Marketplace: Better Place - bitter place?

The rise and fall of Shai Agassi’s electric car start-up

By SHLOMO MAITAL
Updated: NOVEMBER 12, 2017 08:46
Shai Agassi, the founder of Better Place, poses next to an electric car in Jerusalem, in 2009 (photo credit: BAZ RATNER/REUTERS)
Shai Agassi, the founder of Better Place, poses next to an electric car in Jerusalem, in 2009
(photo credit: BAZ RATNER/REUTERS)
“HOW DO you make the world a better place by 2020?” This was the question Klaus Schwab, founder of the Davos, Switzerland, World Economic Forum, addressed to a group of young global leaders in 2005. Among them was an Israeli ‒ Shai Agassi.
“[The question] was intended as a conversation starter,” Agassi later said, “but I took it seriously.”
Agassi launched Better Place on October 29, 2007, with the goal of creating an all-electric car that would make Israel and the world independent of crude oil. The car’s 700-pound battery would be rapidly ‒ and robotically ‒ switched when depleted in about the time it would take to fill a tank with gas.
Deployment of Better Place electric vehicle networks in Israel was announced in 2008 and talks were held with 25 additional regions, including Australia and Oregon and California in the US. In January 2008, a deal was signed with global auto giant Renault Nissan to build electric cars for Better Place.
By September 2012, there were 21 battery- swap stations in Israel and Agassi had raised more than $850 million to finance his vision. Wired magazine called Better Place the fifth-largest start-up in history.
Fast forward to May 26, 2013 ‒ Better Place files for bankruptcy.
The fascinating rise and fall of Better Place, and its ultimate downfall, is recounted in a new book, “Totaled,” by Brian Blum, a Jerusalem-based writer. Blum and his wife Jody are also featured in an hour-long Israel Story podcast about Better Place and how they sorrowfully parted forever with their beloved electric car.
Blum’s book helps us understand how and why a very well-funded start-up with a charismatic founder and world-changing product crashed and burned. Agassi is both the hero and the villain.
As Blum tells it, Agassi’s story begins with his father Reuven, who at age 9 was among some 150,000 Iraqi refugees who arrived in Israel in 1950. The IDF paid for Agassi’s Technion engineering degree, and he served as a career officer for 16 years.
Next, Reuven worked for Tadiran and relocated his family to Argentina, where he sold the company’s communications equipment in South America.
Young Shai returned to Israel to study computer science. After serving in military intelligence, he launched a start-up, Quicksoft, with his father and moved to California. When Apple canceled a deal with Quicksoft to build an online education portal and five other companies then also canceled, Reuven called from Israel to warn that Quicksoft had just two more weeks of cash left.
Desperation led Agassi to transform his product into an enterprise information portal, renamed TopTier. Money poured in and, in 2001, the German software giant SAP acquired TopTier for $400m.
Agassi went to work for SAP, and aspired to become CEO. He resigned on March 27, 2007 when someone else was appointed to that spot. At 5 a.m., after pacing all night, Agassi told himself, “I’d rather fail at Better Place than succeed at SAP because no other job could compare to trying to save the world.”
The launch of Better Place followed quickly. Harvard Business School Prof. Rakesh Khurana observed that charismatic leaders can destabilize organizations in dangerous ways. Agassi was supremely charismatic. Blum recounts that few knew about Agassi’s achievements playing competitive poker in Las Vegas, where he learned to bluff and read opponents’ faces.
Better Place itself was high-stakes poker.
Ultimately, it succumbed to founder’s disease – an often fatal syndrome where a charismatic founder with an appetite for risk is reluctant to turn his “baby” over to seasoned professional managers with industry experience and, as a result, leads it to disaster.
Hindsight vision is 20/20. Nonetheless, there is value in learning what went wrong with this most spectacular bankruptcy.
Here is Blum’s take on the multiple reasons for Better Place’s collapse.
“The crash of Better Place,” Blum summarizes, “was in many ways a perfect storm of unexpected changes that upended the company’s business plan and assumptions, combined with some flat-out bad luck and an unbending commitment to a singular vision [battery swap].” Among his points are:
● The only company willing to make cars for Better Place was Renault. Israelis did not like the clunky, expensive Renault Fluence ZE (Zero Emissions). In Israel, such Class C cars are provided as corporate perks, along with free gasoline, leaving no incentive for electric.
● Israelis preferred fast-charge electric cars to the battery-switch model.
● Gridlocked US politics and rigid regulations kept Better Place out of the rich American market.
● Better Place built hardware – switch stations, change spots and a smart grid with cables and connectors. But the company’s entire top management, including Agassi, came from software; none really understood or loved cars.
● Toward the end, Better Place burned money at a staggering rate of $1 million a day, and faithful investors, such as tycoon Idan Ofer who invested $100m., balked at pumping in more money.
● Better Place pursued a rigid policy of not collaborating “with any car that had a tail-pipe,” e.g. General Motors’ Chevrolet Volt.
● Operations were launched on five continents at the same time with money poured into taxi trials in New York, San Francisco, Japan and Netherlands. Better Place was seriously overstaffed.
● Finally, Blum explains, there are “the dangers of running a one-man show... Seek out and listen to your advisors, especially the least powerful among them, or pay a price.” And the price Agassi paid was heavy – collapse.
IN HIS book, Blum notes a key fact that underlies Agassi’s vision. According to Technion’s Prof. Ilan Levy, the levels of nitrogen oxide (the main element of air pollution) fall 83% to 98% in Tel Aviv over Yom Kippur, when traffic stops.
What if every day could be Yom Kippur with zero vehicle emissions and sparkling clean air? And what if Iran and Arab oil-producing nations’ strategic weapon, crude oil, which gives them cash and strategic leverage against Israel, was made valueless? What if Israelis could breathe clean air that also is free of threats to its national security? Better Place has not, in fact, become Bitter Place. Agassi’s effort to rid the world of oil and emissions was praiseworthy, glorious and courageous. On the wreckage of his colossal failure ultimately will rise a hoard of all-electric (and self-driven) cars that transform our world and slow climate change. At that time, Better Place will take its place in the pantheon of fearless forerunners.
Israel is far better at giving birth to startups than at raising them to healthy adulthood.
According to the Israel Venture Center, of more than 5,400 start-ups launched after 1994 and still active in 2014, “only 139 companies can be defined as successful, or about 2.5 %.” Failure is an inherent part of hi-tech innovation, especially when it is radical and idol-smashing.
I believe we have not seen or heard the last of Shai Agassi. He is only 49. In his next venture, he will be wiser, savvier and more likely to find viable ways to make our world a better place. Until then, we owe him admiration. 
The writer is senior research fellow at the S. Neaman Institute, Technion, and blogs at www.timnovate.wordpress.com