💥 SPACE. What is the Value Proposition?

“We are currently at an inflection point to shift the integration of what we consider to be Space systems from the ground to orbit.

Everything we are doing at Arkisys is to enable the infrastructure to allow the tools, the know-how, the platform, and the capability so we can try to take advantage of once you throw that mass up...

We throw away everything we put into Space.

It is crazy.”

David A Barnhart, Co-Founder & CEO of Arkisys

Space Tech Expo USA Day 2:  Innovation, GeoPolitics, and the Real Value of the Space Economy

Innovation, Competitiveness, and GeoPolitics

How do you innovate in the Space economy while protecting national and private interests?

Plain language:  How do you build new tech in a global marketplace of private and national entities that may threaten your ability to monetize and protect your intellectual property/special sauce?  We can take this one step farther by addressing the imperative need to protect financial, health, environmental, national, and international security.

It’s about relationships and learning.

This is not a transactional business.  Spacetech is a relationship business.  Customer needs (private and public) are always evolving and so are the available tech solutions in the Space economy.  If you are insular and not collaborative you will miss out on learning from customers, competitors, and the marketplace in general.

Panelists at Day 2 of the Space Tech Expo USA in LBC remarked that in the past they would not have been able to talk about their government investment priorities.  Now, it is understood that innovation (and competitiveness) is stifled if you do not have an open interchange with many people about needs, funding, and timing.

Innovation requires collaboration, especially international collaboration.

I have always appreciated the value of working with cohorts of founders from around the world.  Helping many makes me better at making a meaningful positive impact on specific individuals and their innovative businesses.

No one can afford to wear blinders in Spacetech or in any rapidly innovating sector.

There are specific export rules for sensitive strategic technologies.  Got it.  Yet we must not lose sight of the real value of all of this technology and build efficiently towards that.

The Real Value of the Space Economy

There is a huge value in hard tech, especially in the Space Economy.  No doubt.

Over the last two days at the Space Expo and through my own work with Spacetech companies I have learned about great tech for more efficient rocket propulsion and space mobility, satellite constellation management, advanced communications, quantum computing for nearly everything, habitats in extreme environments, in-orbit manufacturing, advanced sensors, etc.

Cool!

Yet that is not the real value.  These incredible technological advancements are tools.

Helium-3 and other precious resources?  Water for fuel, work, and life off planet?

Very valuable.  But still a means to an end.

So what is the real value?

Content.  It’s always about the content.

Driving the economies of the Lower Earth Orbit (LEO), the moon, Mars, Europa, and beyond is the need for information to make decisions.

The Value Proposition:  Data in real time.

Actionable reliable information and predictions without latencies is the ultimate value.

For governments, data is desired about the military and economic capacity and activity of both friendly and unfriendly governments and of the private sector.  The more precise the better.

For the private sector, data and its timely and secure processing and transfer (read: immediate) is desired about a host of things.

Businesses are using advanced remote observation from space for natural resource exploration/protection, matching supply to demand, economic choices related to climate forecasting, enabling improved agriculture techniques, monitoring consumer demand patterns via population movements... the list is long.  Experiments in space provide information for a range of scientific choices leading to breakthroughs in medicine, advanced materials, and a host of daily uses including advanced communications.

Transfer speed with minimal latency is expected across all applications. A senior defense official wondered aloud whether a text to his mother informing her that he was coming to visit could possibly be delivered faster than an inbound missile warning to this country.

A critical piece of data sought via satellite remote sensing is the transport of nuclear materials across borders.  That is hyper imperative for sure.  Quantum computing, Helium-3, and AI make this easier, faster, and more accurate.

That is very valuable.  But more valuable is the information flow motivating individuals, groups, and countries before they transport these nuclear materials across borders.

Why am I trying to make the case for data and information as more valuable than hard tech (which I emphasize is extremely valuable)?

Because it is important to know what is valued most when making decisions about scarce resources as an innovative founder, researcher, and capital allocator.

In Spacetech, NASA cuts hurt, university research budget cuts hurt, and the challenges of early and growth stage funding (or lack thereof) hurt.

How do you convince capital allocators to choose your innovation?

By proving the business case.

What gap are you filling and what special abilities do you have (personally and as a business) to capture and retain large market opportunities?

Market does not exist yet?  What is the true value customers will acquire and pay for related to your solution?

Narrow tech?  What is the wider market application?

Government and grant dependent in the early stages?  That is expected but what is the value you will realize in the greater commercial marketplace and why?

If you can’t prove your business case, don’t expect funding from anybody these days except for pure R&D which is very worthy but increasingly limited.

The Nexus of Defense and Commercial Tech in Space

Space is a team sport.

It is all dual-tech (public/private) at some level and we play in an international league getting more competitive by the day.

Space is now a contested domain.  One entity’s Spacetech interacts directly or indirectly with another’s.  Earth’s moon and other extraterrestrial bodies will soon have more public and private entities staking a claim on them in some way.

The bulk of the Spacetech R&D is now in the private sector.  All launch is now a commercial service.  The US government seeded the Lower Earth Orbit (LEO) marketplace.  Yet this area of public-private sector success has not yet been replicated in any other of the US government mission segments.

Regardless of the current political environment, funding for Space is a long game.  The government and private sectors have a lot to learn from each other in terms of communicating needs, funding, restrictions, and enabling the execution of innovative Spacetech solutions.

Enterprise sales acquisition is hard.  Government sales acquisition in Spacetech is harder and evolving.

Entities like SpaceWERX act like a go between to help private innovators map the acquisition process of earmarked government funds for new tech.

Exploit.  Buy.  Build.

I heard this mantra several times on Day 2 of the Space Tech Expo USA in the context of US government acquisitions.  It also applies to lean startup launches.

Exploit (or leverage) what is already out there to serve your customers and immediate objectives.  You cannot and should not do everything yourself.  Not at first for sure.

Buy what you cannot exploit or share in a partnership.

Build only what you really need to build, when you must do so.  In short, be cash sensitive because it runs out faster than expected.  Effective fundraising is based on meaningful milestones, not inefficient management of expenses and cash reserves.

Political Trends

Golden Dome.  It is a movement to get all the things in Space to fully protect the United States.  Translation:  details unclear but the objective is to avoid a gaping hole in security or competitiveness.

NASA and other critical federal cuts.  The proposed cuts are not final.  Contact your members of Congress and flex the democratic and US lobbying system of influence in your interest.  Negotiations are a part of life.

John Neal, VP of the Space Industry Council for the U.S. Chamber of Commerce noted:

“Somebody may go to bat for you.  There is a lot of value in getting together with your peers, circling the wagons and explaining the impact.”

David A Barnhart, Co-Founder and CEO of Arkisys, an innovative space servicing utility, offered a great takeaway:

“The bigger question is what the cuts are trying to achieve.  Is it about spending alone or do they instead suggest a bigger push into the private sector?  There is an opportunity to have a conversation with the group cutting and the group being cut.”

Keep it Clean

One final tip.

Founders for dual-use technologies, please keep in mind an important consideration when fundraising.

Raise clean capital.  This means that you should ensure that you raise funds from sources your intended US government partners can accept.

Klingons no.  Federation yes.

Day 2 Select Morning Panels

Opening Keynote:  Exploring Our Universe Through Space Technology

Dr. Charles D. Norton of NASA's JPL Photo: J Fairbanks

Moderator: Raquel Buscaino, Novel & Exponential Technologies (NEXT) Leader, Deloitte Consulting

Presenter: Charles D. Norton, Acting Chief Technologist, NASA Jet Propulsion Laboratory(JPL)

Dr. Norton’s current role at NASA is to define the agency’s strategy to incorporate SmallSat missions within its broader science, technology, and exploration goals.

Fun fact, Dr. Norton chose between becoming a professional bassoonist and pursuing science and engineering.  He still plays the bassoon.

Countering Threats to National Security

Moderator: Robert (Sam) Wilson, Director, Center for the Space Policy & Strategy at the The Aerospace Corporation

Panelists: Mandy Vaughn, Founder & CEO, GXO, Inc and Operating Partner at Embedded Ventures; Lt Col Vinny Pande, Materiel Leader at SpaceWERX; Col Edward E. Jones, Principal Deputy Director at the National Reconnaissance Office (NRO) ’s Office of Space Launch; and Matt Magaña, President of Voyager Technologies

SpaceWERX acts like a translator between the US government and startups related to needs and access nodes.  Sometimes the government, like many large enterprise customers, does not know what to ask for or sets requirements in a non-specific “bin” type of request.

The need for network flexibility requires a new level of cooperation between government mission owners and commercial entities that differs from the past way of doing things.  The acquisition process is changing and both sides need the tools to capture and sustain innovation.

In the trade-off between control and speed on the part of the enterprise buyer, the need for speed and resiliency has shifted the markets in favor of the commercial side.

There is greater openness of requirements, capabilities, and relationships than before. But government agencies are still struggling with Title 10 and 50 requirements of the armed forces and overall national security.  This has a direct impact on startups and capital allocators seeking large market opportunities on a global scale to fund innovation.

This is particularly true regarding Space Situational Awareness (SSA).  SSA refers to monitoring and predicting the location of the thousands of objects in Earth’s orbit.  The Space Data Association (SDA) is the international organization of satellite operators working to avoid collisions.

The government agencies are learning a lot from the financial sector in handling security sensitivities and threats.

Mandy Vaughn touched upon evolving integration and trust requirements for industry and government partners.

More on integration next.

The Future of the Commercial Industry:  What Direction is it Heading?

“The notion of a connectible interface is that you design a spacecraft to allow things to connect…

We partnered with another visionary company doing satellite manufacturing, Sidus Space (NASDAQ: SIDU).  We provided to them a connectable interface and they’ve flown it.  It is pretty cool.  It is one of the first spacecraft that allows connectivity to occur.”

“The technology is there.  Our vision is to enable that entire capability to integrate anything you want to post launch and therefore be able to grow to almost any scale.”

David A Barnhart, Founder & CEO of Arkisys

Dave Barnhart of Arkisys captivating his fellow panelists at Space Tech Expo USA in Long Beach, California. Photo: J Fairbanks.

Moderator: Frank Slazer, Space Exploration Advocate

Panelists: Nick Hackard, PMP, Prime Branch Chief at SpaceWERX; John Neal, Executive Director for Space Policy at the U.S. Chamber of Commerce; Katie Wall, VP of Federal Affairs at Artemis Group; Matthew Feldman, CTO at Viridian Space Corporation; and David A Barnhart, Co-Founder & CEO of Arkisys.

John Neal, Executive Director for Space Policy at the U.S. Chamber of Commerce is an advocate for reciprocal access with foreign partners to incentivize collaboration.

No one is irreplaceable in Spacetech.  The Spacetech business is moving quickly so the wider the network, the better to keep up and remain relevant.

Katie Wall, VP of Federal Affairs at Artemis Group, suggests that everyone should be calling their members of Congress.  The proposed government cuts spooking everyone are not final.

That being said, the end of one funding source and guidance lends itself to bolster innovation and commercialization activity in an area previously dominated by government.

Restrictions on exporting certain key technologies to foreign buyers came up.

Katie Wall noted that if some of the requirements are not modified, foreign companies might get their tech from our adversaries.

A historical dilemma.

Matthew Feldman, CTO of Viridian Space Corporation, remarked that keeping abreast of the myriad of government guidelines can be a burden for an innovator.  A small company many not have the bandwidth to understand what is expected of them as government policy shifts.

“This is a signaling mechanism… [which is] very important to how the VCs see us.

It is important to get a Program of Record otherwise you will not get the investment dollars.”

A demand signal is an early indication that an innovative technology has a potential buyer. In venture capital, it is a signal of a startup's ability to capture large market opportunities. It needs validation for private investment dollars to flow in. A Program of Record (POR) is a demand signal. For a US government agency, a Program of Record (POR) refers to a line item in its budget that has been formally approved and funded via an acquisition program.

The signal of a POR is why it is important to have an organization like SpaceWERX to keep the innovative technologies coming.

The government agencies are pondering how to take more risk.

Front and center.

Keep in mind the value proposition and evolving customer needs.

Those with the tightest relationship with the customer and end user will have the competitive edge against those that do not.

Innovation and private investment dollars flow accordingly.

For takeaways and highlights from Day 1 of Space Tech USA check out: To the Moon and Beyond, Earthlings https://www.linkedin.com/pulse/moon-beyond-earthlings-joy-fairbanks-ctjwc/?trackingId=YOv5mSWISvq3ydIC9T9zyQ%3D%3D.

About the Author

Joy Fairbanks is an experienced institutional investor, builder, innovation advisor, and educator. She is Managing Principal at Fairbanks Venture Advisors.

Joy has served as a faculty member at Columbia Business School running the impact venture incubator and helped launch the Long Beach Accelerator, a public private partnership. She has worked with a wide range of accelerators including Techstars, Blackstone, Village Capital, Venture Out, Columbia Venture Community 2.8 Womens Accelerator 💙🦁, LBAN/Latino Business Action Network, Stanford's Hacking for Recovery, Cal Hacks, and NYU's New Media Lab.

Joy advises over a hundred tech startup founders per year across sectors and geographies on product development, market assessment/customer acquisition strategy, partnerships/pilots, financial forecasting, funding, M&A, and exits. She is a requested speaker on these topics and writes about startup success at FairbanksVentureAdvisors.com.