The Company Building Factories in Space | Delian Asparouhov and Will Bruey

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We can do special chemistry because we can essentially turn off gravity.

This is unlike every other space company. We have material scientists, we have biologists, we have reentry experts. Three, two, one, Ignition.

Historically, traveling into and back from space has been overshadowed by the specter of catastrophe.

Obviously a major malfunction, there's reason to be afraid of it. But I was like, well who wouldn't be afraid of it? Somebody's actually fucking done it before.

Meet Delian Asper Rohoff and Will Brewey. The founders that are carving out an incredible space in well, space. They have a simple but very game changing idea. Move specific parts of the manufacturing process out of the Earth's atmosphere and into space where a microgravity environment can allow for new innovation. The idea that you can build new and better stuff in space is not an entirely new one. Astronauts aboard the International Space Station and Skylab have already shown that producing things like pharmaceuticals, fiber optic cables and semiconductors can be optimized in space. But it's remained in a pretty experimental phase and most of of the people that have tried it in the past have been a little academic and slow moving. Until around a year ago in May of 2020, Delian was investing at Founders Fund, giving him a good bird's eye perspective on the space market.

Now is the best time to start a deeply capital intensive space company. I tweeted it and I stared at it and I was like oh fuck, I've read the thesis and I now need to follow the thesis.

He was also looking for the ideal co founder for what would become Varda Space. The person needed to have worked at SpaceX, ideally on the Dragon capsule because around causing it to deorbit and re enter the Earth's atmosphere as the cosmos would have it. Delian and Will collided third week of August of 2020.

We hopped on the phone and you know, the rest is history.

At their warehouse in Torrance, California, Varda engineers are continually hammered with one binding rule.

No science allowed, minimum risk.

Meaning they're not supposed to take risks on unnecessary speculative approaches. But Varda is not without its risks. Which include deorbiting and re entry from space, launch costs not dropping far, hurting the unit, economics of the company, and funding drying up. So grab your nylon space suits and your oxygen tanks because we are going on a voyage with the commercial kingpins of space. This week's American Alchemists, Delian Asparohov and Will Brewey.

You put something wrong in those capsules. Maybe you should interview me.

So I'm here with Will Brewy and Delian Asparohov, who are the founders of Varda Space. I'm very excited to be here. This is a concept I'm pretty pumped about personally. Why don't we back up for people that can't wrap their head around this? So you're manufacturing things in space, but they're for commercial markets on Earth. What are some specific possible use cases? You know, people talk about fiber optics, they talk about pharmaceuticals. Are there use cases that you guys are very excited about and what gives you confidence kind of on the R and D front that they'll actually work?

Yeah, and there's actually only one product that has actually like made it to commercial markets basically at scale. It was actually this program done by Merck known as Keytruda. Basically they had a drug that previously you'd have to, you know, take over the course of like 12 hours with IV. They in microgravity research on the ISS discovered a way to sort of reformulate that drug such that you could take it in the form of an injectable like a, you know, syringe shot, as opposed to like 12 hours of like IV.

To summarize in a very direct way, it's long term newer drugs that would not be able to be capable or be manufactured in gravity and in the near term, better versions of already existing drugs.

And the ISS has proven over the past decade that there are certain materials with very particular steps. It's not like every single step of the process, but particular steps in the manufacturing process, Whether it's semiconductors, pharmaceuticals, fiber optics, human organs, where you can produce much higher quality versions of the product when you do that particular process or step in microgravity rather than in a gravitational field.

Down on Earth, Building things in space has various benefits. For example, there's a special type of fiber optic cable that transmits stepwise better bandwidth than traditional silica cables. It's a cable made by molten glass called Zblan. On Earth, when you try to make zblan, crystals form form, reducing the signal strength. But in microgravity, crystal formation is reduced, the structure is more of a monocrystalline structure, and the signal is transmitted at much higher bandwidth. Given this performance difference, some people speculate that you could sell just a kilogram of zblan for up to tens of thousands of dollars.

At the end of the day, you can think of the value proposition as this is we can do special chemistry because we can essentially turn off gravity for the manufacturing engineer.

Yeah.

And so gravity is one of the four fundamental forces of physics. All of engineering is built on top of physics. So if we can modify 25%, there's plenty of innovation to be done on top. And then the first few products we'll do in house first. But at the end of the day, we're just using microgravity as a unique asset that we're going to generate value from.

And so are you guys in terms of go to market, Are you thinking about one of those use cases first? We mentioned pharmaceuticals possibly is the most exciting initial market, or do we know yet?

I'll steal Delian's analogy. I think it's a good one. Is you can kind of think of it as like the Apple app store in the sense that long term, we want to be a contract manufacturer that offers the unique capability to manufacture in microgravity. And so, you know, our customers don't particularly care that we're going to space. They just want to know that they can put their process into microgravity. If we could invent a microgravity box in the back of our warehouse, we have a better business. Right. But you know, thank God Einstein says that you can't do it. But going back to the Apple app store analogy is. So we would like it to be a platform long term. But just like Apple wrote the first few apps, in order to kind of show the value and how it's done, we're going to do the same thing for the first few products in microgravity.

So the space factories themselves are roboticized. They're automated. Is that right?

No humans up there in order to keep the unit economics cheap. So, yeah, makes sense because that we also have to study which manufacturing processes are possible to do without the dexterity of a human.

So it's basically manmade pre processing that you guys do.

Yep.

Send it up. Sort of an automated process. Manufacturing in space, it's like one very.

Specific process, not like all of it. It's not the packaging. It's not like the, you know, shipping it out to the customer. It's like one very particular process Typically just needs like a couple heaters, a couple motors, like, you know, pretty simple stuff.

Varda's completely automated and robotic space factory is a key differentiator. This is important because traditionally projects like this in the past have relied on people manufacturing materials on structures like the International Space Station. Varda's completely automated and space station independent process basically allows them to forego the long wait times and bureaucracy typically associated with these space stations.

What's the life cycle of like how do the materials get up there, what do you do to them in space and then how do they come back down?

Yeah, so long term we want to have a station up there with the manufacturing facility so that we don't have to always design it and launch it every time for the near term. Our demo mission is we're going to launch a spacecraft, it has a manufacturing module on it and then it also has the re entry capsule. And so after it manufactures the product, it'll deorbit. Now it's an expendable paradigm so that manufacturing module will burn up in the atmosphere, but only the capsule with the products will survive down to reentry. So after we do that a few times and show that we're capable of that system, then we'll start to bring rendezvous capability in house.

What would you guys say is the biggest risk? Do you think it's the re entry process into the atmosphere? Obviously you have as good of experience as anyone can have when it comes to that. Is it the launch cost question that we keep talking about or what is it?

I'd say the furthest like net new, like technical, like you know, push that we're making is like people have done these types of small scale reentry capsules before, but they've typically been coming from much higher orbits or had like, let's say more Delta V than what we have. And so us coming in from a very low orbit, but not that much more Delta V and coming in relatively quickly. That I'd say probably like the newest thing, but again it's like much less difficult than you know, what they've had to do previously with like crew and cargo. Dragon.

Yeah, and it was pretty important that you found somebody who worked on Dragon specifically. Do you want to talk about why that's obviously unique for this business.

Yeah, so I mean microgravity manufacturing isn't like a new or novel concept. A lot of people have talked about it like you know, Skylab, you know, back when it first got launched, already had some microgravity manufacturing machines that were done on it. People have done this type of work on the iss, the Thing that sort of, everybody seemed afraid of that have done any ISS work was then bringing those materials back down. If you ever watch like the old Apollo movies that like, you know, reentry, you know, process always like the scariest part, there's heat, there's plasma, you can't like communicate with the astronauts. Kind of crazy. It's obviously there's reason to be afraid of it, but I was like, well who wouldn't be afraid of it? Somebody's actually fucking done it before.

Right.

Both for like, you know, my own like, let's say like mental sake of like if he tells me it's a bad idea, then it probably is a bad idea. Versus if, like if Will tells me it's a good idea, then it's like okay, we should probably run with it. And also it's like a pretty reasonable like you know, check for investors of like, yo, are you going to be able to do this? It's like, yeah, trust me. Like the crew and the cargo Dragon is like a gold plated limousine. Here we'll build like the Amazon delivery van equivalent. Like you know, we don't have to keep the astronauts safe or comfortable with ac. We just got to get the packages delivered on time.

Yeah. Timing is obviously very important when starting a company and sort of the macro context as well. Launch is becoming increasingly commoditized. There's now reusable launch, it's becoming cheaper with things like SpaceX rideshare. Why is that important for making a business like this work now where it might have been a more academic project?

Yeah, you, you hit the nail on the head. As the crude example is when lemon get cheaper there's going to be more lemonade stands in various neighborhoods. But the real reason I get out of bed every morning that I'm super excited about it is because it's also acting as the economic buttress that will continue to drive the launch industry. Launch costs coming down are great, but unless there's an economic driver to continue their essentially their validation and their continued use and higher cadence, then there's a chance that they could collapse just like Saturn 5 or Shuttle, which don't launch anymore.

And this feeds into the core mission of Arta, which is to expand the economic downs of humankind. We fundamentally believe that the only way that humanity becomes multi planetary or starts to settle into the solar system in a sustainable fashion is with economic incentives. Right. The reason that California became California wasn't because Lewis and Clark arrived on a really, really big boat. It was because of the gold rush and that economic incentive is what created the sustainable drive for people to want to be in California on a regular basis. That eventually allowed us to build infrastructure and explore this frontier. We believe that VARDA sort of that first step into that sort of space equivalent, you know, gold rush, that provides that economic incentive I mentioned. It's much larger than I think some of these, you know, human rated space stations that are being proposed today. Because we have that sort of economic incentive on every step of the way that is addressing very, very large markets. We're the only person that could, you know, in a couple of years go to Elon and be like, we want a Falcon 9 rocket launch every day.

Yeah.

None of the other satellite companies have anywhere near that level of need because again, they're launching satellites, they operate up there, etc. There's no need for that regular cadence. And then that economic buttress is what then leads to eventually making something like lunar ice mining or asteroid mining, etc. Viable. Because those I don't think are commercially or venture backable or viable today. But as VARDA starts to succeed, the downstream implications that business models, they become viable is what, you know, gets me really excited.

Yeah. And it's really, it's like a call option on anything you can manufacture in space, which is pretty cool. Like, well put. Yeah. Like, you know, if you're doing synthetic aperture radar, you're doing optical imaging or something like that, it's like you'll have a bunch of other companies sort of catch up to you. You're all operating in similar orbits and like you eventually sort of get more and more commoditized with you guys. Nobody else seems to be doing this.

And it's a tricky problem. Like you need a wide set of skills. Right. Like this is unlike every other space company. We have material scientists, we have biologists, we of, you know, re entry experts or spacecraft experts. Right.

Another thing cool about the current macro environment is it feels like there's a lot of money in VC and you know, the founders fund manifesto, like, you know, can we do stuff in atoms and not, not bits? It felt like, you know, the last 10 to 15 years that's been sort of hard. Now if you can sort of signal that you're actually doing something legitimate, you can raise a lot of money and you can do it based on sort of, you know, longer time cycle kind of milestone based businesses.

Yeah, absolutely. I mean there's never been a better time to start a business than right now.

Yes.

Given the capital markets the way they are. And so if it's good to start a business then that means it's great to start a capital intensive business like a space factory company.

Yeah.

If not now, then when is really the question.

Yeah, yeah.

Think about the timing of things. Reusable rockets, a commoditized set of infrastructure. Like two years ago we couldn't have bought a photon bus from Rocket Lab.

Way before even starting to think about. I think it was like May 2020. This was like, you know, two months into Covid. I like tweeted something that eventually ended up like incepting the idea in my own head. But I was like, in a world where like investors are rushing to seek alpha, there's crazy returns and everything's hitting the market and so LPs are just driving those venture dollars back in so capital as cheap as ever and all the fundamental infrastructure costs are going down. Now is the best time to start a deeply capital intensive space company. I literally tweeted that like, you know, three months before like we even met. And so it was funny. Like I tweet, like in some ways I tweeted it and then I stared at it and I was like, oh fuck, I've read the thesis and I now need to follow the thesis.

Pushing back on the launch, being commoditized over time. Do you think it ends up actually just being a little more oligopolistic than people sort of realize? Or is it just SpaceX is the 800 pound gorilla. There's more and more on the demand side and like costs are just going to fall. So how's it shake out?

Very.

That's a great question. It's it al. It's very tied to Varda's destiny. If companies like Varda help prop up and continue to perpetuate launch.

Yeah.

Then the answer to your question is limitless. Yeah. If they fail and we and you know, smart commercial space kind of falls by the wayside. Yeah. Then. Then it could go the other way. There's a lot of cool like fundamental barometer test questions like will there ever be a separation between the manufacturer and the operator of rockets? So there's some like interesting things that could come along the way that would show which of the directions you just suggested. But it's very much the cat is still in the box from a Schrodinger's perspective now.

Got it.

Yeah. I mean maybe give like a cynical or like, you know, view is like in the United States, you know, regulators gave Boeing about you know, two decades or so from when they started building airplane at scale and allowing them to operate the airlines as well when they forced, you know, Boeing and United, you know, split up. Yeah, it's out. We're about a decade into, you know, SpaceX both, you know, operate building the rockets and operating the rockets. I probably guess that they have a decade left before regulators start to, you know.

Oh, interesting.

They love to get their fingers on everything.

Everything Interesting.

And so I'm sure at some point they're going to start to force the like, you know, builders versus the operators.

Right.

To actually be different companies, just like they did in airlines.

And they build their own satellites too, so they're like completely vertically.

Like they just love their fingers on things.

And something that, you know, economies of scale do definitely take place.

Exactly. We're in like the gilded era right now where it's like, yeah, there's only a handful of railroad companies. Yeah, they could maybe potentially try to collude or try to like raise prices or become this old monopoly. But at this point, I mean, just looking at the fucking antitrust stuff like Facebook, Google, blah, blah, blah, yeah, that absolutely would start to happen in aerospace if like, you know, some of the players tried to form that type of oligopoly.

What are you guys looking for talent wise? And if somebody, you know, viewing this is kind of fits the bill, how would they get in touch with you?

They could get a touch with us on our website varda.com jobs@varda.com who we're looking for is essentially anyone in an aerospace business. We're starting an entire aerospace company. So electrical mechanical engineers, firmware engineers, structures, mechanisms, those are kind of the rattle off the types of engineers that we're looking for right now the most, but really across the board.

And how much has the SpaceX work culture sort of impacted you guys? Obviously they're, I think they're positives, there are negatives there.

So I loved working at SpaceX, so I'm sure that's, you know, perpetuated here a bit. But I wouldn't say it's completely the same or even necessarily mostly the same. I think one of the differences is a lot of the folks here are kind of mid career in the sense of still very excited and innovative, you know, roughly around our age. But we also have kind of a decade under our belts of getting beat up in either the vibe lab or the thermal lab. And we know, you know, kind of what matters and what doesn't.

My favorite part that we brought from the SpaceX culture is probably just like the iterative like build process where you've kind of seen this with starship very publicly where they're like literally pumping out a new starship like every month or so. It's kind of been a similar approach here where like, you know, Will's analogy has been like the train takes off at 9am Our first mission is taking off no matter what. At the time that we say it's going to take off. Hopefully there's materials and things ready to be produced and customers ready to go. And even if not, we're still taking off at 9am like have whatever you have ready at that point because don't worry, there'll be another train coming six months later and then six months after that and then that pace will just only continue to accelerate. And I think doing those types of full end to end integration tests, actually doing it is something that like a lot of deep tech companies get tripped up on where like they start to build a product but then they just kind of keep expanding scope, keep expanding scope and next thing you're like, you know, six years in, you haven't like, you know, actually shipped anything that's like public. You don't have any real customer validation because you just like kept increasing the scope of like that initial product rather than just like shipping something you're embarrassed by. So yeah, no matter what we're going to be like shipping our, you know, first mission. I hope we're not embarrassed by it. If we are, it probably means that we did the right thing in terms of like, you know, shipping it on time.

Yeah. What's the Zuckerberg like the ships only ship things that you're embarrassed by or.

Exactly, exactly. Yeah, we only fly things that we're embarrassed by.

Yeah, yeah, yeah. And how does that first mission sort of deal de risk things? And how are you thinking about sequentially sort of de risking things with milestones?

It'll kind of be, it'll be the first end to end concept of operations of the spacecraft to show that our entire, you know, quote unquote assembly line is functional and then we'll get ready to put things on that assembly line. So the first mission is really about showing that we can go to space, operate in space and return.

Varda is also in a new class of startups uniquely enabled by all of the amazing aerospace talent SpaceX attracted. Just as a group of amazing mega cap tech companies were seeing started in the wake of PayPal, SpaceX graduates are now looking at starting their own companies in space. The final point I'll make here is that companies like Varda are important for the overall space market to work out. Armchair reports come out all the time from banks like Goldman Sachs and Morgan Stanley saying that the space market will be $1 trillion by 2030. But graphs do not write themselves. This is not inevitable. Right now you can see split the space market, broadly speaking, between two imaging and Internet. On the imaging side you have government reconnaissance and national security. But that market still isn't massive and it's only captured by a few satellite manufacturers and launch providers. The commercial imaging market is even smaller and more speculative. Finally, you have all of these LEO mega constellations doing Internet service provision. These are things like Starlink, which SpaceX announced in 2015. Since Starlink's announcement, a lot of competitive LEO constellations have popped up. But the unit economics of LEO Internet is also somewhat speculative due to the need to build very expensive ground stations to make these constellations work. So only companies like SpaceX, Amazon and a few very well capitalized incumbents can compete. We need the space launch market to get way bigger and we need launch costs to go way down. And for that we need more demand for launch vehicles. Traditionally, when you launch a satellite up into space, you don't really need to pay for another launch once you have the satellite in space. If Varda finds a stepwise more effective and profitable material that you can make in space, then basically the more materials that go up for Varda, the more the company makes. So for Elon Musk's ultimate vision of interplanetary colonization to actually come to fruition, we might need a company like Varda to work out. Thanks so much to Will and Delian for showing me a lot of hospitality showing me around Varda. We had a great conversation. I had a great day. I hope you all enjoyed this episode and for more crazy content like this, please hit the like and subscribe and tune into next week's episode.