How Elon Became a Millionaire | The Story of Zip2

Elon Musk in 1994

1994 was a momentous year for the Tech Industry. It was the year the World Wide Web was born. In the year of 1994, Web became accessible to the public because of the rise of web directories like Yahoo and tools like Netscape web browser.

Elon Musk and his brother Kimball musk realized that the internet is going to be the next big thing and decided to do something on the web.

Elon Musk just had completed an internship at Pinnacle research center where he learned how ultracapacitors can be used as a revolutionary fuel source in an electric and hybrid vehicle.  Elon later even joined Standford to pursue a doctorate in material science and physics. As the story goes, Musk dropped out of Stanford just after 2 days of joining and shifted his focus from physics to the internet, as the internet industry looked promising.

In the beginning, Elon and his brother wanted to build an online network of doctors but, it would take doctors to be interested in joining internet and uploading their info online and it was 1994 no one liked uploading their personal information on the internet.

The Idea of Zip2

Then both brothers realized the importance of taking small local businesses online on the internet. Elon thought that the information and addresses of local businesses should be available on the internet so that anyone could search for different restaurants and shops nearby. He wanted to make this information available to the web-surfing public. So that is it. both brothers formed a company Global Link Information Network and later renamed it as Zip2.

The Beginning of Zip2

The idea was good but the biggest obstacle was making small business owners realize the importance of getting on the internet. There were few local business owners in 1995 who understood the internet thing. They did not really see any value in creating website for their business and having listed on the online listings.

Therefore, Elon and his kimabal musk started visiting local restaurants, clothing shops, and hairdressers. They literally went door-to-door explaining people about the internet and their searchable directory of business zip2 tied with city maps.

This is how Elon tried to explain his concept to people. He used to say, “Everyone deserved the right to know the location of their closest pizza parlor and the turn-by-turn directions to get there.”

This idea may seem very ordinary today because now everyone uses google maps but back then, in 1995, it was something new.

Setting Up An Office

Errol Musk, father of Elon and Kimball gave them 28000 dollars to set things up. Elon and Kimbal rented an office at Palo Alto. Elon was self-taught coder, therefore; he did all the coding behind the service himself.

First Deal

Immediately after starting the service, elon struck an impressive deal with Navteq, a company which spent millions of dollars on creating digital maps. Navteq provided maps to elon’s zip2 for free.

Marketing

Zip2 may have been a go-go internet enterprise but it required old-fashioned door-to-door salesmanship to make people understand the benefits of getting their business online and in addition making them pay for it. Therefore, Elon and Kimbal organized a team and made them go door-to-door for collecting information about businesses.

Then Zip2 introduced premium listing or sponsorship whoever pays gets on the top of the list of their directory but the problem was no one was interested. Everyday sales team returned back to office empty-handed.

Elon Musk’s Devotion for Work

All those days at Zip2, Elon left office rarely he was continuously coding day and night. He kept adding new features to service. Elon’s devotion to the service kept everyone’s morale boosted at the zip2. Even some investors who visited zip2 were impressed by the slavish devotion of Elon Musk.

Funding for Zip2

In early 1996, The Venture capital firm Mohr Davidow Ventures invested 3 million dollars in the zip2 by looking at their impressive data collection of local businesses. In that year zip2 underwent a massive change. The company had already built one of the best directions systems on the web and now was about to stretch their operations nationwide.

Earning Revenue

However, for revenue zip2 shifted their focus altogether on the new thing. Instead of selling their service door-to-door, zip2 started creating a software package that could be sold to newspapers and in return, the newspaper would help zip2 in building directories for real estate, auto dealers,  and classifieds.

The newspaper industry was very late to realize how the internet was about to affect their businesses and disrupt the print media altogether. Internet was about to give birth to the new form of media and we call it the digital media.

Elon Musk was pushed out of his own company

Soon after investing in zip2 venture capitalist pushed Musk into the role of chief technology officer and hired Rich Sorkin as the companies CEO. That was all the same old strategy of venture capitalists – pushing original founders out of the game and gaining complete control over the company. However, Elon did not resist them. They hired new engineers and rewrote some of the old codes written by Musk. Elon was happy about these changes as it made their service more advanced.

Zip2 – We Empower the press

Under the slogan, we empower the press zip2 kept selling software packages to the newspapers. The New York time, Knight-Ridder, Hearst Corporation and other media properties signed up to its service. Some of these companies even contributed 50 million dollars of funding for zip2.

Elon Musk, however, wasn’t really satisfied with it he wanted to offer interesting services directly to consumers and encourage small businesses to buy domains and get their business online.

Zip2 and City Search

But, Money was coming and that kept zip’s board of directors on a conservative path. In April 1998, zip2 announced a merge with its main competitor city search in a deal valued at around 300 million dollars. However, the deal could not end well as City search hid some information from zip2’s board of director. Elon musk still wanted to provide service to the consumers. Elon asked the board of directors to take down current CEO and reinstate him as CEO of zip2. Board of directors declined and musk even lost his chairman title.

Tough Competition

In early 1999, Microsoft entered into the same market. Due to this tough competition from the new players, zip2 started losing money.

Elon Musk becomes a Millionaire

All of a sudden in late 1999, The PC maker Compaq computers offered to pay 307 million in cash for zip2. Zip2’s board accepted the offer and threw a huge party. Elon Musk got 22 million dollars out of this deal. This boosted his confidence because now he was no longer a nerdy kid. Elon was official the young millionaire of the Silicon Valley. After his experience at zip2 Elon understood the importance of controlling the power of his own companies. He would use this lesson when he would cofound his next venture PayPal as we know it now.

If you want to learn more from the life and strategies of Elon Musk. Watch this playlist of videos made on Elon Musk and his strategies. You will learn about the basic economics of Elon Musk and how Elon musk developed his extraordinary skills and qualities since his childhood. Sit back – relax and Enjoy these amazing documentaries

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