The third installment this year of the Space Investment Summit was held Dec. 5-6 in San Jose, in the heart of the Silicon Valley.
It mixed some big names – Boeing, EADS Astrium, Honeywell, Lockheed Martin, Space Systems/Loral and United Space Alliance – with venture capitalists.
The coalition backing the summit includes some less well known space names, too, such as the 62-Mile Club (a year-old promoter of commercial space industry), Ecliptic Enterprises (its RocketCams provide those neat shuttle launch shots), Optech (lidar systems), SpaceIsle.com (Isle of Man finance center), Analytical Graphics (wanna know where your satellite is in orbit?), and Wyle Laboratories (lots of things – medical screening, training, data and risk management).
The idea that space ought to be more readily available to private investors is hardly new. Even the establishment is trying to encourage private investment. Just up the Hwy. 101 freeway from San Jose, for instance, NASA Ames Research Center hosts the Alliance for Commercial Enterprise in Space (ACES) as a forum to bring the private sector, academia and NASA together.
“It’s very important that space no longer be seen as something [only] for governments,” says Steve Eisenhart of the Space Foundation in Colorado Springs.
That’s a long-held hope. But translating it into the kind of “action item” that people who attend a lot of meetings always look for isn’t easy.
Eisenhart, the Foundation’s senior vice president for policy and public affairs, suggests that incremental diversification is the key to attracting investors because it lowers risk. And he takes a wide-field view when he defines “space.” For him, the term means “in space, enabled by space or experiencing space.”
For most investors, “enabled by space” is the likeliest avenue. There are far more rocket and satellite companies than the industry needs, says Shubber Ali of the George Consulting Group, an Accenture company.
“Most customers are here on the ground,” he says. “Space makes sense when you are doing something there that has to be done there. Otherwise, it doesn’t.”
He and others advised entrepreneurs to think in terms of how their idea adds value in the market. Too many try to sell the idea on the technology alone because technology – hardware – often becomes a commodity rather quickly. As an analogy, he noted that it was software applications, not the computers themselves, that made the big profits in computing.
In fact, Ali, a former KPMG space analyst, says the consumers of profitable stuff from space don’t care at all that it was made possible by space.
Along that same line, merchant banker Larry Austin, who specializes in founding and restructuring high-tech companies, said the most common failing of startup companies was poor market analysis. They are so focused on getting funding for their idea for a new technology that they don’t know if there’s any market for it. In that same vein, they fail to keep up with shifts in the market.
One encouraging note was a comment by Bill Reichert, managing partner of Garage Technology Ventures, a Silicon Valley group of angels whose investments include backing Thermal Dynamics, a startup with an idea for a heat-resistant ceramic nose cone for missiles.
“It’s okay to run out of money if you’re an entrepreneur,” he says. What isn’t okay is to run out without showing any progress on your business case.
Like Ali, Reichert says he isn’t interested in the “coolest technology” when he decides to back a venture. He’s looking for disruptive technology – a game changer. Google or e-Bay rather than the web-based companies that wanted to deliver your groceries. They were logisticians, not e-businesses.
So when they make a pitch to a venture capitalist, or VC, such as Reichert, the entrepreneur should forget the wiring diagrams detailing how their gizmo works and concentrate instead on how it creates wealth.
After 4-5 years, VCs want to see $20 coming back to them for every $1 they put in. That’s a steep hill to climb, one that needs a game-changing application, the proverbial “killer ap.”
Too bad some of the entrepreneurs hadn’t heard the advise of these venture capitalists before they made their pitches a few minutes later. Most had a lot of fine print but seemed not so clear on where the wealth would be coming from.