The story of Elon Musk saving Tesla and SpaceX from bankruptcy in 2008

In 1999, a 28-year-old Elon Musk sold his first company Zip2 to Compaq for $307M. That same year he cofounded X.com, which merged with a payments company started by Max Levchin and Peter Thiel to form PayPal.

When eBay acquired PayPal for $1.5B in 2002, Elon walked away with upward of $175M.

Over the next decade Elon bet his entire fortune on SpaceX, Tesla, and Solar City and came very close losing it all in 2008. Today’s video tells that story.

In 2008, both Tesla and SpaceX were on the verge of bankruptcy.

Elon had invested $100M of his own money into SpaceX, which was enough to fund three rocket launches. When all three of those launches failed, it nearly crippled the company.

To make matters worse, Tesla faced the worst economic climate since the great depression. Things were so bad for car manufacturers that General Motors eventually filed for bankruptcy.

With his remaining money from the PayPal exit, Elon faced a choice. As he describes it:

“I could either split the funds I had between the two companies or focus them on one company with certain death for the other. That was a really tough decision. I decided in the end to split what I had to try to keep both companies alive, but that could’ve been a terrible decision that resulted in both companies dying…. I never thought I’d have a nervous breakdown, but I came pretty darn close.”

After betting everything on the two companies, things finally started to look up.

SpaceX’s fourth and final launch attempt succeeded, and a few days later they signed a $1.6B contract with NASA that saved the company.

And when Elon put his last dollar into Tesla, it got other investors over the fence to close the needed financing. As Elon explained in a tweet:

“Tesla financing round closed at 6pm Dec 24th 2008 – last hour of last day possible or payroll would’ve bounced 2 days later. I gave Tesla last of my remaining cash from PayPal. Didn’t even own a house or anything sellable.”

After the round closed, Tesla was able to secure a $40M battery deal with Daimler, and in May 2009, Daimler acquired a 10% stake in Tesla for $50 million.

The rest is history, but betting his entire PayPal fortune on two companies—when failure is the most likely outcome—is an incredible story. It brings to mind the following quote from Musk:

“When something is important enough, you do it even if the odds are not in your favor.”

Full video: Bloomberg Originals “Elon Musk: How I Became The Real ‘Iron Man’”