businessinsider.com:
Tesla co-founder Martin Eberhard is suing Elon Musk and Tesla Motors for a slew of reasons including allegations of libel, slander, and a breach of contract.
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Eberhard was originally supposed to get the first car off the production line, but Musk insisted that he wanted it, so Eberhard graciously let him have it. When it came time for Eberhard's Roadster to be delivered, Musk held it back for as long as possible, then, with a nudge and a wink, Musk had a Tesla employee, who had already crashed another Roadster, take the car out on the Bay Area highways for a 100km "endurance test", until the employee crashed Eberhard's car too. This is beyond sleazy; it's malicious.
Musk has done his best to destroy Eberhard, both professionally and personally, and should be held to account.
Martin and Marc founded Tesla Motors in 2003. They needed venture capital to fund the development of the Roadster. That's when Musk stepped in, 9 months after Tesla was incorporated. In each round of fund raising Musk put in just enough money to be the largest individual shareholder, which allowed him to appoint people of his choice to the board of directors. He appointed his brother, Kimbal, as well as friends and former business associates. Essentially, he stacked the board with allies, and then used the board to eject Eberhard from his own company. Very sleazy. He then went on to take the credit for Eberhard's original idea, as well as all the work Eberhard did to build the company and develop the Roadster. Not satisfied with that, Musk also has attempted to destroy Eberhard's reputation by blaming him for production delays & increasing costs. Many people who have followed the development of the Tesla Roadster over the last several years know that Musk was the one who wanted the door sills lowered, the headlight clusters redesigned, carbon fiber bodywork instead of fiberglass, electronic door locks, 2 speed transmission, etc., etc. Eberhard was the one who counseled restraint, but was overruled.
Trouble in paradise? Oh, well. Just the usual startup rivalry. As long as they keep making cars and one day maybe even a profit, nobody cares.
Equal partnerships do not work. I read "Raising the Bar" written by the founder of Cliff Bar a few years ago and it really opened my eyes to business partnerships. His mistake was to give an equal 50% of the company to a partner. Giving 50% is a huge mistake because you have no maority control of the business. When the company received a tender offer of 140 million by a Big corporation, this partner wanted to sell. With Luck and Perserverance on the side of the founder, he was able to finance the 70 million dollar buyout of his partner. It was totally unfair because he was the person who put most of the sweat equity and ideas to make his company a success. Unfortunately, since he allowed her to 50% of the company 10 years earlier, he had to pay the consequences of his success.
Anyway, the moral of his story is that it's better to have full control of your own company, and if you have to take on partners, never give them a controlling interest and have a several attorneys review the partnership agreement/contracts.
Why should this surprise anybody. There are endless stories in Silly Cone Valley about how entrepreneurs with great ideas were run out of their company by the money men. When you get ready to bring in the guys with the cash to finance your company you better have a good team of lawyers looking at the contracts and know exactly what you are being screwed out of.
Instead of "Buyer Beware", it's "Seller Beware".
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Posted: 06-11-09 08:41 AM