Last Updated on September 16, 2023 by Prakash Kolli
The richest man in the world is Tesla and SpaceX founder Elon Musk. In 1995 he had over $100k in college debt, and today is worth hundreds of billions. So how did he go from being a poor student working multiple jobs to being a multi-billionaire? This article will explain some of the “rags to riches” story of Musk and answer the question, how did Elon Musk make his money?
Some interesting facts about Musk:
He is originally from South Africa.
Attended the University of Pennsylvania.
Is described as an innovative leader, genius, and visionary entrepreneur.
Recently challenged Russian President Vladimir Putin to “single combat” in a Twitter post.
According to the Forbes.com Real-time Billionaire List of over 2000 billionaires, Musk’s net worth at market close on 3/28/22 is $287.7 billion. This interactive list updates automatically to reflect market share prices. With much of their wealth tied to publicly traded stocks, the net worth of the world’s wealthiest people can change daily with market fluctuations.
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Musk was born in South Africa in 1971. His mother, Maye Musk, is a model and dietitian who holds two Master’s degrees. His father, Errol Musk, is a successful engineer. Maye and Errol had a tumultuous marriage and divorced when Musk was ten years old. He was an intelligent, bookish child who had trouble making friends. Musk describes his childhood as “excruciating” due to the harsh situation at home and bullying at school.
Musk has a brother Kimbal and a sister Tosca who are also successful entrepreneurs. Kimbal is the owner of The Kitchen Restaurant Group, co-founder and chairman of the 501c(3) nonprofit Big Green (which builds outdoor classrooms), and the co-founder and chairman of the urban farming company Square Roots. Tosca is the founder of streaming service Passionflix and the executive producer and director of films, television programs, and web content.
Musk was 17 years old when he moved to Canada in 1989. He enrolled at Queen’s University in Kingston, Ontario, in 1990 and stayed there two years before transferring to the University of Pennsylvania.
At the University of Pennsylvania, Musk studied business and physics. He even worked as a teaching assistant at the famous Wharton School of Business as a student. Once he completed his undergraduate economics degree, he stayed at the University of Pennsylvania to finish his Bachelor of Science in Physics, earning it in 1995.
Musk then enrolled in the Ph.D. physics program at Stanford University in California. He was 24 years old and had over $100k of debt, despite scholarships and working while in school.
Musk deferred his attendance after just two days because he felt the internet had more potential than physics. With a loan from angel investors and his family, he instead started a web company which became Zip2.
How Did Elon Musk Make His Money: Start-Ups
Musk, his brother Kimbal Musk, and Greg Kouri founded Global Link Information Network, which became Zip2. Kouri was a California real estate developer and friend of the Musk family.
Zip2 initially provided an internet presence to local businesses by offering a searchable business directory. The search results even included maps. Businesses could pay to be included. Eventually, this internet directory evolved into online city guides for newspapers, with the New York Times being one of the early adapters.
According to the Wall Street Journal, Zip2 was purchased in 1999 for over $300 million by Compaq Computers, which wanted to acquire it for their AltaVista division. Musk’s share of the purchase price was $22 million.
Musk took $10 million of his Zip2 profits and created the online financial services and payment company X.com in 1999. The following year X.com merged with Confinity, a money transfer firm. This combined company evolved into PayPal. This online payment system made online money transfers more accessible and offered fee-based payment processing for online vendors, auction sites, and other businesses.
SEC data shows that eBay bought PayPal in 2002 for $1.5 billion. Although Musk had been forced out as PayPal’s CEO, he left with $180 million worth of PayPal stock since he owned 11% of PayPal. He used that money to found SpaceX.
Fun fact: Musk bought back the domain X.com from PayPal in 2017 because it has “great sentimental value.”
SpaceX is a privately owned company that was valued at about $150 billion after that latest round of fund raising. Musk is the largest individual shareholder with roughly 54% ownership. The original mission of SpaceX was “to enable humans to become a spacefaring civilization and a multi-planet species by building a self-sustaining city on Mars.”
SpaceX has developed reusable rockets and launch systems that reduce the cost of space travel. SpaceX rockets can be used as many as eleven times. NASA has awarded SpaceX contracts to deliver supplies to the International Space Station and transport NASA astronauts.
SpaceX has also developed Starlink low orbit satellites to provide satellite internet access to areas with poor internet connectivity or no services.
Electric vehicle company Tesla Motors (now Tesla, Inc.) was founded in 2003 by Martin Eberhard and Marc Tarpenning. Musk became a major funder in 2004 with his investment of $6.5 million, leading to him joining the board of directors as chairman.
In 2008 Musk became the CEO and product architect after the existing CEO was ousted after financial turbulence at the company. In addition to electric vehicles, Tesla also produces energy storage devices, automobile accessories, and solar power systems through its acquisition of SolarCity in 2016.
The increase in the value of Tesla shares has pushed Musk higher in the wealth rankings. In 2020 alone, Tesla’s stock price grew 740%. Tesla joined the S&P 500 Index in 2020 and was the largest company ever added. Musk became the wealthiest person in the world in January 2021 and has remained on top ever since.
Final Thoughts on How Did Elon Musk Make His Money
Musk faced personal adversity in his childhood at home and school. He was willing to take risks early in his career by borrowing money for business development despite substantial college loans. He believed in his vision and was not afraid to change plans, like attending Stanford, as his ideas evolved. Musk faithfully invested profits in the new technology companies he developed. His determination, perseverance, and faith in himself helped make his companies successful.
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Christine Seaver is a freelance writer that writes about personal finance, budgeting, and debt. She is a frequent contributor at Dividendpower.org. Christine works as an office manager by day and a cookie baker at night. She lives in Massachusetts with her family.