Delian Asparouhov, Co-founder of Varda, on How to Build a Space Company

Today we're welcoming Delian, who is the co founder and current president, slash chairman at varda Space Manufacturing Co. Founded in 2020 by Delian, Daniel and Will. Daniel Marshall and Will Brewey. And he's also a principal at Founders Fund, where he has been investing in advising since 2019. Welcome to South Park Commons.

Thanks for having me.

Welcome back. I suppose.

Yeah. Last time I was here, I think it was 2014. So it's been a minute.

Yeah. And to kind of dive right in, like you have, I guess, two principal identities. One is as a founder, one is as an investor. And I'm curious, how does the investor role fit in? How does your role as a principal, I guess, make sense in the overall architecture of the fund you're working of? Founders Fund.

Yeah, I mean, in some ways, obviously it is in the name of the fund. Founders Fund. Right. We like to be a fund filled with people that have been former founders and for a long time there was actually like a rule and then we've gotten more flexible. There's definitely a handful of people on the team that are just like pure financial investor types. But yeah, Founders Fund has had a decent, let's say, track record with incubating and building companies within the firm. So in 2004, when Peter Thiel was starting the firm, he actually was building effectively Palantir, as the sort of chairman and president. More recently, one of our partners, Trey Stevens, started this company, Anduril, which is effectively like a next generation defense prime. And then I started Varda in a very sort of similar format. And then even after I started Varda, Keith Rabboy, one of our general partners, just incubated Open Store. So we definitely have some sort of consistent repetition in doing it. I'd say it's in a very unique format. If you study across Silicon Valley, there are a venture firms that will do incubations, but most either typically only do incubations or they compete for competitive Series A's. Very rarely do they do both. So on the example of people that incubate a lot, you have Jack Abraham and crew over at Atomic. They have an office in Presidio as well as, you know, Miami. They're basically incubating a company every week, which is, you know, much higher volume obviously than our style of like once every, you know, three years. And then you also have Sutter Hill Ventures, which is probably, you know, sort of one of the best investors of all time that you guys have maybe or maybe not heard of. But as an example, they incubated Snowflake internally at the firm, and they have a bunch of others that have been, you know, really solid successes. They do it a little bit more at the cadence that Founders Fund does it, which is like once every two and a half to three years. But they only do incubations. And then obviously plenty of Series A firms, you know, Sequoia, kp, et cetera, but typically those types of firms don't continue to. Actually, they don't. They do lots of Series A investing. They don't do any types of incubations. Founders Fund is, I think, one of the few places where they actually, you know, are very supportive of our investment team, both continuing to aggressively invest in seed Series A's, highly competitive rounds and beyond, as well as incubating a company. Now, it's obviously a clear, you know, sort of starting a company takes a decent amount of time. It turns out it's not particularly easy. And so I think it only really makes sense to start a company when there's a couple of different sort of key, let's say, attributes to the idea. The first is if you didn't incubate this, then it is unlikely that somebody else would start it. Right. So, like Anduril is a perfect idea or a perfect sort of example of this. There hadn't really been a new Defense prime introduced into the top five in effectively almost 50 years. The likelihood of a fresh grad from Stanford going through Y Combinator and starting a Defense prime was relatively unlikely. It requires such a high level of capital intensity, very unique skill set, and working with the dod, Capitol Hill, et cetera, that basically the only way that it was going to start was Trey Stevens, our partner, who had been at palantir for basically 10 years doing a lot of government BD, pairing up with Palmer Luckey, billionaire engineering founder. And the combination of those two is probably one of the only teams in the world that could have possibly done it. One, and we'll obviously talk more about Varda later, so I'm sort of saving that. So sticking to the Anduril example, two, starting the company in a sort of unique and growing, let's say, space where by starting the company, it actually helps you a ton with, let's say, deal flow, ability to close and win with founders and then even beyond it, just having that type of moral credibility. Right. So again, sticking to the Anduril example, Trey Stevens basically started the most interesting defense tech company. And so now that this is a field that is becoming the hot new thing, anytime that somebody's working in defense, of course, who are you going to want as an investor, as a board member? Well, you're probably going to want the only person that's built a successful company in this space. And so I think the thing that allows me, you know, to balance it on the Varda side of things, that all these same things are true. I don't think anybody else would have started a space factories company. The fact that, you know, aerospace was a particular industry that I wanted to be investing a lot in and was growing quite quickly. What better way to basically make it so that aerospace founders would want to work with me above anybody else is to start a very interesting sort of aerospace company. And so what makes it work is there's actually a lot of synergies between the two. Right. On the Founders Fund side, the benefit of Varda is like I basically see every single aerospace company anytime that somebody's leaving SpaceX to start a company, I'm one of the first people that they like, you know, talk to now. And my ability to, you know, win a competitive deal is much higher as well. As a recent example, if you guys are familiar with this company, Hadrian that I led the seed round for, it's sort of like, I describe it as like a flexport for aerospace and defense machine shops. So they do full stack machine shops in their seed round. They had offers from Coastal Ventures, from Bessemer, from Future Ventures, Andreessen Horowitz, Lux Capital, Caffeinated Capital and myself all like, you know, varying, you know, prices, ranges, etc. Of all of those. Despite the fact that some of the people that offered are on the board of SpaceX or on the board of Rocket Lab or Relativity, I was able to basically win that seed round because of Varda effectively. Chris Power, the CEO, decided to work with me because of that. On the flip side, on the Varda side of things, ton of synergies. One, obviously aerospace companies tend to be very capital intensive and so having a venture investor as a co founder makes it so that you can sort of navigate the complexities of the capital markets and fundraise for an idea where there's relatively long feedback cycles. Right. I'm not going to be able to show, you know, revenue right after a seed round. Having a venture investor as a co founder helps a ton with that. And then two, there's some level of, let's say like moral credibility or brand that Founders Fund has in Capitol hill within the DoD where you know, Founders Fund incubated companies typically do well by the dod. We satisfy their needs, we don't back out of contracts, etc. We have the financial support to satisfy our obligations and so it has made the ability to interface with the DOD, Capitol Hill, etc. A lot better. So there's a lot of times where let's say like one plus one, you know, equals three. This past week I was actually in Washington D.C. both running a dinner for all my portfolio companies where I was with a bunch of senators and congressmen. And then during the day I was like straight six hours on Capitol Hill doing like Varda lobbying. And so when you think about that trip, it's like which side got more benefit? Not entirely clear. Like I think a lot of founders would be interested in being invited to a dinner like that and so will want to work with me. And then obviously Varda had a ton of benefit from the fact that like I was the host of the dinner. And so the only company that was introduced to, you know, in front of the audience of like 60 people which were largely high, you know, high, high power elected officials was Varda. So yeah, I guess one plus one equals three. But it's really hard to actually make that work. If you just start a company where like that was going to get started anyways, you're way better off just having invested in it because like the amount of time that goes into obviously starting something, it better be really, really like uniquely advantageous to have started it. So a little bit long winded answer, but hopefully that gives you my framework as to, you know, why and to.

Kind of like dive a little bit further there. It seems like this is a case where there aren't any accusations of conflict of energies of interest. There's just synergies. How does it, how does that work out in terms of dealing with founders that might be like interested in this space but they're a little bit worried about you representing the interests of a competitor or are you representing the interests of like the company that you're helping co found versus being a warrior for them?

Yeah, it's a good question. Obviously I think even if I wasn't a co founder of Varda, I don't think people would come to founders fund with space manufacturing ideas obviously when they know that it's like a prominent investment. But there's for sure a lot of times where it's like a little gray area where it's like, you know, on both sides, you know, somebody, a co investor that I'm friendly with may not be aware of my relationship with Varda and send me a fundraising deck for a Varda competitor and I'm like sick. Great. Like I now know all of their internal information and there's no way I would have gotten this as like a Varda co founder. And then on the flip side, as a Varda co founder, I get like much deeper access to like how a startup is doing in relation to early customer engagements because like they can, you know, spin me whatever fairy tale they want as a, you know, founder, investor relationship, but ultimately I can just go talk to like the end customer that like sits, you know, two desks over for me and be like, how's it going? Like, you know, and they're going to give me an extremely honest answer because like I'm their boss. So, you know, on both sides it ends up like, you know, being quite fortuitous. And I don't think it's necessarily scared people off, I guess. But yeah, I can't claim like, yeah, yeah. If anything, my saying is always like, you know, if there's no conflict, there's no interest. So yeah.

Tell us a little bit more about Varda. What was the idea, what was the breakthrough that sort of attracted you? It sounds like you were kind of noticing that there was a. Tell us a little bit more about your perception of that gap.

Yeah, so Vardo was actually like a sort of 10 year journey. It was funny when I Axios scooped our seed round announcement as we had to sort of prepare very haphazardly. But it's funny, the day after the announcement came out, I got a text from a friend from 9th grade that I basically hadn't spoken to and he was like, you finally did the thing that you said you were going to do. And I was like, wow, I don't even remember thinking about it in ninth grade, but clearly I did because I haven't spoken to you since then. So yeah, I think I've been fascinated for in the world of, let's say space manufacturing, the industrialization of space for a long time. I think a multitude of different reasons. The first that I'll give is just like a very high level analogy, which is if you actually look in the 1400s, there were two different seafaring nations that were starting to really explore the globe. The Chinese Empire and the Portuguese Empire. And they took wildly different approaches in terms of how to expand their empire's economic and political reach. The Chinese effectively decided to build up very, very large individual ships. They would go on these voyages where they effectively demonstrate their power by showing everyone, look at like all the cannons that we have, look how large our ships are, look how quickly they can go and they like went to Africa on a few different trips. There's one famous trip where they actually brought back a whole giraffe and gave it to the Chinese emperor. Sixty years later, if you look at that strategy, they actually end up deciding to effectively shut down their navy. There's no justification for it. You just kept taxing the population to pay for these large navies that effectively had no real beneficial outcome to the population. Take the Portuguese empire on the very opposite side of it, right? They basically would build these small naval merchant ships. They started off in Portugal, you know, hit Morocco and they basically worked their way down the African coast every roughly 25, 30 miles. That effectively set up a new trading post. And they would only expand down the coast as they actually started to generate economic activity trading within, within that particular location and then start to very slowly move down. Fast forward that strategy. 60 years later, you, you basically have the Portuguese empire across the entire world. They're an incredible economic powerhouse, political powerhouse versus China effectively became a threatened nation. I think that exact same analogy applies to how humanity is generally thinking about space today. I think there's a lot of people that are thinking about how do I make these very large ships and demonstrate my power and send off and maybe I'll bring back a giraffe like a moon or a Mars rock or something like that. But ultimately there's not really end economic benefit to folks down here on Earth and whether it's taxes or private capital and at the end of the day, the capital that funds that is coming from people here in this room in various ways versus if you took that Portuguese approach to space. Well, you need to establish these trading posts. And the most obvious area right now is just establish a trading post effectively in low Earth orbit. We've done some amount of economic activity up there. You have companies like Planet Labs, Starlink, take photos of the Earth, sell that, communicate with the Earth and sell that. That's a relatively limited and thin economic use case. It's really just putting a computer in space. The next natural, most obvious thing is like are there things you can either bring from space or manufacture in space that would have benefit there? So that was the like, let's say, you know, 10th grade version of the sort of thesis. And then in 2011, Peter Diamandis and Google came up with this idea of like the Google X Lunar Prize where they're actually going to explore a variety of these ideas. So there's a category basically the Google X Lun enterprise was set up where there was like a Certain challenge you had to hit. If you hit that challenge, you got like four, five, six million dollars, whatever from the parent organization sponsored by Google. You know, one challenge was drive a rover on the moon and take photos and bring that back down. Do it purely commercially. Another one was around in space manufacturing, another one was around asteroid mining. So back in the day, there were a couple different companies that started to tackle these various use cases you guys might remember or be familiar with them. Planetary Resources, Moon Express, Made in Space. Those were probably the biggest three sort of players that got some level of like venture funding and traction. And these were all founded in like the 2010 through 2013 basically timeframe. So that was what then sparked it off even more. So sort of, you know, realistically where it's like, okay, there are now people in the world working on these particular, you know, sort of problems. And when I first moved out to Silicon Valley in summer 2013, I actually debated should I go get involved in one of these companies? I like, actually lightly kind of interviewed with a couple of them, came away somewhat disappointed. I was like, these kind of feel like a little bit more like science projects right now than something that's like concretely going to end up like raising lots of money, building an actual business today. And part of that was in 2013, you know, SpaceX wasn't really quite successful yet. You were still basically going to like Boeing, ula, Ariana, Space and, you know, Europe in order to get access to space. And so I sort of put the idea, you know, back on the shelf. Became a venture investor in 2017, started investing in a couple of aerospace companies more like, you know, again in those initial two use cases around communications and observation. And then late 2019, Q4, 2019, it was the first time that a Falcon 9, I believe landed four times. So, you know, was launched reused four times in a row. And that to me was like the rough breaking point of like, if they can do it four times, they can definitely do it 40. Like, nobody knew how much it would take to like refurbish a rocket, whether they could do it, like if it didn't, like, you know, it was totally possible that like, it turns out you can only use a rocket like two times, three times. And then like, you just got to rebuild the whole thing from scratch, kind of similar to the space shuttle. But like, once you've done it four times, you've done it pretty cheaply. Almost certainly you can get all the way out, you know, to 40, which makes the economics of space like wildly different. And So I was like, okay, I'm currently like a venture investor. I've invested in aerospace companies. The trend is finally here. Like clearly the next economic outcome that's very interesting in space, you know, especially after seeing some of these companies succeed. The only thing that really seemed to make economic sense was manufacturing materials in space and bringing them back down. Given that you had a very large market, that is these high value materials can be sold to anybody on Earth versus like asteroid mining. You're bringing things into low Earth orbit, who knows who your buyer is going to be. And so I went down and met with all these groups again. I met with, you know, Made in Space, there's a few others that had started, you know, sort of since then and about a quarter later came away with like the same, you know, sort of unfortunate outcome or analysis which was these are all just still science projects. Like you know, NASA's paying them to do some, you know, little fugazi fairy dust thing on the iss, got a little publication, but it was just like all complete bullshit. If you took their result and tried to sell it to somebody on Earth, they'd be like, this is completely nonviable for a wide variety of reasons. One, when you're trying to publish a paper versus bring a commercial material to market, the level of like process control that you do is wildly different. But then two, also the International Space Station is like the worst place to run a manufacturing line. It's a multinational bureaucratic that like geopolitical risk, you know, human rated station that is extremely expensive. You have to work through one of the most bureaucratic organizations in the world, NASA, in order to get on there. And then you have to rely on one of the most geopolitically risky people in the world, Putin, to like not fuck you somehow. And so it's like you're going to build a business there. Like that's like the worst place to build it. So I even pitched some of these companies. I'm like, what if we like did the things that you're doing on the iss, but we did them like not there, just like it's pretty easy. What you're doing is like, you know, you're mixing some fucking liquids together. Like this is not like six degrees of freedom robot arms being around. I'm not saying it's a piece of cake, but like no need to have humans on board whatsoever. No need to have complex robotics. So I pitched a couple of these groups, I was like, I will give you $10 million to go do the exact same things you're doing, but like prove that we can do it off the ISS and start to build up that commercial market. And literally every single one of the founders is like, NASA won't fund that though. And I'm like, I know because NASA's sorry, this is recorded. NASA's great, but. But maybe is not economically incentivized to do the most appropriately commercial things. And so I was like, okay, well these guys are all addicted to NASA's policy. I'm not sure that that's the way to like build a business. And so I put the idea on the shelf again for a second time. And the second time I was much more frustrated putting the idea on the shelf because this time I was like, there's a thing here, like you can clearly build it, right? Like, I don't know quite if it's going to work. Like at the end of the day, the way that I sometimes think about Varda is like by 2035 there's going to be people manufacturing shit in space. The question is like, was the right time to found the company 2012? Probably not. Was the right time to fund the company 2020? I don't know. But like, I think so. Like my so far my answer is I think it was roughly the right time to start it, but maybe the right answer is 2026. And I also was too early and there'll be a, you know, whatever 27 year old that's making fun of me a decade from now, just like I'm making fun of some of those earlier companies. But anyway, so I put the idea on the shelf for a second time. Was very frustrated that I had to do so. Covid hits, you know, our sort of policy at Founders Fund was no investing. Go on vacation for a minimum, you know, two months. And so I went from having a very time intensive and very engaging job to basically being unemployed, but high salary. And so I lost my fucking mind. And I'm sure all of us did. But in March 2020, I just played World of Warcraft for 12 hours a day. Not the most productive use of my time. About a month in, one of my mentors, one of the partners at the firm, Keith Rabboy, was like, you need to get your head out of a hole. Let's go down to Malibu for a weekend. We'll get this very distant, whatever, socially distanced house and let's go on a hike. And I remember on this hike, Keith was giving me this feedback. He was like, look, we're probably not gonna be investing for a while. Who knows what's going on. We did end up starting to invest like two months later, but we're not going to be investing. You should figure out how to spend your time productively. You clearly like building companies. You've done it before, just build another one. And I remember sitting there being like, it was so painful the first time. My first company, like totally failed, went through White Combinator, raised a small seed round but like got to ramen profitability and just like died afterwards. And like just so much PTSD from that because like, you know, you get the thiel fellowship in 19, you get into Y Combinator in 20, you put up on this pedestal, of course you're going to be like the next Zuckerberg. And then you just like completely run into a wall and totally fail and like lose your investor's money. And so I'm like, I just can't imagine putting myself through that again. It was so painful. But I remember saying like, during that I was like, the one thing that like I'm motivated enough to do would be this fucking space manufacturing idea because like nobody's going to do it. And I could kind of see the argument for like, okay, this could be the type of thing where like a founders fund investment member would be the right person to like incubate and build this. And so I went home, I like talked to my, you know, girlfriend, now wife or wife at the time was girlfriend. And I was like, okay, if I'm going to do this because like it's going to be painful for my physical, mental health or relationship, et cetera. I'm only doing this if I like line up the perfect co founders. And my list of criteria was like, I need somebody that has literally built a ton of spacecraft before, but in particular has worked on reentry vehicles. Because counterintuitively the reason that these guys were all terrified of going off the ISS was not like doing the manufacturing off the iss. That is actually like piece of cake. Lots of engineers can do that. The tricky thing is like, what do you do once you're done? You got to bring the ship back down. On the iss you get a free ride down from like the Dragon, the Soyuz, the Cygnus, the Starliner. Lots of governments will happily give you a like somewhat subsidized but expensive, you know, ride down. If you're out there on your own, good luck. You can't like go re dock with the ISS and ask for a ride down. So you got to make your own ride down. Nobody has ever made a commercial reentry vehicle and Somewhat counterintuitive, but that's actually in some ways like the much harder part than the rocket because like the way that you're getting to orbit works is you like, you first go up only a little bit, but then most of what a rocket is doing is sending you sideways super, super fast. So once you're in orbit, you're going Mach 25. You need to basically figure out how to slow down these materials from Mach 25 down to zero, throw out a parachute and basically make sure that you can recover them. The set of engineers that have worked on that is actually very, very limited. Like lots of people have worked on Rockets. Probably 100 people in the world have worked on reentry vehicles because again, most of the time we don't bring stuff back down. We send lots of shit up there. But why would you bring stuff down? Either bringing humans down or what else? The only other times they bring stuff down are like asteroid sample return missions. So the Japanese and the Americans have done that a few times. So anyways, I was like, I want a co founder that comes from SpaceX, because that's the only reputable, you know, space company. And two has specifically worked on the reentry Dragon program. And they have to be like the CEO co founder. I suck at being a CEO. Like I need them to like be able to be an amazing leader actually understand what like seed Series A's are like. I can't coach them on like everything about startups. So like, let's say there's like 40 reentry engineers of the one at SpaceX, of the ones that could fit into this like leadership profile, there's maybe two. Three probably would be my guess, you know, in the world. And then on the other side I was like, I'm not going to like totally start from scratch on the material side. I want somebody who's actually done material science basically on the iss. And like the number of people who have done that is like seven. And the number that aren't like, you know, Russian nationals is like two. And so it's like, okay, you're asking for like n of 3, n of 2 in the entire world and, and we have to get along and we have to like convince one and we have to be available and like go with equity splits. I started telling my wife, I was like, there's just no fucking way. Like this is just an impossible bar that I've set for myself for this to happen. And then fucking third week of August I got introduced to like a like spacecraft reentry leader. And a material science microgravity expert and they both wanted to start a company. And I remember at the time I was like, I literally feel like I was somebody that had tried to commit suicide before and like shot a shotgun into my brains and the first company almost killed me. But like not quite. And I'm choosing to proactively go put my mouth around a fucking double barrel shotgun again and shoot it a second time. For some reason, but very vivid. Yeah, the idea for some reason is worth it. And so yeah, that was how it came about. I ended up deciding to pull the trigger.

Wow, thank you. So what is it takes the time now for Varda, like what is it about manufacturing? What is it about demand? Like what do you believe? Like, you know, in order to pull that trigger you have to believe that there is a market out there, that there is some breakthrough like application of this technology. What do you think that application is and how are you going to get there?

Yeah, I'd say when starting the company there were lots of NASA papers about here are the interesting market and here's the scientific results, etc. And those were helpful guideposts. But again you have to think about it like NASA is really publishing those papers because they just want funding from Congress. So it's all just fugazi. And so it's like somewhat relevant in terms of like pointing you towards the scientific detail. But their analysis of commercial markets is obviously going to be very rosy in terms of like here's what customers are going to be willing to pay, here's why the economics work out. So I'd say the first like 18 months of Varda were I had a couple of presupposed biases, what I thought the right answers were going to be in terms of what the most interesting materials markets were. To give you a sense, there's a wide range of materials, but the three that are sort of most often talked about are like fiber optics, semiconductors and biopharmaceuticals are the three that are talked about the most. I had some biases on what I thought was going to be the most appropriate market. But I'd say the first 18 months of Varda were like just going and doing the work. Like you can talk about these like theoretical like NASA papers, etc. But the other day you got to like go talk to an end fiber optic, semiconductor and biopharmaceutical customer and understand a couple of different things. Like one, what are the performance improvements and specs they need to be proven in microgravity to actually Buy it. Two, if they see those performance improvements, what is the net dollar amount that they're willing to pay relative to what they could get terrestrially? And then three, what is the total upside of those markets? And so it took quite a bit of time and lots of customer conversations that completely invalidated all the shit that NASA would write about. But yeah, ultimately ended up landing in the world of biopharmaceuticals. And I'll keep it at a high level for now. We'll announce a little bit more later in the year. But if you Google Varda Space Industries on Google Scholar, you'll see our first handful of papers that we publish. So you can kind of intuit between that and our job board what the.

Hell we're up to and to bring it back around to talking about NASA, the organization that we have utmost respect for.

Absolutely. I was with the NASA CFO and their chief policy person this week, Margaret and Bhavya. You guys are awesome.

Yeah. You announced a partnership last month.

And thank you NASA for the heat shields. That too.

Yeah. Tell us a little more about what that like, it sounds like there's a little bit of, a little bit of curiosity, a little bit provocative there. Like there's still partnership with NASA despite the fact that a lot of the things that NASA may be doing is, are incorrect or they're insulated from the right kind of incentives. So how does partnering with government bodies like that work, even though there is some antagonism there?

Totally, totally. Yeah. Ultimately, like the only reason that I even provide these types of critiques about NASA is because like, I want NASA to be the most successful sort of, you know, version of itself. And to be clear, I've made all these like critiques directly to the leadership team at NASA as well. So they, they're very aware of my opinions of NASA. Ultimately though, NASA is a phenomenal like engineering organization. Right. If you look at obviously like the you know, Curiosity rover, three minutes of, you know, terror or six minutes of terror, you know, landing a you know, fucking like SUV sized robot with retropulsive, like retropropulsive landing and also bringing ingenuity. They're like little helicopter that can like fly on Mars. I mean, it's just like dad is out, you know, out of the world there stuff. And so in order to operate in space, you kind of almost always need to somehow, you know, be in bed with NASA. And in particular on reentry vehicles, you have to work with NASA. So the reason being heat shield material is actually a itar Controlled material, which basically means that it's very tightly controlled by the government. The reason being that, you know, if a near peer adversary got their hands on it, think like, you know, North Korea, Iran, those countries already do have orbital capabilities. They can effectively put a nuke inside of a little bit of reentry heat shield landed over the United States. It'd be very difficult for us to actually counter that with our current missile defense systems. And so in order to get heat shield, you very much so have to partner with government and NASA obviously being the primary broker for it, since they're the ones that are largely producing these types of heat shield materials. So our first two calls when we started the company in the first week, the first was to the faa because in order to land the reentry vehicle, we're planning on landing in the Utah desert. And we actually get regulated as an aircraft, experimental aircraft, effectively as we come in Part 450 regulation. So first call them and we were like, yo, this is going to sound crazy, but NASA landed stardust in 2004 in the Utah desert. We're going to try and do it every month. You know, can you approve us to do that? And we're still working with them. And the second was calling up NASA Ames, which is actually in the Bay Area, in South Bay, that specializes in heat shield production and research, basically called them up and were like, hey, we would like to make a reentry vehicle. We literally need your approval in order to do so because you are the only organization in the United States that can actually give us heat shield. So you go through a bit of a negotiation back and forth. It's basically NASA figuring out like, is this like Iranian spies or is this like an actual American organization that is trying to make heat shield? And then from there it's sort of lots of back and forth, let's say like, you know, government organ negotiation, but very synergistic. So as an example, one of the things that we're starting to talk with NASA or work with NASA about is they produce a very limited amount of heat shield. It's mostly like one off runs because they basically like once every four years send something to Mars. Once every 10 or 15 years, do an asteroid sample return mission. And so they very much produce one off batches versus Varda ideally is going to be re entering over the United States every month. And so we're going to have to basically mass produce this. And so one of the things that we're talking about NASA is they actually in that agreement out licensed the Technology to us. So we now own the like. Basically think of it as like the recipe for the heat shield. But as we start to mass produce it, NASA's actually interested in just taking 10% of the supply that we make because it's way cheaper for them to draft off of Varda's volume rather than like have to build it up themselves. Yeah, so yeah, best way to always, you know, interact with the government is make it so that it's, you know, mutually beneficial. You as the corporation gets benefit but the government also, you know, gets gets the benefit.

And when in Varda's sort of great ambition is Varda hoping to be basically a full stack space factory in terms of launch manufacturing raw ingredients and also back down. It sounds like reentry is a major part of the equation. Is launching things to space also part of the Varda equation or is that something that would be outsourced?

I'd say we will go as full stack as is necessary to satisfy our customer demand. I think at this point it is unlikely that we would have to get into launch. There's like 100 different venture backed launch companies. Obviously right now it's still more like oligopoly than it is truly either sort of disaggregated marketplace. At the end of the day, SpaceX has by far the best prices and the next best after that. You know, Rocket Lab is still very subscale in terms of total mass sent into orbit. So again, who knows how this like marketplace shakes out if like four years from today Elon gets hit by a bus. You know, a lot of these companies fail. There's actually like not consistent access to space. Okay, you got to do what you got to do. But I think at this point the likelihood that like all 100 of these players basically don't work out over the coming years, probably unlikely. And then the rest, yeah, we basically have to operate, you know, ourselves. So everything from like the in space manufacturing, the ingredients that we basically bring up with us and then the reentry basically has to be in house. Given that like there are some companies that have been started recently trying to do like reentry as a service, but it just, it's a very thin market. Again, like what are you reentering? You're not going to compete for the ISS reentry market because that's already basically like totally done right Crew, Dragon, Starliner, etc. And then what else are you reentering? It's basically only companies like Varda and the likelihood of me relying on my like something that is core to my business on like some startup that just got funded. No way. Like, I need to control that. The only reason I'm willing to like, not control launch is because, like, it's actually a pretty large marketplace at this point of people that I can go after to provide that service for me. So, yeah, we're going to be as full stack as we need to be. And then, you know, the goal is over time, right now we're sending up like 300 kilogram satellites. So, you know, think of roughly the size of like three of these chairs in terms of, you know, volume a little bit larger than that. And then over time, just make it bigger, do it more often. So we've got our first four launches booked. So two in 2023, two in 2024, and then ideally in 2025, you know, six plus, 10 plus, probably can't go above 10 in terms of, you know, volume. But that'll be more dependent on, you know, how much customer demand we're seeing and what.

I guess without going into too many specifics about the specific customer specific application, what applications are you excited about or what exactly does microgravity do for the manufacturing process?

Yeah, I think most interesting to explain the latter part of it, because the effect of microgravity across fiber optics, semiconductors and biopharmaceuticals, it's all the same essential physics. The easiest way to explain it is effectively through an analogy. So if I lit a candle here on the table in front of us, you're taught as a kid, the hot air rises, right? You put your hand above it, you feel the heat. Why does that happen? Well, when you light it, there's a chemical reaction that happens. A small amount of combustion. What does that do? That generates thermal energy that then gets dispersed to the gas molecules that are around it. Right? The atmosphere, nitrogen, H2O, etc. When you give the atmosphere or these gas molecules thermal energy, the average speed of those molecules increases. And so what happens when the average speed of the molecules in a gas increase? The gas becomes less dense. They effectively get further apart from one another. And because we're in a gravity field, less dense gas floats upwards. Colder and denser gas comes in inwards. And so you end up getting what's known as a convective current. Where a candle gets lit, hot air goes up, and then eventually that hot air actually does cool down, comes back around and feeds it in. And so that's what's known as a convective current due to, you know, thermal thermal energy combustion. Process, take that same candle and light it on the iss. Well, what happens, you still get the combustion, right? You still get the thermal energy getting dispersed to the atmosphere around it. The atmosphere around it becomes less dense. But what happens next, there's no gravity field, right? There's no up, there's no down. There's no concept of that. And so instead what happens, you can actually look at photos of this online. You can Google after this, like, ISS candle experiment, you end up just basically getting like a sphere of sort of expanding gas that very slowly disperses the thermal energy and evens out with the rest of the environment. And so this thermal energy basically slowly goes out. There's no what's known as the convective currents that are introducing it. Instead of this process is known as diffusive, basically. And diffusive currents are still happening even on Earth. They're just by far less dominant, right, because conductive currents are so, so powerful. So I've just given you the analogy on the macroscopic scale. Let's take it down to the microscopic scale. Effectively, in any material science, process, biopharma, reaction, et cetera, what you're doing is you're taking two different molecular compounds. You're typically applying some amount of, like, thermal energy to them, and you're trying to, you know, get above some activation barrier to get them into some finalized state where they create some new molecule, new semiconductor material, et cetera. When you run those reactions on Earth, almost always you're taking two molecules that have different weights. And so because that when you heat one of them up and the other one's colder, again, you get the same thing, convective currents. Convective currents effectively cause some amount of entropy or chaos in the system. Take that same experiment and run on the iss. And so you can have these two molecules, hold them by one another, heat them up, so they get past that sort of activation barrier and basically latch in. And so this can allow you to basically, you know, control processes much more precisely and improve basically quality and yield when you care about basically, you know, sort of crystalline structures and how they're formed, and especially when you shift from convective transport being the primary mode of transport to diffusive transport. So, yeah, that's probably the best way to explain it. And it's the sort of same analogy again. In semiconductors, you're basically trying to remove defects. In fiber optics, again, it's basically the same thing. You're trying to avoid crystallization. And again, that crystallization typically happens when you have molecules Moving a little bit in chaos. And sometimes they latch into place in a way that allows them to crystallize. And then in biopharmaceuticals it's actually the same thing. Typically what you're doing is you're taking a biopharma molecule, you need to like surround it with ethanol or something like that in order to package it up so I can give it to a human again. When you're trying to package it up, lots of things moving around, difficult to actually control it. And so because of that you can actually get very different crystalline structures. So the best, let's say commercial example that I'll provide is Merck has this monoclonal antibody drug. It's a biologic called Keytruda or Pembro. It's a pancreatic cancer drug. It's actually one of the like most blockbuster drugs of all time. It creates, currently does $26 billion a year of revenue for them because of the inability to control how crystals are formed on Earth. In their manufacturing process, they get these really large crystal structures. And so in order to get it delivered into a patient, those crystals don't break down very easily. And so the delivery mechanism is a three and a half hour IV drip. So every day during the treatment you have to go into a clinic, nurse has to administer an IV drip, you got to sit there for basically three and a half hours. You're allowed to watch Netflix, blah, blah. But again, it's a relatively costly procedure. They took that same manufacturing process they were doing terrestrially did it up on the iss. They were able to show that basically they could control the crystal structures, make much finer crystals that would actually allow them basically shift that IV drip to instead an at home syringe. So now all of a sudden you get patients that obviously don't have to go into the clinic. And so if you think about, you know, hundreds of thousands of patients and I'm going to go into the clinic and the, you know, cost of that and the IV drip, et cetera, tons of sort of potential savings there for payers, insurance companies, and instead you get to take it at home and also improved adherence so you know, better patient outcomes. And so when you think about it like the amount of crystals that are consumed of that pancreatic cancer drug is on the order of like three milk gallon jugs. So we can manufacture that in basically like 2 of our emissions versus the net value that you know, sort of insurance companies and patients see is on the order of like billions of dollars effectively. And so very easy to Sort of make those economics work. However, that ip, that process that's been shown in the ISS is basically right now is sitting on the shelf. The like it would have massive outcome for a lot of different patients but right now there's no way for them to do it at scale on the iss. And so instead Merck basically just sits there with this ip.

It sounds like there's like some fairly concrete potential commercial applications. There's a lot of precedent on like basically de risking some of the technology. You're coming from a place where you all are relatively well capitalized. What do you see as the primary risk factors? What do you think is if it was going to be 2026 as opposed to 2020 when this company is founded, what do you think that's going to hinge on?

Yeah, it's a good question. You know, I think it mostly at this point comes down to like execution and customer adoption. I think like when I first started the company it was so high level, like I just had these just generally macro theses of like launch costs are going down. Very interesting chemistry that's happened on the iss. Even if it's a little bit fugazi, it still shows the fundamentals there. And one of the like mottos at Varda is like no science allowed. Like we do try to build off of what's been done in the issuance, not explore like completely sort of net new fields. But I had not yet talked directly to a customer and seen like hey, are they willing to you know, make this stuff pencil out at this point? Like and again, you know, it's not like we've got these like massive signed contracts but like there's enough customers now in the funnel engaging with us with like, you know, sort of deals that make sense in the range of even our current space costs, let alone as we like start to scale and show success here and there's just been ongoing, you know, sort of investor demand. Then I think it's really just going to come down to like execution, like can we build this spacecraft? Can we like satisfy our customer needs? And there's a world where the reason that the answer is wrong is like actually you know, Falcon 9 is currently launching once every six and a half days. But again Elon gets hit by a bus in a quarter space, X stops launching quite as frequently. Space economy kind of tanks. Right. And that's where it could have been the wrong answer, where it's like even you know, I can only do so much internally where it's like building a rocket is pretty Damn expensive. And so all of a sudden, if, like, that goes away and I have to do that myself, that becomes a pain. If somehow NASA budgets go down or like DOD budgets go down, and that's helping support us in the early days, that can be painful. So those are things that I think about.

Ecosystem risk.

Yeah, it's more like ecosystem risk, which is great because, like, I mean, like, you know, a year and a half ago I was like, even if the ecosystem is great, I have no idea if I can build a business here. But, you know, thankfully, that's the whole point of raising venture capital, is to go see, okay, let me go try and start doing it. Our customers biting. And now it's like, okay, enough customers are biting that it's like, if there's five, there's 50. If there's 50, there's, you know, 200.

Yeah, and speaking of ecosystem risk, and I think specifically for space, because space has been an area of exploration and science, science that's been dominated by governments for the last couple years, and it's been one of those odd areas of collaboration between rival governments. It seems like a lot of those collaborations are beginning to fray. A lot of those relations are beginning to fray.

We don't work with the Chinese anymore. They had to set up their own space station.

Right. I'm curious, is that part of the ecosystem risk or does that, does that affect, like, how does, how does that international politics get reflected once we get up there?

I mean, if Russia starts launching ICBMs every single time that, like, SpaceX tries to launch, like, yeah, that would be a problem. So there's lots of existential. Or if they just, like, start, you know, bombing every satellite that is up there and you get this, like, massive debris field, like, that would also be a pain. Yeah, we can operate low enough where, like, we basically don't really care where we are in orbit because we're just up there for the microgravity. So I can basically aim the VARDA satellites to areas where there's just like, not a lot of congestion, or we stay so low that, like, if there is debris, it actually the orbits pretty quickly. But, yeah, you know, I'd say there's a lot of sort of multinational geopolitical risk that comes with operating anything in space. But on the flip side, it's also, you know, one of the reasons that at least I'm very excited to work on it. We'll be talking about this a bit more later in the year, but some of the infrastructure that VARDA is building is Very relevant to some of the DoD's priorities. And so through that, we've got a lot of Support from the DoD on what we're working on. That wouldn't happen if it weren't this sort of like, you know, geopolitical, you know, playing field. And on the flip side, I tend to believe, again, if you look at the sort of Portuguese and Chinese empires, the Portuguese empire ended up being, like, militarily quite powerful because of their approach. And so I sort of believe the same thing is going to happen in space. Whoever establishes that first trading post is going to have the upper hand in terms of eventually, you know, sort of, you know, choosing what type of political system we have on the Moon inside a sort of relatively controversial tweet about, you know, nine months ago, which is like, part of why I wake up every single day to work at Varda is so that eventually the primary language spoken on the moon is English, not Mandarin, which is less to do with the languages and more to do with the political systems, you know, between the two countries. I prefer for the moon to be a, you know, sort of, you know, democratic republic that, you know, believes in individual freedoms rather than, you know, genocidal, you know, communist dictatorship. And so establishing that first trading post is the first step to ensuring that.

Yeah, big words like, I'm curious when you. And I don't mean that. I don't mean that like, I mean, that's a. That's a bold statement and I like it. I'm glad you. We'll stand behind it to kind of like zoom out on Varda and like, what is the sort of grand vision? 15 years, 20 years? How do you imagine this scaling out? What does this look like? Like, sell us that future vision of that ninth grader.

Yeah, this is very much like the first trading post. Right. Like, we're standing as close to Earth as possible. We're tackling large markets that are relevant to people on Earth because it turns out all but 11 people, or I think today it's maybe seven. All but seven people are on Earth. And so obviously this is where most of the economic activity and, like, you know, buyers are. But once you establish that first trading post, what then becomes viable is even more interesting than the first one. Right. I love the idea of asteroid mining. Phenomenally interesting idea. I'm very glad that, like, you know, lots of people are thinking about it how six months after Varda lands in the Utah desert, NASA is actually landing Osiris Rex, which is actually an asteroid sample return mission that I think launched in 2006. It's been like a, you know, 18 year long mission. Phenomenally exciting. The issue is zero commercial market today. Right. Even if I took a extremely high value chunk of like take a comet that is largely made of, you know, ice and water, etc. Brought it into low Earth orbit, who's buying it? Like we have no large scale consumption of water in low Earth orbit today. And so there's just zero market for asteroid mining today versus if you have something like Varda really successful or one of our other companies that we invested in at Founders Fund Impulse Space, which does refueling and servicing in orbit. Both of us will be consuming lots of water because we have business models that are predicated on the idea of like me having raw ingredients. And some subset of my ingredients are actually just water that I'm bringing up from Earth and it's very expensive. And then refueling. Plenty of fuel that you can make purely from water. And so now all of a sudden if we're like shipping lots of water from Earth just to be used in low Earth orbit, great. There's a great outcome, you know, in commercial market for that versus today. The only real large scale consumer of water right now from Earth is the International Space Station. It's like that's a very against still a small market. And it's like, okay, once asteroid mining is viable, well then it might make more sense actually have like a Lunari mining operation. And then eventually you might have something that actually makes sense commercially to actually go out to Mars for. And so I think if you see humanity become a multi planetary species, I think it's going to be much more likely that it comes from sort of economic incentives and like trading routes. Much more so than you know, sort of the Chinese approach of throw a big ship to the other side of the world and like see what happens.

Yeah, to close out on space. What is your favorite sci fi show or book series?

Oh, different, but I'll say for all mankind on TV it is a alternate history. It's on Apple TV where it starts basically in 1969 and the Russians are the first to land on the moon, not the United States. And basically the space race continues. And then every season is basically a decade jump forward all the way until basically mid-90s. Highly recommend. Very much in like the hard sci fi. Like everything is quite, you know, realistic. All the tech and the programs and the things that the Ruskis are working on are actually real things that they were doing just with much more success in the alternate history. So yeah, love that. And Then let's see, on the book side of things, this is my favorite, but I don't recommend this one often. But I do really like it so I'm going to use it here. Given that my normal list I say all the time, but Bobbyverse is a very fun one. It's about a guy named Bob that was a mid level construction worker and all of a sudden during a geopolitical conflict he dies and gets uploaded as an AI up to the ISS and then ends up actually sort of self replicating and then ruling the entire universe. And his name is Bob and he just makes clones of himself called Bob and Robert and John, et cetera and ruling the world. It's a very, it's a very like, it's a little sillier but also actually quite good. Like hard sci fi. Yeah.

Great recommendations. Thank you. Going a little bit more personal. You are a former.

I think we've been pretty personal.

Going a little bit less. Stacey. Yeah. You're a former Thiel fellow or I guess a veteran of the Thiel Fellowship. And you know, Peter Thiel has this thesis that a lot of like really creative minds kind of get hammered down in school. There's maybe a little bit too much reliance on institutional accreditation, feathers in your hat, et cetera. But I think of space as being this place where a lot of benefit comes from the science, from this sort of ivory towers, from the sort of like slow process of accumulating, you know, feathers in your hat that have happened, I guess. How do you square that circle? Do you think that there is benefit? Like how critical do you remain of those institutional creds or of the educational institutions of higher education as a means to sort of breaking through.

Yeah, you know, I think lots of different angles that you can take there. Maybe my first primary angle is if you actually look at, on, you know, Crunchbase, the average age of a, you know, sort of seed stage founder has actually gone up significantly in the past three years. My general argument for that is like the early, you know, sort of days of software were, you know, very much a lot of easy fruit for the picking, let's say. And it didn't require a ton of expertise. But nowadays it's like when you're like, let's say building a social app, you're competing against like TikTok, which is like state funded, $10 billion program. Good luck. Just like a couple undergrads making like a, you know, basically social app that competes against that. And so at this point like the like low hanging fruit have all been Picked all that's left are things that do require some level of expertise. But at the same time I don't. It's not clear that the experts always necessarily have the right sort of angle of attack. So you know, let's take you know, Varda as a very particular example. My original life path was I want to do undergrad at MIT, grad school at Caltech, I wanted to go to JPL, I wanted to work on robotic missions with NASA. That was like life goal from 10th grade. I was eventually going to do this like industrial stuff but it was going to be within the lens of NASA. Ultimately if I'd done that, there's zero chance that I would have founded, you know, something, you know, like Varda. And then if you look at my co founders, they Both have effectively PhD level expertise in their particular areas right around, you know, they aren't PhDs but you know, the like the theory and the engineering they have to do is I think you know, at that level in sort of spacecraft and re entry in microgravity material science. But neither of them had ever thought about the idea of like what if we did space manufacturing off the iss? And like I swear to God it sounds like a very simple answer, right? But I met a like senior policy advisor at NASA that had spent two years, you know, tons and tons of time, money, etc. Gone to this created like a basically 200 plus page report talking about what is the future of space manufacturing? You know, sort of look like. And in his entire analysis he never included a single example that was manufacturing that was off of a human rated space station. And he came and visited us and he was like oh you guys are cheaper than even my best case scenarios of the human rated space station like a decade from now. And he was like huh, probably should have included that in the report at the end of being like yeah, probably shoulda, probably shoulda. So again it's one of these things where like you're ingrained in this particular like mindset work ethic, you know, sort of philosophy. It's really hard to see outside of it. Even though this policy advisor, brilliant guy, he asked the best questions when he came to Varda, but it was clear that like he literally just never even considered the idea of this. It's the same thing like co founders had never even considered this idea. So I think like the real answer is like you kind of actually need a little bit of both. I think again all the low hanging fruit have been picked off. It's really hard as like a fresh grad from Stanford to start a hyper successful company nowadays. It's not impossible. It's clearly happened, right? Like, you know, my latest favorite example is like Alex wayne from Scale AI, like, started the company when he was like 18, 19. It's like in a deep tech, machine learning type space, like not a particularly easy area. So again, not impossible. But I think it's very different than like, you know, 2004 with Zuckerberg, etc. And so I think the right answer is you actually kind of need a mix of both the like, you know, sort of most interesting ideas today. Do you require PhD levels of expertise, but ideally coordinated by and like the vision coming from somebody that comes in with a little bit of beginner's eyes that puts together that team, that capital and vision to fight towards it. And so that's what I think, the role that I kind of played at Varda. I'm definitely not a spacecraft engineer. I've learned a lot at Varda. I'll admit I can speak much more confidently to it than I ever could, but things go way over my head all the time there. I barely understand material science at all, but I understand them just well enough to kind of look from the outside and be like, let's like mix these two in a slightly, you know, different way. And then I just go to them and be like, am I crazy? Does this work? And like, they're both their answers, by the way, at first, like, you're fucking nuts. And then both of them a week later were like, okay, maybe you're not nuts. Like, there's nothing that I can find here that like, disproves why this shouldn't work according to like, laws of physics. And I was like, cool, so you guys want to like, raise a bunch of money and go do this?

Like, so I guess, how does the kind of current cohort of wunderkind kind of rests with you? What advice would you give them? Those people that are kind of graduating from Stanford that are, that do have their eyes sort of set on maybe a pattern that's already a little bit out of date? Would it be stay in school? Would it be like, find a specific application of your creativity? I mean, I'm just curious, how would you kind of coach them if you were dealing with somebody who wanted to be an entrepreneur?

Yeah, I mean, this obviously, you know, happens on a regular basis. My, you know, best suggestion to most folks is like, go work at the most inspiring company that you see out that's out there. Like one of my most influential, you know, Sort of career moments, was actually working at Square in summer of 2012. At the time the company was like when I interviewed 90 people, when I joined 130 people. This is like not obviously the Square that you see today, but like I got to you know, work there for almost you know, four months straight. Again, small period of time but enough that like you just get imbued with like oh, this is what success looks like with a world class entrepreneur, right? I got to like have multiple one on ones with like Jack Dorsey as like a 18 year old at the time. I got to like work with world class engineers. Like the Android team that I worked at at Square was literally the team from Google that had made Android. These were like the best Android engineers in the world. And so you just understand what like world class looks like. And so I could then go take that to my startup. And nowadays I think, you know, back then I think I could get away with four months. Nowadays I think you typically probably want to do on the order of like two or three years. And again don't go work at like you know, fang or semi retire at age 22. Like you know, go work at something that is like a meaty problem that is relatively early stage that you can have impact on that is in an area that you're like passionate about and go learn from like the world class founders and also use that as a way to build up your network. And so you know, very practically this is exactly what I did with my brother. My brother wanted, well he didn't necessarily want to drop out. He actually wanted to be antithetical to my path in life and wanted to stick it with school. But I was very convinced that he should drop out, it was going to be good for him. And so I put him in at Ramp as the first like 20 employees and I was like, look, just like go here for four years, you're going to learn what it's like to work with second time founders, world class entrepreneurs. And it's been a phenomenally wonderful experience for him, right? He's now watched the company go from like 20 to 200 people over the course of two years. He's a 21 year old or just turned 22 and is you know, now an engineering manager and has like, I think he even at this point manages managers. He built a lot of their entire like if you guys have seen Ramp has like this bill pay product, he built a lot out of that and it's like their fastest growing non core like revenue line. There's just no way that you would get that level of both coaching, mentoring, you know, sort of experience, just like going out and like starting a startup. If anything, that was sort of my failure in my first company was like four months at Square was not nearly enough. And so yeah, I do tend to say like, I think, you know, college is for most people, for a subset of people, you should probably leave and just go out into the real world and start accelerating your career because there's so many benefits that are just compounding. And so starting that earlier, like when I think about relative to my MIT peers, I'm the equivalent of like, you know, right now I'm how old am I? 28, I think. And in some ways have the equivalent of a 32 year old's level of experience because of the extra almost like three, four years that I got by dropping out. And so yeah, I still believe in sort of discarding the institutions, but also you probably want to go work at the right institution that is high growth, early stage startup. If the way that you want to impact the world is startups, there are obviously many other ways of impacting the world. There are obviously machine learning PhDs that have impacted in the world in a lot of very interesting ways in the past year.

Yeah, this is sort of taking an angle on the investing world in general. There's a bit of like a tendency for there to be kind of like the current vibe or the current it in the way that sort of investing themes work out. I mean, right now we're talking as part of the theme of the new American frontier.

Yes. Space in defense is somehow the new theme. It was not the theme five and a half years ago when I started investing in it. Yeah.

And so there's like a little bit to a level to which there's kind of convergence on groupthink of different kind of funds coming to the same point, I guess. Are there sort of benefits of that groupthink? And the other question is how does somebody who wants to stand out, either as an investor or founder, make progress in things that are not aligned with the current kind of like theme.

Yeah, I mean part of it is the reason that it's so, let's say reflexive. And your groupthink base is like ultimately in order for companies to succe succeed, even the, you know, but there are some companies that are consensus, you know, sort of from day one and they stay consensus, you know, all the way through. And I think Peter has actually given a, you know, sort of public talk that walks through a bit of our, you know, framework on this. But like ultimately, even the most contrarian companies in the early days, in order to become successful, need to become consensus. And so in some ways, like, you know, venture investors are so group think based because at the later stages the only way to actually make returns are to convince everybody else that the thing that you're working on is like the hot new thing and like, you know, bring them in. And in some ways that's what ultimately allows companies to actually, you know, go public. And so, you know, groupthink obviously has its pros and that it's what allows companies to eventually, you know, sort of reach breakout scale. But ultimately, you know, as somebody that's, you know, like earlier stage in your career, it's sort of highly unlikely that you're going to have true breakout success if you just work in the thing that everybody's working on, you know, today, given that you're then competing against people that are highly sophisticated. So like, if you're a general partner at a top tier one fund, you can go into the hot space and still actually make great returns and have great outcomes because you can just win off of the basis of like your career, your experience, etc. If you're a like seasoned executive, you can go be a CFO of like a, you know, whatever the hot new thing is and still get a percent of the company right before the IPO and make fuck tons of money, right? Like there are tons of people that joined Coinbase a year before IPO that had come from traditional tech and made a lot of money by like, you know, joining a year beforehand. And so if you're a senior, you can go to the hot new thing. If you're a junior going to the hot new thing, you're competing against a million other junior people that are also doing the hot new thing. Highly unlikely that you end up having like a differentiated outcome. And so the only way to, I think really have success early on in your career is to have a very differentiated, you know, viewpoint. And so mine, five and a half years ago, again, at that point I think it was clear, at least to me, that like SpaceX was seeing a level of success. But I really bet my sort of like, you know, career and focus and energy on like aerospace is going to become the hot new thing five and a half, six, seven years from today. And now in this moment, I get to reap all the benefits and rewards of like, you know, there are a lot of people that are interested in funding aerospace companies, defense companies, starting them, etc. And like one it's most of these investors are just marking up my companies and paying a 10x higher price than I did or two. It's you know, invest, you know, founders that are coming to work and I get, you know, sort of differentiated access and ability to actually, you know, lead their rounds. But now if you're just going into aerospace and defense, like okay, you kind of like missed the boat potentially by like five, five and a half, half years now. It's not to say that it's not an interesting place to work in. I still hope people start lots of aerospace companies. There's probably still more interesting. Obviously plenty of interesting aerospace companies to be started. But the alpha is obviously a little bit, a little bit gone relative to where it was a couple of years ago and alpha being gone. Great for somebody that's an insider because like even in this like recessionary environment, all my portfolio companies are getting marked up versus the crypto companies are not.

Thank you. I'm going to end my questions here. You mentioned you could stay a few minutes after and forgive me for going, going a full hour here but we could take a few questions from the audience. Happy to give people a moment to ponder. What do you think happens when aerospace.

And defense is no longer the hot new thing? You know, I don't like it clearly changes how valuations work and investor flows work. And so ultimately we live in a over financialized society and the only way that industries get made is in some ways there has to be bubbles. Then it's whatever survives the bubbles and is super healthy is the thing that makes the industry sort of long term. So for sure, like there's just no way that aerospace and defense is going to be the hot new thing five and a half years from today. I'm sure it'll be something else. Right. I'd say like in today, in 2022, it feels like the hot new things are like machine learning and like you know, aerospace, defense. It's like a year ago it was like crypto and other crypto. I guess, I don't know. It's not anymore. God, it's painful but you know, almost certainly there will be some compression evaluation, some companies will die that were overcapitalized. But at least in this current moment it's a sort of great outcome for both the United States, the aerospace community and that tons of attention, tons of interest, tons of financial capital flowing to it and that it is going to artificially accelerate progress for a few years and then I'm sure there will be some artificial deceleration One of my favorite things about COVID has just been proving how momentum in society is so clearly linear. Like if you look at like E commerce adoption, you know, in the United States, right, for the first two months of COVID everybody's like, oh my God, we accelerated a decade in terms of E commerce adoption. This is incredible. And then what happened over the following two years? We just perfectly fell back down. And we're right back down. We reverted to like the mean line, you know, curve. And effectively it's as if Covid never happened. Like, our E commerce adoption is exactly what somebody would have predicted in 2019, what they would, what it would be in 2022. And you didn't have to tell them Covid happened or not. They would have been able to predict it perfectly today. It's the same thing with aerospace. It's like, I can probably predict to you, like, here is where humanity will be in 2035. We may have like an artificial acceleration today, but we will revert to the mean. I guarantee you when that bubble pops in like, you know, three, four, five years. But ultimately, as long as you're investing with the expectation of not this like sudden burst, but instead, like, here is where it will be and my business is going to be healthy all along the way, then you're going to be fine. But there are plenty of people that assume, oh my God, this curve that we're on is going to continue indefinitely and my business only works if so. Those people get thrown out with the bathwater. And same thing obviously happened with crypto. Even as much as I shit on crypto all the time, there's clearly some interesting use cases. I'm not sure that whatever trading jpegs of donkey of donkeys was the right one, but I'm sure that there will things that would come out of this winter that will be very valuable for humanity. Sorry. Yeah, go for it. Can you talk more about the incubation space players in it, what you're seeing? Sure. You know, I think it is somewhat becoming a hot new thing lately in venture capital, you know, as well, but there's again, still very few players that have successfully done it. I think it is actually quite tricky to. There's two forms of it, right? There's incubators that only do incubations and there's venture capital firms on the incubators that only do incubations. You do have a little bit of like adverse selection because at that point you're doing it at such high scale, you need founders that are like, why are they Opting into your program versus like a Y combinator or just raising their own seed round. And at that scale, you like actually do face that problem. On the like venture side of things, you face a little bit less the problem because typically those models are doing it a little bit less frequently. And it's because the partner has such a differentiated viewpoint. Like if you're building a company every week, the likelihood that you as like the incubator, you know, firm that is doing this every week has like a unique viewpoint on every single part of the fucking world every week, probably pretty unlikely. Versus if it's like the venture firm. It's like you do these things like once every three years. Like Sutter Hill being the perfect example of this. They like complete, do a complete market mapping. They find the exact technology where they want to sit in the stack. Who the perfect, like, right. I mean it's like it's a, it's a scientific process. Like there's a reason why like if you look at, you know, Center Hill, they've had like 10 incubations and like four of them are like north of $5 billion companies. Right. Like is the most phenomenal hit rate of any venture investor in the world. But it's because like they're not really venture investors. They're like venture company builders. Like they do so much homework before they like pull the trigger on something. But that's difficult to do within a more prototypical venture firm where people also want you like doing your one series a year and your four seeds a year or if you're a growth stage investor, one series B a year. Right. You know, being competitive in that area while also having the time to like really think through this thesis build I think is really hard. There's some, you know, sort of venture investors that I've seen that like tried to force some of their partners to do it. But I think it's one of these things like you can't force like especially within if you're a full time venture investor. It's got to be these things where it's like, it's got to feel like a magic moment. It can't be like, oh, I'm going to like incubate a grocery delivery app. Because like I'm seeing that all these grocery delivery things are doing well. It's like, why you, like, why are you the person to incubate the grocery delivery thing? Why not just go fund the dude that's already working or woman that's working on, you know, the venture or the grocery delivery thing? And so, yeah, I guess, you know, I think I share a air of skepticism, let's say, on like some of the people that are trying to, to like scale up this model. I think it's inherently somewhat like not particularly scalable. Every single one of those successful incubations always feels like it's had a little bit of like a truly like magic moment. Not something that's like been an equation. And I think too many people are trying to analyze it from the view of an equation. So yeah, that's my rough view on it. I'm really curious about the story you told about Arda and how often we use historical analogies and context to help kind of build your decision mapping and storytelling. Oh, all the time. In the original seed deck we actually had back then, my analogy was much more to the Gilded Era, which was basically when the railroads were built. The first thing that people did was just ship humans on them. And so Vanderbilt became phenomenally wealthy, but who ended up being sort of much richer than him. Very shortly thereafter, it was Rockefeller who had the valuable commodity that he had, oil, and you know, had, you know, Vanderbilt basically, you know, ship it on him. And so Vanderbilt ended up being the commoditized player. Prices went down. Oil was the super valuable thing. And so that was sometimes the analogy that I use where I was like, you know, SpaceX is, you know, sort of the railroad. It's going to be phenomenally successful, but we're going to be, you know, the sort of Rockefeller. The oil that's built on top of it, they're fundamentally just transportation versus where the material good that actually has all the margin in it. So yeah, all the time. I think, you know, I love reading about, you know, sort of business and political history. Given that, I think you can draw a lot of these analogies to how, you know, society will evolve. I think at the end of the day, whether it's, you know, reversion to the mean or, you know, sort of history repeats itself, we all think we're, you know, special snowflakes. And individually we all are, but, you know, in tandem we are very predictable. I'm a big fan of the sort of foundation series, you know, sort of what is his say again? Psychohistory. There we go. You know, a big fan of his, you know, philosophy of psychohistory, where it's like it's actually very easy to predict humanity in large groups, or Peter Zeihan is maybe the more current geopolitical version of this. You can actually predict geopolitical conflicts entirely based off of the geography and the natural resources of each nation. And so I think the same thing is generally true of humanity. And so the reason being very important to study history because it's the best way to become good at psychohistory, to sort of predict the future. Again, you have these one off magnates, Elon Musk for phenomenal person shifts the world in a way that is maybe difficult to predict. But in some ways you could also argue if it wasn't Elon, there probably would have been something sometime in the 2010s, 2020s, 2000s that would have tackled that same problem. He just may have accelerated a decade or two. And again you get that potential quick jump away from the mean line, but you'll always come right back to it. Yeah, so I was kind of thinking as you're talking and listening to you, you're lobbying in front of Congress and you know, kind of the way that you're thinking about and approaching the space manufacturing problem that it's sort of surprising.

To hear you mentioned like, oh, you.

Know, 27, 28, whatever. Right. Like I guess outside of the things that you've mentioned, you know, with getting the early experience and so forth, I guess like what sorts of things do you kind of credit for your kind of trajectory, velocity. Right. Is it, you know, do you have certain routines, is it your environment that you create for yourself?

I'm always kind of curious to hear.

That for people who are, yeah, I think pretty easy, sort of three step at least process for me. And I can't claim that it works for everybody. One is just like at any path point or any decision point in life, I've always taken again like the higher risk, higher reward option. Right. So at mit, plenty of people just were going to finish it out, take a software engineering job and use that to start the startup. I was like, screw this, I don't know anything about startups, but I'm going to go drop out and start working on this immediately. Failed ultimately obviously. But the experience that I got there of just like both the network of people that saw that I took that risk as well as like you just learned the basics of sales, of fundraising, of marketing in ways you could never learn in like an MBA or even if you just have a more siloed job at a series A startup, it's ultimately, I think, you know, even though the company didn't work, taking that high risk, you know, option was, you know, critical. The second I'd say was just, you know, having and optimizing for, you know, sort of you know, mentorship and having somebody that really taught me. So after being CEO of my own thing, I was in full control. I then became a VP of growth. This company called Teespring again had a lot of sort of moral and executive authority about what I was working on. And then the next job that I took, I was like the bitch boy that brought in the Diet Coke to the board meeting. I was Keith Red Boy's chief of staff. And so optimized for complete sacrifice of ego. You become the most junior person in the room. You have literally zero authority. Your job is to effectively take notes and bring in Diet Coke. On the flip side, I got to go to like Max Levchin's board meetings for a firm and you just absorb so much information by seeing a wide variety of companies and high class entrepreneurs and how they operate their businesses and so truly just optimized for just like network learning, mentorship at the sacrifice of things that like I actually used to value a lot. Like the Thiel Fellowship extremely inflates your ego. Literally tells you you're in the top 20 people of your age at 19 in the entire world. And like, maybe probably not, but like, but you know, you had to learn. And I got it beaten out of me like, you, you weren't in the top 20 people, so go fuck yourself. And so now I was willing to take this very low ego job because I was like, I need to figure out how to become the top 20, otherwise I'm not really going to satisfy the obligation of the whole Thiel Fellowship thing. And so I've got to go learn from one of the people that has proven himself to be, in my opinion and I think is almost basically fact at this point. He's like one of the top 20 venture capitalist entrepreneurs, basically startup builders of our time. And even if it means just being the guy that brings in his Diet Coke for two years. So I'd say, yeah, three step process. Oh, sorry. And then the third I'd say is, you know, sort of after that, I think religious focus on just like analyzing my own just personal habits and what made me happy plus productive and just ruthlessly optimizing for that. So everything from like, you know, I basically moved to Miami on a whim entirely because like I spent you know, 10 years basically in San Francisco. I then spent a week in Miami and I was like, I was happier, I was more productive, I ate better food in Miami. I. Even though my entire network is in San Francisco, I thought I was gonna live in San Francisco for my entire life. I Need to like optimize for my productivity and ultimately Miami is the place for me, you know, being super religious about like working out effectively every single day and like sleeping on innate sleep. Like I basically invested $10 million, you know, super early on. I like stuck my neck out on the line. It was like one of my first early investments and I had no clue if it made sense as a consumer product. But I was like, I know I'm gonna use this bed and this thing is gonna like, you know, change my life in terms of productivity and being super religious about like, you know, go to bed at the same time, wake up at the same time. So yeah, my three step sort of process I think was like take the high risk opportunity, find like the like, you know, sort of world class mentor and then just be super obsessive about just like the inputs into my productivity. I think those are the key, the key things for me at least you.

Have for boys ripping you out of.

A World of Warcraft funk. That's true, that's true. Yeah, that was very helpful. Credit tip. I don't even know if I've told him that story. I need to at some point tell that me to but I've said it publicly a few times so maybe he's heard it.

But yeah, I'm sure we'd love to go on. Mindful of your time.

I got until 3:30 so yeah, I'm happy to.

Any other questions you mentioned like heat.

Shields as an IPAR regulated material, how much has IPAR or other regulatory firms? Extremely so. So ITAR compliance. The moment you become effectively a government contractor or have government owners materials, your entire company effectively gets covered by itar. So it's not just that material. You basically, you know, I don't know what the equivalent. It's like Cas9 it spreads through your entire, you know, organization. And so if you are ITAR controlled as an example, you can only hire US citizens or green card holders. And obviously I'm, I mean I'm a former not US citizen, right. I became a US citizen when I was like 14. I obviously am a strong believer and I think like immigrants are the best people to hire and I basically can't hire them unless they have become a green card holder or a citizen. So yeah, it's definitely quite restrictive but it's sort of the default in aerospace and defense. Like every aerospace company is itar constrained. And so because that typically aerospace engineers that are moving from internationally, they very quickly make sure to get their green card. Otherwise they don't have opportunity so it's one of these things where it's like, yeah, it sucks, but also it kind of sucks for everybody. And I kind of get it too. Like I wouldn't want a Chinese national around our heat shield materials. And so it's probably the right thing. Even though plenty of Chinese nationals, you know, work in Silicon Valley companies all up and down the block here. And so yeah, it's very restrictive.

I've got another one which is, I guess on that kind of convergence or.

Reversion of the mean.

Reversion of the mean. There we go.

Credit to John Ludic, one of my colleagues that published a great post on this. Highly recommend.

Yeah, and this is sort of like about people and the ability of people that are really high powered or high throughput to almost bend reality. And I'm curious, like in your experiences of working with a bunch of relatively ambitious, high powered, intelligent people, to what extent do you believe in people's sort of ability to manifest the reality that it takes for them to be successful? And to what extent are they just sort of products of the time and the circumstances that are sort of set out before them?

It's a good question. I definitely think it's a mix of both. Like, you know, the way that I always like, sort of key thing on this, which was basically like if you just didn't do all the stupid shit in startups, your hit rate actually becomes roughly 50, 50, and it's basically like 50% success. You did, you didn't do all the stupid shit and you succeeded. And 50%, it was basically like outside of your control. You chose the wrong market, regulators clamped down on you, you know, etc. And so I actually do think it's a pretty significant component. It's actually roughly in that 50, 50 range where it's like 50% of it probably circumstance, and you can analyze circumstances and try and figure out how to place yourself in them, etc. But like again, predicting the future is somewhat possible, you know, not, not entirely possible. And then of the 50% that is controllable. It's funny, you know, I think at this point, both from like MIT Network to like Teal Fellowship cohort to my Y Combinator cohort, I've had these very interesting slices, let's say, of like people that are generally high iq, ambitious, you know, work hard, et cetera. And it's funny, if you look at them like there's very little correlation between like IQ and success necessarily. Even between like work ethic and like hours worked in success, there's definitely Some amount, but most of what it actually comes down to is just like, time allocation, like, what are you choosing to spend your time doing? And so I'll give like a, let's say, direct example of this from, like, work. This past summer, I had one very particular goal at Varda. I had this key executive hire that I wanted to fill. And so what I did is like, you know, from May 2020 until July of this year, I was on a plane every four days because I was like hopping between board meetings. Varda this. I basically sat myself down in Manhattan beach, in la, basically in our office from July until basically Monday of this week. I didn't get on any planes. It was like three and a half months straight. And all I did was recruit for this basically particular role with like, probably 50, 60% of my time. And. And unless it was like something urgent at Founders Fund or something truly urgent again at Varda, I refused to do basically anything else. And even if it meant that there were some days where I'd have a three hour gap and most of the time people would be like, I've got three hours gap. Go do this thing or this thing, this thing, and you end up focusing on something that is not your number, number one priority. So instead I'd just be like, no, unless it's the number one priority, I refuse to do it. And so in those three hours, I would read about a public company that has a business model that has candidates that we're trying to recruit from. So when I go into that interview process, I'm more sophisticated or read some particular scientific paper that has come out that again, allows me to become a better sort of recruiter. And so in that uncomfortable free space, I actually, by not allowing myself to work on anything but the number one focus actually became better at the number one focus in ways that were somewhat unexpected without just giving myself the free space to basically only focus on that. And so it's surprising how much people are incapable of, like, both one, articulating what their core focuses should be, but then also the correlation between their core focuses and like, what's actually on their calendar. Like, if you have something that is your number one existential risk and focus, it should probably represent 80, 85% of your calendar. But the number of times that, like, somebody tells me, oh, like, you know, hiring a VP of sales is existential. For my startup, we need to scale that in order to get to like, you know, series A or series B. And then I asked the founder, like, go pull up the calendar. It's like, okay, cool. They spent like an hour on LinkedIn on Monday. They did like, you know, two phone screens on Wednesday for 30 minutes apiece. And that was basically it. It's like, okay, so your number one existential risk was something you spent two hours of the week on. Like, you either are lying to me or you're lying to yourself, you know, about what your core focus and core risk should be. And so it's been surprising that that's actually like the number one variable that has basically been predictive of, like those outcomes across all of those cohorts is that willingness to just be relentless, like relentlessly ruthless about, you know, sort of time allocation in relation to core priorities in a way that is also, again, sometimes counterintuitive. It's not necessarily, like, fill up the number of hours in a day. Sometimes it's give yourself, you know, series A or series B. And then I asked the founder, like, go pull up the calendar. It's like, okay, cool. They spent like an hour on like two hours of free space to just mull and think and like, have that shower time, but while sitting at your desk saying no. Yeah, exactly. Saying no to things that again, might be quite valuable but aren't quite as valuable as the number one thing. Because all of the world, you know, comes down to just like compounding returns. And so you, like, you know, instead of focusing all your energy on the thing that will compound your returns the most, instead focus on the thing that is like a little bit more linear benefit. It may feel like in the short term, oh, but like, I did like, you know, go like, write this, you know, documentation, or I went and talked to this investor, blah, blah. But again, it pulled away from the thing that is going to be the core input into the compounding returns. And all of life and especially venture capital is so compounding. It's like, you know, it's. The more successful you are as an investor, the easier it is to be successful. The more successful your company is, the easier it is to continue to be successful. The more that you hire great people, the more. The easier it is to hire even better people. Like, all of this stuff is just so compounding that you're better off just focusing early on. How do you get that compounding going and being ruthless about that rather than getting distracted by the one off little, you know, fugazi? Yeah. So are there any 10 years in the past which kind of drives you of, like, lost money for the investors or anything? That's my first question. The second question is being a VC as well as a founder, and also see some tweets. In which of what do you think the VC industry could do better for? Let's see. So on the first question, I very much believe in Josh Wolf's saying, chips on shoulders, put chips in pockets. I definitely was very frustrated that in my same cohort in the Thiel Fellowship, you had Austin Russell from Luminar, which is now a $4 billion publicly traded company. And my thing basically lost all my investor money. And so it set this bar and this level of, like, I don't even know, like, psychological pressure of, like, if I was going to do it again, it better be real fucking good. And that was actually basically what a handful of investors used to underwrite Varda. They were like, I know how much psychological pressure you're putting yourself through. The only reason you're starting this is you think you can actually make money this time. And so even people that invested in the prior one basically invested in this company. And so, yeah, I think, you know, I don't think there's a lot to be learned from failure in a lot of ways. Like, I don't think I was learned the best version of marketing or sales or fundraising by failing the first time around, but I do think there's a lot to be motivated by from sort of failure. And then on the venture investors doing things better. I, you know, I have to admit that, like, most of my mental energy goes into building the company in terms of, like, the free space. And then the investing is much more, like, reactive of, like, you know, whoever comes to me and the things that I like, you know, just kind of, you know, do. I can't claim that I've, like, practically thought about what I think venture investors should be doing better. I tend to kind of believe, you know, sort of somewhat nihilistically, it's a capital market. Like, it is what it is. There's no such thing as, like, having morals or, like, you know, guidelines. It's just like dollars get deployed. Some are efficient, some are not. And the, you know, market finds the efficient frontier. You may have feelings about, you know, what that efficient frontier looks like. Maybe the gender distribution of the efficient frontier should be different, but it's like, great, and let's shift that. But there are probably market forces at work that are causing that, that aren't one evil person that should be doing something better. It's probably something more fundamental that you need to analyze that isn't necessarily even within the venture industry.

On that note, is there anything that you feel like is a perturbation in market forces or something that you would really like to change, whether that be a legal or regulatory sort of constraint that prevents things on converging on the best outcome.

I do think there is some level of over regulation in the United States. So as an example, VARDA has to do an environmental analysis as a part of our reentry program. So we land a small reentry vehicle in the Utah desert. It's about this.