The Space Economy

Before it was built, people couldn't conceive all the potential use cases and opportunities and new value that, that would create. Our world today couldn't function without GPS. It's foundational to everything that we do. And it is spawned, created, grown market after market, based on that really important signal that comes from space and can't come from anywhere else.

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Chad Anderson:

Welcome to the Space Capital Podcast. I'm your host, Chad Anderson, founder and managing partner at Space Capital, a seed stage venture capital firm investing in the space economy. We're actively investing out of our third fund with a hundred million under management. You can find us on social media at Space Capital. In this podcast, we explore what's happening at the cutting edge of the entrepreneurial space age and speak to the founders and innovators at the forefront.

This is the Space Capital Podcast. And today we're breaking from our standard format to discuss the launch of our new book, The Space Economy: Capitalize on the Greatest Business Opportunity of Our Lifetime. The book is intended to be a guide for investors, entrepreneurs, and aspiring professionals, and it's meant to give you the lens that you need to understand the changing landscape and to help see the opportunity at hand. It's not a history book, but the history is important context. And in the book, I try to tell the story of the emerging space economy from a nascent market perspective.

I did that by interviewing some of the incredible people who have been instrumental in making it happen. And that's why I'm very pleased to be joined today by Tom Ingersoll, who is my partner at Space Capital and also features heavily in the book. He founded his first space company in 1996. He's built rockets and satellites and operating systems. He's founded companies with assets currently in orbit and has led multiple exits as venture-backed CEO. So, Tom, thanks for coming on the show, really appreciate it.

Tom Ingersoll:

My pleasure, Chad. Thanks for having me.

Chad Anderson:

Okay. So I was hoping that we could start with some of your background. Can you tell us how you got started in aerospace, in the beginning, and how have you made your way to Space Capital?

Tom Ingersoll:

Yeah. I've always wanted to be an engineer. And I was not really into space, but when I graduated from college with a master's degree in engineering, I was looking around at where some exciting things were happening, and I ended up going to work at a McDonnell Douglas Corporation which has become Boeing within their Phantom Works.

I had a number of job interviews and I found this group where there's just really, really smart people. They were top of their class, from the best universities, and I thought, "Wow, I don't know if I can compete here, but I know I'm going to learn a ton." But it was always in my mind that I'm going to be in aerospace for a little while, and then I'm going to leave. I'll go do something more commercial. And that was always my plan. But I started working on some of the coolest project and working with great people.

I started in the early days of Star Wars with my first projects, Chad. I was coding and really not enjoying coding. And I went to my boss. I said, "I need something a little more interesting to happen here." And he said, "Well, we have a project that we need someone to run, but we don't think you're up to it." I go, "Hey, give me a shot." We were trying to test how neutral particle beams could potentially ignite Soviet era rocket systems. So they needed someone to build and put together solid rocket and liquid rocket propulsion systems, take them to Brookhaven National Labs, zap them with high-energy protons to see what kind of reaction would occur. I'm like, "I am in." So I spent the next two years in the lab at a nuclear particle accelerator as a kid, two years out of college. And then it kind of went on from there.

I was able to work on, as you said, building satellite systems. I then was able to work with some of the astronauts that walked on the moon. Pete Conrad was my boss. He was the third man to walk on the moon, and it kind of went from there. We worked together for a number of years on rocket systems. And I think I mentioned to you earlier, a story where we could see the development of commercial space. And we went to our boss and said, "Hey, there's really important things happening here within the industry." Teledesic, which was a satellite-based communication system was coming on board. There was greater demand for launch. And we said, "We really need to put together commercial space." And he said, "Well, why don't you guys take a cut at a business model for commercial space?"

Pete Conrad and I spent some time laying out how we would approach commercial space, and we went to him and said, "Hey, here's how we think we should do it." And we got about halfway through the project, our business plan, and he stopped us, and he said, "You guys don't get it." He said, "Why do I want to do low-cost commercial space when I can sell all the expensive stuff I can make?" And that comment just sort of riveted within us. And I think about a year later, Pete Conrad retired, and we went off and did commercial space stuff on our own. Anyway, so that's a long answer to your short question. But I really never expected to be in aerospace my entire career. But I did learn that that's where really cool stuff happens. It's a challenging environment. The systems are complex, and it's just an area that I've really enjoyed.

Chad Anderson:

And then so after that, you've also continued on with your commercial space efforts, were went in different directions, some of them successful. We'll talk about this a little bit more later, but Universal Space Network, a ground station company that you sold and probably one of the first venture-backed exits in the industry. You led Skybox Imaging and its sale to Google, and that's kind of where we met in 2016 and teamed up to launch Space Capital. And so, curious, can you fill in those gaps and what happened when you and Pete decided to run off with your commercial ideas?

Tom Ingersoll:

Yeah. Here I was, 35 years old with four kids, and a mortgage and Conrad's retiring and said, "Hey, let's go start a new venture." I think we had $75,000 in the bank in the company and said, "Ah, why not?" So quit my day job and we pursued a number of different space ventures. And at the time, there really was no investment thesis around commercial space and it just wasn't happening. The money that people were able to raise was through friends and family. Luckily Pete had a lot of friends, but it was pretty unstructured.

Pete and I worked together for three years on various different business opportunities, and we really landed on a company called Universal Space Network, which was a commercial ground station company. So the idea was, at the time, a satellite owner, operator, and even a NASA project would go have to build their own ground station to communicate to their satellite, and that gave them very few communication opportunities per day. Or they could utilize the NASA ground network, which was old and expensive and in need of repair. So we saw ourselves as a commercial option and it was very low cost, but we were a startup, and no one really understood commercial back in those days. But we were able to primarily, because of Pete's reputation, continue on and move forward with that. And we got that business going. We could talk more about some of the important decisions that were made to allow that to happen.

In parallel with that, we also actually started a launch vehicle company. It was called Rocket Development Company, and we recruited T.K. Mattingly to run that. T.K. Mattingly was an Apollo astronaut. He was actually the... For those of you who don't know T.K. Mattingly, he was the individual who was exposed to measles and was not able to go up into Apollo 13, but yet he was the one who stayed back and knew the systems well enough to actually save the crew.

And the people that I've spoken with say that in the Apollo 13 movie, the Gary Sinise character was T.K. Mattingly, and they claimed that T.K. didn't get enough credit for what he did. They say that he pretty much single-handedly saved that Apollo 13 crew. So T.K. was crazy brilliant. I had the chance to work very closely with T.K. So we had Universal Space Network going. Unfortunately, Pete died in a motorcycle accident just as we were getting ready to raise a commercial round of financing with Universal Space Network. Tragic, but T.K. Mattingly agreed to be chairman. We actually ended up getting some venture financing from Warburg Pincus and we're able to grow that company. We got a decent amount of revenue. We're cash flow positive, sold that company in 2008 or '09 when the economy was in an interesting position. And I stayed with Universal Space Network and the acquirer for about a year and a half, and then was approached by SkyBox.

Tom Ingersoll:

And Skybox Imaging was a young company. There was about 40 individuals, almost all of them friends from Stanford that were working to build, in essence, a real-time Google Earth, having a constellation of small imaging satellites that could take daily revisit of the Earth, and also a full motion video. So I helped build that company out as well. We sold that to Google in 2014. And what I noticed was that there were a lot of burgeoning developing commercial space companies beginning to raise financing. And there was beginning to be an investment thesis in the venture capital community around space. But what's also very clear to me is that many of the investors did not understand the technology or the marketplace or the ecosystem, and they were making some really bad investments. It was interesting, you'd go to conferences and entrepreneurs would talk about how much money they'd raised in space. "Oh, I've raised a hundred million dollars on this space venture and I've raised 50 million, I've raised 40 million." And then you ask them how much capital they'd returned, and it was silent.

And so, I got really nervous that unless there were some real rational investments made in good companies that [inaudible 00:10:09]. And the finance committee started making money in space, the investment category would begin to dry up. So when Chad called me and said, "Hey, I'm thinking about doing Space Capital." I was really intrigued because I felt like I could help make sure that the investments that we looked at and that we made were based on a pretty solid foundation. I told Chad, "I'm happy to work with you on this, but I am going to keep us a long ways away from what I call space crazies that are just investing in physics that don't work, math that doesn't close, and markets that don't exist." And that's really how I was able to meet Chad. We were able to start working together, and it's been a great ride ever since.

Chad Anderson:

And we were in violent agreement on that. It was a very interesting time. I mean, like most early markets as they're developing, there's a lot of excitement, a lot of interesting stuff happening, but it's also a breeding ground for hucksters and snake oil salesmen. So bringing a lens of professionalism and an experience to the table was very important to me. And one of the... That's why you, Tom, were at the top of my list of people that I wanted to work with. And so, count ourselves very lucky to be working with you and lucky to be calling you my partner as well.

In this book, one of the favorite questions for me that we explored was, "Where did the commercialization of the space economy begin?" Because as everyone knows, we've been operating in space for decades. Everyone's familiar with the Apollo missions. But for the first 40 or 50 years, it was incredibly limited market. On the one hand, we had a handful of defense contractors, and on the other hand, we had the government really as the sole customer. And so space has only recently become a category for investment in entrepreneurship, like you just mentioned.

On the heels of SpaceX, removing the barriers to entry. But SpaceX didn't do this in a vacuum. The change that's underway is so massive. There's no way that this is the result of one person or one company's efforts. The progress that we're seeing today is really the result of many people chipping away at this for decades. And where all my interviews in research led me to was that the 1984 State of the Union speech by Ronald Reagan is as good a place as any to mark the birth of today's commercial space industry.

Remember in that speech, he directed NASA to build the Space Station. Likened space to just as the oceans opened up a new world for clipper ships and Yankee traders, talked about the enormous potential for commerce, talked about ready access to private sector launch services, tasked the Department of Transportation to help get them off the ground. It was talking about regulatory constraints and easing regulatory constraints and promoting private investment into the sector. So Reagan planted an important seed, even if that seed would take far longer than it should have to germinate. So what was going on in the '80s? You touched on it earlier, but everything that was going on back then was really underpinned by geopolitical motivations and the Star Wars program, wasn't it?

Tom Ingersoll:

It's interesting. As you think back on how that evolved, it did take a long time, and it took a lot of players. And there are some standouts in my mind that really helped move things forward. And there are others that tried real hard to hold it back. The Star Wars initiative was really instrumental in helping people think of a new way of doing space. There were satellite systems that were built and flown in 18 months. Whereas, previous to that had been multiple years. We worked on the Delta Clipper Experimental in 1993. We were landing rocket engine systems on their tails, just like Elon is doing now but we did it in 1993. They were looking at the National Space Plane, which was a hypersonic system that would go to orbit. We were looking at single stage to orbit, which was extremely low-cost launch systems.

All of that kind of evolved. There was a project called Venture Star, which was a single stage-to-orbit system in the '90s. None of that really came together, but it all kind of laid the groundwork for the fact that systems needed to change, the paradigm needed to change, and that it was possible because of the advance in technology. And a lot of that was technology that was proven during Star Wars.

And then there became a shift around budgets and policy and thinking. And one that jumps to mind is the CSOC contract, which is the Commercial Space Operations Contract that NASA put in place. Joe Rothenberg, I think, deserves a real strong mention here. Joe was associate administrator for Space Flight. He had a, I don't know, $8 billion budget working for Dan Golden back in the '90s. And he had... Well, he was responsible for Space Station, Space Shuttle, many of the NASA centers, but also for a lot of the ground systems that were in place that would support orbiting assets. And they needed to be replaced.

And a number of the contractors came to him and said, "Hey, we need a multi-billion dollar contract to replace all of this aging Apollo-era infrastructure." Joe looked at the trades and Joe said, "You know what? This is not that hard. This is infrastructure that the whole community's going to need. Reagan gave this speech about commercialization of space. Why don't we consider buying these services commercially rather than just building this dedicated infrastructure?" And everybody, really, there was... No one was really supporting Joe. And however, Joe had control of the purse strings, and I remember him telling me, "The best way to control a bureaucracy is with the budget. You just cut off the budget." And that's exactly what he did. Rather than having a line item in the budget for billions of dollars to replace infrastructure, he put tens of millions of dollars per year in for services in the out years. And so they had no choice but to find alternative ways to do that.

Tom Ingersoll:

And it was actually that CSOC contract for the purchase of commercial services that enabled Universal Space Network because we were able to then sell ground station services to NASA. We had NASA projects. And then the commercial folks like Sirius Satellite Radio said, "Well if they're good enough for NASA, they should be good enough for us." So we were able to sell services to Sirius Satellite Radio. We even got to the point where we were selling ground station services to the Department of Defense and satellite companies around the world. So here we had a visionary government employee who said, "Wait a minute. It's time to make a paradigm change. Let's change the budget line item. Let's save the government billions of dollars by allowing commercial services." But in doing that, the unintended positive consequences, we created a business model for a very successful commercial company and commercial market. We had a prominent venture capital company back us. We had a positive exit.

And today, those ground station services, really, everybody uses commercial ground station services these days. KSAT is the largest provider of KSAT services of ground station services in the world. Swedish Space Corporation, SSC, probably the second largest. There are a number of commercial networks. Nobody would even think about building a dedicated ground station these days. Everybody buys commercial services.

And so that was one just little piece that started. We could go on about launch and how many, many organizations tried to form launch. Elon finally broke that one out and made that happen. But again, that was possible because of a lot of people that came before him, in my opinion. We could talk more about that, but you're exactly right, that it was a large group of folks that came together that each played critical pieces in allowing that to happen and overcoming a lot of obstacles. We talk a lot about some obstacles that were out there. Anyway.

Chad Anderson:

I mentioned that NASA didn't believe that there was price elasticity in launch, meaning that if you lowered the price, it wouldn't matter. There wouldn't be any more demand. And I was kind of going back to what you were saying with CSOC and with Joe Rothenberg, is that there was also some parallel innovation happening in the phone companies, for example, following a similar sort of path. Do you think that helped people get their head around the opportunity for ground stations?

Tom Ingersoll:

Oh, absolutely. Yeah. We used to talk about building that... Universal Space Network was in essence a commercial phone system for satellites. And that was the exact analogy that we used. And you were right. At that time, there was a lot of unbundling and deregulation of the telephone industry. When I was growing up, long distance phone calls, if you wanted to call the next county over, it was very, very expensive. And I remember as a young parent talking to grandparents, they would watch the clock, "Oh, it's been five minutes. You how much this costs. You better hang up." So the unbundling and deregulation of the phone system and having that become much more commercial, I think, was a good analogy and helped prepare the market.

You know it was interesting, I was in the meeting with some NASA executives when we were trying to do commercial launch, and they spent an hour showing us all of the research that they had done that said, "There was no price elasticity of demand in launch." They were absolutely convinced of that fact. And they had reams and reams of data and studies to show us that we were kidding ourselves if we thought that if we could reduce the price of launch, that would cause more satellites to be built. So there were some inherent obstacles, cultural obstacles that had to occur.

And I think the bigger obstacles were financial. I go back to the comment from that executive at McDonnell Douglas that said to us, "Why in the world would I want to do low-cost space when I can sell all the expensive stuff I could make?" The Venture Star program was a single-staged orbit project that NASA had pulled together. And the idea was to build a launch capability that would replace the Space Shuttle, but do so at a fraction of the cost. The Space Shuttle was probably the most expensive launch capability ever built.

And there was a big competition between McDonnell Douglas and Lockheed Martin. We had built a prototype. It worked. We knew it worked. We could demonstrate it. It had flown. Lockheed Martin had a really cool system that they were building in their Skunk Works, and there was all kinds of interest in hype, that aura of innovation that occurred there at the Skunk Works. And it was very clear that some of the corporate fathers there were working very, very hard to control that procurement because if there was a low-cost launch system that was going to directly compete with Space Shuttle, which was billions of dollars a year, it was competing with the Lockheed Martin Titan rocket that was about a billion dollars a copy. Imagine that. A billion dollars a copy, and it wasn't very reliable. So there were instances where their billion-dollar rocket would blow up a billion-dollar satellite, and it was all cost-plus, so they got to build another one. I mean, it was a pretty good business back then.

But think about a billion-dollar launch vehicle. You could hardly get your head around that these days when SpaceX sells them for 50 or 60 million dollars.

Chad Anderson:

Wow.

Tom Ingersoll:

It's hard to believe. But that was the state of the affairs back then. So it was interest... Not a surprise, that Venture Star, when it went to Lockheed Martin, eventually, they just couldn't make it happen. Because in a large case, I think people were... It was pretty obvious that it threatened very significant revenue streams in other parts of the business. So I think that there was a lot of structural issues, business, cultural that took a long time to overcome before commercial could really get going.

Chad Anderson:

Okay. So around this time, there is interest. There is key people and key players making moves and making things happen. There are people trying to do it within large organizations, yourselves, and some others leaving to go do it to blaze your own trail. But can we talk a little bit about why these early commercialization efforts fail?

There are a lot of folks that have tried to start businesses that didn't get off the ground for one reason or another. DC-X ended and some of those folks went over to Kistler. And Kistler, they got some government contracts along with SpaceX in the early days, but that company's no longer around. Beal Aerospace was a wealthy businessman who came in and had the financial resources to get a rocket company up and going, you'd think, but that company came and went. Can you talk a little bit about that? Why these early commercialization efforts failed, and why we're starting to see some succeed now, with SpaceX and others?

Tom Ingersoll:

I think it really boils down to the trite phrase, but it's true, that space is hard. And unlike a lot of commercial industries, you can throw money at a problem and eventually, you'll get it done and you can make it happen. You can sell a widget to a consumer because it's not that hard. Space, it is that hard. And each element of the system has to be perfect. Otherwise, you'll never get there.

And then the other piece of it was the financing. There wasn't a financing ecosystem that allowed teams to go out and raise money. So some teams could raise money and they just didn't have the technical prowess. Others would have the technical prowess but weren't able to raise the money. And I think at Beal Aerospace, Andrew Beal had a lot of money. I think he went through hundreds of millions of dollars.

But the basic concept for a large peroxide rocket was flawed from the beginning. Peroxide is not a stable propellant, and they never could get that to a point where it could do what it needed to do. And I think Kistler had a good team, but not a great team to do their very, very lofty ambitions. So as we're trying to explore the market, the balance being technology and finance, it was just very, very challenging. And I think Elon had the right mix. He's brilliant technically, and he had the financial resource to go make that happen. And I think honestly, Elon was able to pick the best and the brightest from the industry.

But even with Elon's talents, he still had to foot the bill for a lot of that because there wasn't that financial ecosystem around him. But it was that realization of how hard this really is to get the very, very best team with someone with enough resources that could get it to the point where it could be seen as a viable investment.

And I think that pretty much tells the story in a lot of ways because there's a lot of smaller space companies. If you think about Telenet. If you think about Iridium, for example. They went through what, $5 billion, built an exquisite technical system, but they didn't have a market. They were so focused on the technology and the engineers building a very exquisite system. They took their eye off the fact that it had to make money and you had to sell it within a marketplace, and just the market wasn't there. So it was that blend and it took a while for it to get there.

Chad Anderson:

And sometimes you can have both of those things. You can bring together the technical talent and the business mindset to build a successful business and the timing could be off and the market could fall out from underneath you. Do you want to tell us a little bit about Rocket Development Company?

Tom Ingersoll:

Yeah. Well, I think there's an example there where we were building a low-cost expendable rocket system. We had very capable executives and engineers. We tested all the key elements. T.K. Mattingly who had built the Atlas launch system and proven his ability to build successful and reliable launch systems. We had an exceptional crew around them. Our challenge was finance. We just couldn't raise enough money to go off and do it. We raised $20-ish million from friends and family, but that's a lot of money from friends and family. And we went out to market to raise our Series B. It was in February of 2000. Many of you'll remember the .com bubble burst shortly thereafter. And then right after that, Iridium had launched and failed and gone into bankruptcy. So not only did the timing around our market opportunity seemed to go away. The timing around any kind of innovative financing also went away. So we just hit a tsunami of challenges.

But I will say, when we were in the last days of that company trying to raise some funds, we had two investors come look at us. One of them was Elon Musk and the other was Jeff Bezos. And they could see that we were on our way out unless we could get some money. And they let us go under. And half of our guys went to work for Elon Musk, the other half went to work for Jeff Bezos, and it all worked out well for all of them. Back to the timing issue, even though we had great technology, the timing was not right for us. And Elon was able to leverage some exceptional talent to help build SpaceX, as was Jeff Bezos at Blue Origin. So yeah, timing matters a lot, Chad. Absolutely. You got to be lucky in this business sometimes.

Chad Anderson:

Like everything in life. Look, switching gears a little bit. As this category has grown, we've seen a lot more investor interest. There's a lot more coverage by the media. There's more bank coverage. All of the big consulting shops now have a space practice. But it seems like most people are looking at this opportunity through a really narrow lens. They're really focused on the space infrastructure and the launch, and what we call emerging industries like the space stations and debris cleanup and manufacturing and that sort of thing.

But as you know, and anybody who listens to our podcast knows is that these are really the most CapEx and the most risky. A lot of factors play into it other than just having a great team like we just talked about. And also makes up a pretty small portion of the overall space economy. And so, we've got the framework where we think about the thesis that guides our investment decisions is focused on key space technology stacks, GPS, geospatial intelligence, satellite communications, and the different layers of infrastructure and distribution and applications within them.

And then just, a lot of times, the hardware is essential. The data that's coming off these orbital assets is essential. But really a lot of the times, the value is in the applications and how that data is used. So I'm curious, as someone who's worked extensively as an engineer and operator on the infrastructure side of things, but then also as someone who has built a data product that people want to buy, how do you view the current state of things and the opportunity set as an investor?

Tom Ingersoll:

In Space Capital, one of our important publications is the GPS Playbook. And I think that really shows and models so much of what can happen in the marketplace where an important piece of infrastructure like GPS, and I worked with the guys who were in the early days of the GPS program and they tell stories about that program almost being canceled multiple times because nobody in Congress could understand what value a GPS signal would be. Like, "That's why you have a map and a compass. Why in the world did you need GPS?" And in fact, even people within the military had a difficult time articulating and creating a vision around what GPS could do.

And you think about that where before it was built, people couldn't conceive all the potential use cases and opportunities and new value that that would create. Our world today couldn't function without GPS. It's foundational to everything that we do. And it is spawned, created, grown market after market, based on that really important signal that comes from space and can't come from anywhere else. So I think that that model follows directly. We've got so many different space-based infrastructure assets that have been put in place that have an impact on the way we live or will impact the way we live. But you don't even know that it's space infrastructure.

People don't know that GPS is space infrastructure. I mean you can't see it. And I think the same thing is happening in communications with Starlink. Starlink is going to change the way people think. It's going to provide global access to high bandwidth. It's going to provide electronic connectivity in places that were never before possible. Mobile assets. I think there's going to be use cases there that people can't even really comprehend today. And it's going to spawn and provide a foundation for a number of businesses and marketplaces are going to be very successful.

And the list goes on. And we talked about that in our Geospatial Playbook as well, where all of these assets that are developing and providing radar-based information, optical information. We've got systems that are doing hyperspectral. There are research assets that are in space that are providing data. All of that is going to be able to be mined and extract new ways to understand how the world operates. It's going to provide ways for us to better defend ourselves. It's going to, hopefully, provide ways for us to get along better as a world community. So it seems so obvious in so many ways, but it didn't appear obvious in the early days for sure. But I think it's now beginning to become clear to most people that space infrastructure is going to become a bedrock for many of the growing industries that are going to come out in the future.

Chad Anderson:

In Chapter 8, we talk about navigating space careers and you've got some great advice for young people in there about how you broke into space and some lessons learned from them. One about getting your master's degree in engineering management, which involved taking some MBA classes, which allowed you to not just focus on technical challenges in your career, but to also be sort of brought up to focus on the bigger picture. I'm curious, do you have anything you'd like to say to bring out about that, advice to young people who are looking to get into this area and maybe start a career here or maybe start a business?

Tom Ingersoll:

Yeah. You don't want to get me going on this topic, Chad, because I can go on for a long time. I've witnessed so many successes and failures that it's so clear to me, the path, the right path. And as I tell people, the technical side of space is hard. And when you get out of college, you really don't know very much. And it takes time and being immersed in the industry on the technical side to really know enough and learn enough that you can be productive.

And as I tell people, you've got to stay in engineering long enough to learn your craft. Engineering in many ways is an art and understanding how to trade requirements and do trade-offs within capability versus cost, versus reliability, and all those elements just take time to learn. So I strongly encourage engineers that want to be entrepreneurs and want to be able to make a difference, to go work somewhere where they can get great experience.

In fact, we're seeing that now. We're seeing a lot of engineers that have been at SpaceX for 10 years who understand what success looks like and they know how to build systems and they don't understand the complexity of them beginning to roll out and being entrepreneurs. And I think that's very helpful. Because you get into a system, and engineering, especially in our field, in aerospace, it's so broad. There's so many various pieces. You need to know how to scale. You need to know how not only to build one thing but how do you build one thing that flows into 10 and then that can grow into thousands and then can build into a market. So to me, that's very, very important.

And then the second piece, and it was very helpful for me in my graduate studies is I took the core MBA courses. I know how to read and generate financial statements. And it's really surprising to see how many entrepreneurs don't know how to do that. And that's also a pretty key element that... And if you're going to run a business, you better understand what a balance sheet looks like, what it means, what cash flow statements and what an income statement looks like. And so you need to marry those two to be successful. I think that when entrepreneurs try to shortcut either one, that's when they run into trouble. They don't have enough technical base, then they really don't know how to build a successful product. And if they're too technical and don't understand the business side, they can end up building a product that can't grow, can't expand, or doesn't meet a particular market need. So that's an important balance, but also some important decisions that in education, I think aspiring entrepreneurs really, really need to take seriously.

Chad Anderson:

Okay. One of my favorite Tom Ingersoll quotes is, "Vision without execution is hallucination." Can you tell us what you mean by that?

Tom Ingersoll:

Yeah. It kind of goes back to what I was talking about. Engineering is hard. And especially Chad, when you and I first started doing early-stage investment in space companies, you have entrepreneurs that have these great ideas. "Hey, let's go build this rocket system that'll take satellites to space for $1.95." And that's great. You can have a great vision. But if you don't have the technical chops to be able to actually build it and make it work, then you're just wasting everybody's time. And I go back to, space is hard. And I hate to say it because it sounds trite but it's true. And if you don't have deep technical chops and understand how all the systems play together, you're going to fail.

There's that other adage, Chad, that in business, "Metrics will destroy vision." You can have a great vision around a company, but if you're not earning revenue and flowing cash, eventually that vision's going to die. Well, the same thing happens around technology. You can have a great vision, but if you don't have the technical chops and the understanding, the team building, the team leading capabilities to actually be able to build it and make it work, the company's failed. So as when we look at investment opportunities at Space Capital, we spend a lot of time researching the team. We have a very broad network. It's very, very rarely that we meet an entrepreneur that we can't make one or two phone calls and find people that have worked with them, that know them well, that understand their capabilities.

And for us, a minimum bar for us even to consider investment is a technical management team that successfully built systems of similar complexity from something that they're planning with their business. Because again, if they're not... If they don't have the ability to actually make it happen, then they're just wasting time. And Chad, how many companies do we know of in the past 10 years that have had these grand visions but went up in smoke and went down in smoke because of bad execution? So many of them fell into that category.

Chad Anderson:

Yeah, that's why I love that quote. So to wrap it up, in Chapter 10, the final chapter, we sort of recap what's happened over the last decade and think about what's coming next. Starship is obviously going to be a huge piece of that. We just closed fund three last week.

Tom Ingersoll:

Congratulations.

Chad Anderson:

And launched our third funds together. So given the reset NVC and the correction and asset prices, and there's less competition right now than there was over the market mania of the last couple of years. There's greater availability of talent. We think that this is going to be a great time to invest. Given you've seen some of these ups and downs already, what do you think is next, and what are you most excited about?

Tom Ingersoll:

Well, you and I have been chatting a little bit about this. It's interesting. You look at our... The investment thesis at Space Capital has been looking at solid town foundation, solid technical foundation, a solid management team, and a market that we understand, and is there for the taking. We are not momentum investors. We don't invest in hype. We don't invest in vision. And I think what's playing out right now is companies that were really vision-driven, that got very high valuations and were focused as much on publicity and hype as they were on execution, have really taken a significant hit.

And as you know, our portfolio is doing very well because of our fundamental investment thesis and then the discipline that we've taken in making our investments. And I think we're going to continue to do that. And what it enables us to do, I think, one is, we continue to attract good companies because we're seen as smart investors.

The second thing that we're going to be able to do is take advantage of some of these companies that maybe had solid foundation but got wrapped up in the overall downward trend, picking out really potentially successful companies and pick winners because of our ability to understand the technology in the marketplace perhaps better than a lot of the... Sometimes they're called tourist investors in space. So I think that there's going to be some really interesting opportunities for us as we dive in and look at some of the companies that maybe are struggling, not because they aren't great companies, it's just that they're not well understood. And I think we're excited about the fact that we have a real strong portfolio and those companies are going to continue to excel.

Chad Anderson:

Yeah. I mean, it's just we are recording this on April 7th, and Starship is been rolled out to the pad. It looks like it's gearing up for an orbital test flight that's going to happen in maybe a few days, maybe in a couple of weeks. So it's pretty exciting. And as we talked about a lot in our partner meetings and things and at the firm, it's going to have a huge impact on what's to come. The types of companies that are going to be... that are possible. There's going to be a big wealth transfer, we think, between existing solutions and the types of new solutions that are going to become available. So you probably have a better lens, a lot more experience seeing the ups and downs of the launch industry and the capabilities that it enables. So I'm just kind of curious, what do you think the impact of that vehicle is going to be?

Tom Ingersoll:

Well, I think we can sum it up pretty concisely in saying that the NASA studies in the '90s that said there was no price elasticity of demand with launch is about as wrong as it could possibly be. I think, right now, we're seeing a wide range of new systems being created and conceived and prepared for launch because of low-cost launch that fundamentally enables a different way to engineer systems, to conceive, to architect, and to finance.

And as the cost of launch comes down, that's even going to get greater. I think the second... And Starship will do that. The other important piece is Starship is going to allow larger systems to be flown because it's payload bay is so large. That's going to again change the economics of building satellites and make them cheaper to build so it gets cheaper to fly, more systems will fly. So I think we're just seeing NASA was very wrong in the '90s, and it's going to continue to grow and expand and the use cases, the utility, and the demand for space-based assets is going to continue to grow. And Starship is going to be that next sea-state change that it's going to enable it to accelerate even faster. I'm convinced of that.

Chad Anderson:

Beautiful. Okay. Pick up your copy of the book and learn more about Tom's exploits. Please visit the spaceeconomy.com or visit your favorite bookseller. Tom, thanks a lot for taking the time to do this. This was great.

Tom Ingersoll:

It was a pleasure. Thank you, Chad.

Chad Anderson:

Thanks for tuning into the Space Capital Podcast. If you enjoyed this episode, please leave us a review and subscribe to make sure you never miss an episode. And if you're interested in learning more about investing in the space economy, I invite you to visit our website, spacecapital.com where you can get access to more industry-leading insights and learn how you can join the entrepreneurial space age.

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