Better Place

What did it do?

Better Place was an international start-up that developed and sold charging and battery-swapping services for electric cars. Its official headquarters were in Palo Alto, but most of its planning and operations were run from Israel, where founder Shai Agassi and its main investors lived. Customers would buy driving range on subscription, much as they bought mobile phone minutes, while the battery stayed in the company's ownership.

Why did it shut down?

Building the charging and battery-swap infrastructure consumed around USD 850 million of private capital. Agassi had expected 100,000 cars on Israeli roads by 2010, but fewer than 1,000 Renault Fluence Z.E. cars were delivered in Israel and about 400 in Denmark. The company spread its resources thin with pilot projects and feasibility work in many countries; according to Wikipedia's assessment, mismanagement was also among the causes of its financial troubles. In October 2012 Agassi stepped down as CEO and the company asked investors for around USD 100 million in emergency funding. Better Place filed for bankruptcy in Israel on 26 May 2013, and its remaining assets were sold in November 2013 for just USD 450,000.

The story

Shai Agassi's vision began with a question. At the World Economic Forum in Davos in 2005, Klaus Schwab had asked how we could make the world a better place by 2020. Better Place was Agassi's answer. Unveiled as Project Better Place on 29 October 2007, the company quickly became one of the most ambitious ventures in clean technology.

The model borrowed from the mobile phone industry: customers would buy kilometres instead of minutes, and the expensive battery would remain the company's property. On long journeys a depleted battery would be swapped for a charged one at robotic stations within a few minutes. Renault-Nissan would supply the cars and Better Place would build the infrastructure. A USD 111 million Series A round was raised at the end of 2007, and in January 2010 a Series B round led by HSBC brought in another USD 350 million. The company announced networks in Israel, Denmark and Hawaii and said it was in talks with more than 25 regions.

The first charging station opened near Tel Aviv in December 2008, but customer deliveries only began in the second quarter of 2012. By September 2012, 21 battery-swap stations were operating in Israel. Demand, however, fell far short of expectations: Agassi had forecast 100,000 cars on Israeli roads by 2010, but in the end fewer than 1,000 Renault Fluence Z.E. cars were delivered in Israel and about 400 in Denmark. It was also the only car that could use the network.

In October 2012 Agassi stepped down as CEO and, a week later, left the board. The company asked investors for around USD 100 million in emergency funding; according to Ynet, it was preparing to cut 150 to 200 of its 400 staff. In January 2013 the new CEO, Evan Thornley, was also removed. After burning through around USD 850 million of private capital, Better Place filed for bankruptcy in Israel on 26 May 2013. Two takeover attempts failed, and the remaining assets were sold to Gnrgy in November 2013 for just USD 450,000.

The lesson of Better Place is that scale and timing are unforgiving in infrastructure-heavy models. Running pilots in many countries at once spread resources thin, and demand tied to a single car model never reached the volume needed to carry the cost of the infrastructure.

Lessons for founders

• In an infrastructure-heavy model, do not expand into new countries until you have proved in one small market that you can win enough customers to cover the cost of the infrastructure.
• Depending on a single vehicle model and a single manufacturing partner ties the company's entire future to that product when demand stays low.
• Ambitious targets that attract investment erode trust quickly when they are missed; base your internal plans on realistic scenarios.

Sources

1. Better Place (company) (Wikipedia)
2. Israeli Venture Meant to Serve Electric Cars Is Ending Its Run (The New York Times, 2013-05-26)
3. Another Clean Tech Startup Goes Down: Better Place Is Bankrupt (The Atlantic, 2013-05-26)
4. https://www.wikidata.org/wiki/Q832434
5. Wikipedia (English)

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