At a lecture three years ago Shai Agassi, the founder of the Better Place electric car venture, accused the state of Israel of lacking vision.
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The state had refused to give him a $150 million grant to build a factory making electric cars in Beit She'an, Agassi griped. It also declined to offer him a gift in the form of a large plot of land in the Negev to generate solar power.
Come this Sunday morning, Better Place motioned the court to appoint a temporary liquidator to itself.
The firm's collapse may be sad, but it's no surprise. It never did have a compelling business model. Put otherwise, its business model was complex and complicated and in the end, couldn’t support its own weight.
This is not a case of being wise after the fact; from the very first day of the company I asked its founder and investors what their business model was, and I received evasive or contorted responses that never satisfied.
Some in the Israel Corporation, which owned the Better Place electric car venture, accused me of hostility to the vision of the electric car. Nonsense: I have no schadenfreude. On the contrary, I would have been happy if there was a fleet of nonpolluting cars today; and I would even have considered buying one if and when their price descended into the reasonable zone.
A journalist without vision
I won the dubious title of a journalist without vision from the first day that Shai Agassi visited TheMarker to present his ideas.
He was unfaultable on his numbers regarding the present and future prices of fuel. He showed us mathematical formulas on the board – but when I asked what his company’s business model was, he gave me a disparaging look, explained that it was still not for publication, and even wondered aloud whether I really believed he would invest his own hard-earned money in the enterprise without first examining a business model.
When Agassi said he wouldn’t ask for state aid, but later reversed himself and asked the Industry, Trade and Labor Ministry for money, I warned that the ministry should first see a strong financial plan before investing hundreds of millions in Better Place. Agassi’s request of $150 million from the state to build a factory to manufacture electric cars in Beit She'an was turned down.
After Agassi succeeded in convincing Idan Ofer, the controlling owner of the Israel Corporation and the main investor in the electric vehicle vision, I was invited to the office of the CEO of the Israel Corp., Nir Gilad. He was sitting between mountains of files to his right and left, with another pile on the floor.
Gilad told me that all these files contained the project’s feasibility plan, and was amazed I didn’t believe him that the project was worth it. After that I received a personal interview with Ofer in Davos, where he reprimanded me for a long time on my lack of vision.
Better Place’s business model was complicated, complex and was also changed every once in a while. These were not good signs for the company.
Better Place resembled a bubble. It was a startup that raised the astonishing amount of $850 million, of which $300 million came from the Israel Corp. It itself said it only expected to achieve positive cash flow in 2019.
Now investors have decided not to keep it alive on artificial resuscitation. They have given up.
He's good at physics
Here are a few things I wrote after Agassi’s lecture in July 2010 at the conference of CEOs at the Interdisciplinary Center in Herzliya:
Agassi enjoys demonstrating his knowledge of physics. He seems to know his numbers (though it's to check them when he's firing them out at light-speed). He easily skips from topic to topic. Seeing the audience is captivated, he stretches out in his chair and nonchalantly criticizes the government, as though the issue at stake had nothing directly to do with him. The government did not have the courage and vision to help him, said Agassi.
Reminiscing on, Agassi revealed which gifts the state refused to grant him and his main partner in the project, Ofer. The state did not give them land in the Negev to build a solar farm to generate electricity to charge the cars; nor did it come through with a request for a $150 million grant to build a manufacturing plant in Beit She'an, or a special train track from Beit She'an to the port in Haifa.
And who lost out, according to Agassi? The state, of course.
One car needs a solar panel the size of two cars, that is like four million cars parked in the desert, said Agassi. He said he offered the state to let him build his solar farms in the Negev and even marked out the places with circles on the map. “We came to the state and said we would build a solar system and buy the electricity for 20 years. They told me, ‘This small circle is a huge area, are you crazy?’”
“I said, and if I would have said there is oil underneath? According to this view we have the ability to build a virtual oil field above ground, not below,” said Agassi.
“Our biggest mistake is that we could have built a car factory too," he said: all they wanted from the state was $100 million to $150 million, less than Intel, that the state would have gotten back in royalties. "We asked for matching [funds] for what other countries give and railroad tracks from Haifa to Beit She'an. They told us that they could work out the grant, but they didn’t know what to do with the train tracks. Thus the factory was built in Turkey. It could have created 50,000 jobs in Israel. And then there would have been another factory,” said Agassi.
Why did the politicians err, he said? they were afraid of media backlash. "What is $150 million? That’s a trivial decision for a government. President Peres told me we waste such budgets on even stupider projects. But, there is no one who wants to be connected to the failure of a project like this. The president and then prime minister Ehud Olmert told me: ‘Bring the money from outside, we will try not to interfere, and when you succeed we’ll tax [you],’” said Agassi.
But, he finished, he wasn't complaining.