The Story of Elon Musk's First Company (2022)

Zip2 was Elon Musk ’s first company and it sold for $307 million in 1999. For most people, that would be the high point of a lifetime, but Musk looks back on the experience with frustration and disappointment.

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By Mark Mann | Updated Jun 16 2022

Elon Musk might be the only person in the world whose biggest failure in life made him a millionaire. Zip2, the serial entrepreneur’s first venture, sold for $307 million in 1999, earning Musk $22 million for his 7% share of the company when he was only 27-years-old.

For most people, that would be the high point of a lifetime, but Musk looks back on the experience with frustration and disappointment: He wanted to realize the full potential of the Internet, but all he did was make himself rich.

The Story of Elon Musk's First Company (1)

An early screenshot of Zip2

Early screenshot of Zip2.

Table of Contents

  • Launching Zip2
  • What's The Internet?
  • Personal Sacrifices = Professional Gain
  • Show Me The Money
  • Who's in Charge Here?
(Video) The Unknown Story of Elon Musk's First Company

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Launching Zip2

Whatever else went wrong with Zip2, Musk definitely chose the right time and place to launch the company: Silicon Valley in 1995, the year the consumer Internet was born. Musk moved to San Francisco after graduating from the University of Pennsylvania with degrees in physics and economics. He planned to do his PhD in materials science at Stanford, but a few weeks before classes started, Netscape went public with a valuation of nearly $3 billion. Musk was already aware of the business potential of Internet, but now he saw that Internet companies were about to have their moment, and he wanted to be part of the action. He lasted two days at Stanford before dropping out to launch his first online venture.

The way the story is usually told, Musk didn’t know what kind of company he wanted to create, just that it should be an Internet company. In fact, he’d done an internship in Silicon Valley the previous summer, where he happened to hear a bungled pitch from a YellowPages sales rep for an online listing to go with the printed book. While the rep clearly didn’t know what he was talking about, Musk recognized that searchable web directories were a quick and easy way to offer value online. He began scheming with his brother Kimbal—who would join him in California as his co-founder and business partner—about ways to capture the opportunity.

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What's The Internet?

The first thing Musk did was purchase a local business directory for a few hundred dollars. Next, he negotiate free access to digital mapping software from a GPS company called Navteq. From there, the concept was straightforward: He’d simply write the necessary code and put the two databases together. Everyone should be able to find the closest pizza place and figure out how to get there, Musk liked to say.

Today, the utility and appeal of such a service is more than obvious, but at the time, the brothers had trouble convincing anyone else to believe in their idea. The small businesses they approached didn’t see the point, and even venture capitalists were slow to grasp the potential. “Back in ’95, there weren’t very many people on the Internet, and certainly nobody was making any money at all,” Musk said in an interview in 1999. “Most people thought the Internet was going to be a fad.”

Since Musk and Kimbal weren’t going to get any funding with a mere proof-of-concept, they had to build out the company using their own capital, and there wasn’t much of it. When Zip2 launched, Musk only had $2,000 in the bank. Kimbal had a bit more, having recently sold his share in a College Pro Painters franchise, but most of their startup costs were covered by their father, Errol Musk, who gave them $28,000 to get going.

(Video) The Incredible Story Behind Kimbal & Elon Musk's First Company

The Story of Elon Musk's First Company (2)

An early photograph of Musk and Kimbal

An early photograph of Musk and Kimbal

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Personal Sacrifices = Professional Gain

Since Musk and Kimbal barely had any money, they came up with an elegant solution: they hardly spent any. “When you are first starting out you really need to make your burn-rate ridiculously tiny,” Musk said at a talk at Wharton Business School. “Don’t spend more than you are sure you have.” For the two entrepreneurs, applying this principle meant sleeping on futons at the office rather than renting an apartment, and showering at the YMCA a few blocks away. “It was the best shape I’ve ever been in,” Musk told a crowd at Stanford in 2003.

Even after sacrificing their own living quarters, they still had to keep operations extremely lean. They shared one computer between them; Musk programmed at night and turned the server on during the day. At first, the best Internet connection they could afford was through a cheap dial-up modem, but eventually they were able to convince an ISP startup in the office below theirs to let them plug in. Musk drilled a hole in the wall and ran a cable down the stairwell.

Once the website was up and running, Musk hired three salespeople on commission. They went door to door in malls and shopping districts to sell sponsored listings. Slowly, the money started to trickle in. One of the benefits of keeping expenses so low is that even with a small amount of revenue, the brothers were able to achieve positive cash flow early on, which looked good to investors.

The brother’s hard work and early sales eventually earned some attention from the venture capital community in Silicon Valley, which had finally clued in to the potential of the Internet. Musk wasn’t above using smoke and mirrors to impress them, reports Ashlee Vance in his authoritative biography Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. The young entrepreneur built an elaborate casement around the PC that housed the Zip2 server and stacked the whole thing on a large, wheeled base, to make it look like “a mini-supercomputer.” The trick worked, and investors were suitably amazed, not only by the futuristic machine, but by Musk’s do-or-die approach. “My mentality is that of a samurai. I would rather commit seppuku than fail,” he told one (though Musk later denied having said this).

(Video) Becoming Elon Musk (Full Documentary)

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Show Me The Money

At last, Musk’s big gambit paid off, and in early 1996 the firm Mohr Davidow Ventures invested $3 million into the company, on the condition that Musk hand over most of his shares and cede operational control to a seasoned tech executive named Rich Sorkin. Musk was demoted to Chief Technology Officer, and not surprisingly, he hated to see someone else run his own business. But he needed the money to take Zip2 to the next level, so he took the deal.

Under Sorkin, Zip2 shifted its focus from local to national. Instead of helping flower shops and auto dealerships stake their claim on World Wide Web, Zip2 began offering a platform service to newspapers across the country, so they could create their own local directory services. The New York Times Company signed up for its first website with Zip2, along with the Chicago Tribune and big media properties like Knight Ridder and Hearst Corporation. Craigslist hadn’t yet robbed the newspapers of their classifieds cash-flow, but the writing was on the wall. Media companies still had money to spend, and they knew they needed to do something to avoid getting rolled under. For a time, Zip2 played the white knight to print publishing, and the company grew quickly as a result.

With all the new money, Zip2 was finally able to hire software engineers and even poach some of the best talent in the Valley. Musk had done most of the initial coding himself, and though he was a gifted programmer, his work clearly showed that he was self-taught. The new programmers found that they needed to rewrite most of the software, to make it more efficient. Musk’s DIY approach to coding didn’t include chunking, so he inadvertently created a “hairball”: a tangled mess of code that’s nearly impossible to unravel if anything goes wrong.

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Who's in Charge Here?

But Musk didn’t always agree with the changes, and he had a bad habit of returning the favor. Often he would re-write his programmers’ code after they left work at the end of the day, without telling them of the changes. He was also prone to micro-managing and rudely criticizing his team. Needless to say, they found him difficult to work with. Musk never stopped himself from bluntly correcting others when he thought they were wrong. As a child, this alienating habit earned him the unwanted attention of school bullies. In his first company, he won the begrudging respect of his employees, but not much affection.

His lack of social delicacy definitely impacted his working relationships at Zip2, but mostly importantly with Sorkin, whom Musk accused of mismanaging the company. Although the money coming from media partners had made Zip2 very profitable, Musk felt that Sorkin’s strategy had compromised the company’s potential to reach consumers directly. To Musk, they were helping the old-guard defend against Internet encroachment, rather than making the Internet more exciting and impactful for users.

(Video) The Elon Musk Story | PayPal & Zip2 | Stories of Success

In 1998, three years after Musk arrived in Silicon Valley, Sorkin tried to merge Zip2 with CitySearch, a comparable service with more national reach. Musk assented to the deal initially, but later rebelled. He organized a coup to have Sorkin ousted and himself reinstated as CEO. The plan worked at first, and Sorkin was dropped, but it quickly backfired when Zip2’s board turned around and sold the company to Compaq, which was trying to beef up its AltaVista web portal. Musk never even considered sticking around; he was ready for the next thing.

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Defining Failure & Continuing Success

Musk often says that he never expected any of his ventures to be successful, including Zip2. But, like many other Silicon Valley entrepreneurs, his willingness to take risks is a major point of pride. To repeat one of his most often quoted sayings, “Failure is an option here. If things are not failing, you are not innovating enough.”

Still, failure isn’t sweet. At an awards ceremony in 2011, Musk spoke briefly about his time at Zip2, in a tone of self-reproach. “I was very naive and much stupider than I am now. I wish I could go back and give myself a slap on my face.” He added, “I was trying to make up for my mistakes by working really, really hard.” Musk didn’t clarify which mistakes he was referring to, but in Vance’s book, he shared some of his regrets about his poor leadership and communication style.

“Even if they would like to behave like you, they don’t necessarily have all the assumptions or information that you have in your mind,” Musk said, speaking of his employees and colleagues. “You have to put yourself in a position where you say, ‘Well, how would this sound, knowing what they know?’”

Whatever the lessons, Zip2 gave Musk everything he needed to start his next company: the financial capital, but more importantly, the frustrated sense of disappointment at how things had worked out, and an urgent desire to do it better next time. Musk took his share of the sale and bought himself a new home and a Maclaren F1—the fastest car in the world at the time, and a decent symbol for Musk’s approach to life. The rest he invested in his next venture, X.com, which ultimately became PayPal.

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(Video) How Elon Musk Started Zip2

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FAQs

What was Elon musks first company? ›

Zip2 was Elon Musk 's first company and it sold for $307 million in 1999. For most people, that would be the high point of a lifetime, but Musk looks back on the experience with frustration and disappointment. Elon Musk might be the only person in the world whose biggest failure in life made him a millionaire.

How did Elon Musk finance his first company? ›

After dropping out of Stanford in 1995, Musk started Zip2 with his brother Kimbal using $28,000 borrowed from their father. In 1999 it sold to Compaq for $307 million, with Musk earning $22 million. Musk invested $10 million of his Zip2 proceeds into founding X.com, one of the first attempts at online banking.

When did Elon Musk sell his first company? ›

How did Elon Musk first get rich? ›

Early on, Elon Musk became a self-made multa-millionaire through his shares in Zip2, the first company he founded. After a merger, his second company, X.com, eventually became well-known as PayPal. Tesla, Inc. and its space transportation and electric car ventures grew his wealth further.

Does Elon still own PayPal? ›

PayPal would go on to be one of his most successful companies; Musk and his partners, including Confinity co-founder Peter Thiel, sold it to eBay in 2002 for a $1.5 billion stock deal.

Did Elon grow up rich? ›

Was Musk really born into a rich family? The billionaire spills the truth. Agencies Musk also only had a few thousand dollars when he kick started his first company.

How much money did Elon start with? ›

Musk said he started his first venture, Zip2, a software company, in 1995 with $15,000 and a later round of $200,000 from investors, including his father. Zip2 sold for $300 million in 1999.

What businesses did Elon Musk start? ›

Elon Musk cofounded the electronic payment firm PayPal and founded the spacecraft company SpaceX. He became chief executive officer of the electric-car maker Tesla.

How many businesses does Elon Musk own? ›

Musk runs Tesla and SpaceX alongside two smaller start-ups, Neuralink and The Boring Company. From building rockets and brain chips to digging tunnels, here's what all of Musk's companies do.

How much did Elon Musk make from PayPal? ›

How much did Elon Musk sell PayPal for? In 2002, eBay purchased PayPal for $1.5 billion. As the majority shareholder in the company with 11.72 percent of shares, Musk made between $175 million and $180 million from the deal.

How did Musk get his start? ›

Educated at the University of Pennsylvania in physics, Musk started getting his feet wet as a serial tech entrepreneur with early successes like Zip2 and X.com, which merged with a company that became PayPal.

How much money does Elon make a day? ›

Based on the fact that Elon Musk has a net worth of $253 billion, we can calculate that he earns approximately $650 million per day. In other words, that's $81.25 million per hour.

How fast did Elon Musk make his money? ›

The Model X sport-utility vehicle launched in 2015, and the Model 3, its biggest seller, came in 2017. Tesla went public in 2010 at $17 a share with a market cap of $1.33 billion. That valuation exceeded $1 trillion in October, bringing Mr. Musk's net worth close to $300 billion.

What does Elon Musk drive? ›

Elon Musk has confessed that his Tesla Model S is the car he drives the most. That shouldn't be a surprise, given that the Model S is the comfiest and most accommodating vehicle in the Tesla fleet.

Does Elon Musk own Bitcoin? ›

Tesla, which made waves last year when it revealed a major investment in Bitcoin, has now sold off most of its holdings of the cryptocurrency. The electric car firm has offloaded 75% of its Bitcoin, which was worth about $2bn (£1.7bn) at the end of 2021.

What is Elon Musk investing in? ›

Elon Musk's top investments
CompanyValue# of Employees
Tesla$943 billion99,290
SpaceX$125 billion12,000
The Boring Company$5.7 billion<200
Neuralink$500 million – $1 billion<200
1 more row
9 Aug 2022

How much money did Elon Musk parents give him? ›

In 1995, Errol gave Elon and his brother, Kimbal, $28,000 to start their first software company, Zip2. “I had a terrible upbringing ,” Elon says .

Is Elon self made? ›

The Truth Behind “Self-Made” Billionaires | Robert Reich - YouTube

How many countries is Elon Musk richer than? ›

Musk's net worth exceeds the GDPs of Colombia, FInland. Pakistan, Chile and Portugal. Musk is clearly in uncharted territory when it comes to wealth. He is the richest person ever, according to Forbes.

Why Elon Musk is so rich? ›

Elon Musk has made billions from various business ventures - from founding PayPal and SpaceX to becoming the CEO of Tesla. His net worth is also based on his shares in Tesla, as he owns around 24%.

How old was Elon when he made his first million? ›

​Elon Musk

Musk, co-founder of PayPal and Tesla Motors, and founder of SpaceX, had already reached the title of a self-made millionaire by the age of 27 in 1999. But he turned a billionaire at the age of 41.

What company did Elon Musk just buy? ›

The deal became official: Musk was acquiring Twitter for $44 billion. On April 25th, Twitter's board of directors accepted Musk's offer of $54.20 per share, or $44 billion, for total control of the company. It was the same price he named in his initial offer on April 14th.

What makes Elon Musk successful? ›

The open mindset of big thinking is one of the prime factors of his success. Elon always had big plans and big dreams. He believes in the fact that big dreams prepare us for a higher level and demand higher work output with different thinking.

What is the monthly salary of Elon Musk? ›

Elon Musk Net Worth 2022: Salary Earnings Assets Biography
Net Worth:$215 Billion
Salary:$2400 Million +
Monthly Income:$200 Million +
Date of Birth:June 28, 1971
Gender:Male
4 more rows
12 Jun 2022

Who owns the Tesla? ›

Elon Musk co-founded and leads Tesla, SpaceX, Neuralink and The Boring Company. As the co-founder and CEO of Tesla, Elon leads all product design, engineering and global manufacturing of the company's electric vehicles, battery products and solar energy products.

How much is SpaceX worth? ›

The equity raising lifts the total to $2 billion in 2022. SpaceX's valuation has soared in the last few years, reaching $127 billion during its previous equity round in May, CNBC reported.

Is using PayPal free? ›

It's free to use PayPal to donate or to pay for a purchase or any other type of commercial transaction unless it involves a currency conversion.

What projects is Elon Musk working on? ›

San Francisco: The Boring Company, the tunnel construction services company founded by Elon Musk, aims to build a high-speed hyperloop in the coming years. "In the coming years, Boring Co will attempt to build a working Hyperloop," Tesla chief executive officer (CEO) Elon Musk said in a tweet.

Is PayPal safe? ›

PayPal is a highly secure financial service, backed with some of the best end-to-end encryption available. You should also make sure to enable two-factor authentication, and delete any unused bank accounts or email addresses. Even with all this security, remember that no online service is immune to hacking or theft.

Where is most of Elon Musk's money? ›

Key takeaways. Elon Musk has made most of his money by investing in ideas and companies he is passionate about. After PayPal was acquired by eBay, he used his significant stake in the company to fund the creation of SpaceX.

Who is the richest man in the world 2022? ›

Elon Musk is at the top of the list with a net worth of $273.5 billion. India's Gautam Adani attained second position in the list with a net worth of $155.5 billion on Forbes' Real-Time billionaire rankings, but immediately came down to the third spot with a fall in the share prices.

What languages does Elon Musk speak? ›

Elon Musk speaks 2 languages to varying levels. Elon Musk speaks English and Afrikaans. English is his first language as he was born to English-speaking parents and went to English-speaking schools.

How much does Elon Musk earn a second? ›

It is estimated that Elon Musk generates over $22,500 per minute. Therefore, if you break it down, it means he earns close to $375 per second. This is an incredible amount for any investor and an explanation when he seems to acquire anything she wishes. In 2021, Fortune ranked him as the highest-paid CEO in the world.

Who is the richest person alive? ›

Jeff Bezos' net worth is approximately $131.9 billion, according to Forbes. The founder, chairman and former CEO of Amazon held the number one spot on Forbes' billionaire list for four years until he was overtaken by Musk. Bezos owns The Washington Post and Blue Origin, an aerospace company.

Who is richer Jeff or Elon 2022? ›

Having overtaken Amazon's Jeff Bezos as the world's richest person just weeks after last year's Forbes 400 was finalized, Musk is now $100 billion richer than his space rival, whose fortune fell by $50 billion, the second-biggest drop among this year's 400.

Who has the most cash in the world? ›

Elon Musk, with a fortune of $203 billion, is the richest person on the planet. Despite supply chain bottlenecks, Tesla delivered a record number of vehicles globally in the first quarter of 2022.

How many billionaires are there in the world? ›

Specifically, there are 2,668 billionaires as of March 11, 2022, according to Forbes. However, only 140 people were in the exclusive billion-dollar club back in 1987.

Who owns SpaceX? ›

Elon Musk

What businesses did Elon Musk start? ›

Elon Musk cofounded the electronic payment firm PayPal and founded the spacecraft company SpaceX. He became chief executive officer of the electric-car maker Tesla.

What did Elon Musk do before Tesla? ›

Born and raised in South Africa, Musk spent time in Canada before moving to the U.S. Educated at the University of Pennsylvania in physics, Musk started getting his feet wet as a serial tech entrepreneur with early successes like Zip2 and X.com, which merged with a company that became PayPal.

How did Musk get his start? ›

He taught himself how to program, and when he was 12 he sold his first software: a game he created called Blastar. In grade school, Musk was short, introverted and bookish. He was bullied until he was 15 and went through a growth spurt and learned how to defend himself with karate and wrestling.

How much companies does Elon Musk own? ›

Musk runs Tesla and SpaceX alongside two smaller start-ups, Neuralink and The Boring Company. From building rockets and brain chips to digging tunnels, here's what all of Musk's companies do.

What company did Elon Musk just buy? ›

The deal became official: Musk was acquiring Twitter for $44 billion. On April 25th, Twitter's board of directors accepted Musk's offer of $54.20 per share, or $44 billion, for total control of the company. It was the same price he named in his initial offer on April 14th.

What makes Elon Musk successful? ›

The open mindset of big thinking is one of the prime factors of his success. Elon always had big plans and big dreams. He believes in the fact that big dreams prepare us for a higher level and demand higher work output with different thinking.

How much money did Elon start with? ›

Musk said he started his first venture, Zip2, a software company, in 1995 with $15,000 and a later round of $200,000 from investors, including his father. Zip2 sold for $300 million in 1999.

What has Elon Musk invented himself? ›

Is Elon Musk the richest man in the world? ›

Key facts about Elon Musk

Estimated net worth of $254 billion as of August 2022, making him the richest person in the world, according to Bloomberg. He is nearly $90 billion ahead of the man in second place, Amazon founder Jeff Bezos. Leads four ventures: Tesla, SpaceX, Neuralink and The Boring Company.

How fast did Elon Musk make his money? ›

The Model X sport-utility vehicle launched in 2015, and the Model 3, its biggest seller, came in 2017. Tesla went public in 2010 at $17 a share with a market cap of $1.33 billion. That valuation exceeded $1 trillion in October, bringing Mr. Musk's net worth close to $300 billion.

When did Elon sell PayPal? ›

How much did Elon Musk sell PayPal for? In 2002, eBay purchased PayPal for $1.5 billion. As the majority shareholder in the company with 11.72 percent of shares, Musk made between $175 million and $180 million from the deal.

What languages does Elon Musk speak? ›

Elon Musk speaks 2 languages to varying levels. Elon Musk speaks English and Afrikaans. English is his first language as he was born to English-speaking parents and went to English-speaking schools.

How much money does Elon make a day? ›

Based on the fact that Elon Musk has a net worth of $253 billion, we can calculate that he earns approximately $650 million per day. In other words, that's $81.25 million per hour.

What is the monthly salary of Elon Musk? ›

Elon Musk Net Worth 2022: Salary Earnings Assets Biography
Net Worth:$215 Billion
Salary:$2400 Million +
Monthly Income:$200 Million +
Date of Birth:June 28, 1971
Gender:Male
4 more rows
12 Jun 2022

What does Elon Musk drive? ›

Elon Musk has confessed that his Tesla Model S is the car he drives the most. That shouldn't be a surprise, given that the Model S is the comfiest and most accommodating vehicle in the Tesla fleet.

Videos

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