Gulf South Angels is investing in SpaceX. Network founder Mike Eckert explains why.
When Mike Eckert, a co-founder and former CEO of The Weather Channel, moved to New Orleans in 2013 to be closer to his new grandson, he found that the city had a lot of entrepreneurial activity but no formal angel investment group to support it.
As a retired executive and investing veteran with time on his hands, Eckert decided to launch the Nola Angel Network.
That was 2014. In the 11 years since, the group, now known as Gulf South Angels, has grown to more than 150 accredited investors across 18 states, including doctors, lawyers, executives and other wealthy individuals who are willing to bet on startup companies in hopes of a big return.
To date, the network has invested more than $32 million in nearly 70 companies across a range of industries. Fourteen of those startups have been sold or merged with other companies. Four have gone out of business. The rest are still in business though haven’t produced any returns.
Earlier this week, Gulf South Angels announced a new investment — not in a small local startup but in SpaceX, Elon Musk’s $400 billion space company. Eckert, now chair of the board of Gulf South Angels, says the network isn’t turning away from scrappy homegrown companies but is taking advantage of an opportunity for the network’s members that was too attractive to turn away.
In this week’s Talking Business, Eckert discusses how the investment deal came together and what it means for the future of Gulf South Angels.
Interview has been edited for length and clarity.
The recent announcement that Gulf South Angels had an opportunity to invest in SpaceX is interesting and unusual. Why is this significant?
It’s significant because a local angel network had an opportunity to invest in SpaceX, a privately held company with a valuation of $400 billion. Usually, those kinds of opportunities are restricted to large private equity and venture capital firms. We were able to get in on it.
So how did this deal come together?
SpaceX recently had a large fundraising round. Typically, when that occurs, there is a lot of demand for the round from the investment community, so the company allocates a certain amount of capital for each investor. We, Gulf South Angels, have formed a deep relationship with a venture capital fund, Balerion Space Ventures. They’re a Texas-based VC firm that invests in space technology and we have done a number of deals with them — and have had some great success. Well, Balerion was able to get into this SpaceX financing round and allocated some for us. We jumped at the chance.
How much did y’all invest?
Half a million dollars, which is a small amount relative to the allocation given to Balerion, which was somewhere between $25 million and $30 million. But what Balerion does is roll up all these allocations, and in turn, SpaceX rolls up all the allocations, so there is this waterfall effect. What is really fascinating here is that we are one of the few angel groups in the U.S. that has formed a relationship and become an investor in VC funds. Many angel groups strictly invest in local startups. We are getting in on bigger deals through VCs like Balerion.
I thought Gulf South Angels was formed to invest in local startups because angels were one of the key pieces missing from the local entrepreneurial ecosystem. Does this sort of fly in the face of that?
No. We can still do both. There is more early-stage startup capital in Louisiana today than ever before in history as a result of the Biden administration’s American Rescue Plan Act in 2021 and the program it set up that allocated money to states to help small businesses. That program created the State Small Business Credit Initiative, or SSBCI, to invest in startups. (The federal program is administered through Louisiana Economic Development and designated roughly $90 million for equity investment in local startups and $23 million for small business loans.)
We started one of these funds. Now, there are seven of them in Louisiana, and they are putting this money to work. So, maybe there wasn’t money for startups in the past, but that is not true today.
And we continue to invest in Louisiana companies. We have invested in four Louisiana companies of the 16 total investments so far this year and we will continue to invest locally.
Does this SpaceX investment enhance the reputation or prestige of Gulf South Angels? Would it, say, make more investors interested in being a part of the network?
Certainly, because it demonstrates that the Gulf South has access to opportunity. It’s not a prestige thing but a deal quality thing. This is not a risky startup. This is SpaceX, a company with a market cap of $400 billion. And some analysts think that by 2029 or 2030, just five years from now, its valuation could be between $2.5 trillion and $3 trillion. Their Starlink satellite service has 2,500 satellites up in space right now. They want to have 30,000 by 2030. So, when you are looking at this company as an investment opportunity and comparing it to a high-risk local startup, it’s hard to pass up.
(Editor’s Note: This story has been updated with the most recent investment figures for Gulf South Angels.)