Erik Nordeus - The Engineer

As they continued to develop their product, they branched out to more areas than was covered by the original business idea. Visitors to Zip2 could look up a movie, and then find a restaurant or nightclub in the same neighborhood. The Zip2 software could also give visitors door-to-door driving directions. “It [Zip2] did a bunch of things,” Elon said. “It was Internet publishing, mapping, yellow pages, white pages, calendar. Basically, what my first company really did was to help bring the media companies online.” 321

This was the first description on their website:

Every year, businesses in your community spend thousands or even millions of dollars on advertising in order to provide you with information about their products, promotions, and services. This information comes through the mail, the print Yellow Pages, and many other forms you see and hear every day. However, despite all these efforts, you simply don’t always find the information you want when you want it… and here’s where the Internet can help.

The Internet not only allows you to get the depth of information you need about a business faster and more cost-effectively than any other source, it also allows you to go a few steps further. Through the Internet, you have the ability to communicate with that business once you’ve found it; the ability to get a map showing you where that business is relative to other businesses; the ability to look for businesses by proximity to your home; the ability to get door-to-door directions to that business, and many more. Zip2 not only brings you all of these benefits, but it is focused on continuing to provide new and innovative features in the years to come. 262

The 1996 version of the Zip2 website featured a blue logo, which consisted of a running person where the legs form a lightning. You could search on the site, and the main heading said, “Search accurately for over 16 million businesses in the USA…” Zip2’s Management Team page revealed that, “Elon published his first computer program at age 12 and four years later achieved the highest possible grade in the IBM aptitude test for engineers.” 262

Zip2 rented an office in Mountain View, California. The monthly rent was about $450, and it had a leaky roof. “It was just the nastiest place you can imagine,” Elon said. “It was way cheaper than a garage. Garages are expensive.” They didn’t have a home to live in because the apartment was more expensive compared with the office, so they got rid of the apartment. “When you are first starting out you really need to make your burn-rate ridiculously tiny,” Elon said. “Don’t spend more than you are sure you have.” 436

They tried to repair the roof, and during the night they slept in the office on futon sofas, which is a Japanese type of furniture that easily transforms from bed to sofa. The futons were placed in the meeting room. To shower, they went to the El Camino YMCA. The facilities included a gym where they exercised, so they were all in good shape. Regular exercises were a good idea since they frequently ate at the low-cost fast-food restaurants Jack in the Box and White Castle. 4,71,258,264

One floor below Zip2’s windowless office, a smaller Internet service provider had their own office. To get a fast Internet connection to Zip2’s office, they drilled a hole through the floor and connected the cables. For this connection, they needed to pay $100 per month, and it was a large improvement for the company. They had previously used Elon’s own computer and a dial-up modem to run their website. “I’d program it in the night and turn the server on during the day,” Elon said. 71

All these smaller savings meant the company had low expenses, and they had some revenues. It didn’t take long before Zip2 had a positive cash flow – a fact they could brag about when they searched for outside investors. But the life of a Zip2 employee was still far from luxurious. They had so little money that Elon and Kimbal’s mother Maye had to pay for colored copies of their business presentation they needed when they presented their company in front of outside investors. 417

In 1996, the fish took the bait when the venture capitalist firm, Mohr Davidow Ventures, invested $3.5 million for less than 50 percent of the company. Elon thought they were crazy who had given him all this money. “Do they have any idea what they’re doing giving me all this money?” he asked. “I was terrified of blowing that money.” In total, Zip2 would get $38 million more in funding. 71,265

Zip2 had earlier asked other venture capitalists if they wanted to invest in the company, but they declined because most of them had never heard of this Internet. “Back in 95, there weren’t many people on the Internet and nobody was making any money at all. Most people thought the Internet was gonna be a fad,” Elon said. 27One venture capitalist threw a phone book at them and asked, “Do you really think Internet will replace this?” 320

The reason why everyone now wanted to invest in Internet companies was that Netscape became a public company in 1995. This was, however, not the largest IPO this year. Pixar’s – another technology company famous for movies like Toy Story – was larger. But while Pixar’s stock increased with only 77 percent the first day, Netscape’s stock increased with 107 percent. It was clear that technology, especially Internet, was the hottest investment. “Netscape went public in late 95, and that was the first inkling that – even if nobody was making any revenue on the Internet – at least there was some greater fool who would buy the stock,” Elon said. 57

Elon’s first car was a used 1978 BMW 320i with a price tag of $1400. The car was in a miserable shape, but Elon fixed it up himself. He owned it for two years, and once, he loaned it to an intern who worked at Zip2. While the intern drove the car, one of the wheels fell off. The intern called Elon who rushed to the scene. He recalled how he could see the scratches in the road made by the axle where the wheel had been attached. 124

When Elon was seventeen years old, someone gave him a book on classic convertibles. The car he liked the best was the Jaguar. He would later buy one for himself, but had to wait until the venture capitalists invested in Zip2. They gave Elon $40 000 as a bonus, and $35 000 immediately went to a 1967 Series 1 E-type Jaguar. While the E-type is considered to have the best car design ever made, it’s also unreliable. Elon recalled that the “Jag” was like a bad girlfriend since it kept breaking down. It even broke down on the way home from the car dealer. 124

To get this first investment, Elon agreed to replace himself as CEO of Zip2. Replacing an inexperienced CEO with an experienced one is a common thing to do in new companies as they grow, and Elon assisted in the recruiting process. They decided that Rich Sorkin was best suited to become the new CEO. Sorkin had a degree in economics from the Yale University and an MBA from the Stanford University Graduate School of Business. Before joining Zip2, he worked at companies such as Goldman Sachs and Creative Labs. When he took over the rudder, Elon thought it was a good idea because the value of his shares in Zip2 would increase if they hired a competent CEO. But he would later regret the decision to step down as CEO. 71,324

As Elon is a person with strong views, he didn’t always share the new CEO’s vision. Zip2 wasn’t a consumer company with a recognized brand name. The only clue a website was a part of Zip2 was that it included a smaller logo with the text “Powered by Zip2.” Elon wanted more visibility, and visibility to him meant he wanted his picture on the front page of a magazine. 263“I’d like to be on the cover of Rolling Stone, that would be cool,” Elon said. 27