If you ask a random person on the street who started Tesla, they’ll almost certainly say Elon Musk. It’s the obvious answer. He’s the face of the brand, the guy tweeting about it, and the one who led it to a trillion-dollar valuation. But honestly? That’s only about half the story.
The real history is way messier. It involves a bitter lawsuit, a group of engineers who wanted to prove General Motors wrong, and a 2009 legal settlement that literally had to define who counts as a "founder."
Basically, Tesla wasn't born in a SpaceX hangar or a futuristic lab. It started with two guys who had just sold an e-book company and were looking for a way to make electric cars actually cool.
The Original Duo: Eberhard and Tarpenning
Back in July 2003, two engineers named Martin Eberhard and Marc Tarpenning incorporated a tiny startup called Tesla Motors. This was in San Carlos, California. Musk wasn't even in the building yet.
Eberhard and Tarpenning weren't "car guys" in the traditional sense. They were Silicon Valley veterans who had just sold NuvoMedia—the company that created the Rocket eBook—for $187 million. They had money, they had technical chops, and they had a chip on their shoulder about the GM EV1.
For those who don't remember, the EV1 was GM’s early attempt at an electric car. People loved it, but GM eventually recalled all of them and literally crushed them in a junkyard. Eberhard and Tarpenning saw that and thought, "That's ridiculous. There’s a market here."
They weren't trying to build a cheap car for everyone. Not at first. They noticed that wealthy people in Palo Alto were buying Toyota Priuses to look environmentally friendly, even though they had Porsches in the garage. Their "big idea" was to build an electric car that was actually a status symbol. They wanted a car that didn't feel like a golf cart.
How the name happened
The name "Tesla Motors" was a tribute to Nikola Tesla, the Serbian-American inventor who pioneered alternating current (AC). It was Eberhard’s idea. He wanted to acknowledge the guy who actually made the technology possible, even if history had sort of pushed him to the sidelines.
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Where Elon Musk Fits In
So, if those two started it, how did Musk become the "founder"?
In early 2004, the original team needed money. A lot of it. Designing a car from scratch is insanely expensive. They pitched to dozens of venture capitalists who all said no. Eventually, they met Elon Musk at a Mars Society conference.
Musk was fresh off the PayPal sale and had recently started SpaceX. He was obsessed with the idea of sustainable energy. He led Tesla’s Series A funding round, putting in $6.35 million of the $6.5 million total.
Because he provided almost all the cash, he became the Chairman of the Board.
At first, the roles were clear:
- Martin Eberhard was the CEO.
- Marc Tarpenning was the CFO and VP of Electrical Engineering.
- Elon Musk was the funder and Chairman, though he did have a say in the design of the Roadster, specifically pushing for the carbon-fiber body.
The Five-Way Founder Split
Things got complicated as the company grew. Two other names usually get lost in the shuffle: Ian Wright and JB Straubel.
Wright was the third employee, joining just a few months after the start. Straubel, who later became the legendary CTO of Tesla, joined in May 2004. He had been working on his own electric car projects and Musk basically convinced him to bring his talents to Tesla instead.
By 2007, the relationship between Eberhard and Musk started to crumble. The Tesla Roadster was late. It was way over budget. Musk blamed Eberhard's management; Eberhard felt Musk was overstepping.
In late 2007, the board (led by Musk) asked Eberhard to step down. He was demoted to President of Technology and then eventually left the company entirely. Tarpenning followed shortly after.
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The Lawsuit That Changed History
In 2009, Eberhard sued Musk for libel and slander, claiming Musk was trying to rewrite history and take all the credit. It was a nasty legal battle.
Eventually, they settled out of court. Part of that settlement—which is why this gets so confusing—was a legal agreement that five people are allowed to call themselves co-founders of Tesla:
- Martin Eberhard
- Marc Tarpenning
- Elon Musk
- Ian Wright
- JB Straubel
Why Does It Matter?
You might think this is just corporate semantics, but it matters because of how we view innovation.
If you think Musk started it in his garage, you miss the reality of how startups actually work. Tesla was a "pivot." It was an idea by two guys (Eberhard and Tarpenning) that was saved and scaled by a third guy (Musk) who had the vision (and the bank account) to turn a niche sports car into a global energy empire.
Musk didn't invent the electric car. He didn't even come up with the name Tesla. But without his aggressive—and often controversial—leadership, the company almost certainly would have gone bankrupt in 2008.
Actionable Insights for You
If you're looking into the history of Tesla for business research or just out of curiosity, keep these three things in mind:
- Check the primary sources: If you look at the original incorporation papers from July 2003, you’ll only see Eberhard and Tarpenning. Musk doesn't appear on paper until the 2004 funding documents.
- Understand the "Founders' Agreement": In the tech world, "Founder" is often a negotiated title, not just a chronological one. This happens more often than you'd think (look at Netflix or Facebook).
- Watch the early interviews: There are old videos from 2006 where Eberhard is the one doing the press junkets for the Roadster while Musk sits in the audience. Seeing those really changes your perspective on the "Musk-only" narrative.
If you're researching this for a project, your next step should be to look into the 2009 lawsuit settlement details. It's the most definitive look at how the company's "founding" became a legal definition rather than a simple historical fact. You might also want to read the original Tesla Master Plan blog post from 2006, which shows exactly when Musk's vision for the company really took the wheel.