Startup Forensics: The Fall of Better Place

Better Place raised roughly US$850m, according to contemporaneous reporting, and was valued at US$2.25bn in its November 2011 financing. It filed for liquidation in May 2013. Why Better Place failed is a question of sequence: stations were built before enough compatible cars existed to use them.^{[1] [2] [6]}

Our read: the core flaw was committing infrastructure before compatible demand was proven. The record shows that sequence clearly.

The Patient: Better Place Funding and the Promise of Swappable Batteries

Better Place wanted to remove the two things slowing electric cars: expensive batteries and the wait to recharge. Drivers would buy a compatible car, lease battery access and use automated swap stations. Founded by Shai Agassi in 2007, the company raised roughly US$850 million, according to contemporaneous reporting.^{[1] [6]}

Financing came before proof of demand. In effect, the plan built the network first and hoped the drivers would follow. A November 2011 financing announcement valued the company at US$2.25 billion and brought in GE and UBS alongside existing backers.^[6]

• The problem: expensive batteries and the wait to recharge slowed electric cars.^[1]
• The pitch to drivers: buy a compatible car, lease battery access and use automated swap stations.^[1]
• Total funding: roughly US$850m, according to contemporaneous reporting.^[1]
• November 2011: US$200m financing at a US$2.25bn valuation, with GE and UBS joining existing backers.^[6]

The Symptoms: Better Place Warning Signs Between 2012 and 2013

Our read: the first visible sign was leadership. Agassi was replaced as chief executive months before the liquidation filing, and a leadership change could not instantly turn existing infrastructure into a busy network.^[4]

The system needed three things to move together: compatible cars, drivers who bought them, and enough swaps to justify the stations. A large network was serving a small compatible fleet.^[1]

Our read: these figures point to a coordination problem more than an exact cost per swap. A station needs equipment, land, maintenance and spare batteries before heavy use arrives. More stations improve convenience, but they also raise the number of drivers needed to fill them.

• Agassi was replaced as chief executive in October 2012.^[4]
• By March 2013, reporting described 37 Israeli swap stations.^[1]
• The same reporting described roughly 750 Israeli cars.^[1]
• Renault's Fluence was the only available compatible model in that account.^[1]

Cause of Death: Why Better Place Failed When Stations Outran Cars

Our read: the fatal execution risk was committing infrastructure before compatible demand was proven. That is an interpretation of the deployment and funding sequence, not proof that every station lost money.

The shutdown followed a failed search for more money. The Better Place shutdown took the form of a liquidation filing on 26 May 2013, after the company could not obtain further financing. It had sought more support from shareholders, including Israel Corporation.^[2]

Better Place also faced other ways to solve range anxiety, including battery improvements and conventional charging. To win, it had to beat those alternatives across the whole customer experience, not just on the duration of a swap.^[5]

The Toxicology Screen: The Numbers Behind Better Place's Collapse

The US$2.25 billion valuation was an equity-financing valuation. It was not the value recovered in liquidation. July 2013 reporting described a court-approved asset sale for NIS43 million, against cumulative losses near NIS3 billion. Cumulative losses are not the same as monthly cash burn, which is the cash spent each month.^{[3] [6]}

The records used here give no Better Place unit economics: no customer CAC (the cost of acquiring one customer), no swap contribution and no Better Place burn rate. The 750-car and 37-station figures are March 2013 figures for Israel, so they give a fleet-to-station ratio, not station utilization.^[1]

• Customer acquisition cost (CAC): Not publicly disclosed. CAC and swap contribution are missing from the records used here.
• User churn: Not publicly disclosed. The records give no share of drivers who stopped using the service.
• Pricing model: Not publicly disclosed. Drivers were to buy a compatible car and lease battery access, but the records give no price points.^[1]
• Monthly cash burn: Not publicly disclosed. Cumulative losses near NIS3 billion are not monthly burn.^[3]
• Runway at collapse: Not publicly disclosed. The records give no closing runway before the 26 May 2013 liquidation filing.
• Total funding: Roughly US$850m, according to contemporaneous reporting.^[1]
• Peak valuation: US$2.25bn at the November 2011 financing. This is a valuation, not cash raised.^[6]

Open full-size image

Exhibit A. Figures, periods and uncertainty follow the cited records.

The Post-Mortem: Lessons for Founders

Gate each station on observed demand. Count demand from compatible vehicles in its area, not from planned fleets. Measure paid sessions, battery inventory and contribution after local fixed costs for several months before approving the next site. A smaller first network means weaker coverage, but it lets you test the economics before repeating the same uncertain assumption at scale.

Do not build on a single vehicle forecast. Secure a second compatible vehicle program before you treat one manufacturer's sales forecast as your network plan. Stress-test your financing against a one-year slip in that program. Keep enough cash for service commitments and an orderly transfer, even if that postpones new construction.

Further reading

• Reuters, “Better Place files for liquidation,” 26 May 2013
• Reuters, “Better Place sold for NIS 43M after losing 3B,” 10 July 2013
• Benjamin K. Sovacool, Lance Noel, and Renato J. Orsato, “Stretching, embeddedness, and scripts in a sociotechnical transition: Explaining the failure of electric mobility at Better Place (2007–2013),” Technological Forecasting and Social Change, October 2017

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