Moving quickly along so that I can get it all up here for people to see before it is no longer relevant, the next session was the demand panel. Joe Pistritto, an investor in XCOR (who was supposed to be on the Capital panel, but had to head to the X-Prize Cup) gave his presentation at this time also, but as you'll see, it was at least partially aprapos.Space Islands Group: Crazy Enough it Just Might Work?
The first presenter was Gene Myers of the Space Island Group
. If you haven't been around the space industry for the last decade or so, these are the guys who want Shuttle External Tanks delivered to orbit so they can fit them out as wet workshops. Honestly, I really haven't paid them much attention, since most of their ideas really didn't seem to connect too well with business reality, but some of their latest ideas (while still flawed) are getting closer to the realm of feasibility. In fact, one of their ideas is crazy enough it might just get funded. I'll have to go more into detail on that in a later post, but for now I'll just summarize their most recent work.
Their most recent idea is to build a privately developed Shuttle Derived HLV. It would use 5-segment SRBs, a slightly stretched ET with engine mounted on it, and a sidemount ET that is either converted into a cargo carrier, or a space station module, with a DC-X like vehicle on top. The DC-X derivative would only need to handle landing, and abort scenarios, so it doesn't need a huge amount of fuel. They figure they could carry somewhere between 20-30 people, and up to 65 tonnes of cargo to LEO per flight. This is where things get a little interesting. Instead of selling flights to orbit though, they would actually give away the flight to orbit for free, and instead, they would try and make their money off of renting out space in the two tanks that are delivered. Something like $25/cubic foot/day of pressurized, powered, and environmentally controlled space on orbit (which is two orders of magnitude cheaper than space on ISS at the moment). Each tank station could theoretically hit breakeven within 9 months if fully utilized. It's an interesting idea, but there are some issues with it. But I'll have to go into those later in a further post.
Their really interesting and crazy idea is trying to do space solar power. Now the idea has been batted around for decades, but they have an approach that may just be crazy enough to work. Once again, I'll go into more of the details later, but the basic jist of the idea is that they're trying to presell 2 Trillion kW-hrs worth of electrical power (at $0.10 per kW-hr) from a future space solar sattelite to India or China. Basic details are that of the $200B or so, they would get $2B up front per year to develop the power, then starting in 2012 or so, the SPS systems would start being brought online, and the buyer would then pay the remainder of the cost by buying electricity (ie if they had paid 10% of the 200B up front, they would switch to buying electricity at $0.09/kW-hr at that point). The idea being that India and China are both industrializing, and facing a severe energy crunch. They don't have the same NIMBY issues that you have here in the US, and the current Indian President (not the PM, the President) used to head their space agency, so there's some real interest in space related solutions.
It's still a long-shot, but definitely interesting if they can work something out. As I said, more details later.Joe Pistritto and XCOR: Thoughts on Financing and Development
As I mentioned earlier, Joe Pistritto gave his presentation at this time due to needing to catch a flight. He's on the Board of Advisors for XCOR, and was one of their first angel investors. Joe works with Embarcadero Technologies, and generally knows his business and financing stuff real well.
Anyhow, he discussed a little about XCOR's business philosophy. Basically, you use revenue from contracts and projects to "keep the shop doors open", and you use investment to make progress on your real plan. This allows you to keep going while incrementally working your way toward your goals. Due to the relatively capital-scarce nature of alt.space at the moment, this sounds like fairly sage advice.
Joe then brought up the key things investors look for. If you've heard an angel trying to help space nerds get a clue, this will probably sound familiar:
- People, people, people: a good team, with good trackrecords is more important than a good plan. Good teams can figure out how to make money even if their original plan falls through. Joe gave Yahoo as an example.
- Business Plan: the big idea. How you're going to make money, who you're going to sell to, etc.
- Intermediate Milestones/Stairways to Profit: how can you make money or provide exit points before you actually reach your final goal?
He then discussed the fact that most space financing so far is still in the angels level instead of bringing in VC money because there isn't an existance proof. The running gag in the industry is that this is a great industry to make a small fortune in...just so long as you can start with a large one. Until a SpaceX, or a Bigelow Aerospace, or a t/Space can come along and show small fortunes becoming big ones, this is unlikely to change (but once they do, expect the lemmings to arrive, en masse not too long thereafter). Another reason he gave for the lack of VC interest is that most VCs need to see potential markets of $1B/year or more in the relatively near future--because they're spending other peoples' money, and because only a few of their ventures really take off. Fiduciary responsibility can be a real pain apparently.
He mentioned a few revenue models:
- SBIRs and other government grants: Good for seed money, but don't get sidetracked. Make sure they're paying for something you needed to develop (or something close to what you needed to develop) anyway. Don't become an SBIR farm!
- Commercial customers: They do exist, and they're a lot easier to work with than the government. For XCOR, their sweet deal with the Rocket Racing League comes to mind.
- Firm-fixed Price, Competitive Bid Contracts: If you have to go with government contract, avoid cost plus contracts. You don't have to document you costs, which allows you to be an engineering firm instead of an accounting firm. Small, innovative companies have a hard time remaining small and innovative if they have to be both engineers and accountants at the same time.
- Prizes: Joe mentioned that winning the prize usually require raising as much money as the prize is worth first. Large, complicated prizes often have a difficult time raising sufficient investment interest to actually get more than one or two teams funded sufficiently. Look at the X-Prize for instance. Other than Scaled, there wasn't really any other team that got a decent chunk of money, and a year later we still haven't seen the second X-Prize competitor fly into space. He suggested focusing on smaller, more focused prizes with high leverage, like the spaceglove prize, a prize for a low cost IntraVehicular Activity suit, or for low-mass nanosat upper-stages.
Next was Dan Bland of SpaceHab. I got to work with (and probably get on the nerves of) Dan quite a bit in several of the breakout sessions and workshops on the second or third day. He's a really sharp character, with a lot of experience, and a lot of battle scars. As one of the few commercial space successes out there, SpaceHab had some valuable lessons to share.
He discussed a bit about SpaceHab's history. Apparently they started as a Space Tourism company, trying to fly something like 20 people or so in the cargo bay of the shuttle. Then Challenger happened. After challenger, they switched to focusing on making an orbital lab for the shuttle, and were able to raise about $125M or so from VCs as well as "vendor financing" (which seemed rather clever to me--few are more interested in the success of your company than your suppliers, especially since that translates into their bottom line), and in 1990 got a firm, fixed-price contract from NASA for the job. In 1995 they went public, and were promptly forced by their shareholders to diversify, so they aquired Astrotech (a payloads servicing company) and Jonson Engineering (a manned spaceflight consulting firm). They were doing very well, and had rolled out several new projects, when the Columbia accident happened. They lost a fairly expensive piece of hardware in the accident, and I'm not sure if NASA ever reimbursed them for it (anyone know?). Once again, they were forced to reevaluate themselves. They've managed to get back on their feet, and are cashflow positive again (albeit with about 1/3 the number of employees as they had pre-Columbia).
He then quickly went into some lessons learned. First, he drew a distinction between "commercialization" and "privatization". Privitization is like what is being done with the Shuttle. Boeing and Lockheed via the United Space Alliance operate the system, but they don't own any of the assets, don't raise any private capital. NASA has merely outsourced the exact same work. Commercialization entails actually raising private capital, owning the assets involved, taking risks, having "skin in the game", etc. He then pointed out the following thoughts:
- Truly commercial companies really need to have gross margins of 30-50% to survive, which means that they can't live with cost-plus contracting (which usually only allows 10% gross margins). They need to do firm, fixed price contracts.
- Regulations though favor FAR 15 cost-plus contracting.
- If government is your anchor tenet, it is very difficult to think either strategically or tactically, since everything is at the whim of Congress from year-to-year.
- Your best customer can become your worst competitor (he then brought up several examples where NASA more or less ripped off their ideas to make similar, government funded substitutes. Lack of full-cost accounting often makes such substitutes look cheaper compared to commercial alternatives because most of the costs for the government provide solution aren't actually counted).
- He also brought up the fact that from over a decade worth of experience working with NASA, experiments flown by space entrepreneurs, big businesses, and universities actually tended to be more reliable than NASA experiments, not less.
Lastly, he gave a little discussion about their future direction, talking about the APEX program (which I discussed a few months ago on the blog). Basically, they've seen the writing on the wall, and are designing a family of "carrier" vehicles that can function as delivery vehicles or free-flyers. They can provide both up and downmass, and each one is launchable on several potential launchers. This way they are not tied into a single government owned solution. All in all, I think that if any of the space microgravity R&D ideas mentioned in Part II of this summary pan out, that SpaceHab will still be alive, kicking, and profitable for many, many years.Tether Technologies
The next guy was Joe Carrol of Tether Technologies (of southern California). He was a rather knowledgeable person, and I got the opportunity to pick his brain a bit about tons of various technical topics over the course of the three-day conference. His presentation reviewed various payload return ideas that had been discussed over the years, and then focused on his prefered method: tether based reentry maneuver, ballistic capsule, with helecopter recovery over land using a parachute for decelleration. He also brought up an idea near and dear to my heart: flying payloads on ELVs with reentry capsules, so that even if the launch vehicle fails, the payload can be recovered and reflown.
The two most interesting ideas he brought up were:
Constellation Services: ISS Resupply Issues
- The heart and soul of profitability in space launch or in any space related business is frequency. Frequent access to space leads to everything else.
- Disaggregation in the space industry might be a very good idea.
David Anderman was next up. I've known David for several years over the internet and in person. I think he gets a bit of a kick out of being a bit of a wet blanket. However he's also one of those guys who had the annoying habit of being right a lot of the time. He first discussed a lot about the reality of "proximity operations", ie rendezvous and docking.
He discussed the long, and dismal history of autonomous rendezvous and docking, as compared to the much more succesful history of piloted proximity ops. Having a man in the loop on-board one of the two craft makes many things worlds easier than even teleoperation (since most current ground-based teleoperation schemes involve time delays of up to 3 seconds due to the communications infrastructure).
He then brought up an interesting question: can a single company do both the launch vehicle and proximity ops, and do both of them well? He seemed to think that the answer might well be no, and instead suggested the idea of disagregating the container from the ships (much like is done with intermodal shipping containers). He brought up that by decoupling the prox-ops vehicle from the launch vehicle you allow both to benefit from incremental improvements. This is similar to my argument I've been making against the ESAS architecture--it has no real way of benefiting from substantially lower launch costs over the next 15+ years. An interesting example he gave of disagregation was FedEx. FedEx doesn't develop or build the airplanes or trucks, nor does it have a single main customer. It operates other vehicles developed by other people, it flies tons of small cargos from millions of different customers. How this applies to space isn't entirely clear yet, but it is an interesting idea.
For ISS resupply, David suggested the typical idea of NASA as an anchor tenet, but gave the following question as a way of guaging success at a future point: what percentage of the traffic is commercial? If 10 years from now almost all the flights on commercial manned orbital vehicles, and cargo containers is NASA personel and NASA cargo, something was seriously botched.
After all that, he still didn't really discuss at all what CSI's plan is. Those of you who know their company know that this is pretty much par for the course, in fact I think David enjoys being a tease. It's annoying as heck, but they have the right to be as vague and secretive as they want to people who aren't giving them money. He did note however that if NASA finally gets it's thumb out of its nose long enough to get the "non-traditional" RFP out for ISS resupply, that some of his company's strategy would probably then be publically available in the form of their proposal. So, hopefully we'll see.InterOrbital Systems
The last speaker on the supply panel was Randa Milliron of InterOrbital Systems. IOS is an interesting company I've been following for several years. When I noticed that they were on the speakers list, I decided to pop on over to their website
, to see what they were up to lately. I noticed some interesting things I wanted to blog, but ran out of time before the conference (since that was the day before), but Randa brought most of them up in her talk, so I'll mention them briefly here.
She spent a lot of time talking about their Neptune launch vehicle that they're working on. It's a Stage-and-a-Half design, much like the old Atlas ICBM. Basically it has a big booster engine that gets jetisonned after it is no longer needed. This allows the rest of the vehicle to reach orbit without having to do the usual staging, and without having the huge mass fraction issues inherent in SSTO designs. Their system is slated to be launched from a floating position at sea, uses LOX/Methane, and the LOX tanks are designed to be fitted out as a space station on-orbit, for either space tourism or research. The vehicle is sized to carry a fairly spacious 9000lb capsule (if I'm remembering it right) that carries the crew and any cargo.
Anyhow, they've been around making big claims for a while, and I had just about written them off as being all-talk, but they are claiming two very interesting recent successes that definitely make them worth at least watching.
First off, they've apparently ground tested a work Expansion-Deflection type rocket engine. This is an altitude compensating nozzle design that as I understand it had previously been tried, but nobody had gotten it to work very well. Basically, an E-D engine has a centerbody of sorts that deflects the exhaust outwards toward the walls of the engine. In theory, at low altitudes, the core in the middle is supposed to stay at about ambient pressure, which results in an annular exhaust jet that isn't overexpanded even though the expansion ratio on the engine may be as high as 100:1 or more. As altitude increases, and the pressure in the void drops, the jet fills up more and more of the nozzle, until eventually it reconnects in the middle and you have a full nozzle with a very high expansion ratio. At least that's the theory in a nutshell. The problem is that it tends not to work that way. The fast flowing gasses surrounding the void tend to asperate so much gas that it quickly drops well below the ambient pressure, causing the engine to act as though it were in a vacuum, more or less elminating most of the benefits of the design (while keeping all the drawbacks). Apparently though IOS claims that they've succesfully eliminated or avoided the asperation problem (though obviously they didn't explain how). It's relatively easy to tell if your E-D nozzle is working on the ground, because if it isn't working, the flow will separate from the nozzle walls if you have a high expansion ratio. If it doesn't separate, it means that the E-D nozzle is at least doing most of its job. If they've really solved the problem, this might be a technology worth licensing out to other alt.space firms. I'm sure most of us would like having altitude compensating rocket engines.
The other interesting news is that they've now presold their first spaceflight. IOS, since it doesn't have the credibility of a Space Adventures or Virgin Galactic is offering a rather unique (and hopefully legal) deal to help raise money. Basically, the first several passengers get a $250k flight deal (instead of the $2M/seat normal price) with a full refund two years after their flight. IOS plans on raising the money for its orbital vehicle through by preselling enough tickets. Apparently this presell that they've finally managed was enough to fund the rest of their Sea Star, nanosat launcher (a subscale version of the Neptune), which they claim should be flying within the next 10 months or so. As it is, it should be interesting to see if they can pull it off.