Better Place
From Invertopedia, the encyclopedia of how things fail
Better Place was a Palo Alto startup, founded by Shai Agassi in 2007, that built charging spots and battery-swap stations so electric cars could trade a flat battery for a full one in minutes[1][3][5]. It raised more than $850 million[1][3], was valued at $2.25 billion in 2011[4], and found only one carmaker, Renault, to build a car that worked with it[3]. Fewer than 1,000 of those cars were sold in Israel[1], and in May 2013 it asked a Tel Aviv court to dissolve the company[1].
Contents
The bet
Range was what held electric cars back, and it could be fixed with infrastructure instead of better batteries. Better Place would own the batteries. Drivers would buy the car, lease the battery and pay a set fee for a yearly mileage allowance, charging at home and swapping at a station on longer trips[5]. Agassi compared it to buying a cell-phone plan[3].
It also bet that carmakers would agree to standard battery shapes and sizes, so many models could use the same stations[3]. Better Place partnered with Renault in 2008 and committed to a production run of 100,000 electric cars[7].
What happened
| 2005 | Agassi, then an executive at SAP, pitches battery swapping at a World Economic Forum meeting in Davos. Israeli president Shimon Peres urges him to pursue it.[3] |
|---|---|
| 2007 | Agassi founds Better Place. A $111 million Series A is led by Lend Lease Ventures.[1][2] |
| 2008 | Better Place partners with Renault and commits to a production run of 100,000 electric cars.[7] |
| 2010 | A $350 million round led by Morgan Stanley.[2] |
| Nov 2011 | A $200 million round values the company at $2.25 billion.[4] |
| 2012 | The network launches in Israel and Denmark. Better Place has less than $7 million in sales for the year, according to PrivCo.[3][5][7] |
| Oct 2012 | Evan Thornley replaces Agassi as CEO, and the company lets go of about half its staff.[1][7] |
| Jan 16, 2013 | Thornley steps down after four months. About 600 Better Place cars are on the road in Israel and fewer in Denmark.[7] |
| May 26, 2013 | Better Place files in Tel Aviv's Central District Court to dissolve the company.[1][6] |
The kill shot
Better Place needed carmakers, governments and drivers to commit at the same time, and only one carmaker did. It built a network for a mass market and sold fewer than a thousand cars in its main market.
The stations only worked with cars built for them. After five years of business development, only Renault agreed to make one[3], so every customer drove the same car, the Renault Fluence Z.E. sedan[5]. The board's closing statement said "the wider public take up would not be sufficient" and "the support from the car producers was not forthcoming"[5].
It also spread itself thin. Better Place signed deals to install charging infrastructure in Israel, Denmark, the Netherlands, China, Australia, Hawaii, San Francisco and Japan, each needing heavy spending before customers signed up[3]. In January 2013 its own chief financial officer, Alan Gelman, said, "We at times were too focused on turning into a global company and expanded too fast"[7]. Israel Corp's November 2012 earnings report had put its accumulated deficit at $561.5 million[7].
Red flags ignored
- One car from one carmaker. Only Renault built a compatible car.[3][5]
- Eight markets before one worked. Infrastructure deals in eight markets, each needing heavy spending before customers signed up.[3]
- A valuation ahead of the product. Valued at $2.25 billion in November 2011[4], before the service launched in Israel early the next year.[5]
- A revolving door at the top. The founder was replaced in October 2012 and his successor was gone four months later.[7]
- Sales that never came. Less than $7 million in sales in 2012, according to PrivCo.[3]
The cost
More than $850 million raised from investors including General Electric, HSBC, Morgan Stanley and Israel Corp[1][2][3]. Israel Corp, controlled by Better Place chairman Idan Ofer, owned about 30 percent[2][7]. A last round led by Israel Corp in late 2012 raised $50 million of a planned $100 million[2].
About half the staff were let go in October 2012[1]. Drivers had bought their cars but leased the batteries from the company now being wound up[5].
The inversion
Count how many other companies have to say yes before your product works. Each one is a way to die. Win one market with one partner before you sign up the world.
What survived
The idea, not the company. The board said it still stood behind Agassi's original vision[5]. MIT Technology Review judged that the failure would not significantly slow the electric car industry, but that it showed the limits of the battery technology of the time and how hard it is to bring a new service into the auto industry[3].
References
- ^ “Electric car company Better Place files for bankruptcy in Israel”. JTA via St. Louis Jewish Light, May 26, 2013. The Tel Aviv court filing to dissolve, Palo Alto base, about half the staff let go in October 2012, fewer than 1,000 cars sold in Israel, more than $850 million raised since 2007, Agassi as founder.
- ^ “Better Place found in bankruptcy”. Global Corporate Venturing, May 28, 2013. The $850 million total, the $111 million 2007 Series A, the $350 million 2010 round, the late-2012 Israel Corp round ($50 million of $100 million), Idan Ofer's control of Israel Corp, backers GE and HSBC, founding in 2007.
- ^ “How Better Place Came to a Bitter End”. MIT Technology Review (Martin LaMonica), May 31, 2013. About $850 million raised, only Renault on board, less than $7 million in 2012 sales (PrivCo), the 2005 Davos origin, the cell-phone-plan comparison, the standard-battery bet, the eight markets, investors, and the verdict on the industry.
- ^ “Better Place gets $US200m recharge”. The Sydney Morning Herald via Eco-Business, November 12, 2011. The $200 million round valuing Better Place at $2.25 billion.
- ^ “Battery-switching car pioneer Better Place files for bankruptcy”. The Christian Science Monitor (John Voelcker), May 26, 2013. The Renault Fluence Z.E. as the only eligible car, the battery lease and mileage-plan model, launch in Israel early 2012, and the board's statement.
- ^ “Better Place (company)”. Wikipedia. The May 26, 2013 filing date (cross-check).
- ^ “Better Place CEO leaves in electric car firm's latest shake-up”. Reuters (Steven Scheer), January 16, 2013 (archived copy). Thornley's exit after four months, the October 2012 change from Agassi, Gelman's quote, the 2012 launch in Israel and Denmark, Israel Corp's 30% stake, the $561.5 million accumulated deficit, the 2008 Renault partnership and 100,000-car commitment, about 600 cars in Israel.