Here’s how it goes when you buy a car: you buy a car. It’s yours. From then on you’re responsible for putting in gasoline (if you want it to move), insuring it, paying licensing fees and parking and/or speeding tickets if you tend to accumulate those. But it’s the car that you want – probably – since you could choose anything in your budget.

Here’s how it goes when you lease a car: depending on whether it’s a personal or corporate lease you pay some money each month and don’t actually own the car at the end of the lease, although there are leases which allow you to buy the car at the end of the lease. For the most part companies prefer to lease and not own cars so that it becomes an operating expense (and not a capital expense). It’s a tax thing. The leasing company pays for all the associated costs with the exception of fuel.

Here’s how it goes when you get a car from Better Place: you pay for the car, but you also pay them every month. You sort of own the car, but don’t own the battery that gives the car its go-go juice. The fee you pay allows you to drive a certain distance each month. Just like with cell phone plans, there are several packages available. You can get any car you like, as long as it’s one of the models that the company sells, of which there is exactly one: the Renault Fluence ZE. And it comes in three colours, so you can’t say there isn’t choice. Oh, and the company knows where you drive, and even instructs you on what route to take so that you can make it on the remaining charge you have or swap batteries on the way.

When enterprise customers factored in the price of the car and the monthly running costs, they came to the conclusion that the net financial benefit to owning Better Place cars was exactly: nothing. In other words, except for the feel-good of producing pollution somewhere else and not out a tailpipe, Better Place was not making any sort of value proposition. No value proposition – no enterprise or fleet sales.

And even those for whom green is a way of life and not just a colour, the Better Place model was just too difficult to understand.

Oops number three: alienating the natural customer base.

For those who did buy into the vision and were willing to set economics to the side, many suffered greatly from range anxiety or FONGT (Fear Of Not Getting There).

An average commute in the US is about 25 miles, and in the countries where Better Place was active, the average commute is a bit less. But average is just a mathematical mid-point. With a real-world range of roughly 110-120 km (or about an hour’s worth of highway driving, less going up hills) and many users commuting at least that distance daily the need for swapping/charging stations is obvious, but their proximity was never a given. Most travelers plan their routes and find filling stations on the way – with Better Place you navigated between swapping stations and hoped that there was some scenery to fill the space in between.

Quite simply battery technology isn’t where it needs to be to pull off the company’s vision. There are countless stories of founders waiting until technology caught up to their visions before launching their companies, Pixar being one example.

Oops number four: putting the electric cart before the battery.

Better Place could have better served everybody by spending lavishly on battery R&D than on lavish visitor centres. Yes, it could have put them at a competitive disadvantage, giving other companies opportunity to build other parts of the system, but a long-range, quick charge battery is exactly the technology that will push the industry mainstream. That could have been significant enough business for Better Place, giving them far more leverage with all the players than the almost-none they had. That’s for the next post.

In the first part of this series on Better Place  I made the rather simplistic assertion that the company failed because quite simply it brought in much less money than it spent, and then ran out of money by trying to be all things to all people.

While the concept of cars was not new and the idea of putting batteries into cars was not all that new, the notion of electric car-as-cellphone was new, with the company itself making that analogy both in terms of its billing practices (fee plus system usage) and its unique battery swapping system.

Better Place put a great deal of effort into marketing by going so far as to build a visitors’ centre so that the general population could learn about the company, the car, and go home with a bumper sticker that read “My next car is going to be electric”, stuck to the behind of many a gas guzzler. It was soft-sell all the way with the hopes of converting the visitor into a customer on the next purchase of a family car.

Oops number one: first-hand family cars typically stay with their owners for between 5 and 7 years. There was no sense of immediacy to switch nor was there incentive to buy, say, being paid book value for trading in your old car.

For all the lobbying the company did, and with all the friends it had in many high, high places , it was surprising that no government program (in Israel) incentivised drivers to switch.

Now it could be that the relaxed sales approach was a cultural choice, or that the company was deliberately selling slowly so that it could build out its support systems and infrastructure (a la Mailbox). But the visitor centre’s real purpose was to draw in early adopters who were far more mesmerised by the car’s allure than its practicality. They would then turn into an evangelical force multiplier, spreading the word to other potential customers.

I can personally attest that this tactic worked very well with early adopters bombarding their friends with messages and photos about their wonderful new shiny thing. Even so, I’m still friends with them.

But Better Place completely misunderstood their market. It’s not mom (or pop), it’s the corporate fleet manager where fuel, maintenance, turnover and worker jealousy all play a part in large purchasing decisions.

Oops number two: the first customers should have been the Israeli government, key corporations (the Israeli Electrical Corporation, for one), and municipalities.

The enterprise sales route was tried and failed. Why? Next post.

Too Important To Fail. That about sums up the investment thesis behind Better Place.

A grandiose scheme to make the world a better place, born at the World Economic Forum in 2005 and launched in 2007, Better Place as a company never fell into a nice, neat niche. It was not a car manufacturer, a battery manufacturer, or a technology provider. Instead it was a sales & marketing organization, a battery-swapping infrastructure management company, and a tracking & billing company rolled up into one uncomfortable mashup.

Even though it raised astronomical sums of capital and had the appearance of a large multinational, it was every bit as much of a startup as say, Tumblr, also founded in 2007. However, while Tumblr had a focused mission that was fulfilled gradually, Better Place tried to be, and perhaps had to be, all things to all people, at least to its customers.

For comparison, imagine a modern automobile company not only needing to engineer and build its own cars, but also to make tires, transmission fluid, and open gasoline refilling stations wherever it thought its customers might drive. Not a very feasible proposition. This is, however, roughly what Better Place took upon itself.

The reason behind Better Place's failure to thrive is actually very simple: the company earned less money than it spent. But the lessons lie in the reasons why that happened. For now I want to deal with just one:

It All Starts At The Top

On the one hand, we expect founders to have vision – not just small, compartmentalized vision but an encompassing vision of their niche – and also to be assertive about pursuing and communicating that vision. On the other, declaring that your company or business model is the only solution to a problem is a sure way to be blindsided by the competition that will inevitably come.

In my opinion Better Place lived and died on arrogance and hubris, greased by greed. This is essentially the underlying theme to the other issues which will be covered in the next posts.

Over the next few posts I will try to dissect why Better Place didn’t succeed from the point of view of it being a startup. There are some good lessons to be learned which can be applied to most startups, no matter what the field.