See if this sounds familiar: An Elon Musk-founded company strikes on an idea ahead of its time and rises to prominence by revolutionizing a basic service. But it's Musk's original small business, and it's one you may have never heard of: Zip2.
Before all the companies with which Musk has become synonymous, from The Boring Company and SpaceX to Tesla and PayPal, there was Zip2, an early online directory that helped users find nearby businesses and provide turn-by-turn directions from a set origin, and allowed small businesses to establish an online presence — all in 1995. Zip2 struck landmark deals with media companies including The New York Times — which were anxious to understand the new thing called the internet. Zip2 was acquired in 1999 by Compaq for more than $300 million.
With all Musk has ventured into since, it's hard to believe his first fortune came by creating an online Yellow Pages. But as a Musk biographer notes of the idea, "Musk often explained the concept through pizza, saying that everyone deserved the right to know the location of their closest pizza parlor and the turn-by turn directions to get there. This may seem obvious today — think Yelp meets Google Maps — but back then not even stoners had dreamed up such a service."
Zip2 provided the young, unknown entrepreneur with ways to test his big ideas and bold management style on the fly. Here are 7 lessons from Musk's first business success.
When he was in college, Musk developed his short list of game-changers: in addition to the Internet, the production and consumption of sustainable energy and space exploration. "Those were the areas that I thought would most affect the future," Musk said in a 2012 video interview with tech entrepreneur and podcast host Kevin Rose. "I was fortunate enough to be involved in those areas. It's kinda my best guess at what would most likely affect the future in the biggest way."
Surprisingly, Musk didn't see an entrepreneurial path in his future. "In '95, I kinda thought the Internet would be something that would change the world in a major way, and I wanted to be a part of it," Musk said in the interview. "I wouldn't actually try to start a company, I'd try to get a job at Netscape." When Netscape did not respond to his application, he even tried waiting in the lobby until he became so embarrassed he left.
Musk did pretty quickly display an entrepreneurial knack for selling ideas.
"Musk built a huge case around a standard PC and lugged the unit onto a base with wheels. When prospective investors would come by, Musk would put on a show and roll this massive machine out so that it appeared like Zip2 ran inside of a mini-supercomputer," an effort that an early Zip2 employee told journalist Ashlee Vance for his biography, "Elon Musk, Tesla, SpaceX, and the Quest for a Fantastic Future."
A lifelong avid reader — including of comic books — Musk relies on reading for historical context. What he doesn't read are business best-sellers.
"I don't read many general business books," Musk said in the Foundation 20 interview. In fact, Musk said he never had a business mentor, but would look for feedback from the people around him and "feedback from the historical context" — books, in other words. He prefers books about scientists, engineers, and of course, entrepreneurs like himself.
"I like Franklin's autobiography and a recent written biography on Franklin," Musk said, referring to U.S. statesman and historical figure Benjamin Franklin.
"I decided to go on deferment," Musk said in the podcast with Kevin Rose about his decision to not attend Stanford University for a graduate degree after gaining admission. "I was just writing software that summer and it got to the start of the quarter at Stanford. I figured if I start a company and it doesn't work, then I can always go back and graduate school."
The department chairman told him he probably wasn't going to hear from Musk again. "He was correct," Musk said. "I've never spoken to him since."
The original Zip2 office was studio-sized (20 feet by 30 feet), in a building lacking elevators and reliable toilets. The office Internet connection was provided by Musk drilling a hole in the drywall near the Zip2 door and then stringing an ethernet cable down the stairwell to the ISP of an Internet-business below Zip2's office.
Musk and his brother, Kimbal, a Zip2 co-founder, kept their clothes in a small closet and showered at the YMCA, according to Vance's biography. The Musk brothers took meals (sometimes four a day) at the local Jack in the Box. Elon was prone to sleep in the office on a beanbag next to his desk and asked employees to kick him awake when they came in so he could get back to coding. When an intern borrowed their car, the wheels literally came off along the way, cutting a groove into the pavement.
If you're in business for the first time, buckle up — you better be in it for the long haul.
Even when the Musk brothers and their team couldn't sell anyone on Zip2's actual product, one way the sales team's confidence was kept up was through seeing the continual improvements Musk was making to the software. But Elon was less good at managing staffers, especially when it came to giving criticism.
"You would see people come out of the meetings with this disgusted look on their face," A Zip2 salesman told Vance. "You don't get to where Elon is now by always being a nice guy, and he was just so driven and sure of himself."
Musk's first wife told his biographer, "Elon is not someone who would say, 'I feel you. I see your point of view,. Because he doesn't have that 'I feel you' dimension there were things that seemed obvious to other people that weren't that obvious to him. He had to learn that a twenty something-year-old shouldn't really shoot down the plans of older, senior people and point out everything wrong with them. He learned to modify his behavior in certain ways."
Employees at SpaceX let off steam by playing video games, a tradition that stretches back to early days at Zip2 where stress ran high and, at least early on, success was no sure thing, according to Vance's biography.
While at Zip2, Musk even formed a video game team to participate in Quake competitions, which came in second and won several thousand dollars. "We would have come in first, but one of our top players' machine crashed because he had pushed his graphics card too hard," said Musk in an interview for Vance's book.
After Zip2 secured venture capital funding, backers pushed the company to hire a professional CEO. Musk himself initially supported the idea, he said during the Foundation 20 interview, hoping it would free him up to work on software and product direction. But the decision turned out to be disastrous for the company, Musk said. "The company succeeded in spite of that person, not because of them." The concept is most obvious in the quandary between shareholder and stakeholder. "At the time I thought it was a good idea," said Musk. "I didn't really know what I was doing."
It's a learning experience that seems to have stuck with Musk to this day, given the tight control he retains over his current companies.