In 2009 Shai Agassi and his company Better Place were the toast of the town.

A star at the President’s Conference, he told an interviewer, “by 2015-2016 we should see Israel going to more than 50% of the new cars will be electric [sic].”

On Sunday, Better Place filed for bankruptcy.

As The Atlantic’s Todd Woody noted, the company had “attracted $850 million in funding from such blue-chip investors as General Electric, Morgan Stanley and HSBC and Israel Corp.” With 350 employees now facing a bleak future, this has been a terrible faltering for one of Israel’s “sexiest” businesses.

Numerous key questions about the failure remain.

The story of Better Place is featured in the introduction to Dan Senor and Saul Singer’s 2009 best-seller Start Up Nation. The book begins with a question Shimon Peres asked Agassi: “nice speech, but what are you going to do?” According to their telling of it, Agassi was at Davos in 2007 with then-vice prime minister Peres, and he discussed his ideas for an electric car charging station network with corporate executives. “Here Agassi was, with the next President of Israel, trying to instruct an auto executive on the future of the auto industry.”

It was Peres, however, that supposedly fell in love with the dream of getting the world off oil by creating a viable electric car alternative: “he [Peres] orchestrated for Agassi a whirlwind of more than fifty meetings with Israel’s top industry and government leaders....

Peres also sent letters to the five biggest auto makers, along with Agassi’s concept paper.”

When Agassi met Carlos Ghosn, the chairman and CEO of Nissan and Renault, Ghosn seemed skeptical and said that any plan to build his cars in Israel would require manufacturing 50,000 a year. According to Senor and Singer “Peres didn’t blink, and committed to an annual production of one hundred thousand cars.”

Ghosn was serious about electric vehicles.

When he came to Israel in 2008 he was feted by Ehud Olmert and declared “for the first time in our history we have created the circumstances to sell electric cars for a large number of people in Israel.” By 2011 he had invested $5.6 billion outside of Israel in various electric cars to be built by Nissan.

Agassi, with the support of Peres, became the romantic hero of the “start-up nation.”

The idea was that Israel was a small country with dynamic people who were innovating the way Silicon Valley had in the 1990s.

Everything Israelis invented was a gold concept.

The oft-repeated mantra was “Israel has the second most companies on Nasdaq after the US.”

The model Better Place proposed was to build battery exchange stations throughout Israel. Since Israel is a small isolated country it was a perfect test case because people would rarely need to drive further than the range of an electric car, and setting up a grid of battery exchange stations would be possible.

As Senor and Singer explain, “the key to the model would be that consumers would own their cars, but Agassi’s start-up Better Place would own the batteries.” People would pay a subscription, like with cable, and would have the right to swap out their batteries.

Agassi capitalized on this sexy “clean energy high tech” sales tactic and was aided by Peres and books like The Start-Up Nation. He received support from then-prime minister Olmert and early investments from Idan Ofer, head of the Israel Corporation, one of Israel’s largest holding companies.

Agassi raised $200m. relatively quickly, making Better Place “the fifth largest startup in history” according to Senor and Singer.

The company was going from success to seeking markets in Australia, Denmark, Canada and the US. Furthermore, Agassi had “recruited a former Israeli army general...

to become the company’s local Israeli CEO and lead the planning for the grid and the national network of charging/parking spots.”

In an undated online article apparently from 2011 about the Davos group Young Global Leaders, Agassi was featured as an exemplar of the qualities of the innovative new-technology businessman: “In 2007 he left [German software giant] SAP and he is now bringing large numbers of electric cars onto the road.” In the article Agassi is said to have raised $700m. and claimed he had a full supply line of vehicles from Renault-Nissan.

“Our biggest challenge in the coming years will be meeting demand,” he is reported to have said. He is quoted as claiming that “In 2009 we had one [battery exchange station], in 2010 there were 10, this year there will be 100, and next year there will be 1,000. By 2013, the total should stand at 100,000.”

IT IS hard to quantify, but in terms of startups, Better Place received more hype than many. Its claims were rarely questioned.

From Fox News specials on the company to hagiographic articles in Wired and The New York Times, it was always presented as the classic case of the plucky Israeli that would easily conquer not only Israel, but the world as well, with an innovative idea.

In a 2009 article in the Times by Clive Thomson, he claimed “Going country by country, [Agassi’s] start-up firm has begun to construct what it hopes will ultimately be a worldwide network of millions of smallscale ‘charging spots,’ parking-meter-like posts scattered around downtown areas and along highways.” At a meeting with Thomson, Agassi boasted, “I’ve learned every industry in the world.” According to the author Agassi claimed he was approached by Peres after speaking at the Saban forum in 2006, who told him, “you have to do this thing.”

The Times piece shows how deeply intermeshed Better Place was with Israel’s elite society, and points out that “within months, he [Agassi] had acquired crucial political and financial backing.”

Peres is presented as selling Better Place to government ministers and, as related above, to Nissan’s Ghosn. Thomson also related that Agassi’s brother, Tal, was working as the company’s global manager for infrastructure.

Alan Salzman, “Agassi’s main American investor” was so enamored of Agassi he told the Times, “he’s the Steve Jobs of clean energy.”

However, buried in his article is an interesting quote from Toyota employee John Hanson regarding electric cars: “There is no market.” It turns out Hanson was correct where the rest of the world was falling over itself to invest in Better Place and believe in statements like Agassi’s “I’ve learned every industry in the world.”

In October 2012 the dream seemed to be over. Todd Woody at Forbes expressed shock.

“What’s behind the ouster of Shai Agassi,” he wondered in a headline. He couldn’t figure it out in the article, but did note that “Better Place has lost $490 million since its founding.”

The company seemed to enter a death spiral.

As with Enron or any other company, the sudden departure of a founding CEO is a sign something is deeply wrong. Agassi’s replacement, Even Thornley, was out the door in January 2012 and Dan Cohen, formerly vice-president of the company’s strategic initiatives, was brought in to give the sick beast its last rites.

When it was all over the carnage was impressive. According to the Atlantic the company had only signed up 750 customers (Some reports mention 1,300). The Atlantic also claimed it had cost the company $500,000 to build each battery changing station. According to Walla! the company had only built 21 stations in Israel by September 2012. It doesn’t seem it could have built many more after it began juggling CEOs.

If these cost figures are correct, the company only spent $10.5m. on building the stations.

Better Place seems to have delivered its first cars to customers in 2012, so it was actively in business for only about a year. As with its dreams in Israel, its expansion overseas never met expectations. It was attempting to build 500 charge stations in Australia but apparently only built around 20.

SO WHERE did all the money go? Supposedly the initial investment of $200m. was to cover infrastructure roll-outs in Israel, but the stories of 100,000 exchange stations or millions of charging spots were just that: a dream. When Enron collapsed with $38b. in outstanding debts, it was considered a major scandal. Since America’s economy is about 58 times the size of Israel’s, the relative financial sizes of the Enron collapse and the Better Place collapse are not so different. Yet here, no one seems to be asking tough questions about where the money went.

How much did the top executives earn, for instance? This is the downside of the “start-up nation.” There is very little transparency in Israel and never contrition for failure. It is easy to sell dreams when CEOs can boast that they “learned every industry in the world” and business reporters don’t call them on it.

Talk of hiring “a former general,” always markets well to people abroad but really is quite meaningless. Usually farming out these “former generals” is just a way to give them a good retirement, they don’t necessarily bring much to the table. Furthermore the strange entanglement between Better Place and the government, particularly Shimon Peres, is a cause for concern.

Peres plowed political capital into the company, but where was the followthrough? Men like Carlos Ghosn likely feel burned, not by a private company, but by Israel, that promised the moon but couldn’t deliver. The next time a suave, smoothtalking businessman shows up to talk to one of these companies at Davos, they may be more wary of Israeli government commitments and all the talk about “100,000 cars.”

Business reporters should ask tough questions about what happened at Better Place.

According to the reports there was a great deal of money invested and a lot of political entanglements. Those can be a toxic mix for any company. Israel should be the start-up nation, but that means having real start-ups, run with transparency and with a proven business model, not just financial black holes that use the Israeli brand to sell themselves.

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