I'm a huge Elon Musk/Tesla/SpaceX fan, and have often felt it would be the ultimate opportunity to work at either company (Tesla would be my first choice, as automotive interface tech is one of my passions).
However, doing a quick bit of research earlier today, a search for "Tesla working environment" turned up more than a handful of reports by former and current employees that hint at an unpleasant company culture. Six to seven day workweeks, below average compensation, hyper-political management, management that is quick to fire, and a generally chaotic environment. These factors seemed to be reported even by folks who cited other benefits such as a high degree of autonomy and the opportunity to work with other highly passionate top level engineers on important emerging technologies. One additional oft-repeated concern was that the pace at which Tesla works its engineers is unsustainable, and will lead to burnout for lack of work-life balance.
Can anyone closer to the Valley than I am comment on whether these concerns ring true? And how does this compare to work at other highly innovative and passionate industrial startups?
Elon's explanation of the latest round of fundraising is welcome news, and personally I'm gunning for Tesla to become the Apple of the auto industry. (I plan on buying stock as soon as I'm able.) Is there anything we can infer from these employee reports about the health of Tesla's organizational core/DNA, and what effect that might have on the company's prospects for long term success?
[Edited for clarity]
I'm guessing, but the culture clash might come from an intersection of "car factory" meets "startup mindset", with the latter introducing an against-all-odds urgency. If you want to put a rocket in space or create the first viable electric car company, you probably can't initially go home at 5pm. You're probably less forgiving of those that can't keep up with the insane pace.
Here's hoping it calms down, and that the people who helped make the vision a reality are well rewarded.
Hogwash. If you can't do something at a sustainable pace, you can't do it at all.
In startup environments crunch time has a nasty tendency of becoming normal time, and you get nosediving morale, massively increased attrition, and lower overall productivity. It's lose-lose all around.
So sure, in a startup you'd expect some late nights. When late nights become the norm though, you are now officially in dysfunctional company territory - don't let naive founders with rainbows and unicorns in their eyes convince you otherwise. Very sick of this Valley attitude that you must push yourself to the very edge of death-by-exhaustion to achieve anything worthwhile.
Hogwash. You can’t even start a new bank on bankers hours much less spaceship company, or more prosaically a restaurant.
Companies are founded on the time and passion of their earliest members.
Obviously burnout is a problem from day one, and the trick to building a company for the long haul is to move from zero to a monetarily sustainable enterprise while at the same time moving from insane hours to viable ones, and to do it fast enough that you don’t burnout the whole company before you get there. It’s not an easy trick.
A real big question, especially in startup-land, is when is a startup no longer a startup? When you offer health insurance? When you're cashflow positive? $1MM/yr? $10MM/yr?
It's really easy to justify the long nights with, "Well, we're a startup." And if you generate enough money with those long nights to KTLO and make sure paychecks don't bounce, it's hard to call it quits. But after N years, the "we're a startup" excuse gets old.
Every baseball team has a bench. The unsung hero that is the difference between start-up success and failure is often a family member, friend, or junior helper who keeps the caffeine and food and goodies stocked, has the temerity to send people home when they're so exhausted they're no longer helpful, and last but not least, can occasionally talk some sense into the SuperFounder. Or at least makes sure there is a long comfy couch.
Don't let a few postings online deter you from applying to work for a company that you find intriguing. Just ignore the naysayers and give it a shot. That's the only way of finding out if you would enjoying being a part of something. It's a startup pushing the boundaries of technology within two industries, there's going to be a few sleepless nights, but in the long run you will definitely be part of something massive, which could evidently change humanity as we know it.
I have a bunch of friends who work at Tesla. They do work hard, one of whom works waaaaay too hard, but it's meaningful work. They're changing the world.
It's a similar feeling I get from people I know who work at Apple.
I understand the geek/social effect of saying that you work for Apple or any other well perceived company, but get real: you're no changing the world. You would change the world if you were one of the first few employees at Apple, or nowadays if you are a high ranking executive/manager. Other than that, you're just a small piece in the engine. Maybe an independent developer is doing more to change the world than an employee at Apple.
> You would change the world if you were one of the first few employees at Apple, or nowadays if you are a high ranking executive/manager. Other than that, you're just a small piece in the engine.
“Almost everything you do will seem insignificant, but it is important that you do it”
Getting a similar feeling from Apple employees as Tesla employees doesn't mean Apple employees are really changing the world, it just means that the Apple employees genuinely believe that they are.
Agreed, with their disappointing stock performance from the beginning of the year on, stock options would definitely be one thing to really examine and determine if they would be worth anything at all.
Really? That's the direction you took? You realize what Tesla is doing is going to destroy the oil economy - dependency on oil for cars - and practically eliminate the need to pay for re-fueling your car once you own it? Or is it that you just don't believe it?
loceng your comment falls directly into the "Drinking the Kool Aid" bucket. If Tesla was such a sure thing then their stock price would reflect that. It doesn't because people who assess it still see a lot of risk to go along with a lot of upside. So it's fair to ask "If you're taking a reduced salary in exchange for stock options how likely is it that you'll be rewarded?" Right now the jury is out. It's important to remember that Tesla has no real competition to their core market right now. Mid to High end electric cars. Once they prove out the concept they'll face stiffer competition. I do hope they'll succeed and think Musk is one of the greatest visionaries and innovators of our time. That doesn't mean you don't get to ask hard questions around execution and competition.
As to the OP and original thread I think the question would be "Do a Google search on your four or five favorite startups/companies around "X working environment" Does Tesla feel disproportionately represented by negative comments or inline with the others relative to age and size. EVERY hard charging company has disgruntled folks. It's a question of proportionality I think.
> Really? That's the direction you took? You realize what Tesla is doing is going to destroy the oil economy - dependency on oil for cars - and practically eliminate the need to pay for re-fueling your car once you own it? Or is it that you just don't believe it?
Calm down:)
All I was responding to was a couple of comments about working for below average wages, bad work environment and the performance of Tesla's stock, which has been a bit disappointing over the past year.
I do think that Tesla will become profitable, but I don't' think for a second that it will "destroy the oil economy".
And consider for a second this statement:
> "practically eliminate the need to pay for re-fueling your car"
I don't' think Tesla has any such goal, as far as I know they still require you to refuel your car by plugging it into an electricity source. Electricity is literally the new fuel source.
How are you imagining that this is going away? Or are you using fuel in a narrow manner to refer to only oil based fuel?
Tesla are setting up Supercharger stations to refuel cars. From my understanding they are garage-port like things with solar panels on them, that recharge themselves. Solar cells can last a long time, and the technology will continue to improve. For climates with less sun there will likely need to be an alternate method of generating energy, though that will all be figured out. Read the following for details of I'm talking about, re: free to refuel your car - http://finance.yahoo.com/news/tesla-motors-launches-revoluti...
If that's your proof for Tesla ruining the oil economy then your standing on thin evidence, as bandy said. The only people getting unlimited free charging are the people that just bought the new model S, AND they have to get to one of the stations. Also personally I could care less if the oil business's crash after Tesla becomes even cheaper and widespread. People may think global warming may or may not exist, but as I ride a bike to work, and breath all the car fumes that pass by, and get light headed just from that, well I'm not too worried about not having more gas burning cars around.
So, you're saying that people who have sufficient disposable income to purchase a very expensive sports car that they can only "refuel" near their home needn't worry about how much it's going to cost them to do so?
Of course one should determining what one thinks the stock options will be worth in the future, but the current stock performance has little bearing on that.
I know nothing of Tesla/SpaceX, but be aware that how glamorous/hip a company/industry/etc is, often correlates negatively with how well they treat employees by objective measures, i.e. working hours, salary, etc. Just read some posts about the gaming industry. It's supply and demand, really.
I was going to assume everyone is happy there since they should realize when joining that they're facing big challenges, but I was surprised to see so many disgruntled people on Glassdoor:
Tough to say what the stories were behind all of these, but I can see how they might feel the need to push people way harder than normal, because during yesterday's presidential debate Romney lumped Tesla in with a list of losers that the government has given money to. Plenty of people are expecting them to fail even though many of us are excited at their prospects. In such an environment, I can see how Elon Musk might push some workers beyond what they can handle. However, I'd expect many of them are still happy to be part of the team even though the work is hard, because a Tesla employee really is part of something more world-changing than an Electronic Arts coder is.
I'm pretty sure Elon Musk himself said that he works his Tesla employees hard - he asks for people who are passionate about their mission, and that they know that they will be taking a pay cut, as they are a startup, in exchange for being worked to the bone.
It's not that he created a bad culture, I think he just hired people who were willing to take a risk with Tesla, and they work hard to produce a successful company.
I don't know why you've got some down votes on your comment since you just pointed out the truth.
Many of us here are founders and we're in business to challenge status quo and possibly make a dent in the universe. That takes hard work from founders AND contributors.
If anyone thinks things should be different in startup business, they should take a step back and really evaluate how much hard work really goes into achieving these goals.
After that if they can't see no compelling reason to do it, they should just get a job in a more traditional business. I don't blame people for taking that route. This business isn't for anyone.
Work/life balance? If I worked at Tesla I'd have a very hard time going home in the evening. I think exciting companies attract people who just keep going that extra mile.
Getting out of work at 5pm kind of defeats the purpose of working at a company like Tesla.
Ok, even though i am generally pro tesla and like musk, in order to prevent this from becoming a total worshipfest i will provide some facts that elon is not sharing.
It is true that tesla has made all their payments under the doe loan agreement. But they were not in total compliance with said agreement. The agreement required that tesla keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked trhe government to change the terms. The government complied but wanted something in exchange. What they wanted was early repayment of their loans. That is why he is talking about early repayment. And that is probably one of the reasons why they raised extra money (although elon is unlikely to admit that).
So that is the full story. It is no big deal, i think tesla are very unlikely to default on the loan, but elon was definately not giving you all relevant info.
Oh definitely so. But his statements have no sense of any of that, one would never suspect anything is being withheld, they come across perfectly sincere and warm and from him and not from some lawyer, it's masterful.
Yeah, there's some dodgy stuff, a lot of information about these cars, such as the reality about their batteries and how much energy they really use to go from A to B over time has high spin when I start looking into details. Was genuinely surprised.
Thanks for the details about what the financing is really about, that's very interesting info.
I feel it too. His statements are so nice and logical, the truth becomes secondary. That's one talented advocate. Let's instead condemn reality for lacking truth and beauty.
Well, he seems to address this directly where he states:
"We did suggest that holding nine months worth of principal payments in advance in a reserved account was a bit extreme and, moreover, was never part of our original loan agreement. The DOE agreed and reduced the advance payment reserve account to six months."
You saying
"keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked the government to change the terms"
...doesn't seem to add to or contradict his statements.
So unless you can clarify, your statement that "that is the full story ... elon was definitely not giving you all relevant info." seems inaccurate.
Financial ratios and/or debt covenants compared to a reserved cash account - two different things. Sure, the cash account can be a small part of a debt covenant but is usually just that - a very small part.
Which debt covenants were breached? Often times they put these checks in when they think something bad is going to happen. Then a couple of years down the line they mean absolutely nothing, are breached (usually because the company has forgotten about one of them and accidently breaches them) and need to be restructured with the lender asking for something in return.
What?! FTA: we expect Tesla to become cash flow positive at the end of next month.
However, given that we do have a global supply chain and that floods, fires, hurricanes or earthquakes can cause supply chain interruptions and halt production, we thought it would make sense to raise capital to protect against such an event.
Translation: "So we expect to be cash-flow positive, we won't spend the money that we raised, but we'd thought we'd go ahead and dilute the shareholders, you know, just for insurance."
I believe actions not words. The actions are: He raised money and diluted. You don't do that when you are flush with cash.
How do you jump from "we're almost cash-flow positive" to "we're flush with cash"?
And isn't Tesla's situation a little too tenuous for them to be feeling sorry for diluting their shareholders? Making viable electric cars is their priority - not making their investors rich ASAP.
It's insurance. What he's saying is that the company is fragile right now, and any blip could very seriously harm their growth. The fundraising is a direct response to that risk analysis.
Otherwise, they would probably raise money later for a specific project requiring lots of capital (like a new vehicle, as mentioned).
I get the impression that Tesla becoming cash flow positive is financial engineering. Do you have any idea how that would be done in the case of Tesla or in general?
There are a few comments here regarding disclosure & such.
Still, I think it's amazing how much speaking with the voice of a person stands out in a positive way. It's similar to the impact that a Warren Buffet shareholder letter has. It's describing an enormous conglomerate/investment-fund/financial-institution/holding-company, but it's being described by a person and its being described for you.
We are so used to things that sound like they are written by institutions for other institutions, that when something sounds like it was written by a person for people, it stands out.
The sentence "I don't know how to state this more clearly." is a minor mistake.
I often say things like that, and it never works to my benefit. I'm trying to cut it out. It indicates frustration with the audience, and it almost always comes across that way.
Well, he probably is frustrated. I'd be if I had to take time out of my work to respond to something that amounts to some bizarre political pissing contest.
Having to justify a 500m loan to a pioneering technology company in one of the biggest recessions? That's a rounding error compared to the billions spent on rescuing failed banks or in researching fancy new ways to blow stuff up.
Really? All of that wordsmithing is saying how he is technically defaulting on the loan from U.S. taxpayers. The loan is now "repay us someday, if you have the cash". Total spin.
I think people underestimate what an agile and lean startup like Elon seems to be running can accomplish. He's a super intelligent guy with a growing positive trackrecord. The vehicle industry has been waiting for disruption for 20+ years, and the giants finally have lost control and whatever unnatural advantages they tried to maintain. Technology for electric vehicles will only continue to improve, and costs will go down. Luckily for economies very attached to oil they can shift to systems like free re-fueling once a vehicle is purchased; That's pretty incredible and something I never even thought about or imagined possible, though it makes sense and works once the puzzle pieces are all in front of you. P.S. Elon's my new Man Crush.
In the next month I'll be dumping money into getting a patent. Time will tell if that ends up being a better investment than into Tesla. Maybe I should try to get Elon as an advisor / investor. I'll have to hope to not get giddy when speaking to him if there's ever the possibility ...
I'm not sure a company that is losing $30M a month (or $400K per year per employee, of which there are 900) can be classified as lean--and possibly not agile, given that they spent a fortune creating the Roadster only to abandon it three years later as being too expensive, having sold only 2K copies. I'm sure it was a learning experience, but Tesla's burn rate is only increasing, so I hope they learned enough.
And, while SpaceX's rockets are undoutably advanced and very safe, they aren't currently the cheapest cost per pound sent into LEO; that honor belongs to the Russians:
SpaceX has some cheaper launches "in development" but they've already revised their initial prices upwards of 100% of what they claimed early on for their operational launches, so you really can't trust what they claim for in development vehicles.
Romney then name-dropped a few beneficiaries including the bankrupt solar panel maker Solyndra and Tesla Motors, the car maker that has gotten a $465 million loan from the Department of Energy, which it is paying off.
Romney then quipped that “One of my friends said, “You don’t pick the winners and losers. You pick the losers.”
--(1) They defaulted on a fed subsidized loan[#]; (2) They make $90k cars for rich people; (3) US deficit=$1Trillion, US Debt = $16.X Trillion. (4) Item (3) is spread pro-rata amongst the poor people who can't afford Teslas. Their pro-rata share of the debt is a nice chunk of their mortage payments (5) SV is flooded with cash. Tesla does not need US handouts, subsidized loans and other craptrap. If the biz/product is a winner it will do fine.
> Tesla does not need US handouts, subsidized loans and other craptrap. If the biz/product is a winner it will do fine.
If that's truly your belief, let's carry it out across the board to be fair and complete. No more subsidies, exemptions or bailouts for banks, Wall Street, oil companies, mining companies or religions (via income tax exemptions). Oh that's right. Those are approved and supported by the Republican party. So those are perfectly ok.
But if it is about say solar, wind, tidal, or geothermal energy, or about science, education, helping the unemployed, the sick, disabled, elderly, retired -- those are what we should be spending less on as taxpayers and just let nature take its course. Let the "market" decide the winners and losers. If they can hack it on their own, the market will reward them with enough cash. Otherwise they die. There is absolutely no other long term consideration we should be taking into account, no strategic concerns, no follow-on effects, no externalities (those don't exist in a proper capitalist/rightwing/libertarian mindset, it seems), and certainly no moral considerations to be had. And there is no such thing as climate, ecosystems, or species other than humanity or the ones we pet or put on our plates -- that's liberal hippy talk. Science? A thinly-veiled conspiracy against my Bible. Also there's no need for any business or startup to ever do any R&D spending up front that doesn't have an immediate return via product revenue. That's just insane and asking for trouble. Any new idea must be profitable and able to stand on its own legs in year one, on day one -- nay literally within moments of conceiving of it. Period. No exceptions for ramp-up time, for execution risks, experimentation, taste shifts, refinement, pivoting, serendipity, or market events beyond one's control. That's all weak-minded liberal talk.
$500M loan to one particular solar company that folds? Travesty. Trillions spent on unnecessary wars in Iraq and Afghanistan started by the last Republican administration? Crickets chirping because apparently perfectly ok. Chance a few more blacks or elderly or college students might get to vote -- and not for the candidate I want? Tragedy. Billionaires now being able to spend effectively unlimited amounts of cash to flood media with dishonest ads backing their favored candidate? Perfectly ok. Because the market is always right. Government always eeeevil (eg. Social Security, teachers, firefighters, roads, libraries, schools, defense). Market always guuud (eg. Enron, Deepwater, Goldman Sachs, AIG).
How about no more subsidies for interest on Debt, in particular real estate-residential? Isn't it great getting tax breaks on that $1-3 million home? Every year for you? A working couple at median income pay THEIR ENTIRE TAX BURDEN to offset your nice house subsidy in SF? Isn't that great?
But, like the above example, you are completely missing the point. There is little new or interesting. Just re-hash of political talking points.
THERE IS ALREADY TOO MUCH MONEY investing in the Valley. Where do you get the idea there is a shortage? Gov't stepping up might be OK if there was actually a shortage of opportunity (but there is not).
Elon Musk has every advantage of raising capital. He's rich. Friends in high places (also rich). Proven ability to get publicity. Proven ability as a business entrepreneur. The only reason for people <not> to invest with him, is they don't think it's a great idea.[1]
That makes me think that the DOE wanting to accelerate the loan repayments was a purely political decision.
Wasting money on Solyndra in this economy makes Obama vulnerable - using Telsa as a success story would go far to mitigate that, and news of accelerated loan payments is soundbite-y enough for that purpose.
I read it similarly, though I saw it more as the DOE having an "oh crap" moment and wanting to get itself out from under these loans that have been at the center of controversy and get back under the radar. I'm not sure how much micromanaging is going on when it comes to these loans from the White House, but I would bet that the heads at the DOE don't want any more heat.
Paraphrasing Chris Sacca, Elon Musk is one of the most under appreciated entrepreneurs of our time. Talk about someone willing to tackle the impossibly big problems...
>> Elon Musk is one of the most under appreciated entrepreneurs of our time.
I'm sure his time will come (already starting to). He's built and talked, but other than Paypal the world hasn't yet in a huge way reaped the benefits of his labor. With Tesla and SpaceX both (somewhat recently/soon) reaching a point of having products in heavy use, it'll come soon I'm sure.
Though maybe he should have some reward for attempting to tackle the big problems as well.
I've been 100% long TSLA since the beginning and really don't understand the reasoning behind the doubts people have - given how little they actually know about a) the car industry and b) electric batteries and c) the ability to think on first principles and not by analogy. But I guess everyone has the right to an opinion - even if most of them aren't a) warranted b) backed up or c) logically reasoned.
We are past peak oil. Battery tech will reach oil parity within the decade. Solar PV will reach grid base line within the next 2 decades. Fusion will be introduced within the next 3 decades. Electric engines already run 92% efficiency (vs the combustion engines 15%) and global warming externalities are finally being priced.
The electric car is a no brainer (it wasn't a decade ago, and it'll be too late a decade from now) just like the electrification of trains were. This company will electrify suburbia and reduce costs while they are at it.
Timing + skill = Very nice stock returns (timing is about 10x more important).
Disclaimer: Goes without saying - I am long TSLA and will continue to be long for the foreseeable future.
Battery tech will not reach oil parity within the decade. Oil parity would be batteries with roughly 1/3 the energy density of oil (maybe 1/4 if you factor in the fact that electric motors are lighter than ICE motors).
Predictions are hard, but I'm going to go on the record (and am willing to wager) saying that the batteries in EVs produced in 2012 will have an energy density lower than 9MJ/L.
Ultimately that doesn't matter though. The ED in the Model S is already almost good enough, it's the cost that matters, and I think that will go down. If you end up having a car that is a bit bigger and a lot heavier than an equivalent ICE car would be, you can still sell it.
> If you end up having a car that is a bit bigger and a lot heavier than an equivalent ICE car would be, you can still sell it.
The Tesla Roadster was heavier than the Lotus car it was based on, but had quite respectable performance. That fact, combined with the electric car cachet was enough to sell it.
If they can keep putting the batteries in the floor, they could consistently wind up with a roomier and more versatile vehicle than the equivalent ICE car. Then again, what Ford is doing with Ecoboost is very impressive. I suspect there's a lot of untapped potential for different form factors with ICE technology.
Given your thesis here, why do you think electric cars such as the chevy volt and nissan leaf have had such disappointing sales numbers? I was hoping that those two cars would be the beginning of a mainstream adoption of electric cars, but the car-buying public seems not to have embraced them. Curious if you had any thoughts why?
Externalities 50 or 100 years down the road tend to have little influence on economics. Parent strongly predicted commercial fusion in 30 years. That will not happen.
A vacuum chamber containing 150,000,000 K plasma surrounded by molten lithium blankets surrounded by liquid-helium cooled superconductors. Yeah, that sounds cheap.
Solar, anyone? Somehow I don't see $73/watt 7 years from now competing with $19/watt right now (of which about $5 is the panels) and falling fast. I'm assuming 13% capacity factor for solar here, which is pessimistic (Northeast US).
I am aware of iter. The proposed claim to be defended is "commercial fusion power by 2040", not "there exists an international experimental project to figure out how to create a fusion reactor with a positive energy balance and an economic durability, neither of which we know how to do yet."
"Nonetheless, we have a duty at Tesla, having accepted this loan as a portion of our capital, to repay it at the earliest opportunity."
Not sure why Elon and a lot of SV entrepreneurs feel this way. You take a loan; if it reduces your weighted average cost of capital, you roll it and/or pay it slowly. As a Tesla shareholder, I hope such cheap financing remains in place as long as possible to maximize shareholder return on equity by keeping cost of capital as low as possible -- and by improving Tesla's cash position (helping it to operationally succeed) to boot.
The spirit of the loan was to help a promising company make progress on its technology. By repaying the loan early, the DOE will be able to make more loans out of that fund to other such companies. This might not minimize Tesla's cost of capital, but I'd say it's the right thing to do if it doesn't add undue risk to the company.
Okay, you've called this action incompetent, irrational, and inconsistent, but you haven't actually explained why it is any of these things. Maybe it's obvious to someone with more working knowledge of accounting, but it's not clear to me. Could you explain?
A extremely simple analogy here would be home loans. If your home loan costs you ~4%, but you can make 10% in the stock market, than it would make no sense to pay off your home loan early, because you could use that money and invest in the stock market (a net of 6%).
I am no accountant, but in Tesla's case, it sounds like they now have a pile of money that they are going to sit on for emergencies, and that it may make sense for them to pay down this loan early with some of this cash because it reduces their liabilities (by reducing the interest they owe), whereas sitting on it nets a 0% (or near 0%) interest rate. Also, I wouldn't be surprised if there was some political/strategic motivation for paying off the loan. Unfortunately, Solyndra has become synonymous with the loan program, and I wouldn't be surprised if there is some pressure from investors or the board to distance Tesla from the program because of that.
There is X cost to holding debt, and Y cost of holding cash.
The cost of debt is pretty clear - its the interest rate.
The cost of cash/equity is the opportunity cost of what you could be doing with it. (Either invest or spend it on growth or if none of the above are viable, then give it to the investors who can use it more effectively)
A CFO's job is to figure out the lowest possible cost of capital the firm can obtain, by having the right loans and investments and cash on hand as required.
Many companies may even find carrying debt to be cheaper than holding cash.
Doing moral good is a great thing, but its not part of the remit.
Now if you had a firm which does "good". You would usually do that through a different set of vehicles - you could support a foundation (which has tax breaks too! so makes even more sense).
There are lots of ways you can incorporate moral good into your daily activities and there are many incentives by the government to encourage such behavior.
Very few incentives though (if any) are centered around the concept of repaying loans to the govt faster so that they could * hypothetically* use the loans for something else equally or more worthy.
Especially since govt loans are usually part of a programme that has a corpus decided by legislation which matters more to disbursement than repayment.
As of last quarter, Tesla had $777M in assets and a whopping $715M in liabilities--leaving a net balance of only $64M.
Given that their balance sheet is decreasing by an extraordinary $30M a month, that would have left only two months until the company was insolvent. No wonder the U.S. government wants their $465M paid back more quickly than planned.
The company has lost over $850 million since being founded in 2003.
That isn't actually what "insolvent" means. Insolvent refers to a situation in which an entity is unable to pay its debts as and when they fall due. Not whether they have a positive or negative asset position.
Strictly speaking, the balancesheet is irrelevant to Tesla's solvency.
My tennis club owns a property worth $20m from which it operates. It has debt of only $1m and repayment obligations of $100,000. It generates net revenues of $90,000. It is insolvent, with net assets worth $19m.
My startup technology company has no assets other than goodwill and intellectual property. It has no revenues. It has a line of credit from a financier sufficient to cover all expenses. It is solvent, with $1m of net liabilities.
Nope, your tennis club is not "insolvent". It's illiquid. It means it doesn't have cash but enough worth to take pay his obligations. At least, that's what Sal has explained in his KA videos.
"Cash flow insolvency involves a lack of liquidity to pay debts as they fall due. Balance sheet insolvency involves having negative net assets—where liabilities exceed assets. Insolvency is not a synonym for bankruptcy."
> The company has lost over $850 million since being founded in 2003.
I seem to recall that it takes the big 3 on the order of a billion dollars to bring a new automobile model to market. That includes the engineering, marketing, and the cost of tooling in the factories.
With that in mind, 850 million dollars doesn't strike me as being all that much capital for creating an entirely new automobile company.
> The company has lost over $850 million since being founded in 2003.
Lost? Literally? Since it's been lost I'd love to be the guy that finds those money bags laying around somewhere. But seriously, I'd suggest rather it's been spent, and probably spent mostly on R&D, which is precisely what any reasonable observer would expect an innovative new electric car company to be doing. Musk said even today I believe that within a month they appear to be headed to cash-flow positive. That's a huge good milestone for a new company to achieve, even more so in a bleeding edge one as theirs. And they've already built, sold and shipped 2 models of new product already, in customer hands. That significantly de-risks them. Completely de-risks? Of course not. But if you look at accomplishments to date, their momentum, and the degree of talent on board, I think the smart bet to make on them is up/long.
Well, cash flow positive until they decide to develop, test, and manufacture another model, which will again put them in the red. Building cars is a very expensive proposition.
I think the DOE loan has probably hurt Tesla's stock price more than it's helped -- the rumors about late repayment, etc. have probably depressed it from 33-35 down to 29. If Tesla hadn't taken $1 from DOE, it would be able to attack Fisker and Chevrolet and others for being Government Motors, and wouldn't have gotten name-checked in Romney's debate answer tonight.
The only money MuskCo's should be taking from the government is payment for services (like flying cargo to the ISS, Moon, Mars, selling cars or solar power to them, etc.), not using the government as VC. The government is a horrible VC or lender, and the MuskCo's could do a lot better.
96% on this program so far is possible, but there are numerous other examples of the USG investing in businesses which fail, and even worse records for state/local governments (stadiums and convention centers being the classic example)
There are numerous intangible benefits to these programs beyond the success rate of the businesses. Jobs get created, technology is invented or improved, and supply chains and support networks are created or are made more efficient. While VC's might only care about the balance sheet, the government isn't in this to make money, they are in this to make our lives better.
What is the proof for this statement? I'm not asking what are the theoretical underpinnings of this worldview; what is the evidence which compels this conclusion?
That's difficult to say, because government investments mostly go into infrastructure and enablement policies, not ventures. But let's give it a shot.
USA: Green energy investments, of which some companies have turned out to be outright fraudulent.
China: Massive infrastructure and housing overspending and bubble, with much shoddy construction. Housing and construction companies everywhere benefiting from the money only contributing to a high-probability disaster ending.
Most Olympics-hosting nations, depending on what you perceive to be an acceptable measure of return.
If I recall correctly, the DOE loan is very low interest rate, repayment is based on metric milestones, and at the time financing via traditional capital markets was fairly difficult for almost anyone.
Yeah, but the government itself is borrowing money at absurdly low interest rates right now. If you agree with the notion that government intervention to get an edge in strategic industries can be a good idea, it looks like a good loan at whatever rate they got (assuming it's higher than a 1/8 of a percent, the gov't turns a profit, too).
If you agree with the notion that government intervention to get an edge in strategic industries can be a good idea, it looks like a good loan at whatever rate they got (assuming it's higher than a 1/8 of a percent, the gov't turns a profit, too).
I agree with this notion. Why not use whatever resources available to gain a competitive edge?
Gimme a break. Every government with an auto industry to speak of has supported their auto indusstry at one time or another. And almost every government would love to have a company like tesla in exchange for a few loans that are about to be repaid.
Hope some good news come on SpaceX, too. What's up with F-H with its so dubious payload figures, especially for high energy trajectories? How's the cross-feed system is coming along (if it haven't been dropped yet)? Where is the 'super efficient staged combustion methane engine' you mentioned a year back, any idea what thrust class it is and what is the fuel combination?
Not sure if anyone else noticed, but Romney made a crack about Tesla (in the same sentence as Solyndra) as a useless pet project that Obama subsidizes.
I wonder how this will play out politically, especially if Tesla gets into trouble financially. That story is already being spun.
However, doing a quick bit of research earlier today, a search for "Tesla working environment" turned up more than a handful of reports by former and current employees that hint at an unpleasant company culture. Six to seven day workweeks, below average compensation, hyper-political management, management that is quick to fire, and a generally chaotic environment. These factors seemed to be reported even by folks who cited other benefits such as a high degree of autonomy and the opportunity to work with other highly passionate top level engineers on important emerging technologies. One additional oft-repeated concern was that the pace at which Tesla works its engineers is unsustainable, and will lead to burnout for lack of work-life balance.
Can anyone closer to the Valley than I am comment on whether these concerns ring true? And how does this compare to work at other highly innovative and passionate industrial startups?
Elon's explanation of the latest round of fundraising is welcome news, and personally I'm gunning for Tesla to become the Apple of the auto industry. (I plan on buying stock as soon as I'm able.) Is there anything we can infer from these employee reports about the health of Tesla's organizational core/DNA, and what effect that might have on the company's prospects for long term success? [Edited for clarity]