When Better Place’s charismatic CEO Shai Agassi gave his viral TED talk in 2009, describing how his company’s innovative electric car technology could help stop climate change and free nations from the yoke of oil dependence, investors and business leaders worldwide took notice.
Countries from Japan to Denmark to Australia signed on, and the privately-held Better Place raised nearly a billion dollars.
Yet in a few years, it was all over.
The company, buffeted by internal strife, an international corporate spy scandal, the Great Recession and technology disruptions, went bankrupt.
What happened? Were the signs of a company about to implode visible, if only we’d known where to look? What really totaled one of the highest-flying startups in Israeli high-tech history?
What I discovered over the course of nearly 80 interviews with former Better Place employees, venture capitalists and car owners was that the crash of Better Place was not the result of any single factor.
Rather, it was in many ways a perfect storm of unexpected changes that upended the company’s business plan and assumptions, combined with some flat-out bad luck and an unbending commitment to a singular vision – Better Place’s range-extending raison d’etre: robot-controlled battery swap stations instead of plug-in fast charge.
The Better Place story is a cautionary tale: A timely case study filled with valuable lessons for entrepreneurs, investors and executives in businesses of all sizes – as well as everyone chasing the electric car Holy Grail.
Here are a few of those lessons:
How you manage change makes all the difference. Change hit Better Place on multiple fronts, sometimes all at once. The price of the car came out higher than Shai Agassi had promised. Its driving range was 25 percent less than expected. The battery switch stations cost six times what Better Place’s spreadsheets had accounted for. There was only one type of car and customers didn’t like it. Better Place could never crack the U.S. market. Managing change often demands a radical rethink. At what point do you realize the original business plan no longer works?
Startups must remain nimble. Better Place grew so fast that, even before it had a single product ready for sale, it could no longer be described as agile. With over 1,000 people on staff, flashy offices around the world, and an estimated monthly burn rate of $1 million, Better Place lost the easy ability to recalibrate.
Remain open to new solutions. Staying nimble also requires not getting stuck on any particular solution – because the rules change. When a possible partnership with General Motors to work on its hybrid Chevy Volt was proposed, Shai Agassi said, “We don’t work with cars that have tailpipes.” End of deal.
Know when to focus. The corollary to not getting stuck is to resist the desire to explore any and every opportunity that comes your way. Especially in the early days, when nothing is set in stone, it is tempting to answer every call, take every meeting and fly to any country that expresses an interest in your product. Don’t. Being discriminating about opportunities can help a startup succeed.
Individual vision and charisma can take you only so far. Shai Agassi’s confidence in his ability to sell anyone on anything was not unlike Steve Jobs’ famous “reality distortion field.” But hyperbole eventually will wear thin, and whether it’s in the boardroom or on the TED stage, it can come back to hurt a company. When you promise an affordable car, or one that uses “no electrons that come from coal, and don’t – or can’t – deliver, your customers may not forgive you.
Better Place went bust less than a year after I bought a Renault Fluence Z.E., the company’s 100-percent electric car. We continued to drive the car for another four years – no farther than 50 miles round-trip near the end – until Renault finally agreed to buy our cars back for half of what we paid for them. Renault didn’t do it out of altruism: We were part of a class action suit demanding new batteries. Instead, Renault made us an offer we couldn’t refuse.
If we’d known then what we know now, would we still have bought the car? Probably not. But it was an electrifying ride.
Brian Blum’s new book, TOTALED: The Billion-Dollar Crash of the Startup that Took on Big Auto, Big Oil, and the World, will be published Sept. 5 by Blue Pepper Press. For more information, visit www.brianblum.com.
What Killed One of Israel’s Highest Flying Hi-Tech Start-Ups?