How Elon Musk’s friend took advantage of Tesla shares and became a billionaire

How Elon Musk’s friend took advantage of Tesla shares and became a billionaire

Chance led investor Antonio Gracias to meet Musk and put money in Tesla early on. That–and his focus on problem-solving at the manufacturing level—has been key to his outsized success.

During a grueling time for Elon Musk six years ago, his friend Antonio Gracias–a board member at Tesla and an early investor in the company–proved his mettle as both supportive buddy and invaluable problem solver. It was the summer of 2018, and Gracias and Musk were working nearly around the clock to ramp up production of the electric carmaker’s Model 3, sorting out supply chain issues and manufacturing problems. For a few hours each night, they slept in adjacent conference rooms off the factory floor. Gracias, now 53, described it as an “all hands on deck, 24/7” operation, calling it the hardest thing he’d ever done. The two men rarely left the premises—even celebrating Musk’s 47th birthday with a cake from the grocery store next door, because they couldn’t step away long enough for a proper party.

Gracias, a fast-talking, Midwest-born-and-raised investor, became one of Tesla’s first institutional investors in 2005 via his firm Valor Equity Partners and started investing in SpaceX about three years later, per Valor’s website. Over the nearly two decades since then, Gracias’ hands-on investment strategy and bets on Musk’s companies have paid off. He’s now a billionaire, Forbes estimates, thanks mostly to his Tesla shares and other investments made by $14.2 billion (regulatory assets under management) Valor Equity Partners, which he founded in 2001. Along the way, he’s become close friends with Musk, skiing and going on family vacations together. (“If we didn’t go on vacations with the kids, we wouldn’t see the kids. We were working that much,” Gracias once said.) And Musk has invested in Gracias’ Valor Equity Partners, putting $2 million in both its first and second funds, surely lending the firm more credibility. Gracias declined to comment on his net worth or be interviewed for this article. But he has acknowledged in court proceedings that he amassed “dynastic or generational wealth” from investing in several of Musk’s companies—including Tesla, SpaceX and SolarCity.

Gracias’ friends, co-investors and portfolio company executives describe him as intense, demanding and always working. “Antonio is surely the most wildly successful, impactful investor who nobody knows,” proclaims Keller Rinaudo Cliffton, CEO of delivery drone maker Zipline.

What sets him apart, they say, is his willingness to help solve a company’s unglamorous problems. Valor has a 20-person “scale team” whose job is to work full time to help portfolio companies do exactly that. Gracias’ manufacturing expertise and a passion for cognitive science–inspired by his neurosurgeon father–have informed the strategy behind Valor’s portfolio of early-stage and growth-stage companies, which have ranged from produce delivery (Misfit Markets) to artificial intelligence data (Dataminr) and defense software (Anduril). It used a similar strategy for a portfolio companies it once owned that ran hundreds of Little Caesars and Dunkin’ Donuts franchises.

At an investors conference in Florida in February, Gracias described Musk’s and his firm’s relationship with him as such: “We can’t all be genius engineers, but we can take the garbage out. We’re good at that.”

Gracias was born in Detroit, Michigan, to immigrant parents–his dad is from India and his mom from Spain. His dad was a neurosurgeon and his mom is a trained pharmacist who ran a lingerie shop. When Gracias was in middle school, his mom gave him the money to make his first investment—$300 worth of Apple stock, which he still holds today. He reportedly exported condoms to Russia while studying international economics and finance at Georgetown University’s School of Foreign Service in the early 1990s–where he stayed on to get a master’s degree, graduating in 1993. He then spent two years at Goldman Sachs and went to study law at the University of Chicago.

While in law school, Gracias launched an investment business, calling it MG Capital, a reference to his mother’s initials. Using $400,000 from family, friends and earnings from his Goldman days, as well as a bank loan, MG Capital started more like a buyout firm, buying small, struggling manufacturing companies, aiming to turn them around and sell them for a profit. His first bet was on a California-based electronic plating plant, where he learned about operations by running it himself, flying back and forth between Chicago and Los Angeles to spend time on the factory floor.

“That sounds like the story of how someone lost a lot of money,” Zipline’s Cliffton recalls thinking when Gracias told him that story. “I mean, how many law students would go and buy a factory that’s probably on its way out? It’s actually mind blowing.”

Gracias agreed: “Only someone who’s 24, 25-years old, super naive, could ever do something quite so dumb,” he said in 2022 on the podcast Invest Like The Best, adding that they took the company from $10 million to $125 million in revenue before selling it.

After he finished law school, chance intervened and altered the course of Gracias’ investing. One of his law school classmates, David Sacks (who later cofounded Craft Ventures), was working at software and payments startup Confinity in 1999, and Gracias’ MG Capital invested. Confinity then merged with Musk’s payments firm,, and eventually renamed itself PayPal. PayPal went public in early 2002 and was acquired by eBay later that year for $1.5 billion. As a result, MG Capital’s investment ended up returning three to four times what Gracias put in. And it led to something far more lucrative for him: a relationship with Musk.

A few years later, in 2005, Musk contacted Gracias to ask if his firm–by then MG Capital had morphed into fund-based investment firm Valor Equity Partners–would participate in Tesla’s Series B funding round. Gracias said yes, and took part in the $13 million funding at a mere $35 million valuation. Over the next three years, Valor invested some $15 million in the electric vehicle company—at a time when Tesla didn’t yet have a functional product and there wasn’t a clear market for electric cars. Valor’s team ended up investing significant time attempting to lower supply chain costs related to Tesla’s first model, the Roadster, and helping create its original sales plan. Gracias then joined Tesla’s board in 2007.

Around that time, Valor began investing in SpaceX, putting in $25 million approximately six years after the rocket firm was founded. Gracias’ firm has put money in SpaceX via every Valor fund since then—a total of at least $500 million that’s now worth nearly $5 billion. (SpaceX is currently worth a reported $180 billion.) Valor also invested in other Musk-run companies, including $24 million into SolarCity (which Tesla acquired in 2016) and $15 million to $20 million each in Neuralink and The Boring Company.

Over the years, to make sense of why some of his investments succeeded and others failed, Gracias leaned on inspiration from his neurosurgeon father. He started reading cognitive science research, eventually summing up his investment strategy with the buzzword “pro-entropic.” The term refers to the idea that entropy, or chaos, is the norm, and technologies that are “actually disrupting industries and causing entropy” will go through difficult cycles, according to a former Valor executive.

By 2021 Gracias’s personal stake in Tesla grew to be worth approximately $1 billion, thanks to the electric vehicle firm’s skyrocketing share price, Tesla’s generous director compensation and the lion’s share of Valor distributions—for example, 50% of profits distributed to general partners from Valor’s venture fund, according to court documents. Valor exited Tesla after its 2011 public offering.

Gracias has since sold more than $250 million worth of his Tesla stock, some of which went to his ex-wife in their 2021 divorce; the majority of his remaining shares are held in trusts for his children, which Forbes counts towards his net worth. As of October 2021, when Gracias stepped down from Tesla’s board, 99% of his shares were also pledged as collateral for loans. (Forbes discounts pledged Tesla shares by 25%, the maximum percentage Tesla allows directors to borrow against their shares.)

The longtime Musk confidant left the board in part due to pressure on Tesla by regulators to improve its corporate governance amid criticism that Gracias was too close to Musk to be Tesla’s lead independent director–since Gracias’ relationship with Musk went far beyond business dealings, including those ski vacations. (Three other Tesla directors stepped down, too.)

His close ties to Musk have also pulled him into the spotlight tied to Musk’s purchase of Twitter, now called X: Valor reportedly helped oversee its mass layoffs after Musk took ownership, essentially doing tasks that would typically fall to a chief financial officer, The Information reported. Gracias was one of the Tesla board members who approved Musk’s massive compensation package at Tesla, which a Delaware judge struck down in January. Many of the details about their relationship and Gracias’ career come from Gracias’ testimony in the trial. And the Wall Street Journal reported in February that Gracias was one of several Tesla directors who have consumed illegal drugs with Musk. (Valor did not respond to a request for comment on the allegation of drug use.)

In a 2022 text to Musk, referenced in court filings, Gracias had written “I am 100 percent with you, Elon, to the mattresses no matter what,” in a conversation about free speech, referencing a line from The Godfather, one of Gracias’ favorite movies–and indicating he’d fight alongside Musk against others.

Gracias sometimes portrays Musk as a superhero—one whose tail he’s grabbed. Musk is “like the Michael Jordan of investing. And I’m from Chicago,” Gracias said in court in 2022, where he repeatedly called Musk “extraordinary” and a product genius. (Gracias was testifying in the Delaware court case alleging that Musk was overpaid, since was on Tesla’s compensation committee when the pay package was approved.)

The Musk relationship likely helped Gracias deliver above average returns of 20% annually on its first two funds, and raise increasingly large funds. Its later fourth and fifth funds largely contain non-Musk companies like mattress firm Eight Sleep, video game software Genvid and insurance company AgentSync (Gracias sits on the boards of the first two companies, per PitchBook).

Valor is about to close a sixth fund and demand has been robust; its $2 billion target was oversubscribed, according to a colleague of Gracias, who asked not to be named. Going forward, one focus for Valor is defense and security—in part fueled by Gracias’ concern about the United States’ position in the world.

Valor led a giant $1.5 billion fundraise in December 2022 for Anduril, which makes AI-powered weapons and other defense-focused hardware and software—and has its own polarizing cofounder, Palmer Luckey.

Trae Stephens, another Anduril cofounder and partner at Founders Fund, which also invests in many of the same companies as Valor, said Valor’s day-to-day involvement in the hardware side of Anduril’s business differentiated it not only from Founders Fund, but also the rest of the venture market.

“Literally, after they made their first investment, they sent a team in to work day to day with us to help us get our stuff together on the hardware and manufacturing side of things,” Stephens told Forbes, citing Valor’s help with managing inventory and delivery when orders come in sporadically.

Stephens, who also graduated from Georgetown’s School of Foreign Service, also emphasized that Gracias’ background in international relations rather than finance has influenced his tendency to think about geopolitical power and its nuances when deciding on what companies to invest in.

But Gracias is also nothing if not practical and knows how Valor can help, as it did early on with Tesla. “The kinds of problems we deal with are repeated problems for us, but they’re the first time for a first time founder,” Gracias said on the Invest Like The Best podcast. “We will lower the risk. We will lower the pain. We’ll increase the speed, and if anything goes wrong, we can help you fix it. That’s why you want us.”

Leave a Reply

Your email address will not be published. Required fields are marked *

Pin It on Pinterest