Elon Musk: Balancing Purpose and Risk

The case is used to illustrate the place of ‘Purpose’ versus financial risk and returns in a founder’s objectives. It also addresses personal risk profile of different founders, and when paired with the Risk Tolerance Exercise, it enables evaluating one’s own appetite for risk and motivations for starting a venture.
In December 2008, Musk’s two companies – Tesla (that produced high-end electric cars) and SpaceX (that built rockets) were on the verge of financial collapse. The year had been tough for Musk – both companies were in trouble, cash was down to nothing, and he was in the middle of an expensive divorce. Thus far, Musk had been able to use his personal funds for the companies, but he was getting close to personal bankruptcy. Musk needed $40 million to keep Tesla afloat. He pieced together $20 million of his own money, and leaned on investors to match the amount. VantagePoint Capital Partners committed to funding, but had recently expressed disagreement with the terms and an intention to withdraw from the round. Moreover, Tesla had missed production deadlines and delivered only 50 (out of the promised 1,200) pre-ordered electric cars. SpaceX had seen three failed launches, followed by a successful rocket launch 10 weeks earlier. It was in the running for a contract with NASA and Musk was confident that they would win.