Space Access Notes: Day Three Part One
Ok, here goes for the last day of the conference. I think I've thoroughly proven to the reader that I'm utterly incapable of brevity, so I'm not even going to try.
Steve Harrington: Flometrics
The first speaker for day three was Steve Harrington of Flometrics. Steve's company is another promising example of horizontal integration in the alt.space world. They do all sorts of fluid dynamics analysis, design, and consultation, and have helped us out a lot in the past. Steve teaches fluid dynamics at San Diego State, and runs a very nice shop. Last spring we went down to use some of his equipment to run some flow visualization tests on our pintle injectors. After taking one look at his shop, I could tell exactly how Steve got into fluid dynamics. Well, ok, I'm just guessing, but anyone with that many surf boards on their wall, with a shop that close to the ocean....I'm just sayin'...
Anyhow, one of Steve's biggest space related projects has been developing pistonless pumps for rocket applications. Starting about a year or two ago, Steve put together a marketting demo unit made of acrylic spheres which he used to pump marguritas for people at various conferences. This year, I think he was a victim of his own marketting success judging from how few people were awake and not hung-over when he started his talk. Being someone who never has and never will drink, I found it mildly amusing.
Steve highlighted a lot of the progress they've been making with the pistonless pump, and even showed how it might be possible to get better performance out of a pistonless pump than out of a gas generator cycle turbopump, but at far lower cost. He also brought up the fact that a pistonless pump can run the propellant tanks to depletion, unlike turbopumps (which tend to disassemble themselves if they start sucking gas). On the actual hardware side, they've been gradually improving their design to allow for faster pump cycles, which allows for smaller, lighter pumps, and they've found good solutions to damping out the pressure spikes caused by the fact that it's a two-chamber pump. He also mentioned that he's getting 60-75gpm at 500psi with one of his pump designs. They're also working on Supercritical Helium storage to run the pump, allowing one to get away from having to store a bunch of ultra-high pressure gas on-board.
Steve also mentioned a lot of the other work they've done, and showed some of it off. I even noticed a picture of our throttle valves he made for us on one of the slides. All in all, I have to say we've been very pleased with the work Steve's done for us, and I would recommend him to the rest of the community if you have any fluid flow design problems.
Investing Panel: Stephen Fleming, Esther Dyson, Joe Pistritto
This next panel was probably the most profound for me. I've been to several conferences now where Stephen and Joe have presented, and even though there is often quite a bit of review (covering some of the stuff I learned in some of the more entrepreneurial leaning business classes I took at the Y), there is almost always something new and interesting. With Esther Dyson there this year, that was even more so.
I was really glad that Esther came this year. I had intended to personally thank her for some of the new ideas she had discussed, but I kind of chickened out. I guess for all the bluster, I can still be a real pansy at times.
Esther made two very important points that I hadn't thought of before. The first was an analogy about control in a company. She asked "do you want your business to be a 'toy' or a 'child'?" As she put it, a "toy" company is one where you insist on always having control, where it's always nothing more than an expression of the creativity of its creator. A "child" however eventually grows up. You eventually lose control, it will get too big for you, and in all likelihood, it will break your heart occasionally. This analogy was particularly apt for me with little Jonny with me there at the conference.
Now, she pointed out that there isn't anything wrong with a toy company, just don't expect investors to be lining up at your door to invest if they can't have any control. While most of the times investors don't want any control at all (especially while things are going well), when things go bad, investors want a chance to be able to salvage their investment. In a way, this is a good thing. The Esther Dysons of the world didn't make their money by not knowning how to snatch financial victory out of the jaws of defeat occasionally, which means that when the going gets tough, who would you rather have trying to excercise control? Having someone with several million pieces of green foldy evidence that they know how to get businesses off the skids and to pull through tough times sounds pretty good to me. But back to her point--the guys who are good at founding entrepreneurial ventures are almost never the same guys that can succesfully make the transition into a mature market. There are exceptions to the rule, but they're just that. Knowing when it's time to pack up and move on to your next venture, and hand the keys over to someone more able to see your company into maturity is a real challenge apparently. I'd love to have such problems, but it's a challenge nonetheless.
There were a whole bunch of additional pearls of insight from these three, but the other big new idea that Esther brought up was that of sharing investor lists. She said that all too often when a company finds an investor they want to hold him close and lock him up and not share him with anyone else. She brought up a point that while in hindsight was obvious, I had never thought of before, namely that investors like to diversify. If an investor has been convinced enough that the space industry is something they want to invest in, that doesn't mean that they will want to bet on one and only one horse--the exact opposite in fact. It'd be the suckiest thing in the world to be visionary enough to get in on the ground floor of the new space revolution, only to find out that the company you invested in was one of those that didn't make the cut.
The whole idea of sharing investors, referring them to other companies was so foreign to me that I had to chew on it mentally for a while. I still am in fact. I had just always assumed that for instance, Stephen and Joe, when they invested in XCOR were saying in effect "this is my horse, and I'm going to place all my money on it, because these guys seem to be the best bet going". I had never thought that guys who had invested in XCOR or Rocketplane might want to invest in orbital ventures like SpaceX, or VTVL ventures like ours, or Blue Origin, or TGV, or Armadillo. So, I did what any person still trying to understand such a concept would do--I asked a friend of mine who I knew had already invested in one of the alt.space companies. I told him what I had been thinking, and his answer was something along the lines of what I just said--that while he's invested in two alt.space ventures already (one suborbital and one orbital), that he wants to eventually have money in at least both HTHL and VTVL suborbital companies, as well as some in orbital companies.
Trying to feel out the concept a bit further, I asked him about M&A (mergers and acquisitions--what seems to be the most likely exit strategy for investors in alt.space companies). I gave him the hypothetical question of what would happen if an investor were invested in two alt.space companies that merged. It didn't seem like much of an exit option to me. He pointed out that M&A is only really an exit strategy if the company doing the acquisition is already public. If not, then the M&A, if it actually makes sense, is still a good thing, because it is a growth opportunity. Basically, if there's good reason for the merger to happen, it isn't a bad thing if the two companies have some shared investors--if there really is some synergy to be had by merging the two companies then the investors will come out ahead, even if they were already invested in both companies. Good mergers are positive sum events, I guess.
I hate to keep babbling on about a topic where I'm obviously so far out of my element, but the ramifications of this idea (sharing investors) is amazing on the face of it. Think about it. Anyone who has given you serious angel funding probably believes in your business and your team, and your plan as much or even more than you do! Even if you referred him to one of your biggest competitors, it may still be a good idea in the end. When someone invests in a company, particularly a small company, they end up sitting in on board meetings. Meetings filled with a bunch of other investors who have also drunk the alt.space coolaid. Who have friends who may also be starting to get interested in this whole alt.space thing. Who may be looking to diversify themselves...think about it.
Ok, I think I've beaten on that point long enough. Here's a quick list of other ideas that were mentioned by the three panelists that I think are interesting enough to mention even though I don't have the ability to go into each of them individually right now:
Len Cormier: Pan Aero
I could probably go on gum-flapping about the investment panel till the cows come home, but I think I've said about all I can for the moment. The next talk was given by an old friend of mine, Len Cormier. Len's a really nice guy, and he always has some interesting technical idea or other that he's pursuing. It's kind of sad that he hasn't tried to find some more incremental approach instead of trying to hope for a grand slam large investment. He's got a lot of really creative ideas, and seems to really know his stuff (engineering wise).
This year's idea is another two-state to orbit kite-plane design. Basically the first stage is a huge, low-planform loading rocket-powered hypersonic "kite", with a more convention winged upper stage. The first stage wing is mostly empty, with most of the loads taken up by a carbon fiber Iso-truss type structure (which was pioneered by the way there at BYU--had to get some more potlatching in for my alma mater), with an aluminum-beryllium skin that had refractory TPS. The basic goal was 1400kg or 4-5 passengers, plus a pilot to an ISS orbit, at a price/flight of $1.3M.
Len's concept is to try and vertically integrate the launch company with other services, so that he wouldn't be actually selling space flights. Instead he'd be selling communications (in the form of Huge LEO constellations), on-orbit propellant, or entertainment. I particularly think his Huge LEO idea isn't that loony. If you have a high-flight-rate reusable vehicle, in a fleet, and say went in with a cellphone company to make a cellphone sized phone that could switch back and forth seamlessly from cell to satellite depending on where you are, I think you could have a potential winner there. But trying to get financing to do all that under one roof...At least vertically integrating the space tourism part isn't as far fetched. And who knows, he might always have a chance at a COTS contract...but realistically, I think that while Len's long-term goals are good, he needs to focus more on near-term intermediate markets and actually demonstrating technical competence on a smaller scale before he'll ever get the kind of investment money he needs.
Mike Kelly: Personal Spaceflight Federation
Last year, at Space Access, Jeff Greason (and several others including Jerry Pournelle) brought up the point that our industry really needs a trade association. I was so impressed that this was a good idea, that Michael Mealling and I tried to get something going behind the scenes. It was looking for a while like we might pull it off, but it got bogged down, then died with a whimper. So, I was really glad to hear that someone better at organizing such things had picked up the ball--Mike Kelly.
Now that he's no longer with Kelly Aerospace, Mike's been in a good position to act as a well-known, well-respected, but neutral person to head up such a venture. He's working for the X-Prize Foundation, and heading up the RLV working group at COMSTAC, but since he's not financially involved with any of the current players, he has the independence that Jeff was mentioning was so important for the leader of such an organization. He also has John Gedmark (also of the X-Prize foundation) helping him run some of the legwork.
As another quick aside, I think it's cool seeing some of the other younger people in the industry really starting to shine. John Gedmark, Josh Neubert, Alex Bruccoleri, the list goes on. And if you include those who are still quite young, but a little older than me, you could also add Jeff Feige, George Whitesides, and others. With all the concerns in the big aerospace world about the greying of the industry, brain-drain, and all that, it's encouraging to see the quality of some of the younger people who are now stepping up to bat in a serious way in organizing a lot of these conferences, and organizations....
Anyhow, with all that said, why don't I start talking about what Mike actually said in his presentation?
So, Michael pointed out that the scope of their organization was going to be "companies whose business will or do involve human spaceflight under FAA jurisdiction". This includes vehicle developers (such as XCOR, RkP, MSS, Armadillo, SpaceX), operators (Virgin Galactic for instance), and resellers (Space Adventures), commercial spaceports and space destination operators (Bigelow Aerospace). Their goal are to:
Their first big project after commenting on the Human Spaceflight NPRM is going to be starting work on voluntary industry standards. Mike pointed out that voluntary standards like this have been shown to offer more legal protection than regulations. They'd probably team up with ASTM or AIAA, both of which have lots of experience, and neither of which have ever been succesfully sued, and then use industry experts to help provide input to the process. They're trying to set it up so the standards can be changed and evolved easily as we learn, and that they would try to implement standards only as best practices actually start emerging. Mike pointed out that there is a danger from setting bad standards, so they'd try to go slowly as the industry develops, evolves, and matures.
Additonally, they plan on continuing to stay involved in the AST NPRM commentary process, continue doing research on personal liability waivers, and work on developing an ITAR strategy.
All in all, I think this is a very positive development (and it's good to see that even though I managed to drop the ball so bad, that someone else who knew what they were doing was able to pick it up and run with it), and I wish them success.
John Gedmark: X-Prize Cup
John was up next, and while much of what he covered wasn't exactly news to me, it was still good to see the X-Prize Cup solidifying into a more and more professional group. He talked a bit about the Lunar Lander Analog Challenge, which I think will end up being the centerpiece of the expo this year. Should be cool.
Steve Harrington: Flometrics
The first speaker for day three was Steve Harrington of Flometrics. Steve's company is another promising example of horizontal integration in the alt.space world. They do all sorts of fluid dynamics analysis, design, and consultation, and have helped us out a lot in the past. Steve teaches fluid dynamics at San Diego State, and runs a very nice shop. Last spring we went down to use some of his equipment to run some flow visualization tests on our pintle injectors. After taking one look at his shop, I could tell exactly how Steve got into fluid dynamics. Well, ok, I'm just guessing, but anyone with that many surf boards on their wall, with a shop that close to the ocean....I'm just sayin'...
Anyhow, one of Steve's biggest space related projects has been developing pistonless pumps for rocket applications. Starting about a year or two ago, Steve put together a marketting demo unit made of acrylic spheres which he used to pump marguritas for people at various conferences. This year, I think he was a victim of his own marketting success judging from how few people were awake and not hung-over when he started his talk. Being someone who never has and never will drink, I found it mildly amusing.
Steve highlighted a lot of the progress they've been making with the pistonless pump, and even showed how it might be possible to get better performance out of a pistonless pump than out of a gas generator cycle turbopump, but at far lower cost. He also brought up the fact that a pistonless pump can run the propellant tanks to depletion, unlike turbopumps (which tend to disassemble themselves if they start sucking gas). On the actual hardware side, they've been gradually improving their design to allow for faster pump cycles, which allows for smaller, lighter pumps, and they've found good solutions to damping out the pressure spikes caused by the fact that it's a two-chamber pump. He also mentioned that he's getting 60-75gpm at 500psi with one of his pump designs. They're also working on Supercritical Helium storage to run the pump, allowing one to get away from having to store a bunch of ultra-high pressure gas on-board.
Steve also mentioned a lot of the other work they've done, and showed some of it off. I even noticed a picture of our throttle valves he made for us on one of the slides. All in all, I have to say we've been very pleased with the work Steve's done for us, and I would recommend him to the rest of the community if you have any fluid flow design problems.
Investing Panel: Stephen Fleming, Esther Dyson, Joe Pistritto
This next panel was probably the most profound for me. I've been to several conferences now where Stephen and Joe have presented, and even though there is often quite a bit of review (covering some of the stuff I learned in some of the more entrepreneurial leaning business classes I took at the Y), there is almost always something new and interesting. With Esther Dyson there this year, that was even more so.
I was really glad that Esther came this year. I had intended to personally thank her for some of the new ideas she had discussed, but I kind of chickened out. I guess for all the bluster, I can still be a real pansy at times.
Esther made two very important points that I hadn't thought of before. The first was an analogy about control in a company. She asked "do you want your business to be a 'toy' or a 'child'?" As she put it, a "toy" company is one where you insist on always having control, where it's always nothing more than an expression of the creativity of its creator. A "child" however eventually grows up. You eventually lose control, it will get too big for you, and in all likelihood, it will break your heart occasionally. This analogy was particularly apt for me with little Jonny with me there at the conference.
Now, she pointed out that there isn't anything wrong with a toy company, just don't expect investors to be lining up at your door to invest if they can't have any control. While most of the times investors don't want any control at all (especially while things are going well), when things go bad, investors want a chance to be able to salvage their investment. In a way, this is a good thing. The Esther Dysons of the world didn't make their money by not knowning how to snatch financial victory out of the jaws of defeat occasionally, which means that when the going gets tough, who would you rather have trying to excercise control? Having someone with several million pieces of green foldy evidence that they know how to get businesses off the skids and to pull through tough times sounds pretty good to me. But back to her point--the guys who are good at founding entrepreneurial ventures are almost never the same guys that can succesfully make the transition into a mature market. There are exceptions to the rule, but they're just that. Knowing when it's time to pack up and move on to your next venture, and hand the keys over to someone more able to see your company into maturity is a real challenge apparently. I'd love to have such problems, but it's a challenge nonetheless.
There were a whole bunch of additional pearls of insight from these three, but the other big new idea that Esther brought up was that of sharing investor lists. She said that all too often when a company finds an investor they want to hold him close and lock him up and not share him with anyone else. She brought up a point that while in hindsight was obvious, I had never thought of before, namely that investors like to diversify. If an investor has been convinced enough that the space industry is something they want to invest in, that doesn't mean that they will want to bet on one and only one horse--the exact opposite in fact. It'd be the suckiest thing in the world to be visionary enough to get in on the ground floor of the new space revolution, only to find out that the company you invested in was one of those that didn't make the cut.
The whole idea of sharing investors, referring them to other companies was so foreign to me that I had to chew on it mentally for a while. I still am in fact. I had just always assumed that for instance, Stephen and Joe, when they invested in XCOR were saying in effect "this is my horse, and I'm going to place all my money on it, because these guys seem to be the best bet going". I had never thought that guys who had invested in XCOR or Rocketplane might want to invest in orbital ventures like SpaceX, or VTVL ventures like ours, or Blue Origin, or TGV, or Armadillo. So, I did what any person still trying to understand such a concept would do--I asked a friend of mine who I knew had already invested in one of the alt.space companies. I told him what I had been thinking, and his answer was something along the lines of what I just said--that while he's invested in two alt.space ventures already (one suborbital and one orbital), that he wants to eventually have money in at least both HTHL and VTVL suborbital companies, as well as some in orbital companies.
Trying to feel out the concept a bit further, I asked him about M&A (mergers and acquisitions--what seems to be the most likely exit strategy for investors in alt.space companies). I gave him the hypothetical question of what would happen if an investor were invested in two alt.space companies that merged. It didn't seem like much of an exit option to me. He pointed out that M&A is only really an exit strategy if the company doing the acquisition is already public. If not, then the M&A, if it actually makes sense, is still a good thing, because it is a growth opportunity. Basically, if there's good reason for the merger to happen, it isn't a bad thing if the two companies have some shared investors--if there really is some synergy to be had by merging the two companies then the investors will come out ahead, even if they were already invested in both companies. Good mergers are positive sum events, I guess.
I hate to keep babbling on about a topic where I'm obviously so far out of my element, but the ramifications of this idea (sharing investors) is amazing on the face of it. Think about it. Anyone who has given you serious angel funding probably believes in your business and your team, and your plan as much or even more than you do! Even if you referred him to one of your biggest competitors, it may still be a good idea in the end. When someone invests in a company, particularly a small company, they end up sitting in on board meetings. Meetings filled with a bunch of other investors who have also drunk the alt.space coolaid. Who have friends who may also be starting to get interested in this whole alt.space thing. Who may be looking to diversify themselves...think about it.
Ok, I think I've beaten on that point long enough. Here's a quick list of other ideas that were mentioned by the three panelists that I think are interesting enough to mention even though I don't have the ability to go into each of them individually right now:
- A potentially relevant model for how things should evolve in the alt.space world might be found in the history of the early airplane companies. This may be worth further research.
- The fact that this market isn't functioning like a mature market isn't neccessarily a problem yet. One of the panelists said that "a 2 year old acting like a 2 year old isn't a problem. It's when a five year old is still acting like a two year old that you should be worrying."
- IPOing in a foreign market might be an interesting possible exit strategy, since they don't have Sarbanes-Oxley screwing things up elsewhere. They suggested possibly the London, Tokyo, or Australia stock markets. Especially if you do a lot of business in Europe or Asia.
- The point of your business plan is to sell part of your company not your widget.
- There are real non-zero transaction costs for each investment (due dilligence, following up on your progress, attending board meetings, etc), so it turns out that there is actually an investment size below which you're actually less likely to get investment.
- Since such a large percentage of startups don't succeed, investors want to see at least the plausibility of obscene capital gains. They want to see a realistic chance at a 10x return on their investment.
- Almost all investors want to exit at some point, so liquidity events are important to them.
Len Cormier: Pan Aero
I could probably go on gum-flapping about the investment panel till the cows come home, but I think I've said about all I can for the moment. The next talk was given by an old friend of mine, Len Cormier. Len's a really nice guy, and he always has some interesting technical idea or other that he's pursuing. It's kind of sad that he hasn't tried to find some more incremental approach instead of trying to hope for a grand slam large investment. He's got a lot of really creative ideas, and seems to really know his stuff (engineering wise).
This year's idea is another two-state to orbit kite-plane design. Basically the first stage is a huge, low-planform loading rocket-powered hypersonic "kite", with a more convention winged upper stage. The first stage wing is mostly empty, with most of the loads taken up by a carbon fiber Iso-truss type structure (which was pioneered by the way there at BYU--had to get some more potlatching in for my alma mater), with an aluminum-beryllium skin that had refractory TPS. The basic goal was 1400kg or 4-5 passengers, plus a pilot to an ISS orbit, at a price/flight of $1.3M.
Len's concept is to try and vertically integrate the launch company with other services, so that he wouldn't be actually selling space flights. Instead he'd be selling communications (in the form of Huge LEO constellations), on-orbit propellant, or entertainment. I particularly think his Huge LEO idea isn't that loony. If you have a high-flight-rate reusable vehicle, in a fleet, and say went in with a cellphone company to make a cellphone sized phone that could switch back and forth seamlessly from cell to satellite depending on where you are, I think you could have a potential winner there. But trying to get financing to do all that under one roof...At least vertically integrating the space tourism part isn't as far fetched. And who knows, he might always have a chance at a COTS contract...but realistically, I think that while Len's long-term goals are good, he needs to focus more on near-term intermediate markets and actually demonstrating technical competence on a smaller scale before he'll ever get the kind of investment money he needs.
Mike Kelly: Personal Spaceflight Federation
Last year, at Space Access, Jeff Greason (and several others including Jerry Pournelle) brought up the point that our industry really needs a trade association. I was so impressed that this was a good idea, that Michael Mealling and I tried to get something going behind the scenes. It was looking for a while like we might pull it off, but it got bogged down, then died with a whimper. So, I was really glad to hear that someone better at organizing such things had picked up the ball--Mike Kelly.
Now that he's no longer with Kelly Aerospace, Mike's been in a good position to act as a well-known, well-respected, but neutral person to head up such a venture. He's working for the X-Prize Foundation, and heading up the RLV working group at COMSTAC, but since he's not financially involved with any of the current players, he has the independence that Jeff was mentioning was so important for the leader of such an organization. He also has John Gedmark (also of the X-Prize foundation) helping him run some of the legwork.
As another quick aside, I think it's cool seeing some of the other younger people in the industry really starting to shine. John Gedmark, Josh Neubert, Alex Bruccoleri, the list goes on. And if you include those who are still quite young, but a little older than me, you could also add Jeff Feige, George Whitesides, and others. With all the concerns in the big aerospace world about the greying of the industry, brain-drain, and all that, it's encouraging to see the quality of some of the younger people who are now stepping up to bat in a serious way in organizing a lot of these conferences, and organizations....
Anyhow, with all that said, why don't I start talking about what Mike actually said in his presentation?
So, Michael pointed out that the scope of their organization was going to be "companies whose business will or do involve human spaceflight under FAA jurisdiction". This includes vehicle developers (such as XCOR, RkP, MSS, Armadillo, SpaceX), operators (Virgin Galactic for instance), and resellers (Space Adventures), commercial spaceports and space destination operators (Bigelow Aerospace). Their goal are to:
- Present a unified front on various policy and regulator issues (stuff like ITAR, commenting on FAA NPRM's, etc)
- Develop voluntary industry standards as the technology matures
- Coordinate lobbying for the industry
- Do PR for the industry
- Pool resources
- Establish partnerships with other associations/foundations as appropriate
Their first big project after commenting on the Human Spaceflight NPRM is going to be starting work on voluntary industry standards. Mike pointed out that voluntary standards like this have been shown to offer more legal protection than regulations. They'd probably team up with ASTM or AIAA, both of which have lots of experience, and neither of which have ever been succesfully sued, and then use industry experts to help provide input to the process. They're trying to set it up so the standards can be changed and evolved easily as we learn, and that they would try to implement standards only as best practices actually start emerging. Mike pointed out that there is a danger from setting bad standards, so they'd try to go slowly as the industry develops, evolves, and matures.
Additonally, they plan on continuing to stay involved in the AST NPRM commentary process, continue doing research on personal liability waivers, and work on developing an ITAR strategy.
All in all, I think this is a very positive development (and it's good to see that even though I managed to drop the ball so bad, that someone else who knew what they were doing was able to pick it up and run with it), and I wish them success.
John Gedmark: X-Prize Cup
John was up next, and while much of what he covered wasn't exactly news to me, it was still good to see the X-Prize Cup solidifying into a more and more professional group. He talked a bit about the Lunar Lander Analog Challenge, which I think will end up being the centerpiece of the expo this year. Should be cool.
posted by Jon Goff at 2:49 PM
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