When visionaries clash, whose vision do we believe? On newsstands this week, Newsweek's Dan Lyons savages Tesla Motors, the electric-car maker. Tesla was once the brightest hope of Silicon Valley's clean-transportation industry; now on its fourth CEO in less than two years, it's better known for manufacturing boardroom drama than actual vehicles. Lyons writes that Tesla's Roadster is a "classic Silicon Valley product — it's late and over budget, has gone through loads of redesigns, still has bugs and, at $109,000, costs more than originally planned. Company founder Martin Eberhard (left, at bottom) says that lead investor Elon Musk (left, at top), who recently installed himself as the company's fourth CEO, made costly changes to the car's design and is "a terrible CEO." Musk's retort: "Martin is the worst individual I've ever had the displeasure of working with."Eberhard and Musk have long feuded, even before Musk ousted Eberhard as Tesla's CEO. But I'd note that for once, they're not outright contradicting each other here. It's far more common for Musk to have a version of events that conflicts with everyone else's accounting. His history of events at PayPal, the electronic-payments startup he cofounded, seems to be shared only by him. And Musk has been telling everyone who will listen that SpaceX, his rocket startup, has a "Nasa contract to build the Space Shuttle replacement after 2010." If you ask Nasa administrators, they'll say that's more than a stretch of the truth. (In fact, SpaceX is competing for a contract, but it has only hit some of the milestones; Nasa is currently planning to rent out space on Russian rockets to supply the International Space Station, and a future supply contract for SpaceX is a possibility, not a certainty.) So Musk has a tenuous relationship with reality. Is this a handicap in his business? Apple CEO Steve Jobs is famous for his "reality distortion field" — a charisma that leads others to believe the most exaggerated claims, because the vision behind them is so compelling. Of course, Jobs actually has brought his outlandish vision to life four times: With the Apple II, the Mac, the iPod, and the iPhone. Musk has realized the Roadster, and SpaceX has managed, after several crashes, to launch one lone rocket. He's also got SolarCity, a startup which installs solar panels on roofs. If in 2011, we live in a shiny future where we drive Tesla cars powered with clean electricity from SolarCity panels, and SpaceX's Falcon1 rockets are supplying orbital space stations, then we will be living in a reality of Musk's making — much as Jobs envisioned the iPod in the dark days of October 2001, and then, three years later, saw them everywhere on the New York subway. There's another possibility, however, which would also make Musk like Steve Jobs — the Jobs of two decades ago, who was forced out of Apple by the CEO he hired. Tesla could go under, SpaceX could fail to win the Nasa contract, and SolarCity could get beaten down by rival cleantech startups. And then Musk, driving his Roadster on the lonely roads of Silicon Valley, would find himself facing a reality not constructed in his mind. An unpleasant thought, that. Far easier just to succeed.
After coming under attack by pro-environment groups, Apple has tried hard to burnish its green image. But its latest laptops could ruin its reputation among the carbon-conscious. Apple has touted the innovation of its new "unibody" laser-manufacturing process, which carves the MacBook's body out of a block of aluminum. "The process uses a huge amount of energy to machine each case and then to recycle the material removed," an expert on computer supply chains tells Valleywag. "It's a much less efficient and there's a huge amount of waste than any other process to make the housings." The charge could be electrifying, if proven true.Apple has devoted an entire page to the MacBook's environmental merits. The company has taken considerable steps to lower the amount of energy used by the MacBook's display, hard drive, and processor. But Apple is vague about the energy consumed by making the MacBook's laser-carved unibody, and recycling the wasted aluminum. The Container Recycling Institute estimates that 3 percent of the world's electricity goes towards manufacturing aluminum — and China, where most of Apple's manufacturing is done, gets most of its electricity from dirty coal plants.
Tesla Motors, Silicon Valley's troubled electric carmaker, is still running on financial fumes, with $9 million or less in the bank. It's been widely misreported that the company has already raised $40 million. In fact, that's the amount it's hoping to raise, in the form of convertible debt, from current investors in a rights offering, which will take 30 days to complete. Musk made a fortune from PayPal, the online payments startup purchased by eBay, and other startups. He says he has enough money to take the entire round if other investors don't step up. And that may be exactly what he's hoping will happen.In a bankruptcy, holders of Tesla's debt will have priority over all holders of common and preferred stock in the company — including the Valley celebrities like Google cofounders Larry Page and Sergey Brin and eBay billionaire Jeff Skoll who have invested in Tesla. Raising this round of debt, followed by a bankruptcy filing, could be Musk's way of squeezing out other shareholders — especially cofounders Martin Eberhard and Marc Tarpenning. Employee with unexercised stock options will get wiped out in such a scenario. Current shareholders will have a right to invest in this debt round according to their current share — but Musk may well be counting on the short 30-day offering period and tight financial markets to shut out anyone who doesn't have the cash handy. Why do I think this is a likely scenario? Because Musk has done something similar before. When Musk briefly served as PayPal's CEO, he'd run the company's bank account to six weeks' worth of cash. PayPal insiders say Musk was pulling "financial machinations" to maintain his control of the company — but the board fired him instead and replaced him with cofounder Peter Thiel, who steered the company to its $1.5 billion purchase by eBay. Unfortunately for Tesla, there's no obvious white knight like Thiel on the horizon.
Let's face it: Google's every attempt to venture outside its holy circle of search and ads has been a financial nonstarter. So is it thinking about getting into the energy business? Yes. Read between the lines in CEO Eric Schmidt's statements to the New York Times. "Our primary mission is one of information," he says. "As to whether we will be in these other businesses, we will see.” See? When a project is some years off, America's CTO out-and-out lies. Remember how he denied, for years, that Google was working on a Web browser, and then presto ta-da, Google Chrome emerged fully formed from the forehead of Sergey Brin? Right. So if Schmidt is merely ditherating about the idea that Google could play in the energy business, you might as well be getting utility bills in your Gmail tomorrow.
The company that funded Netscape, Google and Genentech is now focusing on electric cars, solar power and biofuels. New York Times contributor Jon Gertner has been meeting with Kleiner partners since last year. His 8,000-word feature in Sunday's paper goes deep on details of a few KPCB investments such as Ausra. But it spends a lot of time framing the story for non-techies outside the Valley. Here's the Sand Hill Road edit:
The Liberation of France says an oft-noticed smell emitted by Apple's Mac Pro desktop computers is caused by a combination of toxins, including benzene, which is known to cause leukemia. The questions now have to be: What did Apple know and when did Apple know it? Posts in Apple support forums, full of Mac Pro owners complaining of the smell, indicate Apple was well-aware of how their computers smell. One owner writes, "They guy in the service center said that every Mac Pro he has set up has the smell at first, so it appears to be normal in his experience." There's no mention of benzene in the forum. Some particularly damning posts:
Confused by Wall Street? Join the club. Vinod Khosla, a venture capitalist who is one of Silicon Valley's most revered brains, doesn't get what's happening, either. "If I can't understand it, I suspect a lot of people can't," he told Beet.tv's Andy Plesser in this video interview. "In the name of economic efficiency by slicing and dicing risk, we're reducing transparency, which is not a healthy thing." I was with him that far. But then he concluded: "Venture capital will be a pretty good place when we return to reality and invest in things we understand and are real." That rules out most Web startup investments made in the past couple of years. Heck, Khosla believes in cost-effective ethanol.
AppleInsider's network of loose-lipped leakers claim they've seen the new MacBooks about to go into production. Gone are the plastic casings that nagged Greenpeace — and scratched way too easily. Like the new iPods and the MacBook Air shown here (I'm skeptical about this alleged spy shot of the new Macbooks), the new notebooks are reportedly slim and round-edged, with downsized adapter ports replacing the largest standard jacks on the side. I've already ordered our aluminum Xmas tree, honey. (Photo by AP/Jeff Chiu)
CAMBRIDGE, MASS. — At MIT's EmTech conference, venture capitalist Vinod Khosla made a shocking assertion: Electric cars are irrelevant. Unless some unlikely breakthrough in battery technology comes about, they will never take enough of the market to matter. This is a financially convenient argument for Khosla to make: He has invested heavily in biofuels startups. But he raises a point few in the privileged West think about: Will the rising middle classes of China and India buy a $25,000 Prius, or a $2,500 Tata Nano?Make no mistake: Khosla intends to overturn oil-based transportation, and make a bundle while doing so. He is a skeptic of corn-based ethanol, but favors biofuels made from cheaply grown biomass like switchgrass. But he also thinks combustion engines can be improved to reach 100 miles per gallon — a "diesel Prius," he calls. Electric cars? Too burdened with heavy batteries, too costly to ever make up a large portion of our transport. Oh, but just in case he's wrong, he's got a couple of long-shot startups in his portfolio which could make them practical. (Photo by James Duncan Davidson/O'Reilly Media)
Scheduled to take the stage at Google's latest Zeitgeist gathering are CEO Eric Schmidt and General Electric CEO Jeff Immelt. The plan is to announce a partnership which "is likely to focus on adding network intelligence to the electric grid and improving capacity," according to Portfolio. The idea is to improve electricity-infrastructure efficiency through more advanced networking technology, presumably resulting in better service and lower carbon-dioxide pollution by reducing demand through conservation and therefore burning less coal. Of course, for now it just means more lobbyists in the Capitol and possibly more money for research and development. What does Google want in all this, besides good environmental press?GE owns vast rights of way for the electrical grid, which could potentially aid Google's efforts to build their own Internet backbone infrastructure — even over the transmission lines themselves. And of course, less demand for electricity combined with stable supply means cheaper juice for Google's giant datacenters. The real question is, what's in this for Immelt and GE? (Photos by AP/Phelan M. Ebenhack, Mark Lennihan)
Tesla Motors plans to break ground on a 600,000-sq. ft. factory on an 89-acre plot of land in San Jose, according to company officials. The electric-car manufacturer is banking on $250 million in financing from Goldman Sachs and the Department of Energy to build the facility, on top of the $15 million or more in tax breaks California governor Arnold Schwarzenegger offered to keep the company in California. Tesla is currently only producing 10 of the company's signature roadster coupes a week in England and California, with a list price of $109,000. CEO Ze'ev Drori says new plant will be initially capable of producing around 300 a week of the Model S sedan planned for introduction in 2010. How many "green collar" jobs will the project create?San Jose Mayor Chuck Reed told the New York Times 1,000, but the company suggests the factory will only employ 400 to 500 says the Wall Street Journal, with 250 current employees moving to the new headquarters once complete. Contrast that to General Motors and Toyota's joint-venture Nummi plant in Fremont, Calif., which employs about 5,500 workers. (Photo by Emil Rensing)
The San Francisco Public Utilities Commission had plans to build a monument to renewable energy in a project that Gavin Newsom pitched to congress as an example of cutting-edge green building practices. But the mayor's newly appointed SFPUC director Ed Harrington, who sagely noted that The City can't balance the books and the cost of the building might spur protests from ratepayers, has nixed the $190 million proposal. Too bad — would have looked really good on Newsom's CV when he applies for the governor's job in 2010. [Curbed SF]
Can't face the slog of another social network startup? Go solar! There'll be plenty of spending on solar panels in the coming decade, especially if Barack Obama gets his $150 billion wish for an alternative energy program. Dude, that's NASA-level money, and it could be yours. Here's the first three things you need to know so you don't look dumb:
When CityNAP, a San Antonio-based datacenter, opened last year, it bragged about its environmental credentials, such as buying its energy from a wind-power concern. "Sustainability and green business practices make good business sense!" thundered CityNAP president Frank Robles, shown here in the blue shirt, in a press release. Robles should have paid more attention to keeping CityNAP in the black: With assets of $100,000 and $460,000 in debt, CityNAP has filed for bankruptcy. CityNAP is contesting $230,000 in claims from its landlord. It's not easy being green.
It's OK if you've never heard of the ITAA or AeA, two of several trade groups which lobby for Valley companies. That's one reason they're talking about merging. Unlike, say, the coal industry, tech has no single front group, nor an industrywide issue around which companies can rally. Heck, there isn't even a Wikipedia page for the expired R&D tax credit. If Silicon Valley expects to see any of President Obama's $150 billion in alternative energy spending, the ugly truth is tech firms will need to get in there and fight before ExxonMobil — the sponsor of Stanford's alternative energy program — grabs it all.
People who know Jimmy Wales well can't stop snickering about the launch of Wikia Green, his new anyone-can-edit environmental site. In his private life, Wales is about as green as Dick Cheney, from what they say. He's been known to toss styrofoam coffee cups out the window as he drives — something we imagine might give his enviroprecious celebrity pals paroxysms. Even green-cheerleading site Earth2Tech is on to Wales's insincerity: