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Demystifying the conversations we're already here at RRE and with our portfolio companies. In each episode, your hosts, Will Porteous, Raju Rishi, and Jason Black will dive deeply into topics that are shaping the future, from satellite technology to digital health, to venture investing, and much more.
Jason: Actual Chinese food—
Will: Yeah.
Jason: Flung into space—
Will: From China.
Jason: Cooked, from China—
Raju: Directly to your door.
Will: Welcome to RRE POV—
Raju: —a show in which we record the conversations we’re already having amongst ourselves—
Jason: —our entrepreneurs, and industry leaders for you to listen in on.
Raju: Hello, everyone. This is Raju Rishi. I’m joined here with my partner, Jason Black—
Jason: Hello.
Raju: And we will be, today, interrogating our third partner, Will Porteous, about his various experience with space and space technology companies.
Will: Hopefully interrogation but no torture.
Raju: Well, to be determined.
Jason: Yeah.
Raju: To be determined.
Jason: I think our listeners will decide whether or not this is torture.
Raju: It’s a vote. There’s a vote at the end. It’s just based on the number of clicks that we get, we’ll find out. So William, this will be a fun one because I know you’ve had tons of experience around this domain. But I’ll go ahead and kick it off with the first question. It’s a rather lengthy question, but we’re going to go for it.
So, for decades, space has been the exclusive province of governments, and the military, and a few large companies. We think that NASA and the Apollo program, the space shuttle, satellites for weather, for spying, and communications. At what point did this area become accessible to venture-based startups, and why?
Will: Thanks, Raju. So, you’re right, I have had ten years to get ready to talk about this stuff today. And it was ten years ago that we started doing work around opportunities in the space sector. And at the time, it cost $100 million dollars to buy a rocket to get to space. The most reliable vehicle at the time was something called a Vega from Arianespace, a French company, and each launch cost the operator 100 million bucks.
And it was that kind of cost barrier that meant that everything that went on that rocket or on the satellite that was being launched had to be a proven technology. And the reality at that time was that the cost of getting to space had actually made it too expensive to try new things. The innovation cycle in the space sector had slowed down to a crawl. And we at RRE started looking at the components of the, sort of, world-class satellites at the time and when realized that the microprocessor families that were going up on these satellites, were basically the equivalent to Pentium II from the early-‘90s 20 years earlier, that’s when we realized that there was an enormous opportunity in this sector.
What happened is that what we call the rideshare market really began to open up. So, SpaceX gets a lot of attention for bringing innovation to the launch market in the form of new reusable vehicles, but Falcon 9 still costs 65 million bucks, if you want to buy one. It was really the emergence of the rideshare market or secondary launch mark—
Raju: Wait, wait. I got to stop you there. You mean, I can get a rocket to my door?
Will: You can have a Falcon 9 delivered for a mere $65 million.
Raju: Oh, my God. Okay, fine.
Will: And they’re available used, too. You know, if you want a reusable rocket that’s been to space once or twice, you can get one for cheaper.
Raju: Will, I’m going to give you five star for that. Five-star rating.
Will: [laugh] But we digress. So, the truth is, what really opened up the sector was what we call the secondary launch market. That market was actually pioneered by Spaceflight Industries, an RRE portfolio company, that essentially built a travel agency buying excess capacity on rockets, and then reselling it to smaller satellite operators that were flexible on when they went to orbit. It was sort of like buying a seat on an airline and not being totally sure when your flight was going to go. But it meant that companies like Spire and BlackSky in our portfolio could get to space within the resources they raised in a venture round.
So suddenly, getting to space was much easier and cheaper. This opened the way for engineers to tinker more with innovative approaches when they were designing and building things that were going to go into space, and the risks of failure were suddenly lower. It also opened up a path to build distributed capabilities in space, that is to say, constellations of many small satellites.
Raju: That’s awesome. Actually pretty exciting, you know, to see it innovate at that level. And, you know, in venture, we always think that every sector, at some point in time, gets reinvented with opportunities for, you know, nice returns. It’s amazing to see it happening in space, and it’s obviously been happening for quite some time. So, let me ask you a follow-on question to this, Will. You recognized these trends. How did you go about thinking which areas were appropriate for investment and which areas probably we should stay away from?
Will: Well, so for [a firm 00:05:11] like ours, that’s an interesting question, right because we knew we needed to find a way to do things in a cost-efficient way that fit within the model of an early-stage venture capital. And what we saw on the satellite sector was the application of open computing architectures that we had seen on Earth over the last 30 years. We realized that more and more value was going to be defined in software, and that hardware would increasingly become a commodity. And we realized that with satellites and the small secondary launch opportunities, that we could create capability and begin to generate revenue in sectors like weather forecasting, and maritime data, and that we could build some capability, get it into space, begin generating revenue, and then raise more money to build more capability in a cycle that’s very familiar in the venture model in other sectors.
By contrast, we looked at opportunities in the launch market, and we realized that the upfront capital costs just weren’t going to be a fit for us. There was way too much science and technical risk, long cycles to get to commercial flight readiness. Now, our view on this notwithstanding, a lot of other investors went into this area. I think there have been close to a hundred rocket companies created over the last ten years. We’ve met with many of them.
And, frankly, we still don’t believe that you can create the kind of sustainable advantage through technology that will give you a more valuable business over time in the rocket sector, unless you’re playing at the level of someone like SpaceX. And I’ve been a board member of multiple satellite companies where we’ve made decisions to buy launch capacity, either to buy rockets outright or to buy slots on other people’s rockets, and the things that you care about, reliability, schedule predictability, access to a desired orbit, actually matter a lot more than innovation and cost. This issue is sort of like asking someone, “Do you want to fly on their new plane,” right? Most people prefer to fly on the proven ones and those that have been flown over and over again, that’s the issue for a lot of the new rocket companies, and that’s part of the reason we’ve stayed away from it.
Raju: That’s awesome. Well, I’m glad you’re thinking about it. These are really important topics for venture. You know, and our fund size is different than some of the really behemoth funds, so we have to think about the sectors that make sense at the level of capitalization that we can afford. So, where are we in terms of commercialization of space? And more importantly, when are we going to see ad tech up there? You know, like—
Will: [laugh].
Jason: Real good… I mean, obviously, Tesla sent the car up, and that’s kind of cool. But like, are we far along in the commercialization side of things? Or are we just sort of at the tip of the iceberg?
Will: Well, I think you—we’re kind of in the, what I’ll call the second year of space innovation, in the sense that if the first era was dominated by governments and then big satellite operators, we’re now into an era where space is going to be accessible to everyone. And the real parallel here is if you imagine the network equipment market in the mid-’90s—now Raju, I think you were probably at Bell Labs, then, running [international 00:08:32] for Lucent.
Raju: Oh, man, the good old days. The good old days.
Will: So, the old days are back again in space, and when you think back on the equipment vendors from that period, like Cisco, and Nortel, and Lucent, and Siemens, and others were seeing massive demand for their capabilities. They were building out the network infrastructure to support the coming e-commerce. That’s a lot of where we are today in the space market. A huge amount of basic infrastructure is being built. Every time we launch a satellite, we are adding another node on the network. That node includes processing, memory, storage, networking, and power.
It may be associated with a particular company and application, but it represents another unit of capacity. We’re essentially wrapping the planet in compute fabric, and much of this infrastructure is built around an open architecture with software-defined capabilities so it can be deployed to support a variety of applications going forward. In the future, we won’t think about this infrastructure layer much, and we will take for granted the fact that it produces a wide variety of data, and insights, and supports diverse applications.
Raju: You know, there’s a lot in common—I’m—I—my—I have a network—I’m a network geek, you know, Bell Labs and all that kind of stuff, and there’s a lot of similarities here, man.j, like, you know, those big heavy iron switches ultimately became highly distributed, number one, and number two, you know, they became very software intensive, and it was almost, like, you know, we just lost that whole element of it. It seems like that’s actually happening in space as well. So, really cool, and I naturally see that parallel.
Can we just switch gears to SpaceX? You mentioned that earlier. There’s kind of a behemoth. They’re, you know, have scale and clout, they do the launch side and the communication side of the space industry with their rockets and Starlink. I mean, how do you think about SpaceX? And are they going to be a positive force? Are they going to be a negative force? Do you think they’re going to shut out competitors? Do you think they’re going to allow innovation to occur? You know, it feels very monopolistic in some ways, but I think they are powerful enough to change the trajectory of small and big companies. What are your thoughts around that business?
Will: Yeah, it’s kind of—it’s one of the crucial questions in this whole sector. So, from our standpoint, SpaceX has been a massive enabler of this new era of innovation, and in some respects, it’s sort of shown the way. When NASA gave SpaceX the ISS resupply contract in 2016, they essentially guaranteed the financial viability of a new launch platform. And if you look at the history of the space industry, there’s actually never been a launch capability that wasn’t essentially supported by a sovereign government in the form of a contract like that one, or in the form of subsidies. And so, that NASA/SpaceX relationship is fundamental to this new era.
And SpaceX has showed everyone the importance of total vertical integration in the sector. And with Starship, the largest, most powerful rocket that has ever been flown—it’s bigger and more powerful than NASA Space Launch System, more powerful than Saturn V, which went to the moon—they are redefining the economics of what it costs to get things in space. I think that that’s basically going to be a massive enabler for the next era of innovation, and I think that SpaceX will likely continue to reserve some of the biggest opportunities for itself, Starlink being the most obvious one. But there’s a lot of room to innovate and build companies in this new ecosystem.
Raju: That’s just fascinating, actually. What about the other, sort of, massive players in industry that I think people are nervous about, which are governments, right? Important partners, you know, because a lot of, you know, sort of regulatory aspect of this is controlled by governments, they’re obviously customers of the space industry, but do you think they’re going to partner with startups? Do you think they’re going to create challenges to get companies, you know, out and launched? How do you see them playing out in all of this?
Will: Yeah, it’s a great question, and I think, in thinking about this topic, you kind of have to separate out the US government from almost everyone else in the world. The US government is a leading customer of all of our space companies, and if you look at kind of the recent era, US government research dollars have underwritten a huge amount of the innovation that these companies are built on. But the thing is, the US space program, and the US government’s commitment to primacy and space, is, is, is frankly, admired by many other countries around the world, and that has translated into a lot of interest in these new space companies. And so, when we talk about government as a customer, there’s the US government on one hand, and then there are these foreign governments that are eagerly engaging with innovative space companies because they see benefits both strategically and economically.
And we’re past a point in time where these capabilities can somehow be restricted. These capabilities move across borders quite easily. And foreign governments are realizing today that they can acquire the powers of a superpower on much more reasonable terms than they have in the past. And so, we see tremendous engagement from governments as customers around the world wanting to onboard these capabilities.
Raju: And just to, you know, play on that a little bit, any sort of obstacles from governments around the world?
Will: Well, there’s—there are regulatory considerations, spectrum considerations, there are fears of the need to control those assets in times of conflict, but by and large, the conversation has been pretty constructive.
Raju: That’s awesome to hear. That’s awesome to hear. I mean, you know, in venture, we always sit there and say, “This industry sells to government,” or, “This business sells to government,” so there’s a little bit of apprehension around sales cycles, but in this case, it sounds like a really, really valuable tool. All right, let me ask you a more fun question. What’s the most quote-unquote, “Far-out” space deal that you’ve seen? And what caused you—obviously, because I know—not to fund it [laugh]?
Will: [laugh] So, there are a couple. Yuri Milner, I think, funded a flock of microsatellites that have been sent on some long range [crosstalk 00:15:26]—
Raju: Is that—by the way, is that what it’s called? Is it a flock of satellites?
Will: [laugh] Literally. Yeah, literally a flock. They actually look like little birds. They’re absolutely tiny. We looked at an asteroid mining deal. I think asteroid mining is going to be enormous in, like, 10 to 20 years. You can extract a lot of what we consider rare earth minerals from asteroids, you just got to be able to get them home, you got to be able to get to the asteroid, hang out on the asteroid, and then get them home.
Jason: I’ve seen some pretty creative calculations on the price of some of the metals you can bring home. It’s like, you know, you can find $30 trillion worth of titanium, or I forget what the precious metal was?
Will: Exactly.
Jason: It’s like [laugh], “Okay well, it’s no longer a rare metal if you have $30 trillion worth of it [laugh] [unintelligible 00:16:13].” So, you have, like, such huge amounts of these metals that are less common on the planet, but if you bring a ton back, then you actually end up affecting the price.
Will: Yeah. You just kind of figure out how to get it home[00:16:28]
Jason: Like, what does your ROI look like if you bring back, you know, a trillion dollars worth of platinum?
Will: [laugh]
Jason: Yeah. [figure it 00:16:34] out.
Will: We also looked at—there was a data centers on the moon deal. There’s a company that is—and they’re operating. They’re building these data centers that are basically going to be dropped on the moon, and the whole strategy is to produce operating assets and businesses that sit outside of any earth-based jurisdiction. So, it’s basically a huge tax-dodging space to run your business, [crosstalk 00:17:00]—
Jason: If you wanted your message delivered eight minutes later than they normally would be on Earth, boy, have we got a data center for you.
Raju: Yeah.
Will: So, one of the more interesting technologies that’s enabling a huge amount, both for our companies and for companies like that, are laser optics in space. So, you know, the successor to everything that we’ve done in fiber optics on Earth that delivers the, kind of, low-latency experience we have with the internet has a future chapter in space-based comms to drive latency as low as possible. And several of our companies have deployed satellite optical—laser optical links in their constellations to move data to ground at an impressive speed.
Raju: Yes, that’s interesting. Did you see Umbrella Academy, Will?
Will: I did not.
Raju: Jason, you saw it, right?
Jason: Yeah.
Raju: Do you think that guy actually lived on the moon?
Jason: [laugh].
Raju: I mean, he was on there for a long time, right?
Jason: Yeah. I mean, it’s… it’s science fiction.
Raju: Oh…
Jason: Or I guess it’s fantasy, so anything could happen.
Raju: Fan—oh… that was fantasy?
Jason: Yeah, it was, it was—
Raju: All right, all right, fine. Never mind—
Jason: —[crosstalk 00:18:08] actual documentation.
Raju: I thought it was a documentary.
Jason: Yeah, it was not a documentary—
Raju: Never mind. All right. All right.
Jason: As it turns out.
Raju: Let’s get back to, like—[laugh] let’s get back to normal stuff. So, what applications are you most excited about that you think new space companies are enabling, Will?
Will: I think that we’re going to experience an era of much, much more precise awareness of changes on our planet, I’m talking about hour-by-hour awareness. I mean, the most obvious examples fall around weather prediction, including real-time guidance on changing conditions. And in this era of climate change and extreme weather, that obviously has a great deal of value. But it has equal value in terms of questions of conflict where you’re trying to anticipate, kind of, potentially movements that could presage action by a party from a military standpoint. There’s kind of going to be nowhere to hide, globally, from all the sensors and capabilities that are in space, and there are a lot of personal applications that may result from that. It has a kind of eye-in-the-sky eeriness to it from a privacy standpoint, but it can represent a lot of positive value for the collective of humanity on Earth.
Raju: Yeah. That’s super interesting. I was kind of excited about the ability to shoot a package really high, wait for the Earth to turn, and then have it delivered. Like, literally overnight, or less than overnight. Do you think that’s going to ever be possible, Will?
Will: [laugh] Well, the thing is, hypersonics are, you know, very much a real capability today [laugh]. So, Will it get to the level of package delivery?
Raju: No, I mean, like, directly to your front porch, I mean, with that level of effort.
Jason: [crosstalk 00:19:59] giant trebuchet.
Raju: Yeah, man.
Jason: Yeah.
Raju: Like, why can’t—why have a courier when you can just let the Earth turn?
Will: [crosstalk 00:20:03] parachute.
Raju: Right.
Will: Yeah. Yeah, giant trebuchet is the way to think about it [laugh].
Jason: It’s the unsolved problem.
Will: Yeah, biggest problem in hypersonics is actually thermal. It’s going that fast in the upper atmosphere without breaking up.
Raju: So, definitely not like a cake.
Will: No.
Raju: [crosstalk 00:20:22] would melt a little bit.
Will: We’re going to need a lot of titanium from that asteroid.
Jason: The frozen food, though.
Will: But it’ll be cooked when it’s delivered.
Jason: Right, and you can get it—
Raju: That’s true.
Jason: —just, like, actual Chinese food—
Will: Yeah.
Jason: Flung into space—
Will: From China.
Jason: Cooked, from China—
Raju: Directly to your door.
[crosstalk 00:20:43]
Will: We’re talking global delivery.
Jason: We [laugh] can’t help but veer off course. But no, I’m curious, Will, you know, when you think about it in a certain way, there’s the, kind of, rate of innovation at various levels of stack, kind of, reaching a steady state. How close to a steady state on all the various capabilities are we? Like, we’re not going to have a one dollar delivery to space, right? It’s just going to requi—no matter what you’re doing, in order to get, you know, assets in the sky and into orbit, it’s going to be a certain baseline rate. And from there as well, that actual technical capabilities that we’re launching, in terms of computing, networking, sensors, where do you see things really settling down, and over what timeline, at each layer of the technical stack when we think about it?
Will: So, I think we are right on the cusp of a whole class of new space companies being able to fund their path, from an innovation standpoint, entirely out of operating cash flow. And I think that’s been the promise of this sector for a long time. The space industry, the satellite industry certainly, has been plagued by a lot of capital intensity historically, but as we’ve adopted the, kind of, cheap hardware, open architecture, defined value in software model that has worked in computing on Earth, as we’ve adopted that model in the space industry, we’ve driven a tremendous amount of cost out of the operating model of these companies, so they should have a great deal of operating leverage. And so, I think we can see a pretty continuous stream of innovation moving into space, both in the form of software upgrades, and in the form of next generation hardware, which is already quite cheap. And Starship, when it’s operational, from SpaceX is basically going to take another order of magnitude out of the cost of getting things to space.
It’s also going to redefine the size of the form factor of things that can go into space. And so, I know for a fact that NASA is basically beginning to rethink the overall operating envelope of stuff that they put into space because the inside of Starship is 30 meters across. They’ve got a huge amount of capacity there to put larger structures in space. And that will open up manufacturing in space, more opportunities for space tourism, more opportunities for real operating businesses to move things in space, and we’ll begin to see space-based manufacturing of semiconductors, which is going to unlock a new era of performance in that industry, so a lot changes as we move to open architectures and larger form factors in launch.
Raju: That’s fantastic. Thank you, Will. I’m going to move to the Gatling gun section of this podcast, which, you know, has become a regular form factor. It started out as something that we were just kind of tinkering with, but Gatling guns.
Jason: It’s a staple.
Raju: It’s a staple now, so it’s going to happen in every podcast and, you know, our listeners can look forward to this. And these are space-themed questions that I’m going to Gatling gun you with, Will. So—
Will: Okay.
Raju: So anyway, let’s start with the first. I’ll give you a softball. Like, what’s your prediction on the year of the first moon colony?
Will: Oh, I’d say we’re probably, you know, 2050, I would say, in order just to have all of the life support systems that we need. Yeah, I’d say we’re 20—25 to 30 years out.
Raju: All right. Excellent. It’s good enough prediction. You’re more of an expert than I am. How about the year when we put a person on Mars?
Will: That will happen sooner. We’re within, I’d say, we’re seven to ten years from Mars.
Raju: If I have somebody in mind that I’d like to put on Mars, can I expedite that?
Will: [laugh] There’s a lot of nominations being offered to that.
Raju: I got a small list of people all right. Well, we’ll talk about that—
Will: The question is whether you want them back, and if you don’t want them back, it can be soon.
Jason: Sounds like it’s a list of people that don’t need to come back.
Raju: Yeah… I don’t want to say that out loud, but yeah.
Jason: [laugh].
Raju: All right, fine. All right. So, if you scream in space, Will, does anyone actually hear you?
Will: I saw Gravity, you saw Gravity, like, it’s pretty quiet up there. You don’t get to hear anything.
Raju: Even with the Starlink system?
Will: [laugh] Even with Starlink, which is all which is always listening by the way.
Raju: When do we get a real life Starship Enterprise?
Will: Oh, boy. You know, I think we’re… a lot depends on the propulsion problem. And can we translate, kind of, nuclear propulsion into a manageable form factor that we can then build a structure around in space? So, I’d say it’s probably 80 to 100 years out. That’s my guess. We need really vibrant in-space manufacturing, we need large-scale life support systems that we don’t have. But yeah, I mean, you can look at the component technologies and see a path, so I’ll call it 75 to 100 years.
Raju: Wow, that’s closer than I would have expected. All right. Best interplanetary movie.
Will: I mean, I’m a Star Wars guy at heart. So, Star Wars. I was raised on Doctor Who and Star Wars, so that’s where my heart lives.
Raju: That’s the wrong answer. It’s Spaceballs. Spaceballs is definitely the best. Wormholes: real or not?
Will: Oh, wormholes, absolutely real. Any black hole scientist will confirm that for you.
Raju: There’s about 300 in my backyard. So, [every once in 00:26:32] a big rain, you can see wormholes all day. All right, you’re correct on that. Old Yoda or baby Yoda?
Will: Old Yoda.
Raju: Grogu is going to be pissed off. You know this. They might come and get you. Next episode of Mandalorian, there’s going to be a reference to this podcast in it. All right Species or Aliens?
Will: Aliens. Anything that can have that many mouths come out of that many mouths is a frightening thing.
Raju: I know, but Natasha Henstridge.
Will: [laugh].
Raju: All right, fine. Fine. Let’s not go there. Let’s not go there. Let’s not go there.
Will: Is that her first appearance on our podcast?
Raju: I don’t know. I don’t know. Kirk or Picard?
Will: Oh, Kirk. Yeah.
Raju: Definitely Kirk. Okay. Best Star Trek episode, Speaking of Kirk.
Will: Oh, The Trouble with Tribbles.
Raju: Yes. No, you got that correct. You got it correct. Best Villain: Vader, or Khan.
Will: Ohh. You know, Wrath of Khan, I actually think is one of the coolest movies ever. Those things that they put in their ears, I had nightmares about that for a long time, so I’ll go with Khan.
Raju: Yeah maybe. I don’t know. I don’t know. I would say Khan, too, but the new Khan looks just like our Jason Black over here. Benedict Cumberbatch.
Jason: Oh, yeah.
Raju: Yeah, he looks just like Jason. Although Jason’s got white hair, still, so I think that was true last podcast; still true this podcast. Well, I think that’s all I had. Anything you wanted to add, Jason?
Jason: No, I think that was great.
Raju: Yeah. Appreciate it. All right. We’re going to call this one a wrap. Thank you, William. Thank you, Jason. Signing off here.
Will: Thank you guys.
Jason: [crosstalk 00:28:04] out listeners.
Raju: Yeah.
Jason: Shout out to, uh… [laugh].
Raju: All of them.
Jason: All of them.
Raju: Every single one. I—no, no, no, we just, we do appreciate you guys. All right, keep listening. Thanks, guys.
Will: Thank you.
Will: Thank you for listening to RRE POV.
Raju: You can keep up with the latest on the podcast at @RRE on Twitter—or shall I say X—
Jason: —or rre.com, and on Apple Podcasts, Spotify, Google Podcasts—
Raju: —or wherever fine podcasts are distributed. We’ll see you next time.