Elon Musk: Always Go With A High-Quality VC Even If The Valuation Is LowDecember 15, 2012 1:27 pm
This is a question many entrepreneurs face during funding rounds – for hot companies, there would invariably be competing bids – and so we have the following possible scenario – lower valuation from a quality VC and higher valuation from a VC with a question mark – which one should you pick? Elon Musk has a clear suggestion to go with the former – lower valuation from a quality VC – always. In Tesla’s case, he says, Kleiner offered a 50 million valuation and VantagePoint offered a 70 million valuation.
“Tesla’s Series C round of financing. According to Musk, there were multiple competing bids, with one from Kleiner Perkins valuing the company at $50 million pre-money, and one from VantagePoint, valuing the company at $70 million pre-money.
On paper, the offer from VantagePoint made more sense, but it all came down to which partner would be working with the company from that point on. Musk had to make the decision of which firm to go with, and he pushed for Kleiner Perkins, so long as John Doerr joined the Board of Directors of Tesla.
In the end, Kleiner Perkins didn’t want Doerr to join the Board, so Tesla was funded by VantagePoint. In retrospect, Musk sees this round of financing as a mistake. One that others can and should learn from.”
Here is the video of the PandoDaily interview: