Chapter 22: Kwaj: SpaceX, 2005–2006

This chapter traces Elon and Kimbal Musk's founding of Zip2, an online business directory combined with mapping software, from their scrappy early days in a tiny Palo Alto office through the company's successful pivot to licensing newspapers, and culminates in Compaq's $307 million acquisition in 1999, which made the twenty-seven-year-old Elon a millionaire with $22 million in proceeds.

In early 1995, Elon and Kimbal Musk conceived of combining an online business directory with map software—an idea initially dismissed by the Toronto Star president, who threw a Yellow Pages at Kimbal. The brothers rented a tiny two-desk office in Palo Alto, sleeping on futons and showering at the YMCA while eating cheap Jack in the Box. Their parents, Errol and Maye, supported them financially and logistically; Errol gave them $28,000 and a beat-up car, while Maye contributed $10,000 and credit-card access. After visiting Navteq, they secured a free license to its map database and created Zip2 ("Zip to where you want to go"), with Elon writing software that merged maps with business listings and earning a patent for the interactive service. Using a fake "Machine That Goes Ping" server prop to impress investors, they secured a $3 million investment from Mohr Davidow Ventures in early 1996, with Kimbal nearly missing the final pitch due to border-visa issues. The VCs installed Rich Sorkin as CEO, moving Elon to CTO—a move Elon later regretted, learning that true product influence required the CEO role. Zip2 pivoted to selling licensed software to newspapers (Knight-Ridder, the New York Times, and others), becoming a successful B2B vendor. However, Elon chafed at being unbranded and pushed to compete directly with Yahoo and AOL. When the board opposed his strategy and considered merging with CitySearch, Elon led a rebellion and demanded the CEO role back. The board instead installed Derek Proudian as interim CEO to sell the company. In January 1999, Compaq offered $307 million in cash; Elon's 60 percent of the brothers' combined 12 percent stake netted him $22 million. At twenty-seven, newly wealthy, he bought a $1 million McLaren F1 sports car and gave his parents $1.3 million combined, while maintaining an earnest commitment to launching new ventures with his winnings.