Elon Musk's 2008 Crisis: Tesla and SpaceX on the Brink

SpaceX's first rocket, the small Falcon 1, launched from Omelek Island in the Kwajalein Atoll in the Pacific. Its first flight, in March 2006, ended within a minute after a fuel leak caused a fire.^[1][12] The second attempt, in March 2007, reached space but failed to reach orbit.^[1][12]

The third flight, on August 2, 2008, carried payloads including satellites for NASA and the U.S. military. Seconds after stage separation, residual thrust from the new first-stage engine caused the stages to collide, and the mission was lost.^[1][2][12] Musk had said he had funding for three attempts. After the third failure, many assumed the company was finished.^[1]

At the same time, Tesla was trying to put its first car, the Roadster, into production. The project had run far over budget and behind schedule, and the company's cost per car was well above its price.^[3][4]

In October 2008 Musk took over as CEO, cut staff and restructured the company.^[3] With the financial crisis in full swing, the investors Tesla needed were retreating from risk. Musk has said he had to choose whether to split his remaining money between Tesla and SpaceX, knowing that doing so could mean both failed. He chose to back both.^[4][5]

His personal situation was dire as well. Isaacson and Vance both describe months of intense stress, a divorce and a period when Musk borrowed money from friends to cover living expenses.^[3][4]

Remarkably, SpaceX's team assembled a fourth Falcon 1 from spare parts in about seven weeks.^[1] On September 28, 2008, it lifted off from Omelek and reached orbit, carrying a dummy payload. It was the first privately developed liquid-fueled rocket to reach Earth orbit.^{[1][2][9][10][11][16]}

Eric Berger's Liftoff describes the scene at SpaceX headquarters as an eruption of relief and joy, with Musk telling cheering employees that few people had believed the company could reach orbit.^[1] The flight gave SpaceX the credibility it desperately needed.^[1][6]

On December 23, 2008, NASA announced that SpaceX had won a Commercial Resupply Services contract worth about $1.6 billion for 12 cargo missions to the International Space Station.^[1][7] Musk has recalled that when he got the call he was so relieved he told the NASA official, "I love you guys."^[4]

The next day, Christmas Eve, Tesla closed a financing round with its existing investors just hours before it would have run out of money.^[3][4][15] In 2009 Daimler bought a stake in Tesla and the U.S. Department of Energy approved a $465 million loan, which Tesla repaid in May 2013, nine years ahead of schedule.^{[4][8][13][14]}

The year shaped Musk's reputation for refusing to give up. Surviving 2008 allowed SpaceX to develop the Falcon 9 and Dragon and eventually make orbital rockets reusable, and allowed Tesla to launch the Model S in 2012 and go on to lead the electric-vehicle revolution.^[2][6]

Musk has often cited that period as proof of how close great companies can come to not existing at all — and of the importance of persistence when the stakes are highest.^[5]