the sale of the Rocket eBook, an early handheld electronic reader he and Tarpenning created in the late 1990s, there would have been no need to seek initial funding from Musk, he says.
Musk has often said he doesn’t care about wealth and sold his Los Angeles mansions last year to live in a humble, prefab box house on his SpaceX campus in Boca Chica, Texas. Nevertheless, he keeps amassing wealth at a remarkable pace. That’s because of an early ownership stake of nearly 20% in the company and a long-term compensation plan announced in 2018 that rewards him with billions of dollars of additional Tesla stock every time it hits quarterly performance targets based on financial and valuation metrics. (He’s also preparing to sell 10% of his stake, worth about $15 billion as of Nov. 9, to avoid a massive tax hit as some long-term options mature.)
“I own no Tesla stock now. Of course I could not imagine a $1 trillion valuation!” Tesla cofounder Ian Wright
Eberhard, meanwhile, sold much of his stake after being pushed out of Tesla in 2007, before the Roadster’s launch. He sued Musk in 2009 over his ouster and for slander, before settling the case for undisclosed terms. As part of a settlement, he dropped opposition to Musk, former Tesla Chief Technology Officer JB Straubel and Ian Wright, an early engineer with the company, also being called cofounders, in addition to himself and Tarpenning.
“When I got kicked out of Tesla I had no money—I mean I really had no money,” Eberhard says. “Worse than that, I had no possibility of employment for about a year” because of a restrictive intellectual property agreement with Tesla, he says. “I did not participate in any investment rounds after I left.”
Eberhard won’t provide details of his Tesla stake, but he confirms he’s not a billionaire. Tarpenning, these days a partner at Spero Ventures, a Silicon Valley venture capital firm, has said he, too, still owns Tesla stock, but he isn’t listed among its top shareholders. He didn’t respond to inquiries from Forbes.
Of the five official cofounders, only Straubel, who left Tesla in 2019, is likely to have attained billionaire status from his holdings. His stake may be worth about $1.3 billion, assuming he retains a significant portion of Tesla stock held when he left. Straubel, currently CEO and cofounder of battery recycling startup Redwood Materials, declined to comment on the matter. Engineer Wright, who joined Eberhard and Tarpenning a few months after they created Tesla, left in 2004 to start another EV company. He sold his stake years ago.
“I own no Tesla stock now,” he tells Forbes. “Of course I could not imagine a $1 trillion valuation!”
Beyond making Musk the world’s richest person, the company that’s become synonymous with a global car revolution has also enriched investors and board members including venture capitalist Ira Ehrenpreis and Oracle’s Larry Ellison, as well as Elon’s younger brother, Kimbal, and countless investors inspired by the potential for a clean energy future.
“Whatever my opinion is about Musk, I am still super happy to see the electric car revolution—that we after all started—I’d like to see that revolution winning.”Martin Eberhard
For all the company’s success in the electric vehicle space and newfound financial stability, as well as the non-stop attention Musk seeks and generates, Tesla’s earliest days were marked by a high degree of management and strategic turbulence that left a single cofounder in control. Other tech-oriented giants that attained trillion-dollar valuations, such as Microsoft and Alphabet, created several billionaires among their cofounders, though Musk’s singular financial gains aren’t so unusual.
“While it does seem true that other notable technology firms minted multiple financial winners, a somewhat similar dynamic at Tesla played out at Apple,” says David Hsu, professor of management at the University of Pennsylvania’s Wharton School. Cofounder Steve Jobs’ Apple stake was worth an estimated $2 billion at the time of his death in 2011 and Steve Wozniak’s wealth is an estimated $100 million, though Ronald Wayne, Apple’s little-known third cofounder, sold his stake early for $800, Hsu says. Musk’s rewards today simply flow from a risky early bet that’s paid off big for him.
“It’s not only ownership stakes of cofounders; we could also point to cases of missing out by investors, including angel and VC investors,” Hsu said. “At the time Musk invested in the Series A round, and for a considerable amount of time afterward, there was a lot of uncertainty about the ability of the firm to execute its bold vision. Some might argue that sentiment is still somewhat true today.”
Citing a “non-disparagement” clause that was part of the 2009 settlement, Eberhard declines to elaborate on his views about Musk these days. By contrast, Musk himself has shown far less restraint. He described Eberhard as “literally the worst person I’ve ever worked with” in a January 2020 interview for the Third Row Tesla podcast, hosted by Musk fans.
Still, the company’s original CEO, who owned “somewhat less” than 5% when he left Tesla, says he’s not unhappy these days, despite not profiting more from its surge.
“The valuation is what it is. What I’m happy about is the success of the company. It’s crucial that we get off of fossil fuels and Tesla has been the major driver of that, which is what we had hoped for from the beginning,” Eberhard says.
“Whatever my opinion is about Musk, I am still super happy to see the electric car revolution—that we after all started—I’d like to see that revolution winning. It has to.”
By Alan Ohnsman, Forbes Staff