What happened to Better Place, the company that was going to build the charging network across the world that would supercharge the sales of electric cars? When I was producing Motoring Weekly podcasts back in 2008 to 2010, this company was in the news almost weekly.
Better Place was founded by Shai Agassi, an Israeli tech developer who like many technology people was in the right place at the right time to benefit financially from the mergers and acquisitions that were rife in the industry. He had built a company called TopTier in Israel and then moved to Silicon Valley ultimately selling it to SAP, an enormous German IT company. Whilst at SAP, he started other companies that were also sold to SAP and there were concerns at the time that there was a huge conflict of interest!
However, he made a mint and became a senior executive of the company only resigning when he didn’t get the top job. Around that time (2008), the Israeli Government were keen to encourage more electric cars in their country. Agassi had founded Better Place the year before and was busy in raising investment with over $100M coming in during the first round. The idea was simple – develop a standardised network of charging stations that could help with range anxiety and allow longer distances to be driven with fast charging at different points on the journey. Better Place also did a deal with Renault to use their new electric cars to help promote the network around Israel.
Over the first two years of operation, the company signed in-principle agreements with many entities in different countries – Israel, Denmark and Australia were the first and then several US and Canadian States offered tax breaks for Better Place to build in their backyards. Apart from building the charging stations, Better Place had a great idea: battery swaps, so a driver who is running low on power could drive in to a station, swap batteries and carry on, rather like the old stage-coaching inns of old where the horses were swapped.
The business model was also interesting. Drivers would sign a contract with a monthly fee that would cover all the costs of the batteries including charging, maintenance and even warranty work! The company campaigned in the industry for standardised charging equipment and plugs as well as pushing the marketing of this new method of transport across the globe.
Another interesting idea they had was to create a “supergrid” – I wrote about microgrids recently and this is the complete opposite end of the spectrum! The Better Place supergrid was in theory, designed to cope with thousands of car batteries being charged simultaneously. This was to be done by connecting several grids together and “time-shifting” the energy drawn so that peak hour usage at any point on the supergrid was not affected and only non-peak electricity was used, even if that was from a grid several countries away!
Timeline of Better Place
2007: Foundation of company with Agassi raising $111M in seed capital.
2008: The signing of the first entities in countries, US States and territories to a memorandum of understanding for connection to the supergrid and other facilities. They also opened their first demo charging station in Tel Aviv, Israel.
2009: The company opened a fully automated battery switching station in Yokohama. Better Place received another $135M in investment and in Australia, a branded local entity announced a $1B investment plan to populate the country with electric cars and charging stations with 500 charging stations to be built.
2010: The company opened another battery switching site in Tokyo with three electric taxis that were tested during the remainder of that year. A similar three-year plan was also announced for San Francisco and San Jose cities in California. The company also raised another $575M in investment! They also signed a deal with the car maker, Chery, to provide cars for local projects in China.
2011: The first charging station in Australia was opened in the capital, Canberra, two years after the announcement that it would be happening. Better Place also announced agreements to collaborate with several Chinese power companies to push more projects across that country.
2012: A further taxi demonstration system with twelve cars was opened at Amsterdam airport. Late in the year Agassi was forced to resign and the CEO of Better Place Australia, Evan Thornley, took over and promptly went to market for a further $100M of emergency(!) funding.
2013: After only 20 charging stations had been installed, the Australian roll-out was stopped to concentrate on Israel and Denmark. This was after Thornley was fired by the Chairman of the Board. In May after another CEO had been appointed, the company declared bankruptcy in Israel and Denmark, effectively shutting the company down. An Israeli company called Sunrise bought the Better Place assets in a fire sale, however that deal fell through when Sunrise couldn’t find the cash!
Insiders say that everything that should have worked, didn’t. Costs ended up blowing out with spending rife across the business on many items it seems it shouldn’t have been buying, put it this way: they lived high on the hog. To exacerbate the problem, they couldn’t hire the right people – apparently there were no managers with automotive industry knowledge or skills! Many were ex-SAP with no knowledge of how a real business works or Agassi family members along for the ride. There were also reports that the Board of Directors didn’t provide enough oversight. There is a saying that directors should have their “noses in and fingers out” of a business. Perhaps the directors had their snouts deep in the trough and not sniffing around the business as they should have been.
Another problem was the marketing from Agassi. He was known to give the impression that the company was committing to things that they either couldn’t deliver or weren’t planning to. One such commitment was a business model that nobody had really thought through! This hubris enabled the hundreds of millions of dollars to start flowing towards the company and the problem with that was it defocussed everyone. There was no fiscal concern and possibly had money been tight to start with, the company would have had a better foundation to build on.
Agassi started to boast about the achievements of the company whilst the staff knew that none of the claims were actually true and he moved the headquarters to Israel and built lavish offices for himself. By 2012, the company’s daily burn rate was $500,000 – no wonder the Board finally woke up and moved Agassi into a non-executive role.
When Thornley became CEO, he discovered that supplier contracts had been written with minimum order sizes that were excessively high and with penalties for cancellation. This alone created liabilities of over $100M. By the end of Thornley’s short reign, the books were closed with an operating loss of $386M for 2012 – that’s just one year of operation and Thornley was running it for no more than three months trying to clean up the mess he inherited.
In the end, it wasn’t just the fault of Agassi, Better Place or their Board. The investors are also guilty of not doing enough due diligence before throwing their money in. HSBC, the Hong Kong and Shanghai Banking Corporation, even had a Board seat and they didn’t see what was going on! Having read several reports for this article, it became clear that the whole eco-system had failed, possibly because everyone thought they were going to be rich beyond their wildest dreams.