Musk went to university in Canada before making his way to America to study at the University of Pennsylvania’s Wharton School and, in 1995, at the prestigious Stanford University.
But Musk’s time at Stanford lasted just two days and he dropped out to start a company called Zip2 with his brother, Kimbal. It was Musk’s first major success. The business created online content publishing software for media companies and in 1999 it was acquired by Compaq’s AltaVista division for US$307 million in cash and US$34 million in stock options.
Musk pocketed $US22 million, but, as he told Inc eight years later, he considered the venture something of a failure. He was looking for a big idea and he found it in electronic payments.
Musk’s next company was the uber cool sounding X.com, which raised $US25 million from investors – including legendary venture capital firm Sequoia Capital – to pursue Musk’s vision of transforming the financial services sector.
X.com would eventually focus on a product that allowed users to make payment via email and in 1999 Musk merged the business with a competitor called Confinity, which had a similar product known as PayPal.
Musk ran the merged business for 10 months before a mutiny led by Peter Thiel saw him ousted and the company renamed PayPal. Musk retained his shares and was, in fact, the biggest shareholder when PayPal was acquired by eBay in 2002 for $US1.5 billion.
Despite earning a big pay day from PayPal, Musk was never completely satisfied with what the company achieved from its giant user base.
“It has 120 million customers, and there’s a high trust factor,” Musk told Inc in 2007 (the user base is now even larger). “There’s a lot of unleveraged value there.”
Musk was now truly rich, but still in his 30s and brimming with ideas.
“If you have millions of dollars it changes your lifestyle, and anyone who says differently is talking bullshit,” Musk has said.
“I don’t need to work, from a standard of living point of view, but I do, you know. I work every day and on weekends and I haven’t taken a vacation for years.”
But despite his decidedly Silicon Valley roots, Musk chose to focus on two established industries: the automotive sector with Tesla and the space sector with SpaceX.
Musk bankrolled both ventures with proceeds from his PayPal stake, initially shunning investment so he could retain tight control.
Tesla went public in 2011 and now has a market capitalisation of about $3.08 billion, with Musk retaining a 29% stake worth $893 million.
SpaceX is privately held, although Musk has said he will move towards an IPO perhaps as early as next year. This could be a big IPO. The company says contact cargo space flights could start as early as September, and a recent valuation from a company called PrivCo has put the value of the business at $2.4 billion, based on trading in secondary markets.
PrivCo says Musk’s stake is worth around $1.6 billion.
The success of SpaceX and Tesla is staggering given Musk has admitted both companies have been on the brink several times.
The SpaceX success is clearly particularly sweet for Musk.
“If you go back, back a few hundred years, what we take for granted today would seem like magic – being able to talk to people over long distances, to transmit images, flying, accessing vast amounts of data like an oracle. These are all things that would have been considered magic a few hundred years ago,” he told Forbes a few weeks ago.
“So engineering is, for all intents and purposes, magic, and who wouldn’t want to be a magician?”
Magic. Now that is pretty cool.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
