Why Better Place Fired Its Founder & CEO, Shai Agassi

In 2005, Shai Agassi had his Aha! moment while searching for the transportation solution that will end the world’s addiction to oil. He thought "What if we separated the battery from the car?"

Two years later, backed up with $200 million in investor funding, he founded Better Place to build “the network that makes electric cars make sense.” Fast forward five years and Agassi’s dream has become a reality in Denmark and Israel and rollouts are planned in a few other countries. Even so, Agassi will not be holding the wheel of his company anymore – last week he was ousted by the company’s board.

So what happened? How come Agassi - who Thomas Friedman called “the Jewish Henry Ford”  and who was described on the 2009 TIME 100 list as “the closest we've seen to a Steve Jobs of clean tech — visionary, technologist, businessman” - is no longer leading the company he founded? Here are four possible reasons:

1. Moving from vision to execution – “Agassi was a good fit for vision but not for day-to-day management,“ a source close to Israel Corp, the main shareholder in Better Place, told the Israeli financial newspaper Calcalist. From the media coverage of the story, it looked like Israel Corp tried to promote this storyline – the visionary Agassi has been replaced by an experienced businessman (Evan Thornley, CEO of Better Place Australia), as the company is getting ready for its second chapter, which includes deployment of its network in a growing number of countries.

This is a rather "convenient" reason because as the Wall Street Journal reported, it follows a pattern among other startups in which founders are replaced at the helm by managers in order to oversee growth. "It's part of the business school literature: a transition from an entrepreneur manager to a business manager,'' John O'Dell, an editor at Edmunds.com told the Journal.

This sounds like a reasonable explanation, and it might have been part of the board’s considerations, but there’s only one problem with it – Agassi didn’t come to Better Place straight from graduate school, another startup or his garage, but from SAP, where he was a very senior executive.  Actually, he might even have more experience as an executive of a global company than his successor, which makes this move a bit less ‘classic’ than it looks like.

2. Unclear future – while Better Place has made impressive progress so far with networks deployed already in Denmark and Israel and trials going on in Australia, China, Hawaii and California. Better Place also ordered 100,000 cars from Renault, its model Fluence ZE, the only one now that runs on the switchable batteries provided by Better Place, and is committed to buy them by 2016. At the same time, Better Place sold only about 750 cars to customers in Denmark and Israel and burned $470 million of the $750 million it raised so far from investors so far.

While the investors probably understand that it takes time to generate profits in a company that needs to heavily invest in infrastructure, it’s no wonder they’re worried. Add to that the fact that no big car company, other than Renault, seems to be interested in partnering with Better Place, the growing competition in the electric car market and the overall difficulties of this market to move forward, and you can see why the shareholders believe it’s time to make changes before it’s too late.

3. Agassi’s rosy forecasts – Agassi is a charismatic visionary entrepreneur, and as such he frequently provided rosy forecasts that helped make the business case for Better Place. For example, in 2008 he said that the company will sell a few thousands cars in 2009, and  more than 100,000 cars in 2010. In 2009, he talked about selling 100,000 cars in Israel and Denmark in five years and in May 2011, he estimated that by 2014, Better Place’s car would be the most popular car in Israel.

These forecasts  generated not only enthusiasm but also expectations of Better Place, and when the company didn’t meet them time and again, questions were raised about Agassi's ability to deliver the goods. Unlike other companies with similar rosy forecast problems, here the CEO has to pay the price.

4. Dispute with Israel Corp on the next market – Better Place’s largest shareholder (33 percent), Israel Corp, is Israel’s largest holding company and is involved in many areas such as fertilizers and specialty chemicals, energy, shipping and transportation. Its multiple interests include a stake at the Chinese car venture Qoros Auto, which plans to develop various models, including plug-in hybrid ones.

Apparently there was a dispute between Israel Corp and Agassi about the next stage of Better Place – Agassi wanted to focus on Europe, Israeli Corp while its Chairman, Idan Ofer (who is also the chairman of Better Place) wanted to focus on China, where the company is already involved in the auto market. As it happens in many disputes of this sort, the stronger side wins and the other side needs to go. The only question left is if Better Place will be a better business as a result of it.

[Image credit: Suzie Katz, Flickr Creative Commons]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business, sustainable design and new product development.