#46 Delian Asparouhov, Founders Fund & Varda

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All engine running. Liftoff. We have a liftoff.

A Space Friends I was thrilled to sit down this week with Delian Asparuhov, who is a principal at Founders Fund, the famed venture capital fund and also a co founder and president of wada, a space startup that's focused on in space manufacturing. So we have a lot of interesting things to talk about in if you enjoy the podcast. Just a reminder, please leave us a review on your favorite podcast platform so other people can find it. Thank you very much. And as always, here are a couple of short messages from our sponsors. And then please enjoy my conversation with Delia. My name is Rafael Rodkin and I'm an investor and advisor to space companies. Just as a reminder, this podcast is for informational purposes only and nothing should be taken as investment advice. This podcast is sponsored by nanoavionics, a satellite manufacturer and mission integrator. Their technologies enable many space companies worldwide to offer services that improve life right here on Earth, such as providing global connectivity, conducting Earth observation, or contributing to scientific discoveries. Check them out. And also check out my episode with the CEO and co founder. Sadly, I am not a rocket scientist, but I'm an alumnus of the International Space University. ISU offers a number of educational programs about space worldwide. Check them out@isunet.edu. well, welcome back everybody. This week I'm here with Delian Asparouhov. Hey, welcome Delian, to the podcast.

Thanks so much for having me on Rafael. Very excited.

It's a pleasure. I've been looking forward to that. I mean obviously we have overlapping roles, well to some of our worlds, overlapping. We're both involved in venture capital investing and looking at the space sector. But why don't you tell us a little bit about yourself for us?

Yeah, so my brief background, I'm currently principal at Founders Fund, which is one of the sort of preeminent venture firms based in both Silicon Valley and Miami. I myself am based in Miami. We have a total of on the order of sort of 20 billion in AUM and 3 billion in sort of recent funds and invest anywhere from sort of leading seed rounds with a 750k check all the way to leading series F rounds with $200 million checks across a wide variety of industries from everything from we're one of the biggest checks in Airbnb, but we were also one of the biggest checks in SpaceX. Since aerospace is a sort of significant, significant focus area, but we also do very broad set of investing and then I actually split my time between Investing at Founders Fund with a company that I actually incubated. Founders Fund is famous for doing several relatively large incubations, Palantir being our very first one. And more recently, Anduril, which has done quite well in the United States. And then we've actually done two incubations in the past year. Varda, which I incubated, and Open Store, which one of my partners incubated. And so I split my time with Varda, where I'm the sort of president and chairman of the company. There we're basically building the world's first space factories. And so we take raw materials up to space, fabricate them in a way that is just not possible on Earth, and then bring those materials back down to our customers down here on Earth. So I always say we're making space factories that are for Earth, not space factories for space. So yeah, that's me.

Well, fantastic. There's a lot to unpack there. I mean, we could just spend hours just talking about Founders Fund. It's probably fair to say that Founders Fund must have one of the biggest stables of unicorns, so to say, on Earth. But we can't do this any justice. And it's a space podcast. So I suggest we let's focus on two topics here. Let's talk a little bit about space in general and your thoughts on space in general and the opportunity that I think we both probably agree that exists there over the next years and maybe even decades. And then after that we can delve a little bit more into Avada, because it's just such an interesting company. But why don't we start with space in general? And first question, I mean, how did you actually get involved in sort of like space investments? Is it as simple as saying that? Well, as you said, founders found obviously very close to SpaceX. One of the biggest investors, I think one of your former partners, Luke, is still on the board of SpaceX. Is it as simple as that or is there more of a story?

Yeah, I had been a space enthusiast for quite some time, ever since I was a kid and sort of grew up in high school in the United States, sort of around 2008, 2011, which is sort of the early SpaceX years, as they were just sort of getting Falcon 1 off the ground and the company was starting to launch on more and more regular basis. And so that was honestly the original inspiration was the combination of sort of like sci fi books and seeking SpaceX. But I didn't really know how I wanted to approach the industry. I had a couple of friends I ended up studying computer science at MIT and I had a couple of friends that after MIT, ended up deciding to go work at SpaceX directly. And that was how they decided to get involved in the industry. But it just wasn't a path that excited me. I found myself to be a pretty decent software engineer, but what I really liked was the combination of engineering, business, product sales, et cetera, being much more multidisciplinary. I actually ended up leaving mit, dropping out to start my first company, which is a boring enterprise enterprise healthcare company. But I always consistently told my friends I was like, the only point of me going to Silicon Valley and starting to understand how to build startups is like, one day I want to do a space company. But I sort of had only seen one mold of successful space entrepreneur which was sort of the like, you know, Jervitson Chamath, you know, Elon Branson sort of approach, which is basically like get rich off of normal things and then like go do space stuff. So I was like, okay, I gotta go like do normal things, like I'll pay attention to space up, but let's like do the normal things. And then around the sort of like 201617 timeframe, I had this like sudden aha moment where I was like, o, the barriers to entering the cost of doing space have dropped enough that you no longer actually have to be a billionaire to necessarily start a successful space company or to invest in space companies. And so I, somewhat fortuitously, through a couple of random circumstances, ended up landing at Coastal Ventures in the summer of 2017. Coastal Ventures is actually one of the primary backers of Rocket Lab and of Skybox back in the day, which sold to Google and eventually became Planet. And so they were also like Founders Fund, a sort of very prominent space investor. And so when I started there, I decided, okay, I'm going to take advantage of the fact that I'm now here and have this platform that is known for space investing. I'm going to try to build that up as a personal skill set. And so I started going to space conferences, meeting with space CEOs and about seven months in actually made sort of convinced the firm to make an investment into my first space company. And that was when I was like, okay, I'm going to start taking this really seriously now that I actually saw the fruits of my labor of being a hobby for years and years, then eventually being a nights and weekends professional project and now it's actually my job now I'm going to just lean as hard into this as much as I can. And so really started to spend 25, 30, 40% of my time sort of on space. And that's what eventually led me over to Founders Fund and eventually that sort of expertise is what led me to eventually incubating Varda.

What was that first investment, by the way?

So the first investment actually was this company, Akash Systems.

It's chips chip advanced chipsets For Satcom, right?

Yeah, for Satcom, exactly. So they're Ganon diamond sort of satellite radios. And so they now finally, after a lot of R and D have produced the world's most efficient lo highest bandwidth radio that's ever been produced for use in satellite communications, which can be a huge advantage to whichever satellites integrate with. Sort of fits into my sort of original and first sort of space thesis which was that there is clearly a space boom happening, right? The combination of lowered long costs, exponential rise in the amount of venture investors and dollars flowing into the ecosystem and the exponential rise in the number of satellites going up, that there was this massive gold rush. And the best place to be in a gold rush isn't necessarily to be the one, but being the people selling the picks and shovels. I've had this very picks and shovels based approach to my space investing where the first one in that thesis was Akash Systems. The idea of being, okay, everybody needs satellite radios. Well, if you invest in the company that makes the best satellite radios, they'll be in a very great spot in the value chain to capture a decent amount of value. And then probably the second and third investments that I made in that category was MagDrive which is based in the UK. They're a small sat propulsion startup where most of the people working on small sat propulsion. So for those that aren't maybe familiar, once a satellite goes up into space, it does need to be able to sort of like move itself around.

Yes.

Right now there's sort of two options on two ends of the curve. There's chemical propulsion which moves you quickly but is very inefficient. And then there's electrical propulsion which is very efficient but moves you really, really slowly. Yeah, both of them have downsides. Most startups that I'd seen sort of working in small satellite propulsion were sort of marginal improvements on either end of the spectrum. MagDrive was the first one that felt like it was actually sort of a 10x improvement. That is they provide both very fast movement, high thrust and very efficient. That is high. And so that's sort of my second investment in the sort of like picks and shovels thesis. And then the third is this company called Hadrian, based in Los Angeles. That thesis is around Most of the aerospace companies in the United States and abroad rely on a network of sort of mom and pop machine shops that were largely set up around World War II that effectively deliver most of the actual metal parts that you need to actually build a rocket, satellite, et cetera. These things are very non tech forward. However, they have extremely specialized hardware and skill sets to build the very precise materials you need for space. And so Hadrian is trying to disrupt that by sort of equating a full stack equivalent of these sort of mom and pop machine shops where they both have software that allows you to track your order and see when it's going to arrive all the way down to. They actually run the CNC machines and try to automate the paths and the actual tooling to produce the parts that you need. And so again similarly, you know, Akash provides the radios, Magdrive provides the propulsion, you know, Hadrian provides the actual, you know, structures and what you need to actually build the satellite. And so I've steadily tacked off, tackled each individual component. At some point I would like to do sort of flight computers that are rad hardened and at some point maybe a battery investment, a solar panel investment. So there's more to come with this thesis in terms of investment.

Yeah, you're trying to be across the stack and sort of get broad exposure to space economy and all of the key things that people need. That's very smart and I hope we're kind of operating in a similar way coming back. So taking a step back on the macro side, you started mentioning core parts of the thesis already which is basically like lowering of barriers, which has to do with substantially, I think with the lowering of the costs of accessing space or like the launch costs just like originally flacon9 bringing it. Some other people just having more options like you mentioned rocket lab and now we've had actually quite, not quite a. Yeah, we have a few people who have now reached orbit on the private side. Firefly tried most recently, didn't make it the first time, probably make it hopefully next time. Obviously Virgin Orbit is there now and Astra and other people. So this group is expanding and this is just one of basically the examples of cost and access becoming easier. Probably what some people on average let's know that. But you and I very familiar that also the cost of the components is dropping across the curve, sort of like Moore's law and sometimes faster curves. So I think those are kind of the by now, almost, at least to people like us. Obvious parts of the thesis. I'm curious, do you think there's any sort of like non obvious parts of the thesis why space should be really attractive over the next decades?

Yeah, I think the thing that people pay sometimes almost too much attention to the actual like inputs of a space business, that is all the costs that go into it, the combination of all these components that you're mentioning. But I think the thing that people haven't necess paid enough attention to and should be more on their radar is the output. That is a lot of space companies just sell to other space companies. Yes, that can be fine while you're propped up by venture capital, etc. But at some point this ecosystem needs to provide value to external providers, right? It's just like, you know, you can't just have a like you know, software company only selling to other software companies and eventually has to sell to like the Walmart etc. Of the world. Otherwise you get the dot com boom where everybody's just selling to each other. And then the moment that the venture capital like song stops all of a sudden the entire ecosystem collapses actually providing value like the outside world. And so I think that's one of the things that isn't paid enough attention to in space. People talk about a like space bubble, but again they analyze it from the inputs. I oh, there's a lot of dollars going into the ecosystem, you know, etc. But that's not the interesting metric to be tracking in order to determine whether or not there's a bubble. The most interesting metric to be tracking that I think is relatively like non obvious is how much of all of the space companies revenues are from companies that have nothing to do with space. And that number only very recently to me is getting quite, quite exciting. You know, for example, one of the companies that I think is you most interesting, you know, right now, that is I forget if they've managed to go public or they're about to, you know, finalize this back. But you know, Spire I think has done a really great job of going direct to companies that have nothing to do with space. Whether it's you know, flood insurance, wildfire insurance, hedge funds, etc. And providing them space data and space intelligence. But package in a way where like the companies that they're selling to could care less about spy space, could come from somewhere else.

It doesn't matter.

Yeah, exactly. It could come from drones, it could come from planes that are, they could care less. They're providing it such A package, easy to understand way where, where like their end customers have to know nothing about space. And that to me is in some ways the most important metric. And I feel like that metric is only recently starting to shift and still needs to come a long way to match with the inputs into the system, the venture capital. But that's also part of the thesis behind Varda of we're a space factories companies. But then they were materials company. And our customers could care less about the fact that we're a space materials company. They just care that we have the best materials because that's what they're purchasing. They're not purchasing. Anything to do with the fact that we go to space.

Yeah, wow. I fully agree with you. It's actually, there's a, there's, there's a, there's a page in our current pitch deck for our fundraising, which actually is one way we split the universe of investable companies in quote, unquote, space. And people have different definitions of that, as we all know.

Right.

One part is what you're mentioning is sort of like the space companies, which are what people think about space companies. So like rocket companies, companies that produce satellites, companies build satellite components. And then the other part, which arguably is becoming increasingly the more important and interesting one, which is the one you're alluding to, which is sort of like, well, companies that take advantage of space technology but out but to provide something of value to large existing markets on Earth. And that honestly, we would like to do much more of that. But let me tell you what the problem is we have. And then you tell me whether you've seen the same thing or what you think about is what we're seeing. Maybe problem is too hard a word, but sort of like the current status of that is we sometimes compare the current situation of space with sort of where the Internet was in the mid-90s and when the Internet was in the mid-90s. If you looked at the typical. Well, there weren't that many. But a typical Internet entrepreneur in the mid-90s was like McEntree's computer science person, right. Hence he does an Internet company right now, if I had to guess, I would say 95%. Whatever the vast majority of business plans I get if you go to the team page, space engineering, aero astroengineering, mechanical engineering with a space miner, worked at Airbus. And that's fine. Obviously for the space part, the problem is if they didn't want to do something where they sell to insurance companies or agri companies or chemical companies, unfortunately, typically they have no understanding whatsoever of the industry they want to sell in. So that's the problem. We're running out up against a little bit at the moment and trying to have these business models which serve large existing markets on Earth. I don't know, do you see the same thing? And if yes, what do you think? How can we sort of kind of solve that?

Yeah, I mean this comes down to one of the fundamental filters that we have when we consider investment, which is does the core skillsets of the founding team line up with the core risks and are they world class in tackling and burning down those risks? And I agree that it is something that is quite rare in a space company in that yes, most are founded by JPL, NASA, SpaceX, et cetera, space engineers on the founding team. And it's great to have as a part of the founding team, but you don't want it to have it be the entire founding team. And so again I come back to Varda where yes, one of our co founders is a space engineer and he understands that world, right?

From SpaceX.

From SpaceX. Myself, I'm a venture capitalist, I understand the business world very well. And then our third co founder, our chief scientist, he's a material scientist that primarily focuses on materials that are used entirely on Earth in Earth based markets and has very little skillset, if anything to do with space. So intentionally tried to set up a very diverse sort of founding team in terms of skill set strength, et cetera, that were directly correlated with what we found the three core risks to be, which was capital intensive project, that is the financing the space operations and producing the materials up there. And then the third risk that is bringing that value back down to customers here on Earth. And so I agree it's very much a limitation of the space ecosystem today that there's not enough non space people founding space companies because those people would be critical whether they have a fire or you know, earthquake insurance background or flooding background. Those types of people should recognize that their skill sets are actually very valuable in the space ecosystem and would be incredible co founders. And on the flip side, the space engineers should be going out and searching for this type of co founders. I made a very intentional. I think one of the things that, you know, I think a lot of also founding teams make a mistake of is they tend to just like try to find people that are sort of like themselves in their founding team, right? They go out and they're like oh well, like I was at SpaceX, let me just get a bunch of my SpaceX buddies together and we're going to go co found a company that's in like XYZ industry and it's like okay, or you could be a co founder and you could spend six months to a year hunting down world class people in completely unrelated industries and then forming a team around that. And I think they think oh well, like how am I going to be a co founder with somebody that I've only just met or I've only just interviewed? Well if you actually, you know, I think most people don't appreciate this. If you run a statistical regression on the companies that have IPO in the past decade that have been venture backed, there's almost no correlation between the amount of time the founders knew each other before starting the business to the outcome of the business. And so we tend to take the approach in our incubations of just hand picking world class people across the various skill sets that are necessary and forming those. So for example, you know Keith Raboy, the partner that I work with a lot of founders fund, he co founded Opendoor back in the day. The four co founders literally didn't know each other at all. And yet Opendoor today is a, you know, I think like $17 billion company. Right. And they all met basically on day one of the company. And so I think people don't recognize that this is a very reasonable and appropriate process to go through in terms of finding somebody that has that appropriate, much more diverse skill set than just a space engineer.

Yeah, I think it's just so interesting that I guess the best case in point for this problematic we're talking about here is that you guys had to incubate Vada in house. Right. Apparently you couldn't find a existing company, existing team that you were confident enough with. And I guess we are internally also working on at least sort of two potential incubation projects in space because again we can't find anybody doing. Is that so of something similar you're seeing. Do you think Varda may not be the last sort of incubation project in space or do you think there's other opportunities?

Yeah, I think the way that Varda honestly started was I had had this investment thesis around space manufacturing for quite some time around these materials. And I thought that for a variety of reasons it was a sort of very undertapped market because most people were doing things that I thought were sort of much further out. I space manufacturing for space or asteroid mining or lunar mining. And those things to me are like sci fi projects that I get that for some reason venture capitalists have back in the past, past that makes sort of no, you know, no sense to me whatsoever. Versus space manufacturing for Earth is very near term commercially pragmatic. And so early in 2020, before COVID I actually went out and spent a lot of time with all the various researchers teams who are working on this and sort of came across this fundamental problem where unfortunately all of those sort of like founding teams, executives, etc. Were just way too narrow in terms of skill set and way too close minded in terms of approach to actually bring it to market. That just didn't feel commercially viable. And so the project sort of went on the shelf for six months. And I sort of had this frustration where I was like, well, what the hell, the economics make sense, the market is ready, like the technology is there. Why is nobody doing this? And I just kind of realized, I was like, I don't want to be asking myself the same question in five years. And if there's nobody doing it, I need to like go do it or else it's not going to happen. Partially because I believe, you know, when we were talking about sort of that metric of, you know, space companies providing value to Earth, that that is the best metric to track whether or not we will become a multi planetary species. Like I love that, you know, Elon builds bigger and bigger and bigger rockets. But that's not the thing fundamentally that is going to make us a multi planetary species. If you look at California, the way that California got developed up wasn't by Lewis and Clark arriving on an extremely large boat. The way California became California was the gold rush. It was providing economic value to the rest of the economy. And that is what caused it to be industrialized and settled and like, you know, grow very rapidly. And that we need to be focusing on that for space as well. Where the gold rush for space is the metric of how is space providing value back to the rest of the Earth economy. And that space manufacturing is one of the best ways to massively grow that particular metric that will eventually lead us to becoming a multi planetary space.

Yeah, I mean, it's really quite interesting in various ways, right, because you mentioned sort of the difference between space manufacturing for space, right. As sort of the people who want to build satellites in orbit. And to some extent that has actually happened before the space manufacturing for Earth with companies like made in space. But now finally it looks like we have several companies really focusing on space manufacturing for Earth. And of course it makes all the sense in the world because we've known for many years that it May makes theoretical sense to produce certain things in space, or we can only do that. It was just always too expensive, but now the costs are coming down. So it's a prime example of using that trend. So in terms of, let's say you produce something in space and I think how much of a difficulty is then sort of like integrating that into sort of like existing, let's call it supply chains, for lack of a better word. On Earth, do you think that's going to be fairly sort of like, smooth, or is that maybe harder than first meets the eye?

Yeah, I mean, I'd say the way that we think of the company is we're sort of like a contract manufacturer.

That provides how much of a difficulty is then sort of like integrating that into sort of like existing, let's call it supply chains, for lack of a better word. On Earth, do you think that's going to be fairly sort of like, smooth, or is that maybe harder than first meets the eye?

Yeah, I mean, I'd say the way that we think of the company is we're sort of like a contract manufacturer that, you know, provides, you know, zero gravity to our clients. At some point, I would love it if it's, you know, much closer to a relationship where a manufacturer comes to me and says, hey, I have this process that I would like to be done in zero G. Can you please do that for me? Because I know you have the expertise, the logistics, the infrastructure, etc. However, it's not that simple today. Instead, we have to go, quote, unquote, much more full stack, where we actually have to sort of become our own customer. Right. You know, it's just like the iPhone didn't launch with the App store on day one. They developed their first 14 apps. We're sort of having to do the same thing where, you know, for our first handful of materials, we're having to go much deeper. We're actually buying the raw supplies ourselves, producing them in microgravity, integrating them into actual end components and systems, and then finally selling those end systems. And over time, we're trying to convince people, hey, we don't really want to be buying the raw materials and we don't really want to be the integrator. And eventually we'll hand those off to others and focus on sort of like our core skill sets and then just start to expand the sets of materials that we work on. But, yeah, that's partially why there's almost like a third of the team at Varda that is sort of like a material science PhD type team that really focuses on those, those sort of more full stack integrations to make sure that we can more smoothly integrate it in the supply chain. And it is definitely not an easy process. It is not as simple as, hey, let's just apply zero G to this manufacturing and then our customers will pay us. There's a lot more work that's going into it. But I hope that again, just like the iPhone proved out the value of the platform by developing the first 14 apps and then 2, 3, 4 versions later, then had a very vibrant app ecosystem. I hope the same thing will happen with us where we will prove out these first handful of applications and then that will prove the value of the platform and then we can really just focus on, on the platform and have many apps coming to us.

Yeah, I think it's very interesting you're saying that because actually another thing I totally agree with, I think actually some people, some potential or existing space entrepreneurs sometimes make that mistake that they don't appreciate that, at least for the moment. I believe, and you seem to believe as well, it's better to be to earn the side of more integration, more vertical integration. Because just developing like one part of the supply chain at times it just becomes really difficult to convince people to. That you want to fit in there. Right?

Yeah, exactly. I think too many people start off with the approach of like, hey, we're going to be the platform where you can go space manufacturer. That's like. But nobody wants to fucking.

Nobody's coming. You build a platform, nobody comes.

Exactly, exactly. And so that just makes no sense to me. Or it's like they're trying to like, you know, customers. And over time we can start to become more of a platform.

Okay, but let me ask you this and select definitely some of the other portfolio companies. So let's take MacDrive for example, because MacDrive is actually sort of an entity that like those considerations.

Yeah, I think it's a relatively like, you know, simple analysis which is basically, is there a value chain that already exists or is there not? Right. In space manufacturing, there is not a value chain that exists today. And so you need to fully integrate across that entire value chain in order to deliver it. And then over time you can start to commoditize certain segments of the value chain and extract yourselves from them. And it's quite difficult to fully vertically integrate because the likelihood of you being able to compete across every single one of those very established layers of the value chain is actually extremely difficult. And so you're much better off focusing on one segment and then just having a very differentiated product. And so the strategy of a company highly depends on the sort of maturity of the value chain that you're stepping into. And so, yeah, in 30 years years, maybe there'll be somebody that steps into the space manufacturing value chain and says, hey, I'm just going to focus on.

This very one particular component, the bio, bioreactor payload. I'm going to, yeah, something like that. Let's do like a similar for Hadrian. And I find it a fascinating company. It's probably the one I at least know, unfortunately. But so this is basically, if I understand it, it's just aerospace focused manufacturing in a much more efficient way. And like you said, a lot of aerospace manufacturing, I mean, for various reasons like, you know, cost plus contracts and everything is just like ludicrously inefficient.

And this is again, you know, in a very established value chain. They're very, on a very, very narrow segment. This isn't just like satellite manufacturing as a whole where yes, it's like, you know, cost plus base. Hadrian is focused on like aluminum bolts and rivets and fasteners. And it turns out everybody from satellites to rockets to everything in space needs to be joined together. And so they're just focusing on the parts that need to be joined together. And it turns out if you're in space and you have a joiner, and especially if it's on a rocket, it needs to be very tightly manufactured of the precision and the like tolerances have to be very, very, very tight. And so what they're saying is, hey, we're going to focus on this very one particular segment and we're going to do it the best. Because right now your option is go to a mom and pop shop. You have to deliver them a USB drive with a CAD file. They never tell you what the actual lead time is. If they do tell you, it ends up being totally off instead of ends up impacting your build schedule. And instead Hadrian's like we're going to use similar to MagDrive, focus on just making this a wonderful, very differentiated experience where you can drag and drop a CAD file onto an online web site. You get a guaranteed lead time. You know that it's going to match the exact precision that you need and the tolerances that you need. And it's going to be very well tested and the alloy is going to be the exact alloy that you need. And then once they do that, then they'll start to expand ever so slightly. They'll add different types of Materials. So maybe they'll add titanium as opposed to just aluminum. They'll start to expand into, you know, larger products beyond just like fasteners. But again, taking that because this value chain is so established, better to focus on just like a very narrow segment on it and absolutely crush it. And so yeah, they're specifically focused on just the manufacturing of aluminum parts that go into, you know, space products like satellites and rockets.

The reason companies like Hadrian didn't exist before is it as simple as to say because like until very recently, just the production numbers in space, which is way too small and hence it was a cottage industry.

That's probably exactly the volume was low enough that like it just made sense to be done by mom and pop shops because there wasn't a sort of like mass of business to be had there. But as the sort of exponential growth of the rockets and the space satellite industry has taken off, that cottage industry one is now large enough that you know, there are real outcomes that can be built building a business there. But then two, also the pain points have gotten painful because these cottage industries don't know how to grow exponentially. Right. So it becomes a sort of area that's right for opportunity where both the customer pain point is extremely high and the value of that is growing exponentially as well.

Yeah, but I mean that's this cottage industry point is not only for the bulls, right? I mean that's actually true for many, many parts of like satellites. I mean there's just tons and tons. I actually remember like Doug Sinclair mentioning it once to me. They thought like most of it is basically cottage industry. So I guess there's then many more sort of like had opportunities, right?

Solar panels, flight computers, eventually, you know, full satellite buses. Like, you know, one of the things that I always think about is that one of the biggest opportunities I feel like right now in space is the fact that there's an opportunity to build sort of like what I call the like Dell for space. Oh, totally. Satellites, exactly. Like you can kind of buy a satellite off the shelf today. Not really. It's more that there's just like more providers that will do it out of the house for you. But there's not like actually hardware sitting on a shelf anywhere versus, you know, I think a similar sort of approach to Hadrian could exist for actually just making it so that there are flight comp and batteries and solar panels that are truly sitting up a shelf and are more mass manufactured on an automotive like assembly line or a consumer electronics assembly line as opposed to. Right now most rad hard and flight computers are effectively almost like built by hand.

Yeah, yeah, yeah. But the dev comparison is really interesting. I thought basically my comparison was sort of like the sort of contract manufacturer for iPhone type thing. Right. Just like outsourced, super efficient mass manufacturing type thing. Right. And clearly.

But in some ways you want a brand behind it. Like the first thing that you want is like you like dash first so that it's like the place that you can go to that isn't just the manufacturer, but they're like the brand and like the owner and they like run the software and they make it so that if something breaks you can go to them and there's like a warranty and things like that as opposed to purely like a contract manufacturing like relationship.

Yeah, fair enough. I can see that. It's also a space where people are very concerned about reliability and. Yeah, and all of that. That's fair enough. Okay, let's. Okay, cool. We've actually managed to go through touch on all of your portfolio companies. I only accounted. Maybe we'll get there still. But I want to take a step back and sort of talk about universe of investment opportunities in space. And so we kind of talked through the thesis for in space manufacturing for Earth. Let's almost do not like a lightning round. But I'm just going to throw out a few kind of call it subsectors of space and see what you think. I'm just going to ask about launch because I mean we have something like in our database Something like 200 launch companies on paper. Okay, maybe a few dollars in that sort of series in terms of funding, but it's just many. Right. You guys are one of the original investors in. I mean, what are your thoughts about launch at this point?

I just think at this point it is unlikely that there is going to be a new launch company founded that becomes massive given just the level of players that are in the space and their level of competence. Because in some ways it's like the railways, which is like, yes, there will probably be four or five, maybe six, maybe even 10 operators. Are there going to be 100 operators? Absolutely not. And at some point also I think it's going to go the way of airlines and the US where at some point also the manufacturer of the actual rocket is going to become different than the actual operator regulations. And so I think that like, you know, industry has like a lot of maturing to go through. But I'm not sure I totally understand the venture investors that are investing in rocket companies in like, you know, 2020 or 2021, it feels like you're sort of a decade too late to the ecosystem and you know that that market is already quite mature and unlikely to have a lot of alpha in terms of investing.

Yeah. So one related point to launch, I guess obviously the key company here is SpaceX and then the key within SpaceX for a variety of reasons right now I believe it's basically Starship. So I think it's fair to say that in house we believe that this is going to work for a variety of reasons. I don't know. Did you share that view?

Yeah, I have a variety of friends that work on Starship and they're some of the best engineers that I know in the world. And I think the question is always with Elon companies and you know, timing and so yeah, I think he's being a bit aggressive on the timing. But in some ways the Falcon 9 Block 5 is like such an incredible product at an incredible price point that like even just having other providers reach that is going to be an extremely difficult milestone for many of them. And then by the time they even reach it, you know, he's going to have sort of innovated to the next step of the curve. And so yeah, yeah, I think, I think, you know, I think it's more likely that Starship is like, let's say launches more than once a year, year to orbit. Probably feels more like 2025 or 2026. I'm a little more skeptical of his like he wants to do, you know, orbital launches regularly in like 23 or 24. That feels, that feels not likely.

I think it was a real Mars with cargo in 24 anyway, anyway, so. But and that kind of brings me to another related point. We sort of like, let's say it's my like second pet peeve. Like my first pet peeve was the one that's like there's not enough non space entrepreneurs in the space sector. One of my other pet peeves is, and pet peeve is a strong word, but whatever is basically I'm hardly getting any Starship Reliant business plans and sort of like even if it only works in 24 or 25. Right. This is like using the famous hockey analogy. This is where the puck is going to be. All of the business plans I'm getting is sort of where the puck is right now. It's like, oh, I'm going to launch on a Falcon 9 or something. Right. Or on Rocket Lab Electron. I don't know, what do you think about that? Would you also like to see more, I mean just if you have 100 ton or 150 ton up capacity to low Earth orbit, it's just completely game changing.

No, yeah, I guess I may be laying more on the other side which is like, I do think it's important to be like, you know, commercially pragmatic and not have too much external risk to the company. And so ideally what I would like to see is like people that can both make money on the Falcon 9 but then also immediately have a plan when starship goes online. Right. I think that's the ideal where it's like, I think you actually so in some ways want both sides of it of you know, it's the same thing that we think about apart. It's like we have a like configuration hardware, etc. That we're going to make sure to be like launching on a regular basis on the Falcon 9 and it's going to de risk many parts of our technical stack. And that same technical stack applies extremely well. Well to when starship is online. But thankfully that won't be like the first time that we're launching. At that point we'll have de risk many parts of our technical stack and are ready to adapt to our like you know, starship capacity versus you know, most people aren't necessarily thinking about that planning for it. Their Falcon 9 launches aren't necessarily de risking the thing that would be the sort of ideal architecture for when you have something that's you know, 100 tons to orbit. So yeah, I think, yeah, the answer is maybe somewhere in between that like yes, you both need to plan for starship, but I don't think you should orient your entire business only around starship.

You have to because you're building, I don't know, you need, you need that much help.

And that's where I'm like not as interesting funding those companies where it's like I don't think that you should be building something that can only work sure for when you have something that's 100 tons to orbit. So yeah, I think yeah, the answer is maybe somewhere in between that. Like yes, you both need to plan for starship, but I don't think you should orient your entire business only around starship.

You have to because you're building, I don't know you need that much help.

That's where I'm not as interested in funding those companies where it's like I don't think that you should be building something that can only work with starship quite yet. You know, I think, you know, Elon is great and exciting, but there are, you know, many ways that, you know, some of this stuff, you know, can go wrong. You get hit by a bus tomorrow and facing some fold or, you know, Tesla goes out of business or something and, you know, that wipes them out. And so they're just, you know, with Starship quite yet, you know, I think, you know, Elon is, you know, great and exciting, but there are, you know, many ways that, you know, some of this stuff, you know, can go wrong. You get hit by a bus tomorrow and facing some fold or, you know, Tesla goes out of business or something and, you know, that wipes them out. And so they're just, you know, there's. There's lots of risks that come with building a business business that's too reliant on an external provider. So there's lots of risks that come with building a business that's too reliant on an external provider.

So did I read it correctly? You guys at vada, I think you signed up with Rocket Lab Electron, it.

Was a Photon, so we are purchasing their satellite platform.

Did I read it correctly, you guys at vada, I think you signed up with Rocket Lab Electron, it was a.

Photon, so we are purchasing their satellite platform, the Photon. And then we haven't announced our launch provider yet.

So it doesn't necessarily have to go on Electron or Neutron or whatever.

Yeah, yeah. So we explicitly said in that area the Photon. And then we haven't announced our launch provider yet.

It doesn't necessarily have to go on Electron or Neutron or whatever.

Yeah, yeah, so we explicitly said in that rideshare, but we haven't actually announced who that launch will be with yet.

Okay. Okay. Coming back to sort of like our briefly discussing, like various potential opportunity sectors. Okay, so we talked like, launch, including Starship. How about, I don't know, potential next big thing, like satellite communications. We have very traditional satellite communications, Geo. Then we had the first wave of other constellations which all went bankrupt in the late 90s, like Iridium, global Stance, so forth. Now we got Starlink and Project Kuiper. On the broadband side, we have. I lost count. Probably two dozen Iot constellations. Then we have the component side. I don't know. Is there anything you find interesting in the satcom value stack?

I get more excited, you know, in relation to like satcom around, like just like the next gen, like satellite servicing, satellite refueling, satellite.

No, I'm going to get to that. That's why we have all the services. Okay. We can do that if you want, I mean if there's nothing in Satcom, we can talk all the services.

Yeah, I guess, yeah, I don't get super excited by like Satcom. I just think like yeah, Starlink's doing an incredible job. There's a handful of companies that I think have the opportunity to do really well with backhaul like Astronis and things like that. But I think it's like, it's an interesting market. I just think it's really hard to compete with the economics of like terrestrial fiber and it's only continuing to improve and so yeah, in a best case scenario ends up being 10, 15, 20% of the Internet market as a whole. But I don't think it ever really gets much above that and man, it's just really tough to compete against just laying a tube of glass and communicating through it. But there's obviously areas like rural, et cetera where fiber doesn't necessarily make sense. But yeah, not an area that I necessarily pay a ton of attention to. But yeah, the orbital servicing area, that's one area that I'm really excited by where it feels like it's one of those things that there's ways to clearly de risk now through sort of smaller scale launches and technical proof points and that as starship starts to come online man then you can really create sort of game changing products in terms of being able to actually have something that consistently stays in orbit and refuels. Lots, lots of different satellites partially because of the increased capacity for launch but also because of the increased density of satellites out there. Just like, you know, just like gas stations don't make sense in terrillers and left cars on the road. Same thing in space where orbital gas stations don't make sense until there's enough satellites on the roads. Just don't work out.

I was going to say that because you can kind of play it in a good and bad way. Right? So in a good sense it's a clear sort of picks and shovels play, right. Well many of these businesses are then in a bad sense it's like you're saying well it's sort of a derivative business, right? It's sort of like people put satellites up there because hopefully they do something useful for Earth and then you as a derivative have those satellites basically as customers which I guess means it pushes it a few years out and has this additional layer of risk.

Totally, totally. Yeah. I similarly like segment each business by like this is one that is trying to provide value for Earth or is this mostly providing value space Ecosystem. And I think both are obviously valuable and important. Right. MagDrive is purely providing value within space. Hadrian is as well versus VARD is explicitly on the other side of that. So I think both are important to have. But dropping infrastructure costs, logistics costs, surveillance, servicing costs always improve the economics of the ones that are actually providing value to those other industries on Earth are obviously valuable and important. MagDrive is purely providing value within space. Hadrian is as well versus VARD is explicitly on the other side of that. So I think both are important to have. But dropping infrastructure costs, logistics costs, servicing costs always improve the economics of the ones that are actually providing value to those other industries on Earth. And so it's important to as well.

Yeah, so one orbit services, one quirky one that we've looked at a few companies and there's another one coming out of Y Combinator now, Turian, which is basically managing space debris. We passed on everything and I can explain why. I don't know. Is there anything you've looked at, any thoughts on that?

Yeah, I mean, I think similarly to let's say orbital service important as well.

Yeah. So one orbital service is one quirky one that we've looked at a few companies. And there's another one coming out of Y Combinator now, Turian is basically managing space debris. We passed on everything and I can explain why. I don't know. Is there anything you've looked at, any thoughts on that?

Yeah, I mean, I think similarly to, let's say orbital servicing and refueling space debris becomes sort of more important as there's more satellites up there. I think my major question is going to be around space debris. Sort of strikes me as a similar thing. For sure. There's some companies that have made some amount of money selling into, you know, air traffic control and things like that, but they're not like massive, massive outcomes. And so I fear that it'll be sort of a industry that largely sells to regulators and becomes sort of a, you know, sort of government based program as opposed to something that has sort of massive commercial upside. And so while I think there is something there, it's not clear to me that it's as big as commercial upside as just focusing entirely on the commercial market.

Okay, so I'm going to, I'm going to open up a sidetrack here because you brought up an interesting point. This is a whole government point. Right. So obviously traditionally space sector very dependent on government and arguably SpaceX in its early years extremely dependent on the government to some extent still today. Right. And it's true for many, many space companies.

Right.

I mean, you mentioned Spire has commercial customers, but Spire also has a big government business. Right. I mean, I guess it's sort of this ambivalent thing. Right. It's sort of like, it's really great. The governments are there because they're sort of providing sort of a base level of demand or something. Right. And then you have like the non diluted funding depending on the countries and stuff like that. And then of course some people don't like it because like, well, this is too dependent on government and governments can change and policies can change and everything. I don't know, how does that enter into sort of your evaluation of companies?

Yeah, I mean, I definitely, I think it's been really exciting to see the United States over the past decade and especially so in the past three years reorient around trying to be a significant player in the venture capital ecosystem. Whether it's the combination of SBIR programs getting rolled out across a variety of different operating groups or groups like the Defense Innovation Unit where they are reporting directly to the Secretary of Defense and they're the only contract agency that does. So I think all of these are signals that the DoD is becoming sort of better and more friendly to work with as a startup. And I think they're great as an investor because it sort of allows you to invest further down the technical curve where okay, maybe there are certain things that just aren't commercially viable yet, but they're viable for the DoD and defense and government. And the DoD is very interesting funding it for the first three years and that acts as the stepping stone that eventually gets it to commercial viable. And so yeah, definitely something that I actively underwrite or think about with a lot of companies. And what's nice is there used to be a much more reliance on NASA and that was much more reliant on political whims of the particular administration versus the DoD is a much larger beast and much slower to move between administrations. And so it's much more consistent. And so yeah, I guess the net conclusion being that I do underwrite it. I'm not as fearful of the political whims changing that much. And I think at this point also the just commercial economy has just gotten so big that Even if all DoD funding were entirely to stop in space, it would slow things down and quite a bit. But it wouldn't kill things. Even three years ago it would have killed things today. It will no longer kill things.

Yeah, no, agreed, agreed.

Okay.

Coming back to some of our investment stuff, I'm Finishing up here. Okay, another quirky one for you. So Luna economy, it's kind of moving back on the radar screen, right? Because there's a bunch of upcoming lunar missions of starship works, of course.

Yeah, yeah. Again, it's one of those things where it's like, just like space manufacturing for space. It's like it's, you know, interesting intellectually and I'm excited that like some people are working on it. But at the end of the day, you're only, you know, there's not going to be any real commercial customers, you know, there for a very long time. Yeah, you know, you're talking about, you know, five, seven, ten years away. It's unfortunately just not venture back of all. But at least, you know, venture back will at the, you know, scale outcomes that need. I understand that there's seed space investors that can invest in something that only has 150 or $200 million outcome. And being a subcontractor for an asset provides those types of outcomes that can be fine but not interesting, unfortunately, to a founder's fund.

Is there anything. Okay, so let me ask you the other way around. Is there anything you wish that would be there in space? I mean, you kind of like when you incubated Varda because you couldn't find any company, Is there any other opportunity you wish there was something there that existed?

Yeah, I mean, I think, I think there's something around sort of like satellite servicing and satellite refueling that, you know, there's some companies that are working on it. But I think if I were to like incubate a company and do it from scratch, I would take slightly different approaches. But I think there's at least the players in space servicing and space refueling are sort of much better suited and much more in the right direction than any of the space manufacturing players were. So I feel like it's more likely that there will turn out to be an interesting investment that I can make there as opposed to having to incubate space something there.

Okay, okay, okay. As we're kind of winding down towards the end here, let me ask you a few different questions. So if everything goes well, let's pick some sort of sensible timeframe. I don't know, but 2030, what will space look like? And then where will companies like Bada be?

Ideally, I think by 2030, you'll have on the order of 50 to 75 humans living in low Earth orbit or beyond. I think you'll have space factories that are, are reentering materials on basically daily basis down here to Earth, I think you have multiple Internet constellations covering the entire Earth, multiple observation constellations covering the entire Earth across a variety of different spectral bands. And you'll have on the order of 10 plus heavy lift commercial launch providers that are going to space quite regularly and probably the early days of a government run sort of research colony, sort of the equivalent size of what the ISS is today, having an equivalent sort of facility basically on the moon and regular commercial resupply to there. That's probably my intuition. So yeah, on the order of like six to seven people consistently living on the Moon and on the order of like, you know, 50 or so living in low Earth orbit and probably in or low Earth orbit doing commercial activity, you know, more so than just government research.

Anybody on Moss?

Probably not. Probably not.

Was he the timelines. Okay, okay, well let me ask you the other way around without trying to be gloomy or anything. So we're both clearly very excited about sort of potential space economy. What could go wrong? What could derail us, you think?

Yeah, I mean, I think there's starting to just be sort of more and more stability. I think the thing that could derail things, you have too many of these sort of like public companies that are going out right now. Rocket Lab, Spire, Astra, et cetera.

Are you saying kind of like a bubble, bubble burst, people get, investors get frustrated, that kind of thing?

Yeah, because at the end of the day, investors only invest when they think there's going to be like a pot of gold at the end of the rainbow. Right. So if the pot of gold, the end of the rainbow looks a little too rusty and not too colorful, that people's enthusiasm upstream really dries up quite quickly. And so I think the sort of leading indicator to be tracking about whether or not there's a bubble is whether or not these sort of publicly traded companies do well over the next two to three years. It's partially why I get excited by companies like Spire, where Spire. Spire's revenue base is so deep in the non space world that it feels more likely that even if everything else crashes around it, Spire can continue to perform well and continue to do well. And you know, you only need a handful of companies like that. Right. Like where after the dot com bubble there's only a handful that survived, but that was enough to sort of keep the Internet and technology ecosystem alive and get to where it is today. And so I think, yeah, I think you could see a similar sort of dot com bust. But I think thankfully we're already past the point where it won't fully die. It just might be that there will be a very small handful of survivors.

Yeah. And plus what we said before, one difference to the Internet.com bubble is you have the underlying government demand which will continue and probably grow, to be honest, for geopolitical reasons.

Totally. Totally. I mean, as China continues to run their own independent space station, as they start to do more space projects, the US will want to step up as well.

Yeah. Okay. Anything else you think that might do? Way less.

No. At the end of the day, as long as invest your dollars flow, ecosystems thrive. Right. And so at the end of the day, that's like the primary thing to be tracking. Because at the end of the day, I feel like, I mean, maybe this is obviously me having a bias from speaking from an investment perspective, but everything flows from that. The more investors that there are, the more companies they get funded, the more news that there is about space. The more aerospace engineers go to college and want to work in aerospace, the more talent that there is, et cetera. It all comes down to. It all comes down to the money.

Yeah, I agree, actually. It's funny for me, actually. I wouldn't call it a risk, but sort of like something that we need to fix is something I mentioned before. It's just I wish there was more entrepreneurs and more investors in the sector. I want to drag them in even faster to make this grow faster.

Yeah, I mean, it's funny, I would actually say, I think there's like, I mean, at least maybe it's different in the United States, but man, there's a lot of my like, you know, more traditional investor friends and all of a sudden I'm seeing them do a lot of space companies. This is amazing to see. So it's definitely growing.

Okay, different question. How do you, what are your sort of favorite ways, if any, to keeping tabs on the, on the space sector? I mean, you mentioned you started going to conference and stuff like that, but I don't know if there's anything else. Could be anything. Could be podcasts, could be books, could be conferences. I don't know, people on Twitter.

Yeah. So I really like this one newsletter, Payload Space. They do a really good job of sort of breaking everything down in the space of economy. And then I really like just like, you know, following all the reporters that, you know, cover the space industry. So, you know, Michael Sheets, Eric Berger, Lauren Gersh, all of them, I think, you know, Ashley Vance all provide just like a really great sort of up to date, you know, heartbeat of like, what is going on in like the space industry. And then. Yeah, some of my favorite conferences are Space symposium in Colorado and smallsat in Living Utah. I think going both of those gives you a really broad view into the entire sort of space industry.

Yeah. Did you go to South Africa satellite this week?

I didn't unfortunately in D.C. but yeah, it was one with you.

Okay, cool. And speaking of resources, I totally forgot I think you have your own podcast as well. Operators podcast.

Yeah, it's obviously very unrelated to space, but mostly just interview basically people that have been early employees and executives at very high growth companies. So everything from doordash, ramp fair, tons of companies that I've interviewed. And the idea being that on podcasts too many people interview just boring VCs like us and CEOs and they should instead of be interviewing the much more interesting people that are actually operating the companies. Yeah.

And like I said, even though it's technically not related to space, I think it's still a very valuable resource for people who want to be space entrepreneurs. So I still get to shout out and I recommend it. Last thing I want to talk about because I love it and I know you love it too. I think by now is the City of Miami Founders Fund opened up an office. Many other startups popping up in Miami. How's the ecosystem now and is there any sort of like link to space? I guess the space activity in Florida is obviously more in Central Florida, Space coast and then Taiwan thereabouts. But I don't know, is there any sort of connection or maybe now, maybe in the future the Miami.

Yeah, I do actually think so. I mean, I think you know, the reason that sort of most of these space companies in Florida are on the percent proposals just because that's where Vandenberg was and there didn't really make sense to be anywhere else in Florida versus now that Miami have is all of a sudden become a massive investor ecosystem basically overnight where you know, you sort of have, you know, on the order of like, I mean at this point it's like $350 billion of AUM. Right. That's like basically as large as like, you know, the entire space economy completely combined has moved to Miami over the course of the last year. I am starting to see both space entrepreneurs and companies that already exist opening offices down here, being founded down here as they want to be near this ecosystem. That's partially why I split my time basically between Miami and la, sort of the two major space hubs in the US at least for me. And I'm hoping that Miami becomes more and more of one over the coming five to 10 years. No, I agree.

And I guess maybe it's feasible. Even if you're something hardware, maybe you could have your office in Miami and then you have your facility up in Cape Canaveral where Space Florida is offering good incentives and all of that.

Exactly. It's a short hop up and we actually have a really great private train line that runs between the two.

Yeah, but I mean, one related question. Why do you think sort of like two minutes, why Miami suddenly? Because I used to have an apartment in Miami like about seven, ten years ago. Used to go there all the time. And I was asking, why can't this be a bigger sort of entrepreneurial hub? And the only entrepreneurial company was basically stuff that was like Latin America oriented and some random artist. Why did you think this happened? Is it as simple as like. A lot of people give credit to Francis Soares, who I think is a great mayor, but is there anything else?

Yeah, I mean, I really think it comes down to just like a handful of like individuals, you know, Black swan of like, I literally joked like, you know, the first dominant fell was Jack Abraham from Atomic Ventures moving to Miami and you know, whatever it was, April of 2020, that is eventually what led to, you know, Founders Fund considering an office there. Founders Fund opening an office office there. That's led to us announcing it. That's what got on the mayor's attention. That's what eventually lead to my tweet talking about moving Silicon Valley to Miami. That eventually led to the first viral tweet of the mayor talking about moving Silicon Valley to Miami and eventually got him on cnn, Washington Post, Both of us getting interviewed across all these things. I think it's just like there's not some like big macro thing. It's like actually just the decisions of like less than 10 people all of a sudden literally like, you know, changed an entire or, you know, sort of created an entire ecosystem from scratching. Yeah. Super, super exciting. And at this point it's obviously much larger than any of the 10 of us. It's incredible to see how quickly the ecosystem is riding the exponential curve.

It really is. And I recommend it to founders who are location flexible. I recommend everybody visit there. Last question, as always, is about science fiction. Do you like science fiction? And if yes, what are some of your favorites?

Yeah, I mean, I like Delta V, which is about asteroid mining 70s by Neil Stevenson, which is about the moon breaking apart, you know, obviously classic, you know. Martian by Andy Weir. Andy Weir's latest book, which is the name of slipping me right now. I like as well. Yeah, huge, huge sci fi fan. Those are some of my favorites that I just listed.

Good stuff. But I mean, I guess your day job and my day job is we got to turn science fiction into reality. So let's do it over the next few years.

Yeah, exactly.

It was a pleasure to have you. All the best to founders fund to all of your portfolio companies. And maybe we'll do the again in like, you know, a couple of years or so and see how far things got.

Sounds great. Thanks Rafael. Thanks so much for having me.

Well, that's it for another nominal episode of the Space Business Podcast. If you like this podcast, please consider giving it a five star rating on your favorite podcast platform such as itunes. You can follow us on Twitter @podcastspace. Also consider supporting us at www.pagepatreon.com spacebusinesspodcast. If the podcast got you interested in learning more about the business opportunities in the space economy, check out my new online course on space entrepreneurship on udemy.com the link is in the episode description. Lastly, if you have any feedback including ideas for guests and that may include yourself. If you have an exciting space story to tell or interested in being a sponsor, drop us an email@sparebusinesspodcastmail.com I look forward to seeing you for the next episode.