Muskains - Story of First startup

So it was the year 1994 and Elon and his brother Kimbal were on a road trip across US and this was the time they scratched their brains to decide on what should be their future plans, what they wanted to pursue and what field to begin with. After all the mind shots, they settled on the idea of doing something in the field of Internet. This was the period when Internet was easily accessible to common public. Thanks to tools like Netscape and Yahoo.

They first began with an idea of creating something for doctors, a collaborative portal for physicians. This was supposed to be their first start up but they just dropped this idea. While in Penn University, Elon took up internship at two interesting places. During day time he used to work at “Pinnacle research Institute”, his task involved exploring ways in which “ultracapacitors” could be used. Studies revealed that "Ultracapacitors" looked promising as power supplies for missiles, because they seemed to be more resilient than batteries under mechanical stresses. Elon loved the work and used this experience for planning industrial pursuits.

While the second half of the day he used to work for “Rocket Science Games”, a startup for advanced video games. A personality named Tony Fedall, who is known for his work for iPod and iPhone at Apple also worked in this startup. This place had mix of people from both engineering background as well as film industry. Some people who worked on original Star Wars effects at Industrial Lights and Magic were part of this startup. Elon’s work is this startup was to write drivers that would let joystick and mouse communicate with various computers. For ease of understanding the writer does describe all computer terminology very well in the book including “drivers”. These internships gave Elon a flavor of what Silicon Valley had to offer both from talent and culture perspective.

So these 20s something boys in year 1995 came up with idea which in future was known by the name “Zip2”, initially called as Global Link Information Network. The initial idea was “online listing”, a yellow pages online directory service. So the idea was that Zip2 would create a searchable directory of business and tie this into maps. There were some early convincing sessions that Elon and his brother Kimbal carried out with local business owners in which they explained them the importance of going online. So the office space for this idea came to life at 430 Sherman Avenue in Palo Alto.

What is interesting is that Elon did all the original coding behind the service himself whereas Kimbal managed door-to-door sales operation. The two were turning broke slowly in this process due to short of funds, and for the first three months the Musk brothers lived in the office. The book mentions that Errol, their father, gave the boys $28000 during this time to continue their work, but sometimes later in the press Elon denied this fact. Don’t know the exact thing about this but this was how it was.

This was the era where first people saw a “.com” address and wondered what it is and how it worked. So it seems Elon was right with the choice of entering this domain. While the product was under development, Elon got cheap license to a database of business listings in the Bay area that held a business name and its address. He later contacted a firm named “Navteq” that created digital maps, pretty much the early GPS idea and navigation system. So these digital maps gave the navigation style to his software. Elon merged these two databases and the result was the core service of Global Link Information System.

From here onwards in the book you will see continuous references and experiences of early Elon’s employee and other related people. As known in news these days Elon is kind of a man with controversies, a giant spoiler for my readers that there was a controversy in the phase of establishing zip2 and even about his academic records which is thoroughly mentioned in Appendix 1 of the book. To get deeper insights and to get things clear, I would recommend those who are reading the book to also read Appendix one.

One year later in year 1996, Mohr Davidow a venture capitalist impressed by this startup, invested $3 million into it and coined the name Zip2 for Global Link Information Network. Some major changes were on the way for this company after this funding took place. The focus now shifted on newspaper agencies. They started to target newspaper to get access to nationwide network of listings. Elon was pushed to the role of CTO and Rich Sorkin was hired as the CEO of Zip2. 

Some sneak peek into Zip2’s office and work environment tells us that, Musk was caught badly into self-taught coder trap verses the clean code practices that the newly hired software developer followed. Also how the team had calibrated their work style with Elon. For example, what was Elon’s idea of one hour work was calibrated to one day by the development team and what was his one day requirement was seen as a weeklong task. Elon’s work style really lacked a leadership quality and his behavior with fellow employees did turn rude at times. Elon used to take some decisions overnight all by him and not involve his fellow colleagues.  In fact he agreed to that saying “well I was never a sports captain or captain of anything and have no experience”. But overall as a company Zip2 made remarkable growth and many newspapers approached them.

But Elon Musk was irritated by the identity of Zip2 being limited as a “behind the scenes” player for newspaper. He believed that company could offer some interesting services directly to the end customers which were limited that time due to company’s policy to target newspapers. And we could see differences of opinion between Elon and Rich Sorkins on this.

Some days later, it was announced that Zip2 would undergo merger with its competitor CitySearch, and this news was almost confirmed. Everything was all set but the deal could not happen and opinions on what exactly happened that caused the deal to fail vary widely among the people involved. While Musk was early advocate of this deal, he later turned against it considering the merger policies that questioned how honest the counterpart company was. Because it was required that some people would be fired to avoid duplicate roles and Musk questioned whether all records from CitySearch are transparent? But the merger did not take place. And as a result of this mess, Musk lost his Chairman title and Rich Sorkin was replaced by Derek Proudian as CEO.

As a turning point, later in February 1999, computer manufacturer Compaq brought Zip2 for $307 million. Musk got $22 million as his share and Mohr Davidow made 20 times its original investment.

Sometime later as Elon observed where Zip2 was heading after being sold to Compaq, he quickly analyzed what went wrong on his behalf while handling situations with employees and what things could have been corrected.

Truly displaying a “learning from mistakes” attitude he headed towards his another project that made a great impact in banking sector.

More about “PayPal Mafia” in next blog…