No wonder Shai Agassi has been able to raise hundreds of millions of dollars with just a white paper. Even in a simple Q&A with Martin LaMonica at CNET, the guy comes across as impassioned, intelligent and convincing.
When LaMonica points out the difficulty in overhauling the way we use cars, Agassi, says, (paraphrasing) “Phsaw! You think this is tough, you’re nuts. This is nothing compared to what I did at SAP. This thing, this convincing nations to fork over hundreds of millions of dollars, and getting people to plug-in, rather than fuel up, their cars, this is easy. Trust me, dog, I got this.”* And you know what, we almost do!
Alas, there’s still the a few problems. First, he’s only got Nissan-Renault on board to build cars. If they build duds, or people don’t like their cars that’s a problem. Agassi would retort, that they only want to target a narrow audience, so this isn’t a real problem. Plus, his cars are “fun.” Fair enough.
But what about making money, how the heck will Better Place do that? Agassi responds with the greatest business cliche of all time: “Volume.” When LaMonica asks at what precise volume do you become profitable? Agassi says, at just 20,000 users Better Place will be profitable (at least in Israel).
To satisfy 20,000 users, Agassi says he needs to build 100 switch stations, which cost $500,000 a piece. He’ll also need 100,000 charge spots which Better Place says costs $500 a piece to build. Then, he’ll need to own 20,000 batteries which cost around $15,000 each. Add it all up and it equals $400 million at minimum for that infrastructure. Divide that by 20,000 users and it equals $20,000 per person.
Our maths is really rudimentary. It’s not taking into account all the other costs like overhead, paying for research and development, salaries of employees and probably a trillion other things we’re forgetting. We would be worried about the business working, but we’re not, because Agassi says solving this problem is “simple.”
Question: This is a hugely ambitious project. Do you ever doubt that you’re taking on too much?
Agassi: Not at all. Look, engineering is a very interesting discipline. You get into a room, you design, design, design. You write a bunch of white papers and you build a prototype. If you’ve built a prototype, the next question is can you build at scale and will it last?
…Is it done? Absolutely not. Will it take another two years to get done? Yes. Have I done bigger, more complicated projects? I gotta tell you, mySAP Business Suite is more complex. What most people don’t realise is we have 300 or 400 engineers working on this. With the BusinessSuite, I had to somehow synchronise 5,000 engineers. Engineering-wise, this is a simpler order problem that I solved before in my life.
…It’s people–getting people to agree to install these things, getting money to install them… Ever see SAP users? In everything you install, there is that variable of the user. In this case, it’s actually an easier thing to do because it’s a consumer. You know very quickly if you fail.
So what I’m trying to say is, the engineering isn’t the problem any more. The second problem is the economics. We’ve sourced in the car most of the components–Renault Nissan has. So we roughly know what the costs are. I’ve sourced most of the components of my system so I roughly know the cost… We’re not that far from what we thought our costs would be. It’s not too complex.
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