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DAVOS, Switzerland - Shai Agassi couldn't have timed the latest round of financing for his company Better Place any better - two days before the World Economic Forum's annual meeting began in Davos, Switzerland, the company closed an unprecedented $350 million round that priced the firm at $1.25 billion.

Agassi got the idea to enter the electric car market at the World Economic Forum meeting three years ago, after leaving business software giant SAP. Since then, he has changed the company's business model and direction several times. Now, for the first time, he's presenting a clear model - his company will set up infrastructure for the cars, first in Israel and then in Denmark. After that, he wants to conquer the world.

You timed this round perfectly in terms of PR.

"We started it 10 months ago. Lawyers can drag these things out endlessly; they bill by the hour. I told them that they have a deadline - before Davos - and we closed it."

The biggest investor was HSBC, which got 10% of the company for a $125 million investment. Other investors included Morgan Stanley, as well as investors from the first round of financing, led by the Israel Corporation, which now owns 30% of the company.

The fundraising round valued the company at $1.25 billion. This company has no revenues, it hasn't begun operating and has no proven business model. It's also in a field surrounded by doubts. How did you reach this valuation?

"The round indeed reflects a valuation of $1.25 billion, which is three to four times more than the valuation during our last round two years ago. ... In terms of the speed with which the value was created - there haven't been any companies like this. This is the largest investment since the crash in 2008 and the largest investment ever in clean-tech."

OK, but how did you get to that valuation? The company has no revenues.

"That's a very interesting question. Look ... we're selling kilometers. The people selling kilometers until now were the oil companies."

Explain what "selling kilometers" means, please.

"When you go to a gas station nowadays, you buy kilometers. It looks like a model whereby someone fills up the tank and pays, but ultimately, it's a purchase of kilometers, 500 to 600 kilometers. It's the same business, an energy distribution network, which is currently called oil companies or gas companies. The global kilometer market is currently worth $3 trillion a year, and [gas stations are] living on profit margins of 1% to 2%.

"Now, we're buying the raw goods at a price that's constantly decreasing ... and we're starting at very high profit margins, much more than 1%."

I still don't understand how selling kilometers brought you to that valuation.

"The total value of the Israeli kilometer market is about $10 billion. It's being sold in servings of NIS 6.5 per liter - for us, the market share is 500,000 cars that get a lot of mileage - half of the distance traveled in Israel. These are leased cars, and the cars of people who drive 30,000 to 40,000 kilometers a year. That's worth $5 billion .... We can get to that market share with profit margins of 40% to 50%."

How do you get to profit margins of 40% to 50%? What about returning the investment, what about operations?

"I buy a battery and electricity, and I sell kilometers. On the way I've laid a lot of infrastructure in order to translate one into the other .... And my profit margins are constantly improving and eventually become very large because batteries keep getting cheaper and electricity keeps getting cheaper, while the price of a kilometer increases since there isn't much cheap fuel left in the world."

Under Agassi's plan, drivers will need to recharge every 150 kilometers - they'll come to a recharging station, where a robot will remove the empty battery and insert a full one. The entire process should take two minutes, and most drivers won't need to recharge more than once every two weeks.

The company has already built its first recharging station. When the project launches, hopefully in the second half of 2011, Israel will have 70 recharging stations, Agassi says.

The infrastructure - the recharging stations, plus setting up chargers at customers' homes - should cost the company $150 million. The company hopes to return the investment within 18 months.

It should take no more than 15 minutes to set up a charger at a customer's house. Customers will not pay for electricity usage - they'll pay a flat cost.

The charging stations will recognize cars based on a SIM-card-like device. When the network is overloaded, electricity will be distributed based on customers' consumption history, says Agassi. However, customers will be able to request a full recharge.

"The program that manages electricity consumption is amazing, because this is essentially the first time that cars will have a computer running Windows 7 inside them and a constant cellular Internet connection," plus WiFi when parked. "This changes the complete driving experience. You can do things like navigation with other cars."

And what about the driver?

"Is your question whether the driver will like it? Well, we're beginning to see that the driver will like it a lot."

The speed at which people will adopt and adapt to the new car are critical questions.

"These changes happen in all fields. The large [car manufacturing] companies are looking at the changes and not moving. They're like deer caught in the headlights. Look at the newspapers versus Google, look at pharma versus biotech, at the music industry."

While the driver may lose due to the inconvenience of having to charge every 150 kilometers - which could increase to 200 kilometers only two years after the project launches, Agassi says - he gains by having something new and innovative. Plus, electric cars will be less expensive - around NIS 100,000, he cites as an example, or NIS 20,000 to NIS 30,000 less than current car prices in Israel. That gap will only grow, he adds.

Let's try to enter the shoes of the CEO or the rental fleet manager at Amdocs, Nice or Comverse. What are their considerations?

"They see a decrease in costs, they see a fixed price for car maintenance. Remember that a year and a half ago, the price of gas suddenly jumped. And they also see a marketing opportunity for their company - an opportunity to be innovative leaders."

And how will they sell it to their workers?

"First of all, the worker will benefit from the lower valuation of the car for income tax purposes."

Gas stations have no reason to fear the new business model, Agassi says - at this point, most of their revenues are from "selling sandwiches and ice cream." If they become recharging stations, they'll maintain the traffic that powers their stores, he says.

And oil refineries? The company's main investors are Sammy, Idan and Eyal Ofer. They also control the oil refinery in Haifa.

"Idan told me during our first meeting: 'You told me that the days of the refineries are numbered, so why should I let someone else kill them? I want to be the person who kills them, because if this works, electric cars will be more profitable for me than refining oil.'"