#16 Space 3.0 Delian Asparouhov, co-founder of Varda Space Industries and principal at Founders Fund

Welcome to The Deep End BionDeck, a podcast where visionary builders, creators and experts discuss world changing ideas. I'm your host, Marshall Kosloff. Let's dive in with the Deep End. We're creating a space where we skip the surface level and go in depth into ideas that matter. I'll be your guide as we explore possible futures of commerce, higher education, art, art, governance, longevity and more with some of the most exciting figures in their respective fields. Joining me in the Deep End is Delian Asparohav, co founder of Varda Space Technologies and a principal at Founders Fund. In this episode, Delian explains why Varda's mission statement is to expand the economic bounds of humanity and how its success will do for space what the Gold Rush did for California. If Varda succeeds in building a space factory 10 times the size of the International Space Station as planned, Darwin envisions that the downstream effects could expand the sphere of human economic activity to low orbit and then to the moon and beyond. And if the prospect of opening whole new frontiers of human activity isn't enough for you, there's more. Downey and I also discussed the emergence of a new generation of space companies he calls Space 3.0, why the most exciting startups in space have to walk the knife's edge between commercial viability and science fiction, the implications of 10xing or 100xing, the number of satellites we have in orbit for the next 10 years, and why Deep Tech founders need to look more like Las Vegas party promoters than software found. Note before we begin, this episode was recorded in front of a live audience, so the audio quality is a bit rough for the first few minutes we're clearing up. At the end of the episode, we featured questions asked by audience members, including an investor at Village Global and On Deck's own Deep Tech Program director. If you'd like the opportunity to get featured in one of our episodes, we're hosting another live podcast recording next Monday, this time about the Metaverse and Web3 with Gabby Goldberg, an investor at Bessemer Venture Partners. We'd love to see you there and to include your questions in the published episode. To attend, visit thedeepend.substack.com the deep end is produced by On Deck, where top talent goes to accelerate their ideas and careers. We hope that those who listen to the ideas on the show are inspired to build. To learn more about On Deck's programs, visit BeyondEck.com for show notes and additional resources related to the Deep End. Check out Ideas Beyond Deck. All right, let's Dive in. Welcome to the deep end.

Thanks so much. Excited to be here.

On the website for Varda, you all talk about how the mission of the company itself is to expand the economic possibilities for humanity. And in most cases in the startup context, something like that would be lofty, maybe a little pretentious, maybe probably not even possible. But what's cool about space and the type of ambitious stuff you're working on is that's actually entirely justifiable and plausible mission. So can you explain what that mission means to you just to start there?

If Varda succeeds, what other things does that actually enable to become economically viable? So for example, plenty of people talk about this is not a new or novel idea about ASHRAE mining and how one could potentially do that and how there have even been VC backed companies that have tried to do asteroid mining. Unfortunately, I'm in the camp of it makes zero sense to venture back an asteroid mining company because even if today you got an asteroid that was full of plutonium and hydrogen and oxygen and helium 3, all extremely valuable materials for use here on Earth and in space, and you put a massive asteroid and you put that thing, call it a quarter of a mile from the iss, far enough away that it's not going to risk the iss, but close enough that they can go back and forth between the two. You could put that up there today and it would still take us years and years and years to figure out how to make that thing economically viable. Like what are you going to do, like send out a couple astronauts with a couple like you know, picks and shovels, like we have no idea how to even begin to material process. And then by the way, who's going to be using those? Are we going to be like sending down to like, you know, plutonium and helium 3 down on like dragons back down to Earth and like selling it back down here? Like this stuff is just like, you know, so far from the realm of reality. And then again that's if the asteroids already here in orbit right next to the iss, let alone the fact that you have to like, you know, go out, grab it, propel it back down, et cetera, those are extremely complicated problems that also don't really have like, you know, end market that would necessarily utilize them. However, if Varda succeeds and you have something that is ten times the size of the International Space Station, that by the way is consuming a lot more materials than the ISS is, Right. The ISS only consumed materials for, you know, basically, you know, food for the astronauts and then replenishment of, you know, the various, like, you know, water and, you know, propulsion and the various things it uses. It's a relatively like, you know, small thing like it, you know, can have a sort of resupply that's sent up every three months. That, you know, isn't a crazy amount of material. Whereas with varda, because the, you know, economic justification for what we're doing literally requires constantly materials going up and down. It means that we're consuming a lot more than the ISS is, even if we're a sort of like, much smaller station at the time. And so given that we're consuming a lot of materials, well, it's pretty expensive to bring the materials that we need for our factories from Earth. We're going to do that for the first many, many missions. But if we succeed, it then starts to provide that sort of economic incentive for somebody to start to go out and do asteroid mining and bring those materials to us and start to invest into that, because we would be a very happy and very large customer for something like that. And so when we think about the mission at Varda, when we talk about this sort of like actually expanding the economic bounds of humankind, we think about the way to make a sort of sustainable interplanetary species is not just by, like, sending out colonists. Like the way that California became Californ wasn't by Lewis and Clark arriving on a particularly large boat. It was because of the California gold rush, the economic incentive to go out there and make money and build infrastructure around that. Right. And that a lot of the people that made the money were the picks and shovels people, not necessarily the miners. But that sort of VARDA is the first step of the sort of equivalent of the gold rush for space, where we provide this very large economic incentive to start to produce materials at scale up there. But then the sort of downstream economic implications of something like VARDA working means that there's a lot more things that suddenly become into play. And, and all of a sudden you talk about, well, we're maybe expanding the economic bounds of humankind from larger being Earth based to being in low Earth orbit. Well, now all of a sudden you're talking about, well, maybe the economic boundaries of humankind extend to the moon or they extend into the asteroid belt. And so that's the mission that gets us really excited every single day. It's not just this like, you know, demonstration three module initial spacecraft that in some ways, by default, we're trying to take as low risk as possible and using technologies that already exist. It's what the implications are of if that succeeds.

So I want to actually start building off what something you said which is distinguishing between the science fiction and the reality when it comes to the space. Because obviously you're coming to Varda Space not only as a founder, but as a vc. When you look at the space at the VC level, what do you see as the opportunities that are reality based and what are things that people may think of in the conventional wisdom or the public discourse that doesn't quite actually fit? A good example you just gave, of course, was the asteroid mining. Right now.

Yeah, I think it's a very sort of difficult knife's edge to balance where a lot of the times founders will fall into sort of like one or two buckets that are working this area. The first bucket, which is sort of easier to understand is just like the, what I call the pure sci fi based approaches. When two sort of Stanford fresh grads are pitching me on like a lunar ice mining setup, it's difficult to understand sort of how that becomes venture backable because again, similar to sort of the ashtray example I gave, it's like even if you somehow had the full lunar ice operation fully functioning and completely viable and you had ways to transport that ice back into the Earth orbit, again, who's going to be using that ice? The ISS isn't set up to be taking on ice and none of the satellites that are up there are necessarily set up to be like, you know, taking on ice somehow and using that as propellant. And so you have this whole set of projects that are sort of purely in sort of the world of sci fi that is easy to dismiss. And then on the other hand, you have people that are sort of taking relatively, let's say like unambitious approaches to space. One category of that being just being a sort of defense contractor or purely contracting to NASA for some of their research based missions, which again you can get some early revenue off of, but is never going to become one of the largest companies on the planet or going to become a sort of like massive VC outcome. Especially because NASA is typically a research organization. And so if they're funding you for a particular contract, it typically means that explicitly the technology that you're working on is commercially viable. Because that is fundamentally not in NASA's mandate, it's rare that you can find those crossover opportunities. If your revenue is primarily coming from NASA for the first five years of your company, 99% of your revenue is coming from NASA, well then it probably means forever for your company. Most of your revenue will come from NASA. The knife's edge that I'm talking about is the balance between these two that I think something like vardalize on. But there's maybe a couple of us other examples that I'm particularly excited by where it is just difficult enough and just far enough into like sci fi that like, it sort of can potentially be one of the largest companies on earth, but it's still sort of like pragmatic enough, near term enough that like you can actually fund this thing sort of with venture dollars and in a very sort of like near term pragmatic way that potentially also has some amount of DOD and NASA backing, but that isn't 99% of the backing, you know, for the like first five years. And so I think beyond just sort of in orbit sort of space factories, the other areas that I get excited by and the filter that I always use is just like, how can you make revenues within three years that are primarily from commercial customers? That's how I filter in some ways to check if somebody's sort of in that knife's edge as filter out the sci fi. And then how do you also potentially become one of the largest companies on the planet to filter out maybe just like the boring contractors? And so one of the other ideas that I get really excited by is given that we're going from right now thousands of operational satellites to over the course of the next five years, tens of thousands, hundreds of thousands operational satellites. There are two areas in the supply chain of satellites that need significant improvement. The first is what I colloquially describe as like the Dell of satellites. Like right now, in comparison to a decade ago, like you can kind of buy a satellite off the shelf. It's still quite expensive to buy. There's only a very small handful of providers. And it's not truly off the shelf. It's more like you can hire an external engineering team that's like built a lot of satellites. Your satellites are pretty similar to the ones that they built in the past. And so they're kind of rinsing and repeating and turning the crank rather than having to redesign and reinvent from scratch. But it's not like there's a Best Buy where you can go purchase it. And so I think in the next five to ten years you'll see a company that becomes quite, quite large, that becomes this sort of like quote unquote, Dell for space, where maybe today we're in these sort of Wozniak and Jobs, sort of like Apple Computer Club days where, you know, hobbyists that are sort of assembling things by hand. But in five to 10 years you'll actually have a company that sort of mass manufactures these at scale on an assembly line that looks like an automotive assembly line. And so because of that has much, much cheaper costs and allows cost of sort of buying a satellite to decrease significantly. So that's one area that I get excited by. And then the other area is as there are so many thousands, tens of thousands, hundreds of thousands of satellites in orbit, it starts to make sense to put up fixed infrastructure there where right now if you're trying to run like an orbital gas depot, there's just not a dense enough set of satellites that are up there for it to actually be particularly affordable for the satellites to fly to, you refuel and then fly back versus as you just, you know, 5x10x the density of satellites, all of a sudden that economic equation tips. And so both, you know, orbital refueling and sort of orbital taxiing, which I sort of both put into the same category because at the end of the day it's just like basically that satellites can deal with having less propulsion on board. That's, you know, an area where, you know, I think there's sort of some companies that are sort of on that sort of equivalent knife's edge. So there's a handful that have been started and actually have decent levels of venture funding. Maybe not from the Founders Fund, Coastal Ventures, Lux Capitals of the world that are operating within that sphere that I think are pretty interesting. And those are all within what I call the Space 3.0 category. It's no longer just rockets and people just sending up satellites for Internet communications or earth observation. It's one of these next generation potential avenues for revenue and building a space company.

Oh, that's actually really helpful. Can you define 1.0, 2.0 and 3.0 for space?

Yeah, so I would define sort of space 1.0 as a purely government funded day. So starting from the early days of Mercury all the way through, sort of like the space shuttle probably being the end of sort of space 1.0. Extreme cost overrun, government bureaucracy, and again, incredible technological accomplishment, but never with any sort of commercial mindset. Space 2.0 being basically like the, you know, whatever 2005 through sort of 15 era. And you know, the primary companies being Rocket Labs, SpaceX, Planet Labs, Fire. Right. And they basically all fall into effectively, you know, three categories. It's either a rocket company taking satellites to space, it's a satellite that's providing Earth observation, I.e. planet Labs, or it's a satellite Providing, you know, Internet connectivity, that is Starlink or Iridium is an example of a company that was doing this sort of even before Starlink was. And so those are what I call the earliest commercial use cases. Right. When you're trying to figure out how to make money in space, the sort of cheapest way to do so isn't by sending. I kind of like a joke like Varda is the first company that's trying to make money by sending atoms up to space and back versus for the past 10 years the only ways that we've made money is setting photons up to space and back. And the reason being that, you know, photons are free to send up and down versus atoms, you know, cost a lot of money to send up and down. And so, you know, both in earth observation and in satellite Internet, you're basically just sending, you know, photons up and down in the form of, you know, radio waves.

I'm really interested when you were Talking about Space 2.0 of marking 2005 as the start because I'm guessing that's a reference to Space X. But as I'm thinking about the space as a non expert, non, AKA podcaster talker in this phase, I would think of post 2011 as the space shuttle program winds down. Can you just really speak about what's happened during the 2000s and how that specifically shaped how we're thinking about the space now?

Yeah, I mean I think there had been many attempts at commercial rocket companies and how even in 2005 there were multiple other launch providers that were trying to work on this outside of Space X. It was just the first time that you started to see this sort of. And this is a broader trend that has been happening in the DoD that's been accelerated honestly a lot by founders fund backed companies, which is that the DoD is starting to run more commercial like procurement processes as opposed to purely cost plus contracting. Right. And so in traditional government contracting, the government comes up with a spec that it wants somebody to match, they run out and run a bidding process and then people say, yes, I'm going to build that for you at this price. And then once you win the contract, then that price that you initially quoted is effectively irrelevant. At that point you basically just start to book your cost to the government and then they give you a 10% margin on it. That's what's led to all these overruns, extreme costs, really long delayed schedules, et cetera. Because as a contractor you're incentivized to just have cost go over since your Total profit dollars increase the more that you let things run over because you just get a 10% margin on top of how much you charge for the government. It's your incentivized to charge obviously as much as possible and things go on for as long as possible. And so around that era is when Palantir look up, there's a couple of lawsuits around this and SpaceX had a couple as well where basically you had a couple of these early founders fund backed companies that basically tried to sue the government into changing how they would award government contracts. And that fundamentally shifted both in the world of DoD technology via the likes of Palantir funding succeeding. But then especially so in the world of aerospace where now the Air Force had to purchase off of capabilities, the base cap, best capabilities and cheapest cost. But then also then as a provider you didn't get to just cost overrun, you got a $400 million contract and that was it. And if you were able to deliver for 200 billion then great, then you basically just had better margin your competitor. And so the reason that I sort of mark sort of 2005 is the era much more so than space shuttle dying is like the reason that SpaceX succeeded was not because the shuttle program got canceled. The reason SpaceX succeeded was because the like Air Force decided to change their contracting process. Like at the end of the day the space shuttle was like a NASA program primarily for like the ISS versus like the early breaks for NASA actually came much more so from the DoD than they did from NASA obviously in the later years especially with like the drag which ended up really helping the company stay afloat for an extended period of time. That was really NASA focused, but the early days were much more Air Force related and setting up a couple of satellites for that. So that's why I mark that era. And in some ways now you're seeing the acceleration of that shift where to me the latest iteration of this in the DoD area is a company like Anduril, which was also incubated out of founders Fund that is explicitly basically trying to say now that the stage has shifted, not fully, but it has shifted significantly. We're going to create a next generation defense contractor that primarily just sells products as opposed to is just a contractor. Right. So Anduril comes up with what they think the government needs and then they basically say here are the products that we're selling. We'll adjust the spec slightly for various use cases that you want, but no more so in some ways than a commercial customer word for a really large Enterprise customer. But we're not going to just like respond to a contract and then custom build whatever the government wants. We're going to build like a commercial product company. And then it's going to happen to be that like our primary customer is going to be a dod. And in some ways like Varda is getting to benefit from that stage having shifted significantly as well. But we're just approach, we're like, hey dod, we're building space factories, we're building some really interesting materials and we're also building like, you know, reentry vehicles that will bring those materials back down. If you're interested in those products, let us know and give us contracts to purchase the product that we're making. But we're not going to adjust our path to be a defense contractor. And if that stance, a decade ago we would have gotten laughed out of the room. The only reason that it's possible now is because Palantir SpaceX sued the government into changing how they work. And then Anduro has showed that by changing how they work, the DoD actually gets a lot of benefits. And now in some ways it's totally flipped. For the first time, you have a acquisitions agency that directly reports to the Secretary of Defense, known as the Defense Innovation Unit. So typically, so acquisition agencies are what the basically DoD uses to buy stuff, right? So there's like operators on the ground that say, hey, I need more Humvees or I need more bullets, right? And then the acquisitions agency is the group that then is responsible for basically purchasing those products. Now typically acquisitions agencies sit within the operational arms, right? So you know, the army, the Navy, the Air Force, etc. They all have their own internal acquisitions departments for the first time a couple of years ago, a new acquisitions agency was formed that rather than reporting into one of those operational groups, actually reported directly into the Secretary of Defense, known as the Defense Innovation Unit. And their explicit mantra was find venture backed companies that are developing products that could be useful to the DoD and figure out how to find DoD buyers. They can use that sort of product directly off the shelf rather than having to go through a traditional standard procurement process where Defense departments comes up with the spec for the product. Instead, just find products that are already built that are close enough to the specs of what the defense partner needs and they're responsible for sort of like bringing those in. And so that to me is like the latest fundamental shift that it's always enabling a lot of these like, you know, orbital refueling and space factories and orbital taxis. Like I literally just went to a half Space Force, half Air Force, half diu, a Defense innovations unit, this acquisitions agency, the reports and secondary defense they threw a like in person commercial space conference in New Mexico, whatever it was now maybe like three weeks ago. And it was like just I thought it was interesting gathering of like space mines I've ever seen because there's literally like all the most interesting commercial space companies gathered with all of the Space Force generals gathered with the acquisitions agency that's responsible for helping marry those two. And so I think it's like a really exciting time that is sort of predicated on all that work that honestly Elon and Peter did by like suing the government several times back in the 05 to 07 era.

It's funny, the number one takeaway I'm getting from what you're describing, and it builds upon something Kathryn Boyle said during one of our first episodes on the Civic Tech governmental space is that it's not the sexy thing, AKA wow, the space shuttle is over. What's going to be the next thing? It's hey, how do I have this knowledge of this obtuse seeming governmental contracting process that's actually going to build a lot of really interesting innovation? So that's just a really important thing to note. One last question on the VC side of things before we get into the specific what of Varda? You specifically called out SpaceX, Palantir, Anduril, now Varda as companies that Founders Fund has done a really good job of working with in this space. What would you say are the broad lessons for founders or folks who aren't traditionally coming from a tech or startup background but have deep knowledge in the space? What have you learned from a founder's front perspective about attacking these types of spaces with those companies in mind?

Oh man. I mean, you're talking about history that starts from literally when Founders Fund was founded in 2004. So I'm not sure that I can speak super credibly to what Peter and Trey Stevens, etc. Learned, but I will do my best to parrot what I've heard from them. And honestly, a lot of it comes down to Palantir, Anduril were both founded by billionaire founders that could afford to go up against the like behemoth of the US Government and sue it and convince it that it was like doing its job wrong. And so it required insane levels of endurance and sort of structuring the companies from day one, thinking through what is every single decision maker and every single person that could influence Palantir and oral success. What Are their like incentives? How do we get in front of them? How do we convince them? Like what are the like legal pressures, political pressures, lobbyist pressures that we can put on them to guarantee that something like this succeeds and just expecting that it's going to take an incredibly long time for that to come to fruition and succeed. The quote that I always remember from Trey is for their earliest contracts, the reason that those things happened, even though they took and they obviously operated a phenomenal pace, they went from zero to 18 months. And having a program of record with the government, which is basically a program of record means sort of ongoing large scale operational contract where they're like buying things that aren't just for like you know, small research contract to check, check out what your company's building, but are like we are actually purchasing things at scale from you. You know, they went from zero to 18 months and getting a contract sign, which you would imagine in like normal startup plan, it's like, oh my God, 18 months like your first contract, that's like way too slow. Like most enterprise SaaS companies have that figured out in their first three months. And even then Trey talked about how the only reason it got done in 18 months was because of meetings that happened in the first week that they started. You know, Andrew. And so they went into it, you know, sort of very well thought out and like well planned. And so I guess, you know, advice to like broader founders is like, man, do not try to start a company that you know, relies on the DoD or NASA without really deeply studying who has done this before and how they've done it and then probably getting those people deeply involved in the company. And so that's partially why with the seed round of Barda, explicitly wanted to have the seed round co led by both Founders Fund and Lux Capital, who I described as two of by far the best investors in this sort of like dual use civics defense space so far. And why we're really excited to also have Kathryn Boyle involved in this series A is because she brings a sort of similar mindset as well. Yeah, definitely. It is not easy problem to tackle. And it's also why for example, literally he was probably what our sixth or fifth employee or something like that, Basically one of the very, very first people to join the team. Hell, even before I think the cash had even been wired for the seed round, our head of federal at Varda, who had previously been at stripe for 4 and a half or 5 years total as one of their early sales hires, so understood startups because of being At Stripe understood sales from doing sales there's. But he wanted to get more into aerospace. He realized that he needed to have more federal background. And so he went and joined Zipline, the Sequoia backed drone blood delivery and medical supplies delivery company and ended up joining there and got them a sort of $10 million contract with the U.S. marine Corps, specifically through the DIU, I believe. And so he was literally one of the first people that we recruited and brought onto the team. And we definitely would not be as far along as we are at Varda in relation to our DoD work if not for literally having somebody that we hired from literally day minus whatever day minus 30. So basically 30 days before anybody actually started full time with the company, basically joining the team. And so this stuff, if you want it to work quickly, you have to literally start from day zero with having this. This isn't a like fresh grad is going to figure this out on the fly type thing.

Something I also want to go to is your and Varda's relationship to NASA. Something I really enjoyed when I was researching was the passion. You were describing the research that scientists and other researchers had done when it came to space based manufacturing. But there was this issue with actually commercializing that or translating that into anything. Can you speak about that relationship and that work and how you all are building on it specifically?

I mean yeah, if you study even the earliest days of Skylab or HAL, even infographics that NASA released in the late 70s and early 80s, they already talked about space factories almost identical to what Varda is doing literally with like the exact material that we're going to be working on. Like the exact infrastructure. Like this idea is not whatsoever like a novel idea. It's been a matter of like, you know, timing, execution and like, you know, pulling together like the right team. But like none of this would be possible if not for the fact that we're like standing on the shoulders of giants. Like the, you know, material for example, the partners working on initially, which we are you know, not yet publicly disclosing, but that initial material had a NASA funded research program that in, I believe it was 96, they went on a parabolic flight on a 747 where basically like basically cause the 747 to stall out and let it free fall for about 20, 25 seconds which allows them to basically like simulate zero gravity down here on Earth is they actually ran this like very similar manufacturing process to what we're doing. And then literally the like Canadian Space Agency two years later followed up with a sounding rocket running a very similar experiment. Basically, sounding rocket is sort of similar to what like, you know, Virgin Galactic and Blue Origin are doing. IHR doesn't go to orbit, but it sort of stays in free fall for four to five minutes at a time. And to allow them to run a more extensive sort of research program. And then again on the iss, over the past decade, there have probably been on the order of like hundreds of, at this point, microgravity manufacturing experiments done by various researchers. And so VARDA would not at all be possible if not for the fact that this idea has been thought about for decades. It has been researched extensively on the ISS and by NASA in a variety of different experiments, you know, both on the station and, you know, prior to the station even existing. And so, you know, all that I did was study the hell out of all that research and then think through, okay, well, the, this now finally makes sense as Falcon 9 is becoming very reusable and Starship is coming online. What team would you need? You know, to do this and talking to a lot of the researchers? There's two things that are necessary. One, you would ideally need somebody who has done microgravity research before, so you're not totally starting from scratch. And so thankfully, our chief scientist, Daniel Marshall, has been the principal investigator of several modules that have made it to the iss. But then the other thing that a lot of the researchers were more wary of and not sure how to do independent of NASA, was the reentry problem. Once you produce the music materials, how do you actually bring them back down to Earth? Because right now when you're on the iss, you have vehicles that will bring you down regularly, right? You have the Dragon, you have the Soyuz, you have the Cygnus. There are ways to basically bring materials back down quite regularly versus when you're operating on an independent platform, you have to figure out how to get down on your own. And so that's partially why as I was sort of going out to recruiting for the CEO, I was intensely focused on specifically somebody that had worked on the Space X Cargo Dragon project, since that is the first time that a commercial reentry vehicle had ever been built. And so Will Brewery, our CEO, was one of the lead avionics engineers on that project and was also head of mission control for eight of the cargo ISS missions. So he not only built the vehicle, but he flew the vehicle and interfaced with the ISS and dealt with the reentry process. And so I was like, okay, how do I find somebody that's not Afraid of reentry? We'll just recruit somebody, a CEO that's done reentry before and then marry the two co founders together. I've got a CEO that's not scared of reentry, I've got a chief scientist that's not scared of microgravity manufacturing, and I've got a VC and myself that can go raise the money necessary to go bring this thing to fruition. And so I cannot claim to be the technical architect or the person that came up with the idea for space factories. I just brought the money to the table and put the right people in the room.

Speaking of that, how was the feeling around. I was going to say around the office, but that's not really a concept which is valid, I'm guessing. How was the feeling around the company when, after Jeff Bezos went out into space, he specifically called out space manufacturing as an opportunity?

Varda is an entirely in person culture. We're based in Torrance, California, and every single person works in the office every day. Except for myself. I work there once a month for a full week, sometimes longer at a time. So office for us is a very determinate word at the office. I'd say most of us have been aware of. Bezos has been talking about manufacturing in space for quite some time. He hasn't talked about it in the correct way. It's clear that he hasn't, or at least publicly. He's not signaling that he's researched it extensively. Since a lot of the times he talks about sort of taking like heavy industry off of Earth. And I've even heard him sometimes talking about like cement, things like that being like, moved off cement production just makes no fucking sense to like, you know, move off of Earth like that. Even if we have two decades from now, extremely cheap launch and reentry and Varda super, super successful cement's gonna be like the last thing that moves off of Earth. It's like very low value, very high mass. It's actually quite easily done down here on Earth and isn't even like that polluted in some ways. And so many members of the team have been aware that he's been talking about it for like 20 years in some ways. And many members of the team are also aware that he isn't primarily really focused on it. Like Blue Origin is a little bit of a mess. He's been clear with their various infographics, PR scandals that they've had over the past couple of weeks. So I'm not even sure that Bezos has the time to Focus on figuring out how to do it correctly. However, I'd say we're all very grateful for the fact that Branson and Bezos have decided to draw so much attention to space and that it's quite easy to get lots of PR attention for space factories, while everybody's also paying attention to space tourism. So we're grateful for their PR stunts that have been quite beneficial for us.

I'm so glad you gave that answer, because that actually leads into the specifics about space manufacturing. So to go onto the Bezos rhetoric for a second, he specifically focused on the environmental benefits, hypothetically, of space manufacturing. To what degree do you think that framing is correct or incorrect? Because judging by what you've put out publicly and what you said sort of earlier, the advantage of space manufacturing is you're trying to do things that you couldn't do on Earth to the same degree. So I guess the real question is, why should folks get excited about this process? Is it the fact that you hypothetically aren't releasing CO2 into the atmosphere? Is it the new goods in new ways? How do you think about that one?

Humans never make, like, particular decisions unless there's economic incentives. And sure, sometimes people will put in particular government subsidies or tax credits such that you do things that are more environmentally friendly, even if they're not, you know, in your correct economic incentives, the government distorts it by making it in your economic incentive. And so at the end of the day, I'm just like a pure capitalist. And so, no, people aren't doing space manufacturing, and it's never going to happen purely for the environmental benefit. And also, there's not even environmental benefit like moving cement off Earth. If you have to still ship the cement raw materials up to space. You're releasing a bunch of fucking hydrazine into the atmosphere on the way up and then reentry on the way down. It's just like, it makes zero sense. Like, the environmental benefit of sort of space manufacturing is like complete bullshit. The reason to go manufacture things in space. And again, maybe the environmental benefit in like 100 years when you're talking about, like, you know, somehow actually being able to remove significant amounts of like, industry off earth and turn it into a part. Sure. I don't like to delve into, like, the world of sci fi when, like, you know, talking about, like, what's actually going to be happening in like, the near term, you know, 100 years is I think you're too far out to be discussing, which is, you know, kind of what Bezos vision for Some reason has been, you know, you know, focused on, or at least he talks about, you know, in public. The reason to manufacture in space is there are a variety of different sort of highly sensitive and highly valuable materials that are sensitive specifically to the effects of gravity in their manufacturing process. And so maybe the easiest, let's say, example to understand is the bioprinting of human organs. Right now, if you'd like to get a heart transplant here on Earth, you're entirely reliant on basically somebody on a motorcycle getting into an accident and having an organ donor. And there's not really ways to bioprint down here on Earth, primarily because as you try to use traditional 3D printing techniques, laying things one layer at a time. When you try to lay the cells of a heart layer by layer, because of the very intricate structure and very sort of thin ventricles, either things that are actually pumping the heart around the heart as you're starting to print, it basically starts to collapse on itself because it's only structurally stable once the thing is fully finished. When it's halfway done, these very thin walls that it has and very intricate structures basically collapse on themselves. And why are they collapsing on themselves? Well, basically due to gravity. When you try to bioprint something in orbit, you can create much more intricate structures and much thinner walls because you're in a zero gravity environment where the structure isn't falling under the weight of itself. So that is one example where you could significantly improve quality of life here on Earth. You could provide kidney transplants, heart transplants, liver transplants to people that desperately need it and not rely entirely on the supply of other humans dying in order to get those organs. That is maybe one of the easiest and most concrete examples for folks to understand. But there's a variety of others that have been studied on the iss. Everything from rare pharmaceuticals for various cancers that are much easier to produce, to higher quality semiconductors. You could have a more performant computer, to higher quality fiber optic cables. You can pay cheaper Internet bills each month. Tons and tons of examples that have shown really promising benefit on the ISS with research that's been done over the past decade.

Something I'm wondering about is, and I hope this doesn't go too far into the sci fi bit, which you've properly trained me against pushing into, is what is the difference between manufacturing in space to bring to Earth and manufacturing in space for space? Is there any bit of that that is of interest to what you folks are working on?

First one makes money, the second one doesn't make money. How Many people buy stuff. Well, humans buy stuff and humans largely live on Earth. There are not particularly many humans in space that would like to buy things that are up there. And so when you space manufacture for space, who are you selling it to? Like when people talk about like I'm going to build things up there, 3D print, etc. It's like, okay, cool, like you can 3D print like a wrench and there's like seven astronauts that will buy that wrench from you. Walk me through how that becomes like one of the most important companies like here on Earth. Now to clarify, as things like Varda become successful, they do start to become more things up there that would potentially buy things up there. And so space manufacturing for space is a niche sci fi, interesting field of research that I'm glad that NASA is funding for sake of proving our technologies so that one day when it's commercially viable, somebody can start the commercially viable alternative and transition that technology from basically research in a lab into something of commercial scale versus space. Manufacturing for Earth is a near term, large scale, pragmatic, commercially viable market. Because it turns out there's a lot of people down here on Earth that are interested in buying human organs or semiconductors or fiber optics or pharmaceuticals. And so yeah, that definitely triggers my sci fi spidey sense.

So given this, and this is another topic we talked about with Catherine a few months ago, how do you feel and you got at this with your answer on government contracting. But I want to just make it really explicit. How do you think about selling products or services to government as the basis for a company like this? So for example, like you said, there's only seven astronauts out in space, but those astronauts represent trillion dollars of governmental spending and all those different bits. So how do you think about the government as a customer in this space?

Annual budget I believe is like $90 billion a year. So it is not trillions. Like you're talking about, like, you know, their ISS budget, you know, I'm guessing probably being like a third of that. And then the amount can go into like wrenches, et cetera. Like it's, it's much smaller than you would, you know, believe. This is not a like trillions of dollars a year type project. So where I get excited is you need to filter any particular space company by do they have the potential to make commercial revenues within ideally three years, potentially maybe four or five years. And if government can act as a stepping stone towards that, then great. If government is the end game, not great. Because that is not in my Opinion a VC backwood with the caveat of something like Anduril, which is trying to tackle a very wide array of products for the government across tons and tons of different types of hardware, as opposed to most companies are like, I'm just doing XYZ and I'm only going to do XYZ and then hope that one day a commercial market fills in. And so I think things like the Defense Innovation Unit, which I described earlier as that acquisitions agency that reports the Secretary of Defense, they provide a much more consistent and reliable path for companies to use the government as a stepping stone to eventually be able to bring things to commercial markets, whether it's the government allowing them to derisk the technologies or allows them to get to the level of unit economics that are necessary for more price sensitive commercial customers. I do think that it is reasonable for as you're taking deeper tech swings to rely on that. And I think it's gotten a lot easier as a venture investor to imagine the government as the sort of stepping stone as it's become more consistent with companies like Anduril, et cetera, being able to actually show that VC backed companies can actually win government contracts. And I think in some ways it's a very exciting time for humanity as a whole where the DoD and the government as a whole can just take deeper tech bets than what venture capitalists can't. In some ways, let's say, imagine that the DoD didn't exist at all. Well, I need my companies to make money pretty damn soon. And so it probably means that my timeline that I need for them to be able to have commercial contracts looks more like 18 months, let's say, rather than three to five years versus because the DoD now acts as a stepping stone. Well, now I can start to think about, well, what are technologies that would be commercially viable in five years? And then can I convince the DoD that they should be the stepping stone because they will get so many benefits from this technology actually coming to market, and especially if it's controlled by a U.S. company. And so I actually find that as a deep tech investor, this is like significantly widened the types or the array of technologies that are now venture backable now that the DoD has become a much more consistent stepping stone.

Cool. So two last questions before we get to Q and A. Can you just. Can I maybe. And maybe you don't have one, but you referenced deep tech, so I want to break it up. Do you have a broader thesis, perspective? Pick your wording around deep tech as a category.

The only thesis that I have Here, which I'll parrot, you know, from this is definitely Peter's thesis that he has repeated many times internally, maybe sometimes externally, but it's that, you know, maybe do it in a little bit of, like, my joke way that I did it once on Twitter, which is the best. Deep Tech founder looks a lot more like a Las Vegas party promoter than a social founder. Social app founder. And a social app founder looks a lot more like a Ph.D. of mathematics than they do like a deep tech founder. The point being that in the world of like, you know, social or like, enterprise, you basically don't need to actually be that good of a fundraiser. You can just, like, build a really great, like, software product. And that if that works really well, people understand those businesses extremely well, how to value them, how to give them money, et cetera. And so you can be a really geeky, introverted mathematics Ph.D. and you can build like a social app. Like, you know, I don't know, I'll poke on him. You know, he's a little bit of a friend, but, like, Nikita Beer is like, you know, I wouldn't describe him as some, like, you know, phenomenal, crazy deal maker fundraiser. He's just like a really great mathematician and knows how to build social apps that hack around people's behaviors and get them to use it a lot. And then because there's such consistency in knowing how to succeed, people are willing to fund that quite easily versus a deep tech founder actually needs to, in some ways, like, you don't want to go so far as Elizabeth Holmes to, like, you know, lie about the underlying technology. We actually need to kind of look like Elizabeth Holmes. You need to be a very sort of captivating storyteller that understands how to translate the, like, very deep technology that you're working on to a very broad set of investors in a way that is, like, extremely understandable. And so that's why I make this joke of like, if you want to do a deep tech startup, you better look like a Las Vegas party promoter. You definitely don't want to look like a astrophysics PhD, because at the end of the day, in deep Tech, it's actually even more important that you're a really great fundraiser than in normal tech stuff. So that's the only maybe broad thesis that I have that I'll admit is 100% a Peter Thiel parented idea, not my own.

I got to ask, how in this space does one become the equivalent of a Vegas party promoter?

Do as I do. I, you know, I come on to, you know, talks like this. I tweet about the company regularly. I try to get coverage in as many different publications as I can. I am constantly thinking about what are the analogies and ways to dumb this down so that even extremely non technical investors can understand what we're doing and understand how we'll actually make money. Like, you know, in this latest $42 million Series A round, 90% of the like work in getting the round across the table was making the economics, the business basically look like a lemonade stand that is like, anybody could come in and be like, oh, yep, they sell lemonade. Here's the cost of lemons, here's the cost of like, you know, the labor to, you know, squeeze lemons and here's how much they sell the lemons for. And that was like 90% of the work. And then 10% was just continuing to parrot the same sort of space factory, you know, et cetera, you know, vision lines that I used sort of in the seed round. And in the seed round, it was a lot of talking about sort of, you know, some of the early stuff that I talked about around the, you know, expanding the economic bounds. What are the implications for humanity as a whole if something like this succeeds? Why can this become one of the largest companies on earth? Since seed tends to primarily be around vision, series A tends to be around execution of that vision. And how will those economics work? And so both for the actual fundraising and investors, it's really focusing on extremely good storytelling that is compelling and very digestible. And I'd say our seed slides did a very good job of. I spent eight weeks, I think in a row, basically almost entirely focused on just iterating on our seed deck. And I would go through the visuals of it and down to each individual pixel of how are we representing a space factory and how does it look and what are the economics? How do we present this vision in a very compelling way? And iterated on it with tons of investor friends so that I would get their feedback before actually doing this formal fundraising process and so spend a ton of time on that storytelling. So it's on the investor community, but then the investor community also feeds off of just the public story that you're telling as well. I can count on many fingers how many times a series A investor that we were pitching would bring up, oh, I've been seeing your progress from the tweets or the photos that you're taking of the office or blah, blah, blah. Sometimes a lot of people critique me that will say, hey, why spend so much time talking about what you're doing at Varda on Twitter, isn't it better off to be more stealthy or blah blah. And I'm like, let me tell you, one, there's not going to be anybody else I think building space factories anytime soon particularly competently. And two, the upsides of doing this stuff relatively publicly are so immense and it's sort of difficult to quantify them because in some ways you don't start to see those benefits until you get behind sort of closed doors and investor brings up like, oh yes, this is super exciting. And then by the way, I've been seeing the photos of your guys office and how it's progressed and the number of people that you're hiring and looking at those profiles on LinkedIn. It's like people see that momentum and can't help but let that influence their investment decision making process.

And then the real last question here, especially because it's so tied into everything that you're doing. I think the useful part of the backlash against private space a few weeks ago really was this sense from folks that they saw the public sector and NASA as just feeling particularly aimless in comparison to that 1960s, 1970s period that you were describing, even if it wasn't exactly commercially viable. I'm curious, what, what is your vision or perspective of what NASA is and what NASA should be doing given the ability of companies like Varda to develop in ways that wasn't possible in the 60s and 70s?

At the end of the day, the DoD and especially a research institution like NASA should be focused on the furthest edge of technological bounds, right? What NASA done phenomenally well, if you study it from basically as the Apollo program started to wind down, you study the sort of like 80s onward, human spaceflight has been like a complete disaster. You know, huge cost overruns, limited technological benefits, limited technological advances. And part of that has been because they focus on sort of cost plus contracting there. And it comes down in some ways to like, you know, the methodology, the contracting versus if you look at like the robotic exploration side of NASA where they focus still on more like, you know, we're going to sort of buy products off the shelf, it's going to be more sort of spec based and you know, going to be pushing the bounds of technology explicitly, far more so and taking more risk because yeah, you know, rover crashes, something that doesn't really matter, you're not losing human life. That's where like you know, sort of NASA's fundamental spirit I think has been extremely well preserved. Like look at it, we have flown by every single planet in the solar system. We have you know, multiple satellites that have gone around Jupiter. We have multiple rovers that are currently operational on Mars, right and have landed in like crazy landing schemas. Like you like, you know, three minutes of terror are an insane landing sequence. Like you're doing retro propulsive boosting with like a cable that you're lowering the rover down to and then like, like you're releasing the rover, they're like, you know, going off and flying off in the distance. Like that technology is absolutely crazy. And so basically I hope that like NASA sort of refocuses on where it does best, which is like taking more risk, which typically involves not humans and deep, deep technological like risks. And so it's been really exciting to see because of SpaceX's success you're now starting to see programs like the heavy launch system or like the lunar lander start to have far greater capabilities with much cheaper prices. And so it's opened up where like now NASA's starting to like invest significantly into like nuclear propulsion. And I'm like hell yeah, like nuclear propulsion. Like this is the thing that will like unlock tremendous like human space exploration. Like you know, it'll have commercial benefits for here down on Earth. And this is like the perfect asset project. It's like unmanned, it's technologically risky, it's deep research. It'll take tons and tons of like money and resources and engineers like no commercial provider could ever afford to do. Like that is what NASA is really great at. Are they great at like maintaining a human based space station research station down in low Earth orbit that like is unfortunately relying on like decades old technology because like the ISS was built so long ago. That's where I get less excited. And so I hope to start to see some of the budget that is spent towards sort of like human related spaceflight spent more and more on like deeper tech and higher risk things as opposed to right now. I think the balance is too far in the world of like lower risk human space flight. Hey. Hey Devin, this is Lucas at Village Global. So this is perhaps connected to your point on the founders ability to fundraise and tell a story in this sector. I think Kathryn Boyle has made the point of you know, the importance of founders being able to sell the government and have the ability of going through the procurement process and how unique that is and different that is compared to just selling enterprise software. I'd be curious if you share that perspective or you know, if you'd be comfortable backing the prototypical pure Founder technologists, like in this industry without their background. And how do you assess that? Yeah, I think it explicitly goes back to, you know, I don't actually think the best like deep tech or DoD founders are founder technologists. Like I don't think that you want to be optimizing for somebody that is necessarily got the best technology because the DoD doesn't just buy the best technologies and the investors that fund deep tech companies don't just invest in the best technologies either. And so I think it's related to both where it's like, I'm actually at this point, I think more comfortable with investing in founders that prove to be very good fundraisers and storytellers. Those same skill sets typically apply to what's considering the DoD contracting process and in some ways, more importantly, what's necessary to recruit somebody that can help you bring in somebody with DoD contracting process. So I think it's less necessary for founders to have that direct experience anymore. But that sort of storytelling and presenting a really compelling vision being far more important than the technology they're explicitly working on because the compelling vision will allow them to recruit the best technologists and recruit the best DOD contracting folks that have experience that will allow them to eventually become successful. So disagree with your framing of the question, but agree with Kathryn Boyle's point.

I work at a startup called Column, based in nyc.

I had a question about how can more people break into space? Since I've had a fascination with spacenet and everything.

And so your Twitter has been a.

Great educational experience for me and reading more into space. So I'm curious, how do you think more people can get into it? Yeah, I think the best way is just like join a company that is like working in it. I think people would be surprised that I was just looking at. An old soccer buddy of mine is now a launch director for SpaceX out in Florida. And his prior background before that was like he worked at like a brewery and like operations. Like, you know, the skill sets that you need to, you know, join, especially some of these like later state aerospace companies. You don't have to have like some, you know, deep aerospace background in order to join them. Because at this point these companies are large enough that they need like finance administrators and they need operations folks and they need supply chain purchasers and like there's so many different skill sets that they need that. Like the best way is like if you do want to get a deeper aerospace background, take whatever skill set you have and almost certainly a company like SpaceX will be able to Utilize that and then use that platform to start to learn deeper and more space specific skill sets. Right. And so he now has, he previously just had like brewery operations experience, but now he does actually have launch operations experience that it is now even more highly valuable. And he can go from like a SpaceX type company to now a much earlier stage startup that necessarily can't necessarily afford to, you know, not hire somebody with experience versus SpaceX at this point is so large that they kind of have to hire people without experience aerospace otherwise like they just won't be able to continue to grow as a company. But it's, you know, a lot easier to join something like a SpaceX and then sort of start to, you know, work your way down into, you know, smaller and smaller startups as you start to build up more aerospace experience. It's James Sinka here. I'm the co founder of the Deep Tech Fellowship at Ondeck. I want to talk a little bit more or ask you about incentive structures. You've shown how that's absolutely essential to expanding the economic bounds of space. And we saw that through lobbying and essentially fighting the government, suing the government, Thiel and Elon were able to change the incentives by which we're actually getting these companies funded and the DoD to work differently. What other incentive structures should we be focusing on changing that would unlock the next age of space? It's a good question. Be like fanciful or far farcical. Like, you know, answer would be, you know, I wish that, you know, our world's, you know, brilliant, brilliant, most brilliant minds weren't so, you know, highly incentivized to optimize, you know, which ads come up in front of you when you're using an app or optimize, you know, which, which video comes up in your feed. And so, you know, fancifully, I would almost be like, well, if there are a way to somehow do the like, you know, Chinese regulatory crackdown on, you know, boring companies like, you know, Google and Facebook, et cetera, and force them to pay employees less so that those people are actually willing to upship and actually do something with wasting away at Fang and actually work on actual hardware, be great. But that's too fanciful of an answer. I'm trying to think what would I actually change in terms of incentive structure within the space industry? I'm not sure that I have a great answer. The thing that I always think about, it just comes back to, you know, world's greatest minds, so many of them. I mean, enterprise SaaS is kind of like this way too. It's like, it's great that Companies like Snowflake, etc. Exist and like sure they help apps, et cetera, like you know, run faster. But like man, there's just so much money in Silicon Valley. It just goes towards things that like just slightly improve some like enterprise workflow or you know, make somebody find and replace Excel spreadsheet a little bit easier to use versus like actually like building hardware. I wish there's like a better way to like incentivize, you know, founders and VC to be investing more into it. In some ways I think like natural capitalistic market incentives start to do this. There's been a couple of broader VC trend essays that have been written lately, which is basically returns are going to get squeezed out of enterprise SaaS as more and more companies start to realize that this stuff is actually relatively easy to underwrite. And so therefore you can actually just grow your company using debt or things like pipe where you can actually securitize your revenue and then you'll not need to raise nearly as much VC. And so VCs will then naturally have to move away from things like enterprise SaaS, which has been their cash code for the past decade, into just harder technologies because that's where the actual alpha is. So I guess if you could somehow incentivize people to be actually willing to take more alpha in the investments they make anyways, that was a little bit long winded. Not a perfect answer.

A good question to finish with would be where do you suggest people go next for inspiration? Because something that you've consistently talked about is you've deeply researched and there's been all these interesting things. Where do you think are the spaces that you would look into if you, you weren't busy with your whole day jobs thing?

Yeah, I mean if you want to dive more into aerospace, I think the best way to do so is just like start to dig into all like. Yeah, I think people view it as like, oh, it's like this like you know, very large behemoth, et cetera, like how will I ever learn about it? And it's like I basically went from like not knowing anything about aerospace over the course of like three, three and a half years just by like consistently like paying attention to all the companies and then eventually getting to know all the various CEOs got to know all the various players. And it's not like there's not an infinite set of players. There are probably less than 20 companies that have been founded in the last five years that have raised more than $10 million. This is nowhere near like an enterprise SaaS. 20 of those companies get founded every month basically. And so it's an extremely small industry. The best way to start to get to know it is like I maybe three and a half, four years ago just like followed all the space reporters on Twitter. So everybody from like Eric Berger to like Michael Sheets is like two examples. Lauren Gersh. Those are probably like my top three favorite like space reporters. All of the various companies in aerospace now typically have pretty active like subreddits like R Space, rspacex or Slash Rocket Lab, all like really active communities. And there are always like really interesting discussions on there. Read lots of like sci fi books. Like honestly like if you actually look at like the VAR business model, it's basically like perfectly articulated in two different sci fi books. One that's more of like a nonfiction in some ways. Like not sci fi, but like sci fi whatever. The Case for Space by this guy, Robert Zubrini. He actually wrote the book that eventually inspired Elon to SpaceX and his book the Case for Space, which helped to nudge me. Thinking about Bartima definitely helped nudge me even further into taking the idea more seriously. And then Andy Weir, who is the author of the Martian, wrote a second book called Artemis that actually literally basically has exactly what Bartima's device in the book. It's awesome just reading these sci fi books, like sci fi authors in order to these ideas also typically read research papers and look into what's actually possible to come up with these ideas. That tends to be like, just change your information. Start to actually pay relatively regular attention to stuff. Put this stuff on your Twitter feed and you'll start to learn more about it by default. And I think that's by far the best way to come up with ideas around things that you would potentially want to join or work on or what the industry trends are. It's just like get that information flow. And a lot of these reporters and CEOs of these companies that you can follow are the best way to sort of change that information flow. Go to conferences too. Like the other thing that really helped me a lot was like going to all the space conferences. So like smallsat in Logan, Utah is one of my favorites. Sat symposium out in Washington D.C. there's this one in Colorado Springs too called the National SAT Symposium. So there's a couple of different conferences where like literally everybody from like Air force, Space Force, SpaceX, Rock Club, et cetera, all get together and like no better way, like learn about the stuff than just like by grabbing beers with a bunch of folks.

That's an excellent place to end. Well, thank you everyone for attending. We're going to keep doing these lots of great stuff and have a good rest of your day.

Thanks so much for having me.

Thanks for joining us on the deep end. If you enjoyed your stay, give us a review on Apple Podcasts and share this episode with your friends and colleagues to help grow the show with us. We've also got show notes and more episodes. Episode it's available at ideas.beondeck.com See you next time.