Twenty-three years ago, Elon Musk founded Zip2. Since then, he has invested from one business venture to another and is among the world’s richest billionaires on the Forbes list. He is one of the most acknowledged and admired businessmen in the whole world, earning respect for his diligence, sheer dedication, and ambitious nature while ensuring the rest of his team succeeds with him.
Media and writers gravitate towards his initiatives and endeavors. Armchair analysts flock over his viability of electric cars and the question of whether or not mankind can survive Mars.
Well, in this article, you will be learning about Elon Musk as a business magnate and brilliant investor. We Will also look at his investments, the companies he manages, and the lessons that we can extract from his success and record.
However, if you want to watch the content instead, feel free to click on the video down below:
A Timeline of Elon Musk’s Investment Ventures to Date
- The Earliest Stages of Musk’s Entrepreneurship
After leaving his academic path in 1995, Elon Musk and his brother Kimbal founded Zip2 after borrowing $28,000 from their father. The whole investment was to become a virtual consumer of the linked Yellow Pages to visual mapping. Right after Mohr Davidow invested three million dollars, Musk was then consigned to the position of CTO.
With that, the whole business took an abrupt U-turn towards having a B2B agreement aimed at the media. As Musk’s ownership dissolved to seven percent, his influence in the industry decreased over time. He later sold Zip2 for $307 million to Compaq in 1999 and was able to earn $22 million.
In the same year’s November, Musk invested ten million dollars from his Zip2 earnings to X.com, in an attempt to build an online banking platform. In March 2000, that online banking platform merged with Confinity platform, which is owned by Peter Thiel, his major competitor at that time.
Later in 2000, Peter Theil became the CEO and Musk remained as a board member, and that online banking business was then renamed to PayPal during 2001. In 2002, PayPal had IPOed; however, eight months after, the online banking company was then purchased by eBay. eBay bought it for $1.5 billion, while Elon Musk gained $180 million from that sale.
- The Multi-Tasking Stage
People who knew about Elon Musk’s shaky beginnings would expect him to withdraw from his next attempts, especially after eBay bought PayPal. However, this was not the case. Although his career phase was exhausting and characterized by risking uncertainty and putting his reputation and finances on the line, he still did not give up on investment.
In 2004, Musk set foot into another business venture— Tesla. By investing another $6.35 million in Tesla’s Series, Musk finally found a realm of his own. At this certain point, he also continued investing his time and money into SpaceX’s formation. Also, at that time, there has been a significant increase in Tesla’s development and sales frequency.
Despite not being the founder of Tesla, Musk’s influence continuously rose, rooting from his valuable financial and operational input. When his cousins, Lyndon Rive and Peter established SolarCity in 2006, Elon Musk gave them advice and even deposited some capital into that initiative as he assumed the chairman position. From 2007 to 2012, he followed three more successive rounds.
In 2008, Musk took another abrupt U-turn in his career. The brilliant businessman was battling on fronts to establish companies with massive scopes and ambitions. To make the long story short, his current situation flared up with his seemingly infinite funds from the PayPal sale now depleted. His wife also filed a divorce which left him short of $20 million.
By borrowing funds from his friends, Musk still managed to pursue his ambition. Fortunately, unexpected gifts were sent to him from his first proceeds. These were from his Game Trust and Everdream investing portfolio.
- Musk the Business Magnate
Tesla had started to gain its own momentum, and Musk continued to invest more of his time and effort in SpaceX. The whole productivity led to positive traction by successful contracts. The three companies’ realms started to gradually intertwine when it comes to the idea of creating a sustainable life for all people.
Indeed, despite the Initial Public Offering in 2012, SolarCity partnered with Tesla four years after. With the partnership’s very obvious vertical integration and synergies, SolarCity was able to receive a significant amount of investments from 85% percent of their shareholders. At that time, Elon Musk’s angel investment portfolio turned towards biotech and artificial intelligence startups.
He turned in an initial winning of ninety-two million dollars from his DeepMind investment. Aside from that, he deposited several other investments into various industries via NeuroVigil, Molecular, and Vicarious. During this period (from 2010 to the present), Musk’s net worth exponentially grew from two billion dollars to nineteen billion dollars in 2018, according to Forbes.
The share price of Tesla also exponentially increased after the Model 3 introduction. This model opened more opportunities for mass-market electric vehicles. Despite the most recent controversies in 2018, Tesla’s share price was still up by eight hundred eighty-one percent since 2012. Also, while undergoing private development, SpaceX raised its funds by a valuation of $21.2 billion in 2017.
What Tactics Did Elon Musk Use to Invest?
Elon Musk is undoubtedly a brilliant icon in the investment industry. He is known for his out-of-the-box thinking and ambitious nature that led to the successes of his attempts. But what did he learn so far during his career? Below are some techniques and formulas he has been applying to attain his ultimate goals.
1. He Went All-In
Musk saw his PayPal and Zip2 journey as a vital lesson. These experiences reflected his approach to control and management, and he learned a lot of things from here that he thought he can always apply in future attempts.
The external venture introduction and the depletion of his shares implied that Elon Musk had lost his strength in resisting being ousted as Zip2’s CEO.
Despite being a wealthy man because of his first company’s successful sale, the outcome made Musk miserable because he was not able to mold it according to what he envisioned it to be. The same thing happened to his attempts of making PayPal successful.
Musk faced significant depletion from his earnings and was also ousted from his position as CEO. The devastating event merely happened while Musk was on vacation in Australia.
The level of frustration the outcomes entail came across in several comments he made about those early experiences. In his career’s next phases, he took a strong grip on his influence and investments. Musk followed on in his electric car venture’s funding rounds to preserve his ownership percentage.
Also, during Tesla’s dispute, he was not scared to possibly put economics on the line for control’s sake. He converted eight million dollars of stock preference into common just to kick CEO Eberhard out. Despite not being the founder of Tesla, his influence and hands-on approach imply that he assumed the CEO position in 2008.
He continually strived towards regaining his net worth and started investing again. Portfolio analysts and experts would even hesitate at his strategy because only two percent is advisable for such venture capital. This should be the capital percentage for a normal and less risky portfolio allocation.
This is only an indication that Musk is truly a confident yet risky investor. His strategy gave rise to principles Musk believed. He knew he always had the advantage point when he kept on investing in himself.
Besides, Musk knew that he had a control element that enables him to take charge of whatever the deal’s outcomes are. This is not true when it comes to a passive investment strategy in real estate or public equities.
Having two successful results or outcomes from his first two ventures gave him an unrivaled assurance in his skill to operate and invest. Musk simply explained his philosophies by telling the media that if he asked investors to deposit some money, then he felt morally obliged to put his own money as well.
2. He Takes Extreme Financial Risks— Which are Often Personal
Musk borrowed a total of six hundred twenty-four million dollars for his personal ventures as of 2017. He used the borrowed money to deposit in his own Tesla investments. These borrowings are actually collateralized by Musk’s own Tesla shares. Morgan Stanley and Goldman Sachs have been Musk’s personal and inspirational leaders, and both of them have underwritten several deals with Tesla.
One example that summarizes how Musk’s personal loans provided him a powerful funding mechanism is an event that took place in 2013. When the loan’s maturity was fast approaching, Tesla got to the capitalists to raise brand new equity to fund their principal repayment.
Elon Musk then grabbed the opportunity to borrow a one hundred fifty million dollar personal loan to buy new stocks. Well, in a general perspective, he rolled a segment of the company’s loan into his balance sheet.
Aside from reinvesting a significant percentage of his net worth, Musk also borrowed to gain more exposure. Meaning to say, one of his goals is also to increase his shareholder value. This will serve as a pillar in Musk’s businesses. This particular initiative enabled investors to take comfort in witnessing him continually funding his investments.
As a result, investors would love to invest as much as Musk does. It gave many investors the confidence to hold their positions and keep their shares for as long as they need.
Simply put, Musk risked his financial stability for the sake of giving assurance to Tesla’s investors. Another risk this initiative entails is that when Tesla begins to underperform, there might be a need to undertake more collateral types.
3. He Surrounds Himself with the Ecosystems He Creates
Musk’s investment portfolio is proof of his entrance patterns, sectoral strategies, and success rate. Studying his investing timeline, Musk made it clear that his earliest investments were merely triggered by the connections of ideas and founders. He only invests in stocks that he knows and only risks his money with people he fully trusts.
The impact of this natural rapport is having more influence and gaining more dominance in the market. The “influence” and “dominance” are way beyond the control mechanisms and traditional board provides to investors. The reciprocity takes effect in both ways because Musk’s network actually rallied to give him support.
Musk also believes that the sum will be greater than all the parts. SpaceX’s, Tesla’s, and SolarCity’s orbits regularly cross, with Elon Musk being the system’s center. The regular interactions between these three assets appear through shared personnel, business dealings, common goals, and common investors.
Musk took these companies’ relationships further by initiating the merge of SolarCity and Tesla. The benefits of economies and synergies were concealed behind the merger’s reasons, with one hundred fifty million of total savings knocked down.
Nevertheless, the idea of genesis was extracted from the bigger picture and was vertically aimed at the process of integration, cross-selling, and sharing of ideas.
The board of directors of Tesla summarized their thesis saying that they will become the only energy firm in the world that is vertically integrated and offers end-to-end quality products to our valued customers. Tesla went on to say that they will begin with the electric car and the source of energy that their customers use to charge that car.
Considering that the two companies develop within growing markets, the act of merging them together doubles the risk as well as the potential rewards for Elon Musk, the never-ending gambler.
4. Uses innovative financing methods.
Musk makes the most out of government support. As of 2015, LA Times estimated that SolarCity, SpaceX, and Tesla had received a total of $4.9 billion from government support. During 2015, the government of Nevada pledged support through $1.3 billion tax breaks for a massive factory of Tesla within its state. The government of New York also supported the company with seven hundred fifty million dollars for a factory of SolarCity in Buffalo.
How to Invest like Musk
If you are an investor looking to invest like Musk, here are some tips for you.
1. Have a Goal and Think Outside the Box
If you are looking to succeed, you must have a goal that is both meaningful and compelling. Love what you are doing and enjoy the never-ending journey of losing and winning.
If the peak goal is only to make money, you are unlikely to continue with the venture when you don’t make profits or run out of cash. Musk did not give up despite the many failures because he had a goal and a vision. Also, learn to think outside the norm and go for products that will solve needs.
Musk formed SpaceX, a company that has developed both the Falcon 1 and Falcon 9 launch vehicles. The company also developed a Dragon spacecraft that flew into orbit and supplied cargo to the International Space Cargo with the help of Falcon 9 launch vehicle.
2. Embrace Startups
From the beginning, Musk embraced start-ups when he created Zip2 in 1995. He was not afraid to invest in starts-ups and so should you. You just need to find the right startup to invest in and you could be the next Musk.
3. Seek Criticism
Believing in your own delusions won’t make you a better professional, businessman, or student. Bear in mind that your ideas are still falsifiable, and anyone can prove you wrong. Anyone can generate better ideas than what you have, and it is always best to know what others are thinking too.
Grab as many suggestions and comments as you can from those you trust. In that way, you can examine yourself and acknowledge your flaws as they slowly surface to your consciousness. Be gracious whenever someone reminds you to reevaluate your plans.
4. Don’t Fear Failure
Despite being ousted, divorced by his wife, and looking for money, Musk believed that failure was part of the journey to success. It is a natural part of the learning process, and if you believe you have the potential to attain your goals, then you have to make sure you’ll go for it. Failure does not put an end to your journey if you do not allow it to do so.
5. Do Everything with Excellence
According to Elon Musk, people always have the choice to be average. Thus, if you are dying to succeed, choose the opposite: question and challenge yourself and the norms. Do something unexpected— something you have always feared to do.
In that way, you will grow and improve. Always strive for the highest standard so that when you can’t reach it, you will just fall anywhere near it.
Conclusion
Elon Musk’s resources may be considered an essential part of his success. However, without anything, people still believe he would thrive. Why? — Because he has the mindset of a billionaire. Success lies in a person’s habit and never-ending momentum, and Elon Musk has “this” habit.
Related: Jeff Bezos Investments: How to invest like Jeff Bezos
