Last month, in this column, I penned some thoughts about The Differences Between an Entrepreneur and a Small Business Owner. My primary argument is that the main differences between the two lie in how each is oriented: The entrepreneur towards sales / growth and the small business owner towards operations / risks.
Today, I’d like to use a real world case study to dramatically illustrate this point — and will do so by highlighting the decisions made by one of the world’s most celebrated entrepreneurs Elon Musk.
At 24, in 1995, Musk co-founded his first company, a software development firm Zip2, which he sold to Compaq near the height of the Internet Boom in February 1999. This made Musk $22m richer.
The next month, Musk invested $10m of that money (nearly 50%) into x.com - the predecessor to Paypal. Fast forward to 2002 - @eBay wanted to vertically integrate into payments and acquired paypal for $1.5B — of which $165m went to Musk.
At this point, Musk had roughly $180m in liquid assets. A small fortune with which to comfortably live out his days? Hardly. Instead, Musk invests it all as follows:
$100m in SpaceX
$70m in Tesla Motors
$10m in Solar City
It is said that Musk invested all his capital - so much so that he needed help with his household payments in expensive Southern California!
As a small business owner and not an entrepreneur, I would have handled each of these capital windfall’s very differently. For one thing, I would have convened a team of top wealth management advisors and developed a life and investment plan that took account of my (and my wife’s) personal, professional and philanthropic priorities. We would have then allocated the resources accordingly. In my eyes, this would have been the responsible thing to do with so much money.
What would you do with $180m? How would you spend / save it? Your answers will say a lot about how much of an entrepreneur you really are.
Looking forward to your comments!