Musk, apparently eager to give the magazine an exclusive and reassure buyers who must put down a sizeable $40,000 deposit for a car that they won't see until 2011 at the earliest, said that GE Capital was an investor:

Q: What can you say to reassure buyers fearing you might go under?

A: Even in the worst case of an Armageddon scenario, I'll personally refund people [their money] if need be. I think there's very little danger of that. We've raised around $40 million, and a bit of news that hasn't come out yet [is] General Electric is investing in Tesla. [GE Capital] will be the second-largest investor in this round, after me. Our business plan that we presented to investors gets us to profitability by the middle of this year, even if some negative stuff happens.

A Car and Driver spokeswoman confirms that the magazine is running a story on Tesla in its May issue.

Musk appears to speaking about Tesla's long-delayed $40 million debt financing round which just closed this month. We asked GE if they had invested in the company. Andy Katell, a spokesman for the GE Energy Financial Services unit said no:

We have not invested in Tesla, although we are closely watching it and several other companies in this area.

In January, speaking at a town-hall-style event for Tesla buyers, Musk had hinted that a major player with a "household name" would soon announce an investment in Tesla. So add this to the list of Musk's statements which later prove inoperative.

Update: Tesla now says GE had promised an investment at the time Musk gave the interview to Car and Driver, but backed out the day it was supposed to wire funds to the company.

In what appear to be leaked excerpts from the May issue of Car & Driver, CEO Elon Musk says that GE Capital participated in a recent round of convertible-debt financing for the troubled company.

Welcome news indeed. Under Musk, Tesla Motors has been running on financial fumes. An engineer troubled by the company's mismanagement leaked word that the company was down to $9 million last October. In response, Musk announced that the company would raise $40 million in debt financing. He also told Tesla buyers that he would personally guarantee their deposits.

Musk has been saying publicly, since November, that the company had raised the money, implying it was a done deal. But tipsters tell us that he actually didn't close the round until two weeks ago. He may well have been delaying the news so he could include word of a deep-pocketed investor like GE in the round.

It's just another sign of Musk's troubling relationship with reality. Every entrepreneur must dream of things that have not yet come to pass. But Musk has a history of presenting futuristic fictions as facts on the ground — like the time he claimed the government had approved his company's $350 million loan application. It hadn't, and his flack was forced to issue a retraction.

Musk is now asking Tesla buyers to pony up $40,000 in deposits for the new Model S, even though he has yet to reveal a site for the factory where he plans to build them or financing for production. It's eerily reminiscent of the career of automotive entrepreneur Preston Tucker.

With Tesla desperately short on cash, and breaking even at best on its sales of its Roadster sports car, Musk is clearly planning to use Model S buyers' deposits as a source of capital. It's a sneaky way of turning them into lenders, without giving them the recourse that, say, GE Capital might have.

And Musk is not being straight with buyers on how safe their deposits are. On Thursday, when he unveiled the Model S in Los Angeles, he stated flatly that buyers could lose their money:

For those who are worried about what will happen to their deposits if the car is never produced, since the money will be spent on development and not held in escrow, Mr. Musk said: "The worst-case scenario is they would lose their money. They are at risk."

That's not what he told Car & Driver readers:

Even in the worst case of an Armageddon scenario, I'll personally refund people [their money] if need be. I think there's very little danger of that. We've raised around $40 million, and a bit of news that hasn't come out yet [is] General Electric is investing in Tesla. [GE Capital] will be the second-largest investor in this round, after me. Our business plan that we presented to investors gets us to profitability by the middle of this year, even if some negative stuff happens.

(A nice bit of misdirection, that — shifting the subject from the company's present losses to the "plan" for profitability.)

So which is it? Are buyers' deposits at risk, or aren't they? Is Musk good for the money, or isn't he?

One reason for Musk's ever-chaning answers may be his shifting fortunes. We hear he's been complaining to friends about being short on cash and having to sell investments at a loss in order to invest in Tesla's recent debt round. He's living in Los Angeles and flying up to the Bay Area to work at Tesla. We're told he's staying with friends — possibly a move to defray the costs of his commute. Add to that an almost certainly expensive divorce from his wife Justine. If buyers are going to rely on Musk's backing for their deposits, they should be asking him to open up his books.

Rose has deleted the pictures after someone at Tesla requested that he take them down. But Tesla flack Rachel Konrad seems thrilled with the leak, praising Jalopnik editor Ray Wert for his site's coverage of the leak. Here's Konrad's email to Wert (who took issue with recent coverage of Konrad's blogger-outreach strategy):

So was the leak a violation of Tesla's intellectual-property rights, or a "really, really nice job"? It's about as clear as anything at the electric-car startup these days.

For Tesla, any publicity is good publicity. The Model S unveiling is Tesla's last-ditch hope at a future in the business. Although it does not have financing for the production of the Model S, or even a site for a factory to produce it, Tesla plans to take deposits for the $58,000 vehicle from customers, a move at least one Tesla executive deemed fraudulent, prompting his departure.

We asked Tesla CEO Elon Musk who sent Rose the takedown request and he replied, "I think it was your mom." And then added, "By the way, I have a crow sandwich coming your way soon." Good to know that this standard-bearer of the green revolution isn't working himself to death to launch his new vehicle and still has time to toss playground insults at bloggers.

Like Detroit, cash-strapped Tesla is currently a supplicant to the government, counting on money earmarked for alternative energy to carry it through its trying times. In other words, a good time to have a political celebrity in their corner, right? Alas, no.

Schwarzenegger frequently cited Tesla as an example of California's nascent green industries in speeches in previous years, and appeared with Tesla CEO Elon Musk at various events. But he's been quiet on the subject lately. With good reason. Two sources close to the company say Schwarzenegger aides have been talking to Tesla since at least the fall about returning the Governator's Roadster. Given the company's financial troubles, Tesla executives asked them to hold off, fearing bad publicity.

Tesla, the troubled Silicon Valley electric-car startup, has been struggling to come up with financing for production of its planned Model S sedan, a prototype of which will be unveiled tomorrow in Los Angeles. The company nearly ran out of cash last fall, and cancelled plans for a car factory in San Jose. It is currently pinning its hopes on winning loans from the Department of Energy, but that is far from a sure thing — and the loans themselves, in a bit of a catch-22, are granted based on the recipient's financial viability.

So why doesn't Schwarzenegger like the Roadster? Built on a Lotus Elise body, the car is not easy to get in and out of, especially for someone with the former bodybuilder's robust frame. "He's more of a Hummer guy," one tipster tells us.

(Photo by Justin Sullivan/Getty Images)

How fitting, since Second Life, a piece of software which allows users to move "avatars" representing themselves around in a three-dimensional space and decorate themselves and their virtual land, resembles nothing so much as a failed academic experiment.

Linden Lab, the maker of Second Life, has raised $19 million in venture capital from a star-studded list of backers, including Benchmark Capital, the backers of eBay; eBay founder Pierre Omidyar; Mitch Kapor, the founder of Lotus; and Amazon.com CEO Jeff Bezos. But the last infusion came nearly three years ago. The company charges fees on people and companies who own virtual land in Second Life, and also issues a currency, Linden dollars, used to trade goods in-world. Kapor, the company's chairman, told the Financial Times last year that it was "absolutely in the ballpark of profitability."

Second Life may well be on the verge of profitability. But it is firmly headed into irrelevance. It is impossible to imagine another BusinessWeek cover story like the one it garnered in 2006. Reuters closed its Second Life bureau last year. The former bureau chief, Adam Pasick, told PBS's Mark Glaser that there was no longer a there there:

We were primarily interested in Second Life as a business/commerce/finance phenomenon, covering it like we would any small but fast-growing economy in the real world. The bureau is now closed. Essentially the story we were there to cover has moved on.

His reporter, Eric Krangel, who now writes for Silicon Alley Insider, was more trenchant:

The very things that most appeal to Second Life's hardcore enthusiasts are either boring or creepy for most people: Spending hundreds of hours of effort to make insignificant amounts of money selling virtual clothes, experimenting with changing your gender or species, getting into random conversations with strangers from around the world, or having pseudo-nonymous sex (and let's not kid ourselves, sex is a huge draw into Second Life). As part of walking my 'beat,' I'd get invited by sources to virtual nightclubs, where I'd right-click the dancefloor to send my avatar gyrating as I sat at home at my computer. It was about as fun as watching paint dry.

What's left for Second Life? Community meetings, underattended cultural events, and education. CNN uses its Second Life "island" to hold meetings with volunteer reporters. WGBH threw a virtual concert with a grand total of 70 attendees. And the Modern Language Association, that bastion of English-department wonkery, is pursuing the idea of using it to hold meetings.

Imagine a dry academic conference enlivened with a few space-alien avatars. Deans with mohawks and tight leather pants! Only compared to the life of a university professor might Second Life actually seem exciting. We look forward to the news that Linden Lab has sold itself to an academic consortium. It's where the virtual world belongs.

Tesla's lead investor, Elon Musk, installed himself as CEO last fall. That's just one of the many parallels between his story and that of Preston Tucker, the doomed automotive entrepreneur whose dream of an innovative new car died amid charges that he was taking people's money for cars he couldn't build. Musk's Tesla Roadster, a $109,000 sportscar which races from 0 to 60 miles per hour in less than 4 seconds, could be the next Tucker Torpedo.

In October, Valleywag reported that Tesla Motors was down to $9 million in the bank. Musk confirmed the company's cash position, and promised he would raise another $40 million in convertible debt from existing investors. But the fundraising is taking longer than planned. At a recent town hall meeting with customers, Musk reportedly told Tesla buyers that the company almost ran out of money in December, before it raised part of the round. Tesla is still seeking new funds.

And it has turned to existing customers as a source of those funds. The company is losing money on every Roadster sold, Musk says. Having already spent their deposits, Musk ordered a price hike on the $90,000-plus car's options, adding charges for everything from delivery to the car's electric charger to its sound system. (It is rather like Tucker's move to sell accessories to car buyers before he had even built one.)

Musk claimed he needed to raise prices to assure the company's viability. If the company does not look like it will make money soon, it will not be eligible for some $400 million in Department of Energy-guaranteed loans on which Musk has been counting to start production of a mainstream $50,000 sedan, the Model S, which has already been delayed until 2012.

But according to a Tesla tipster, Musk's decision to raise prices has caused severe damage to the company's operations. Production ceased while manufacturing waited to hear what options to install. And the company's salespeople were consumed by the task of calling back customers and asking for more money, rather than pursuing new sales. While cars stopped going out, money stopped going in. He also faces a real risk of customers asking for their deposits back; California's vehicle code provides strict consumer protections against such fiddling with prices. Tesla buyers, though, tend to be wealthy true believers, so they may well pony up more money — if they can still afford the car at all, that is.

Now Tesla has cancelled plans to build a factory in San Jose where it planned to build its Model S, a mass-market sedan. Musk is still planning to take deposits from Model S customers starting March 5.

This sounds exactly like the sort of trouble Tucker (left) found himself in, with an engineer accusing him of never bothering to buy production machinery for a factory he'd never bothered to build, while taking money from investors and customers.

Tesla and Musk may somehow pull through this. But he has already told customers they may lose any money they've given him. In November, he offered to personally guarantee the deposits of any Roadster buyer should the company fail. But at this week's town hall meeting, he told customers their deposit money would be at risk if they did not go along with his price hike and Tesla went bankrupt.

Musk, a successful Web entrepreneur whose PayPal sold to eBay for $1.5 billion, is also in the business of building rocket ships through his other company, SpaceX. He's talked about carrying out a privately funded mission to Mars. At this point, that looks more likely than Tesla getting off the ground.

Frame, a high-school dropout who'd nevertheless managed to get a job at Cisco, the networking-equipment maker, could have been at least a TV star himself; he looks eerily like Will Arnett's G.O.B. character on Arrested Development. And Ooma's products, the Hub and the Scout, are pleasant enough to look at, too. As if there wasn't enough of a Hollywood connection, Frame lied about the Palo Alto-based startup's age.

But a pretty face is not enough. Ooma's problem, minus the technical analysis, amounted to this: It was never as simple as a Hollywood pitch. Try as he might, Kutcher could never turn it into a movie trailer. (Perhaps if he'd hired the late voiceover artist Don LaFontaine to intone "In a world without phone bills ...", it might have had a chance.)

Cell-phone carriers long ago figured out that making phones cheap and charging more for monthly service helped win subscribers. Ooma tried to flip that around, charging $399.99 for a Hub device and offering phone service for free. It has since slashed the price to $249.99 — but enrolled all new customers in a $99.99/year service plan for extra voicemail features. (You have to cancel the service to after a 60-day free trial to avoid being charged for it.)

Frame tried to compensate for these flaws in his business plan with a crush of PR. Servile tech blogs like TechCrunch, eager to talk up the Kutcher connection, played along without asking hard questions about Ooma's product. Ultimately, that's what undid him. Our tipster tells us the board "is done with Frame's lack of integrity and moneywasting PR trips and took him out." Other executives have been reshuffled, and a former president of Vonage — a more conventional Internet-phone service that's also losing money — is trying to help the company raise money.

If this were a movie script, it would be time for the third act and a happy ending. But I don't think Ooma will go Hollywood in that way, either.

Update: Tim Weingarten, an Ooma board member and investor, has sent the following response:

I read your article today about Andrew Frame, and as an investor and ooma board member from when I first seed-funded ooma, I feel compelled to correct several inaccuracies. I think it's important you hear this directly from someone who is both a board member and also the largest investor in the company.

1. Andrew has not been fired from the company. The company has made substantial progress with Andrew as CEO. It has been Andrew's vision, leadership and guidance that made it clear to me and the other ooma investors to invest the $45m of capital that has gone into the company over the last 4 years. Andrew's involvement and vision for the future product direction is a critical aspect of the board's intent to invest more in ooma in the future.

2. Andrew's success and contribution at Cisco was the foundation for the original bet we placed on ooma. He joined Cisco at a very young age and excelled quickly to be a top respected technical expert and contributor throughout the organization. We place our bets on people and we performed significant due diligence on Andrew's accomplishments at Cisco and elsewhere and were very impressed with his references and contributions in companies small and large before ooma.

3. The company is growing revenue rapidly and we are pleased as a board with their progress.

A well-capitalized ad broker would be able to pay its publishers promptly; it's part of the reason why such middlemen take a big cut of advertisers' payments. The only sensible reason why Glam can't pay Web publishers promptly is because it no longer has the capital to float its accounts receivable, despite raising $85 million earlier this year. I'm sure Arora will deny that he's running low on money — in which case he will be tacitly admitting that he's stiffing his partners.

W: Letter of Apology
Elon Musk
Sent: Monday, November 03, 2008 4:22 PM
To: Everybody
Below is what I believe to be a sincere apology from Peng Zhou for the leak to Valleywag.
To: Elon Musk
Subject: Re: Letter of Apology
——————————————————————————————-
Dear Tesla Motors Employees,
Tesla Motors is a great company and is pioneering the green revolution. I have always been a proud Tesla employee and we all worked extremely hard towards the company mission. Throughout past two years, I also took a wild ride in the great emotional roller-coaster of WhiteStar 1.0, 2.0 and Model S. Having driven Model S mule few times, I truly believe this is the vehicle that will change the world.
However, macro economic climate changed so dramatically and Model S is getting delayed and the company is refocusing. The past month has been very difficult, sitting through planning meetings and watch employees make in or out of the layoff list. It is so sad to lose 87 employees in a week. I became very upset and did the very foolish thing of writing a letter to Valleywag. I have never thought this letter would create such an upsetting situation for Tesla Motors and I should have never sent that letter. When Elon asked the originator of the letter to step forward, I should have done so. I am deeply sorry things happened this way.
I have submitted my resignation with my manager, who had no knowledge of this. I’ll try my best to make situations better for Tesla Motors.
Again, my sincere apologies.
Best Regards,
Peng

Current Tesla shareholders have 30 days to choose, through a process known as a rights offering, whether to fund the debt, which is convertible, at a later round of financing, to shares. Tesla thereby avoids setting a new, presumably lower valuation for the company — almost a certainty if it had issued new shares, given Tesla's straitened financial condition. But the reality remains: Having raised $146 million in venture capital and tens of millions of dollars more from customers putting down deposits on the $109,000 Roadster, Tesla is now sinking into debt. In January, it may obtain a $200 million loan guarantee from the Department of Energy — meaning that it will be borrowing more cash. $9 million in the bank now, with $240 million in debt to come: Tesla will soon resemble, in miniature, the stumbling Detroit giants it hoped to overturn.

As a longtime employee of Tesla Motors, yesterday was the worst day since i joined Tesla Motors four years ago. A company all-hands meeting was called yesterday evening and a simple six-page company financial model was communicated. I was shocked to learn that we only had ~$9 million in the bank.

The first few hundred cars have been paid full in cash when they booked their vehicles. The reservations following that required from $4,000 to $60,000 of deposit. We have over 1,200 reservations, which manes we've taken multiples of tens of millions of cash from our customers and have spent them all. Meanwhile, we only delivered less than 50 cars.

I actually talked a close friend of mine into putting down $60,000 for a Tesla Roadster. I cannot conscientiously be a bystander anymore and allow my company to deceive the public and defraud our dear customers. Our customers and the general public are the reason Tesla is so loved. The fact that they are being lied to is just wrong.

Update: Tesla's Musk has confirmed his employee's report that the company only has $9 million in the bank.

(Photo by danegolden)

Besides Peerflix, the company started by jilted MySpacer Brad Greenspan has also purchased struggling companies PageFlakes and Revver in the last year, and Greenspan made a personal investment in Flurl, but was turned away by JumpTV.

All that wheeling and dealing while not paying attention to basic operations like payroll? Flashy products and technology that may or may not actually exist? "Out of touch" sounds about right.

Greenspan and friends will probably just blame the market as management shorts employees, since that's all the rage these days. But this looks a lot like a textbook case of "excess and lack of self-discipline" to me. Who may end up the winner in all this? The Hollywood Hills Cat Burglar, who seems to have gotten away from Greenspan's mess just in time. (Photo by Getty/Alberto E. Rodriguez)

Gator had changed its name to Claria, and raised some $40 million to launch a personalized homepage which never caught on. In the sneakiest move of all, it then raised $11.5 million under a new company name, JellyCloud, with the same set of executives as Claria — Scott Vandevelde and Scott Eagle among them. Was Jellycloud just Claria reborn? It's now a moot point, if our tipster's report is accurate. And a painful mistake for US Venture Partners, SoftBank, Sand Hill Capital and Crosslink Capital — who have managed to lose $11.5 million in just five months.

It's as if he thought that playing a game of buzzword bingo would masquerade as strategic thought. A television salesman by trade, Falco was plucked by Time Warner CEO Jeff Bewkes from NBC Universal to replace Jon Miller, in a universally derided move. A commonly held belief among insiders: Falco and Bewkes thought AOL would be sold off by now, with Falco moving on to some role at Time Warner's film and television properties. AOL has continued to embarrass. And so has Falco. The only question is which exit will come first.

IAC CEO Barry Diller has a ghastly track record of launching projects in-house; almost every vaguely promising Internet property he owns, he bought from someone else: Ask.com, Match.com, CitySearch, and so on.

And personal finance sites are deadly. In trying to break the mold, FiLife managed to be even more condescending than most. Its introduction:

Most personal-finance sites are snooze-filled, sometimes schoolmarmish affairs. Save more money! Don't you dare go out to dinner! Suffer, scrimp, suffer, scrimp. We're kind of tired of that approach, and we reckon you are, too.

Watching Wall Street's meltdown, would you be surprised if 20somethings were uninterested in qualifying for a mortgage and investing in mutual funds? Personal-finance sites are usually more motivated by luring advertisers than readers. The former are now in scarce supply, too.

Heavy has never been a particularly reputable company. It used to inflate its traffic with popup ads. Yet it still managed to raise $20 million in venture capital in January 2007. By last fall, investors began to clamor for more revenue. The startup's management then brought in what our source calls "C-level grownups."

The hires included CMO Eric Hadley from Microsoft; CTO Scott Penberthy from Photobucket; CFO Todd Sloan from Nielsen; and VP Richard Rocca, who spent a few months at shady ad network Glam Media after leaving the equally unsavory ad startup Gorilla Nation.

That crew now runs the company, "but the problem is there's not going to be anybody to run it with them," says our source, who calls the new leaders "ineffective."

Most C-level people, you know, they might have been able to roll their sleeves at one point in time, but now they're pretty much ineffective people. In one instance, [Hadley, who came] from Microsoft was going around asking for help with Excel. Didn't they give classes on Microsoft Excel at Microsoft? He was like, 'well, uh, I went to business school.

Heavy's problems run deeper than its executives' lack of skill with office-productivity software. Its advertising deal with MillerCoors to sponsor Heavy's "Tiny Entourage" show has the brewer in trouble with consumer advocate groups. Also, our source says the ad network that's supposed to save the company isn't making any money.

The litany of defections from Heavy is long. The VP of west coast sales left in June. The VP of east coast sales left this week for a competitor. Three sales directors on East Coast left, leaving one with the entire territory. ("He's loving it," our source says.) The entire U.K. team quit in June, and the company is trying to hire new staff there. The VP of marketing left for Ripe Digital Entertainment, an online-video studio. And Jimmy Jellinek, a VP of programming who had quit the company once but returned in February, has left again, this time for Playboy.

But the hardest loss to bear, for a company trying to attract 18-34 males, may be comely reality-TV star Jen Schefft. Scheftt, who starred in ABC's "The Bachelorette," only joined the company in June. She's gone, too, our tipster says. That's a pretty abrupt cancellation.

(Correction: Richard Rocca informs us he was not fired from Gorilla Nation, as we reported, but left on his own. "Gorilla Nation and I are still close and I forward business there way all the time.")

Jobster gave away much of the farm when it raised its third round, way back in 2006. The $18 million third round brought the total raised to $48 million, but on a valuation only a little over $100 million — meaning there's probably little equity left to sell to investors. The $7 million secured in April was likely a "down round," or offered on an even lower valuation. Investors were probably looking to snap up what equity was left and keep the company going for just long enough to sell to someone. Anyone. Please.

But if they're trying to cut the burn rate through layoffs, why is the company maintaining such a large office on the sixth floor in a prime Seattle location looking out over Elliott Bay? Our source was incredulous. "This makes no sense to me at all. No matter how good a deal they have, office space for 20 people would cost less on a cash basis." Maybe as a showpiece for possible acquirers? If that's the case, I'd take a cue from when the Mariners played in the Kingdome and the upper deck was always empty — cover the empty cubicles with a festive covers and bunting to keep it from looking like a mausoleum.