Why SolarCity's Leadership is Noteworthy

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"Look for the passion. Capital needs a purpose." These words of advice come from Tom Gardner, The Motley Fool's co-founder and CEO, specifically referring to finding quality business leaders. "The greatest leaders are trying to use capital to fulfill a mission," says Gardner, "something they care deeply about, something they've been studying, learning about, trying to master for their entire lives." SolarCity  (NASDAQ: SCTY  ) has a particularly intriguing management story that helped sway me to become a shareholder in the business. 

Brotherly love
Like the Motley Fool, SolarCity was co-founded by two brothers. In 2006, Lyndon and Peter Rive founded SolarCity, a rapidly expanding solar-energy provider that leases solar panels to individual homeowners and small businesses across the United States. Lyndon Rive continues to serve as CEO of SolarCity, while Peter Rive serves as COO and Chief Technological Officer. The brothers are 35 and 38, respectively. 

Lyndon Rive started his first business, distributing homeopathic medications, at the age of 17. Prior to founding SolarCity, Lyndon co-founded Everdream, an industry leader in software and services for large-scale computer management, where his brother Peter was brought on as chief technology officer. Everdream was sold to Dell in 2007. 

Entrepreneurship runs in the family
Their early entrepreneurial success enabled the Rive brothers to think about a cause to which they could devote their lives. "My brother [Peter] and I are extremely passionate about the environment and the challenges that we face," explains Lyndon. Out of the Rive brothers' passion for the environment, combined with their keen entrepreneurial sense, SolarCity was born. 

Elon Musk (Source: Wikimedia Commons) 

Before starting SolarCity, the Rives consulted with a significant cousin -- none other than famed entrepreneur Elon Musk. Worth over $6.5 billion, Musk founded PayPal, Tesla Motors, and SpaceX, and owns a significant stake in SolarCity (more on that later).It was Musk who suggested his cousins start a solar-energy business. 

Musk, at just 37 years old, has drawn comparisons to Steve Jobs as a genius innovator with a mind for business. When Fortune named Musk the Businessperson of the Year in 2013, Musk and Jobs were placed in their own category as "serial disrupters." 

Elon Musk and SolarCity
Musk has been a significant backer of SolarCity from day one. Musk now serves as SolarCity's Chairman, and owns a 25% stake in the company. Perhaps even more significant, however, is the praise Musk has for the Rive brothers. 

"Thankfully [SolarCity] requires almost none of my effort," explains Musk, "because those guys are just awesome in terms of their execution of SolarCity."

Think about that: Elon Musk, the "serial disrupter" of our day and age -- who has over $1 billion in SolarCity -- has nothing but trust and praise for the Rive brothers' leadership. Musk does not feel the need to be involved in the day-to-day affairs of the company. Musk's occasional involvement in SolarCity's management essentially boils down to providing strategic and product advice. 

The fact that Musk has entrusted his major stake in SolarCity to the Rive brothers speaks volumes to the leadership abilities of the brothers. In fact, SNL Energy, a business intelligence firm, recently named Lyndon Rive one of the ten most influential people of 2013, explaining that the brothers founded SolarCity with the "goal of making solar technology more widely available, not just to the wealthy."

Musk walks the walk with his confidence in SolarCity. This October, Musk purchased $10 million worth of shares to add to his stake -- 21,028,933 shares in total, to be exact -- in SolarCity. 

Foolish bottom line
When someone like Elon Musk offers sincere praise of a management team -- and backs it up with over $1 billion of his own money -- it is worth taking notice. Should the passion of SolarCity's young management team continue to translate into a transformation of energy delivery in the U.S., SolarCity investors could be in store for market-beating returns over many years.

Take a note from Warren Buffett 
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5/27/2016 4:00 PM
SCTY $22.26 Down -1.47 -6.19%
SolarCity CAPS Rating: ****