In late 2006, via an invitation from some friends at Capricorn, the team at Columbia Ventures met with Martin Eberhard regarding their Series D round, in progress at the time. (see Stan Hanks' answer to If Tesla had started in the commuter electric car market at a $25k price point, would the company have been selling cars as well as (or better than) they are now?)
The opportunity wasn’t compelling. Eberhard, while seeming to be a decent guy, was not confidence inspiring. Over the course of time, there was some back and forth, and eventually as we signaled that we weren’t super interested, a call from Elon Musk.
Musk, he was something completely different. On fire. Passionate. Articulate. Smart as fuck. Not effective in moving our opinion as that was 100% fact based, and he was selling The Future.
So the round closed in May 2007. In that, Tesla picked up a couple of new board members - Ira Ehrenpreis from Technology Partners, and Antonio Garcias from Valor Equity Partners. Both of these guys, in public statements, were bullish on the opportunity to “bring positive change” by “generating consumer demand for it”. They were also looking for a serious opportunity to make bank, needless to say.
As the story went from there, in August 2007, Eberhard was supposed to give a talk at a luncheon for the Motor Press Guild, and sometime before showtime, got a call from Musk, who told him that the board had met without him, and he was being replaced by Mike Marks, an early investor and board member.
Eberhard maintained that he had no idea what happened in the board meeting, that he had no chance to defend himself, and that it was basically a “done deal” before he heard any word of it.
My hunch - based on experience in similar situations - is that Eberhard was chasing a path on which he had detractors, and that Musk, having taken an even larger stake in the company, had “the hammer” in deciding what happened next.
It wasn’t pretty. Marks was only “interim CEO” for a few months, with Ze’ev Drori taking over in December 2007. There was a first-of-the-year purge in the senior ranks in January 2008 following “performance reviews” by the new CEO. They cut overall staff by 10% and started preparing for a new round of financing. In the middle of that (October 2008) Musk took over as CEO and laid off another 25% of the workforce to pull burn down to a survivable level while the new round came in, with the Series E arriving in December 2008, just in time to avoid a Chapter 11 filing.
Brinkmanship at its finest.
That marked a raise of $187M in total of which Musk personally provided $70M.
He had the most at risk, and doubtless had insured that he had if not total, then significant, control of the situation. He also had the necessary will to do whatever it took to ensure that the company made it.
Somewhere in that calculus was “Eberhard has to go”.
Looking at them in the Series D, I can say that Eberhard didn’t have what it took to move my group over the line to invest. I can’t say if he was inept, incompetent, insufficient in other ways, but he was not confidence inspiring. Friendly, knowledgable, willing to talk in detail about any number of talking points you’d expect the CEO to be on top of, sure. But not confidence inspiring.
If I were making a guess, that would be it.
Ref:
Tesla Motors Secures $45 Million Series D Investment Round Led by Technology Partners and Elon Musk
Tesla's Original CEO Reveals What It's Like To Get Fired By Elon Musk