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$6 Billion from $150K investment in Tesla · Elon Musk Podcast

0:01
Hey everybody, welcome back to the Elon Musk Podcast.
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This is a show where we discuss the critical crossroads that
0:08
shape SpaceX, Tesla X, The Boring Company, and Neurolink.
0:13
I'm your host, Will Walden. Elon Musk says that a $150,000
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investment in Tesla by a Stanford professor became $6
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billion. Now how did this happen though?
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So $150,000 investment in Tesla, this is back in 2006, his grown
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into $6 billion. According to Elon, who shared
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the claim during a recent post on X, Musk credited the windfall
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to the early confidence placed in Tesla by Stanford professor
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Steve Jurvetson. Now, the return from that
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investment raises a pretty big question.
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How did a six figure bet on an unproven vehicle?
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It's an EV nonetheless turn into one of the most lucrative
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private to public bets in Silicon Valley now.
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Tesla's earliest funding round in 2004 included $6.5 million
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from Elon, who had made his first fortune from PayPal.
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But the round also included funds from investors like
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Jurvetson and his firm Draper Fisher Jurvetson DFJ, or Jurvet
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Son, which became one of Tesla's key backers.
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As I pursued an EV product at a time when the concept looked
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kind of wild. It's more like science fiction
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at that point, and it wasn't really a viable business.
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It was just somebody tinkering right?
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We all know how Tesla started. It wasn't a viable product off
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the bat. They had the Roadster, but that
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injection of money helped keep Tesla float before the actual
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first Roadster was shipped. At the time of DF JS investment,
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Tesla had no finished product. There was no revenue.
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And there was no proof that it could actually manufacture any
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kind of vehicle, let alone a Roadster.
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The company had not yet launched the Roadster and was still
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refining batteries which relied on lithium ion cells packaged in
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a novel thermal control system at that point.
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So betting on Tesla back then was not calculated because of
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earnings and more on a belief that the battery technology
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could advance quick enough to make long range electric
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vehicles feasible for the consumer market and for later
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models. Now, Steve Jurvetson did not
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just invest his capital though. He actually joined Tesla's board
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and stays involved through the company's hardest years,
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including delays with the Roadster.
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Everybody wanted to see it. It wasn't there cost overruns,
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internal tensions that led to the ousting of the original Co
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founders. His involvement aligned with DF
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JS track record of backing very high risk but also high reward
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if they pay off. And this is for technology
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companies like SpaceX. And also back then, remember
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Skype that just got shut down, They invested in that too.
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Jurvetson's continued presence through Tesla's IPO in 2010 met
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His firm never cashed out during the crucial scale up period.
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They could have made a bunch of money early on, but then the IPO
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happened. The Tesla shares were $17.00
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each and they raised about 226 million through that, which gave
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it a market cap of about $1.7 billion.
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DFJ's initial stake grew substantially during the run up
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to and after the IPO, and over the next decade, Tesla stock
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underwent several splits, A5 for one split in 2020 and a three
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for one in 2022. In Tesla today, shares trade at
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hundreds of times the IPO price, which multiples or multiplies
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the original equity for value of early investors by a factor of
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not 10s or hundreds, but of thousands, which is incredible.
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So Musk is estimating the $6 billion for Jurvetson's original
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$150,000 stake, and he assumes both the compounding effect of
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equity appreciation and the retention of shares through all
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public market volatility. They just held down to their
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shares. What did they say?
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Huddle, of course. That's what we want to talk
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about right now. Through all the huddling, Tesla
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stock has one dramatically up and down over the years.
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You know, the last five years have been tumultuous, driven by
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production targets, profit milestones, and also Elon Musk
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getting into politics. Still, if you hold on to the
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stock, the upside has proven immense compared to what it was
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when you started way back in the day.
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The return on this is insane. It stands out from everything
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else but for how early it was as well in the investment, they
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didn't have anything. It was just an idea and they
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invested $150,000. If you're a persuasive enough
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business person with the right idea, you can get money.
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That's what this is saying. You can get money from people
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that believe in you. Also, Elon had a track record
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already with PayPal and has already cashed out with that.
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And Elon was also putting in a bunch of his own money.
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So of course people are going to believe if you're putting in
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millions of dollars of your own money, what's $150,000?
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You know, for a venture capital firm, $150,000 is nothing.
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So you put that in, you just sit on it, see what happens.
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You hold on to it. Stock keeps rising.
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You hold on to it. Stock keep rising, hold on to it
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up and up and up until you get to billions of dollars now.
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DF JS investment terms are not public though.
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But typical early stage VC rounds at the time valued Tesla
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in the 10s of millions of dollars.
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And if DFJ purchased equity at a $20 million valuation and
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retained a .75% stake after a dilution, the current market cap
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of Tesla, now hovering around 800 billion plus, would
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translate that holding for $6 billion as long as there's no
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secondary sales. So if they did sell off a little
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bit and they're still making billions.
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So I think they're pretty good now.
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The scale of that return shows how a single high risk venture
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investment can reshape a fund's entire performance profile.
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VC funds typically expect only a small number of their
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investments to generate outlier returns, with most startups
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failing or returning modest profits.
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You invest in a bunch of stuff and you invest a decent amount
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of money in everything. And out of all of those, there's
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going to be a few you hope hit really big.
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It's it's like Vegas, man. You go gamble and you play a
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bunch of games throughout the night.
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You put a little bit into every game and hopefully you come up
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ahead at the end of the night. Hopefully you'd make more money
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than you came in with. Or if you're like me, you lose
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it all because you're not good at gambling.
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I'm just going to be honest with you, I'm not even a gambler.
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I just play those silly slot machines and I think they're
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funny and I usually bring in $10.
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At that point, I'm like, you know what, that's all I got.
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That's all I'm going to bring in because I'm not going to waste
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my money. You know, the, the odds are
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against me, but it's a fun time to hang out with friends and you
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know, 10/10/20 dollars, that's not a big deal.
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So at that point, man, you know, I haven't been to the casino in
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a long time, to be honest with you, maybe a decade.
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So anyway, leave it in the comments.
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When was the last time you went to the casino?
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Did you win money? That's a good comment.
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And this is what those VCs are doing.
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They're gambling on all these different companies.
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They're gambling on the people and the leaders of these
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companies more so than on the technology because they want to
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invest in people more so than they want to invest in the tech
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because the people make the tech.
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Of course, that's how it works, right?
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Most start-ups fail and of course some of them do make a
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modest profit, but Tesla is rare in that case where they paid 6
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billion to these VCs after that small $150,000 investment.
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Now, Steve Jurvetson left Tesla's board in 2020 after
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taking a leave of absence from DFJ and later Co founding a new
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firm which is called Future Ventures.
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Despite him leaving though, his connection to Tesla remains A
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defining part of his vesting career.
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His ability to identify Tesla's potential before any cars hit
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the road remains one of the most cited examples of high
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conviction investment in tech history.
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Was it just luck? Did he just spread out his
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wealth to different companies and get lucky with Tesla?
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No one's really going to know. And of course Steve is always
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going to say I knew it. I knew it all along.
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So Elon Musk used an anecdote of Jurvetson's Tesla investment to
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make a big point about long term bets on very hard technology,
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especially Elon Musk's technology.
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He wants more people to invest. He's a salesperson at the end of
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the day. So of course you're going to
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tell the story. Oh, this guy invested $150,000
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and made 6 billion. You know what, even if you have,
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it's kind of like televangelists give give as much as you can,
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you're going to get a payout at the end, right?
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That's what it seems like. And, and I'm not just saying,
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I'm not saying that Elon is a scammer televangelist.
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I'm saying Elon is here to do what Elon does, which is hype up
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a product and telling this anecdote shows that Elon
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believes from the beginning that of course, if you invested in
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the beginning, you're going to get a big payout.
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That's what he told everybody too.
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He's like, this is going to be the biggest thing ever.
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You don't even know. And of course it is.
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You know, it's this claim is likely accurate, $6 billion
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outcome with a broad margin of estimation, assuming DFJ or
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Jurvetson personally held most of their stake through Tesla's
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rise. If they just held on to
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everything, didn't sell it off to private investors, didn't
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sell it off to anybody else. You know, Tesla, SpaceX,
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Neuralink, all of his companies are they keep rising.
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So you could end up with a fortune if you had invested
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early. And of course you're going to
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kick yourself right now if you did invest early, sort of like
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Bitcoin, why didn't you buy those 100 bitcoins at the
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beginning? You would be filthy rich when
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they were like $0.05 or whatever.
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Or why didn't you mine some early and get like a Bitcoin or
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even half of a Bitcoin would be nice.
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But of course, Hindsight's 2020 and DFJ and Jervisdon really did
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come out on top of this $150,000 investment. 6 million or $6
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billion at the end, that's a good one.
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Assume the risk of the 150,000 and came away with a bunch of
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money, but also how far did they spread their wealth at that
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point? Did they invest a billion
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dollars because $150,000 for that company and then 150,000
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for another, you know, does it end up being a million
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eventually and they made out six billion out of that million that
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they invested. It's a pretty good return on
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your investment. You know, it's a problem that
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needed to be solved as well. Hey, thank you so much for
12:33
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And please take care of yourselves and each other, and
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I'll see you tomorrow.