Entrepreneur of the Year, 2007: Elon Musk

Musk enrolled in Queen's University in Kingston, Ontario; Kimbal joined him a year later. With almost no money, Musk worked a bevy of jobs--as an intern in Microsoft's Canadian marketing department, an intern for the Bank of Nova Scotia, and as a programmer for a video-game developer called, presciently, Rocket Science. He transferred to the University of Pennsylvania on a scholarship and completed a bachelor's degree in finance and one in physics. After graduating, in 1995, he moved to Palo Alto, California, having been accepted into Stanford's physics Ph.D. program, where he planned to study a variety of energy storage device called capacitors.

Something changed that summer, as Musk watched a nascent venture called Netscape Communications--founded by a kid younger than himself--quintuple in value the day it went public. "It just became clear that the Internet was going to change the world in a major way, whereas the capacitor stuff might bear fruit, or it might not," he says. "My overarching interest was to get involved in stuff that really mattered." Musk withdrew from Stanford after two days on campus, with the vague idea that he would start an Internet company. He had $2,000 in the bank, a car, a computer, and no friends in the Bay Area.

Musk poured his energy into a company he had founded called Zip2, which in some ways was little more than an opportunistic hack. Musk persuaded Navteq, a digital-mapping company, to let him put its maps online. He then purchased a business directory on CD-ROM for a few hundred dollars, wrote a bit of software code that linked the maps to the directory, and created the Web's first yellow pages. That fall, Kimbal and another friend joined him, and the trio rented a small office with a leaky roof for $400 a month. They caulked the ceiling, bought a couple of futons, and replaced the carpet--and they lived and worked in the dank office. Unable to afford a high-speed Internet connection, Musk ran the website on his PC using a dial-up modem. "I'd program it in the night and turn the server on during the day," he says. Eventually Musk persuaded an Internet service provider on the ground floor to let him drill a hole through the ceiling and plug in.

In January 1996, the three co-founders pitched Mohr Davidow Ventures, a Sand Hill Road venture capital firm, and talked their way into $3 million in funding. (They'd eventually get $38 million more.) In order to get the money, Musk agreed to cede the CEO role to a professional--Richard Sorkin, a Stanford M.B.A. who'd been a vice president at hardware manufacturer Creative Technology. Over the next two years, Sorkin navigated Zip2 competently but not spectacularly. While Yahoo, another upstart directory service, marketed itself to Web surfers, Zip2 focused on helping newspaper companies offer maps, directions, and business listings to their online readers. To Musk's chagrin, Sorkin solicited investments from many of the same companies that were licensing its software. "We wound up beholden to the newspapers," Musk says. "They were investors, customers, and they were on the board--and they basically forced Zip2 into a position of subservience." As Yahoo ushered in an era of new media, Zip2, in Musk's view, was stuck kowtowing to the old guard. (Sorkin, for his part, makes no apologies. "It wasn't a philosophical issue," he says. "We went where the money was.")

By 1998, Musk, who remained chairman and executive vice president, was thoroughly frustrated with the direction of his company but found himself unable to do anything about it. Several rounds of funding had diluted his stake to a mere 7 percent. Investors, which now included Knight Ridder, Hearst, and the New York Times Company, occupied four of seven board seats. In April of that year, Sorkin tried to sell Zip2 to City­search, which would have created the country's largest local search company. Musk, who believed Sorkin was squandering the potential to create a viable consumer brand, helped spark a revolt among Zip2 managers, who threatened to quit if Sorkin was not removed. The board fired Sorkin and killed the deal. Unfortunately for Musk, it installed Mohr Davidow's Derek Proudian as CEO and promptly sold the company to Compaq. "What they should have done is put me in charge," he says. "That's OK, but great things will never happen with VCs or professional managers. They have high drive, but they don't have the creativity or the insight. Some do, but most don't."

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Max Chafkin

Senior writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York.

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