How to Build Strong Space Startups in a Downturn

Space startups already face a belief that their time horizons are longer than your average VC investment standards, but that perception is made more challenging when economic headwinds are unfavorable. So how should startups think about building resilience in tough times?

Foreign [Music] Thanks for joining us so I set that up I Know we're going to go in a lot of Different directions I think today but Um as a starting point uh I think a lot of people are concerned About kind of what are the impacts of What's going on right now what is it What does it mean for the startup space And for for space startups in specific To be looking at what could potentially Become a global recession I guess you Can also refute the premise but uh do You want to maybe start us off Francois Um yes and and maybe as as a starburst Right we have a little bit different Perspective first of all because we have We are very early stage right and so we Look at more than the startup creation Even though we follow up with our Portfolio on the list stage side and Then we are Global which means that we Are not only in the us but we have a Strong presence in Europe Israel and Asia and so what we see is different Even though yes the the late stage Unicorns the spark you know maybe um Telling a different story we still see a Lot of early stage a lot of startup Being created a lot of very seed Competitive rounds right where at least In La VC or you know not competing but you

Know they are present they want to Invest they want to build the next space Unicorns they're still fomo in the Investor Community there's still people Wanting to get in on deals I mean we are still seeing new ideas Right so of course we're not talking About launchers or you know generic Constellation but yeah there's still new Ideas we we look a lot at the you know The X SpaceX employees the the spin-off Of the big Um now whether it's you know SpaceX Rocket labl now others right and um There's a lot of funders with new ideas Yeah and test would you say you're Saying seeing sort of the same thing or Well there has been many changes between Here in space right but from a macro Market perspective There's been a shift in the markets but I would argue they haven't affected the Space industry as much as they have Broader technology and and why is that Well in space we're actually launching Cheaper we're launching less per Kilogram quicker which is actually Helping our clients and customers that Need their assets into space for Offering at a more affordable price Now when it comes to Space startups or I'm going to zoom out Here startups in general the ones that We're planning on going public let's say

This year it's being pushed out and They're being affected immediately with The market correction Rather than ipoing this year they're Having to wait and their valuations are Immediately being affected However earlier in the supply chain Perhaps we're France SWAT Starburst is Setting early it's going to take a bit Of time for it to trickle all the way Through the funding ecosystem right so I'm talking about pre-ipo rounds those Are being effective but it's going to Take time maybe even years if the market Continues in the way that it is to Affect the seed rounds that are still at The last year's frothiness price oh so The exuberance is not going to pass down To to the early stage with time right That's it and then what we are seeing is That for example the European Space Agency right they increase their budget By 20 right for the next uh two or three Years we've seen that you know the the The the space force acquisition arm is Going to emphasize even more on emerging Technologies and startups right so on The demand side at the government and Agency level We still see something that is Increasing and so at early stage we Still think that there's space for an Open opportunities for more more um more Startups and more Technologies now I'm

Curious about because the defense Argument as a hedge seems like an Obvious one right like of course like It's more resilient because you always Have this customer and this customer is Not going to be as affected as other Customers uh by the economic headwinds But on the flip side does it sort of Change The nature of where you sit in the Funnel of how you work with these Companies to know that like perhaps for The foreseeable future these are the Customers you're going to be wanting Going after versus maybe other private Customers I love when my portfolio companies Specifically in Aerospace have a good Healthy blend of gov and commercials Right why is that uh well commercial Once you find your go to market strategy You know how much to push the throttle Spend in sales and marketing to get your Results top line revenue government You're a little lumpier and Unpredictable yeah However massive potential contracts hey Shout out to a TechCrunch disrupt Earlier this year I was chatting Um with Pete from the nro who who I'm Going to get the exact number Pete in The back may be able to help me awarded The largest imagery contract to date This year right

Special at a time like now with markets Down and maybe commercial needing to Push a little more throttle spend a Little bit more to get your Top Line a Type of contract like that that's why The Diversity of customer base is so Important and and zooming out there's Another element of this of last year Investors in boardrooms were pounding Our fists on the table saying growth at All cost who cares about efficiency just Grow your Top Line this year the theme Is efficient growth yes which is where The government's extra helpful for space Companies right now when the commercial Side isn't as efficient right so it's Kind of like you can move those sliders As needed but it's not changing the Fundamental DNA of the companies Necessarily Do you have no it's just to come back on What Tess was saying um Because of the race between the the American government the Chinese Um used to be the the Russian but mostly Uh you know in the fight between the US And China government funding will still Going to stay at high level for at least The next 10 years right and that's I Mean that's not a given who knows maybe Uh China could you know settle down but That that's not what we see Um and so that's that race that pace is

Going to stay as an investor early stage We want to make sure that the startup we Are investing are going to be able to Both take these governments agencies Opportunity and contract rights as well As a more commercial uh we we know in The past at least on the the Upstream Right so it's more odd well related with The launch satellites and everything It's more financed by the government Downstream is more commercial right Um but we want these the startups and This technology to be dual use right Right and that's what that's what we're Looking for right and we do have another Discussion on Dual youth to end the day Cheers so stay tuned for that but I Think uh my uh I have a question Generally about kind of the tensions That then arise you talk about being an International investor right so your Portfolios all over the place but that's Obviously at tension with some of the Defense contracts that come up right Because you can't necessarily be a truly International company and then also Serve you know U.S defense interests Yeah what do we see these so um Starbucks is a large organization right We we have six different office age 80 People Um right now two funds that are Operating one in Los Angeles one in Paris and we are building more but but

Yes we are building geographical funds Right the U.S fund is mostly to invest Into U.S startups and U.S globally is Looking for a superiority right Europe They are you know five to ten years Behind and they are more looking for um Sovereignty right they want some kind of Independence and what we've seen Recently whether it's uh the Gulf region Or Asia without China they they are Looking for some kind of Independence Right they now that's consolation of the Cost of launch right now coming down Concentration are coming down they want Their own consolation whether it's Observation whether it's communication They want their own yeah right so for Sure Um there's there's opportunities not Just in the US I would say uh even Though U.S is a you know a front of all The others Um and in the US we are investing right Now in things that are different than in Europe or or in Asia Um but I would say us is probably 50 of The market right so there's another 50 For you know Europeans and uh Um and other region startups to to grab Looking and monitoring at what the US is Doing and it sounds like the goals are Not necessarily in conflicts like they Can be in parallel because because of The different targets what like super

Superior in one case sovereignty in the Other right exactly yeah okay yeah do You have any thoughts on that on the on That conflict or when you're talking to You know companies that are that serve That customer or want to serve that I Know rocket lab obviously spun up like Uh defense arm but yeah yeah the the Bessemer's to space portfolio companies That I had the honor of working with Rocket lab Inspire global Our our rocket lab is based in New Zealand we've launched over 30 times Down there in Auckland we're actually Launching our first Uh launch in Wallops I'm off to Virginia The day after tomorrow to watch that one Which I am thrilled about I actually was In New Zealand two days ago three days Ago jet lag Um to hang out with Pete uh we're based In New Zealand but we're a Delaware C Corp as well as Spire Global uh where we Manufacture our satellites in Glasgow We're headquartered in Luxembourg but Why is that it's because the U.S Air Force and NASA and NOAA inspires case And DARPA in rocket Labs case are such Important customers So um Were were very very top of Mind of Remaining ITR compliant Um so just to kind of change tax a bit But I guess

Somewhat related but Tess we were Talking earlier about Um some of the kind of like changes you Like the last year to this but also just In the General market sentiment right And and from my perspective Like you know organizing the content That goes on on TechCrunch we've seen Some sort of like lumpy interest let's Say in the coverage areas right and We've seen Uh I would say we've seen the last Interest in the space stuff than we have In in Prior in some of like let's say Last year your pride Um and it might be on us in the way We're presenting it but I I would wonder If It's like also partly is is there hype Cycle kind of going down do you see that Do you think there's any validity to That or do you think we're just paying Attention to the wrong places which is Also totally possible where are we in The space hype cycle yeah and there are Some large differences I would argue that What is the next technical Catalyst or Momentum driver in the space industry I Am very interested uninterested in v300 Fantasy rocket or v30 comms Constellation and hey I completely Understand Moore's Law is continuing so A com satellite or an EO satellite today

Can replace 20 from five years ago But what's the next thing as not just The investor but the aerospace engineer In me I am thrilled and excited for These new potential manufacturing and Space mining asteroids pharmaceutical Testing lunar whatnot But then I gotta think of timing is now The right time is the TRL is the Technological is the technology ready Yet where are we and and I think what we Could do to continue pushing Space as hot and exciting as it is is New tech now one thing to throw back to You yes which I got permission ahead of Time to throw it back to you Another very large difference between Last year and this year is second half Of last year we had more than a dozen Billionaires take selfies in space That's right and this year we had none Hey space tourism only accounts for one Billion of an overall 350 billion dollar Global space economy market and it's Very important to note while that one Billion got a lot of media attention From TechCrunch last year Um The remaining 349 we use in our everyday Lives whether that's navigate us to our Destination via GPS whether that's to Watch television direct via DirecTV Listen to the radio Series radio maybe In a month when this goes up on YouTube

In 30 days it's streaming our internet From a satellite so so the 349 billion Is very important but this one billion Space tourism it stopped this year yeah Why Well so I don't know for sure I know That uh I know that the reaction to a Lot of those articles we wrote from you Know the reader feedback I saw was like We don't care about seeing these people Go to space we're very angry about Seeing these people go to spay Like they have every Advantage already Like I don't I don't wanna I'm not Excited to see them go up there and be Like you know what it was great up there Because I'm rich and did you need Another reminder that I'm rich right so I think that maybe is why the activity Has slowed a little bit but I think you Have you raise a valid criticism was That that we cover that because it Because it attracts an audience right Um but like it also it does a disservice Long term and it also that perhaps Preferences that over the things you're Talking about right which are likely More interesting but also more difficult Too on Earth and kind of fine right so I Guess what's the solution to that like How do you work at getting these Companies that are maybe working on Things that are Less flashy than a cowboy hat

Billionaire in space or whatever like How do you get them out there And get them talking about their stuff Well taking the billionaire in space Selfie a step further and then oh yeah I Promise it's it's I think it's just marketed It could have there could be a tweak People in space we fundamentally I I Believe we need to be a multi-planet Species in order to survive and that's These billionaires going to space and Eventually everybody else as well but It's not to give up on Earth it's Because the technology needed to get to And sustain life elsewhere will Ultimately fix the problems we Face here Right MRI and CCT scanning technology Was developed from the Apollo Mission When we landed on the moon we wanted to Take selfies on the lunar surface that Optic technology is the fundamental Invention saving lives in hospitals Every day laser eye surgery water Purification systems implantable heart Modules the the list is endless of Technology that was developed from Sending people up there and blue and Virgin and SpaceX are continuing that And there are going to be many more very Important life-saving Earth Technologies Added to the list from people going and Sustaining life up there so I think it's Just adding that spin to the coverage

Yeah and personally we were talking Earlier about so some of the Um biomanufacturing and stuff that you Can do up there yeah I I think you know It's interesting to see this billionaire Going to space but Um one of the reasons that the people Are angry is that there's a lack of Purpose right yeah how does you know Preserving the species or Earth you know Uh is related to uh I think the Um Jeff Bezos with his uh Cowboy heart You know at 100 kilometers yeah yeah it Doesn't match right Um and and as Tess was saying right I Don't want to fear another Rocket startup in the US right Um but in in Europe it's a little bit Different Um in Europe it's it's it's only Starting or you know it started a couple Of years ago so yes there's three um Rockets in in Germany well funded There's five in France a few in in UK a Little bit in Italy and and in Spain and They deserve funded and hopefully they Will succeed Um what we are looking now in the US Once you know there's is all right Already a lot of rockets startup fund Did we've seen a lot of tug you know Space Tag being funded yeah a lot of Constellations now our focus is really On you know what are we going to do in

Space Um as NASA is more focusing on the moon Right leaving the the low earth orbits To the more commercial industry what are We going to do what are we going to be Able to manufacture that's going to make Sense either by you know not producing More CO2 on Earth and and putting for Example these uh Computing Farm out of The Earth to space for example but also Yeah what are we going to manufacture in Space that's going to make sense and Interestingly enough at the beginning of This year we launched a dedicated Accelerator program called care in space Or health Tech in space which is one of The the next generation of Biotech elf Tech that's uh could be developed or not Just research but develop and Manufacture in low earth orbit right Where Gravitation is not zero but it's Compensated and so at the end you are in Microgravity and so that's really what's Exciting us we have the Axiom the the Orbital reef and and others these big Guys but then you have the The Outpost The varda that are gonna you know start By doing a reusable payload where so It's it's much less expensive to send an Experiment and then bring it back yeah Right so what are the molecules that's All of the plants that grow faster in Space right to to develop this molecule

And faster and to to use them back Um you know to treat Um breast cancer or other things that's What we really are looking for and That's what we are excited about yeah And then you can ask the question is it The right timing right Five or seven years ago there was a big Everybody was bullish on mining Asteroids yeah it was too early it's Probably still a little bit too early to Think of asteroid minings but we think That you know whether it's now or in in Two two or three years manufacturing its Base is is the right time to uh to Invest right because Um in five to seven years there are Going to be more private space stations We hope or um you know it's going to be More mature on what we can do and how we Can develop that ecosystem right yeah I Think like that oh I'm sorry for my Feedback that I just generated Um I think the uh the the thought there Is like is it is it actually in those Because the timelines is always the Question right especially especially When you're coming at it from the Startup investment perspective because You're like it's gonna make sense in the 10-year period or whatever right so uh But we've we have all that activity Around the commercial or real estate Stations we have kind of a uh a deadline

Although they keep extending it on the On the ISS right and so it's is it then The time can we credulously look at that And say like we are going to have some Orbital science Parks or space platforms Uh in operation within like things the The timelines that make it feasible for VC to play in that space So that's what what's what that's what We are betting on now right Um we will see time will tell right I'm Going to tell the audience a secret I know it's dangerous when I start that Way When I get a pitch deck specifically for Deep Tech hard tech space tech companies The timeline that an entrepreneur Presents I want nothing more than for her or him To hit that absolutely But I multiply that by two or three yeah And I multiply the capital you think It's going to take by two or three Why that's important is because to your Point I've got you know a little less Than 10 years to return Capital to my Limited partners and it's my capital That you're going to be spending to Achieve it now hey this is a piece of so Many more important things you the Problem you're solving the solution You're coming up with the customers that Are going to pay for it but that last One

I think when the timing is right at Least for me is when you're gonna hit That Revenue inflection point that year Maybe the next year Taking in to account I'm multiplying That by two in my head right right so You're you but you're you have the Advantage of them being able to wait Until it's at that point right Bessemer Adventure Partners it's about a five Billion dollar fund so we um have a very Large pool of capital that being said we Invested in rocket lab a pre-launch I Actually I have a fun Spire Global story That I can share Plotzer uh in 2014 had the idea to build The largest general purpose cubesat Constellation at the time it was just AIS sensors for maritime tracking him Along with hundreds of other Entrepreneurs that had this Goal had this Vision so we told Peter Along with everybody else well great go And do it and then come back to us The next year he had two Birds in space And we let a series be yeah Well inspiring I guess hopefully Inspire Inspire I didn't intend I guess we only have a few minutes left But I am curious on uh from both of you And maybe this is is gonna get back into Answers you're a good but like where Should you where would you like to see

Companies focusing their efforts now if They want to have the greatest impact Kind of like We're going through whatever happens in Terms of a recession and then coming out Of it Is it is it Manufacturing in space what Do you think is the most That has the most potential for people To play in right now If I knew I would be working on it I am Very happy as an investor partnering This is a variation and answer you Always give because I always ask some Variations do I always give you the same Answer Um however since I don't have a magical Problem that needs to be solved and a Brilliant solution that I'm uniquely Situated to solve a a business hygiene Fundamental is in a time like now it Really is about efficiency it's about Really watching Your burn and Top Line and fundamentals Of of making it through and making it Through stronger in the end but it Really is about Um So Elizabeth where to focus and how to Focus your business right now right Thank you for saying that better than I Did first one yeah and on all side yes How to make more sense you know of space Right

Um we've seen a lot of application where You know we are looking at Earth and you Know sending back information but yeah Again what can we manufacture in space That make more sense uh for Earth Um and then we are still looking at you Know new technology or people that are Going to think a bit differently and Improve Um a current Problem by a ratio of 10x Right and so how can a new type of Optics instead of be mounted on a two or Three ton satellites can can be mounted On a you know 100 kilos and with a 15 Centimeter resolution right Um how can we build Um Um a digital twin of of Earth with an Accuracy of uh you know 10 centimeters And that type of things GPS 2.0 Um and then yeah we want to see um uh Entrepreneur with more attractions able To fast that that's such a key element Right because we are betting in them for You know five to seven years Um we we still want them to to go fast You know from one year to another from Six months to another six months Um we want to see the ability to um Um To uh to execute right and to to achieve Whether it's small things or big things Right they need to show some Instructions right not just papers

They're on Curious back what do you wish You could cover more as a managing Editor at TechCrunch and what are the Things you're like I'm done covering That one I'm done covering Elon Musk But unfortunately we have to continue Covering forever for all time uh what Would I want to cover more of I mean I Don't know I just love the I love the Potential of of uh low earth orbit uh Economy I think that's super fascinating And I'm I'm very excited to continue Covering that but um that's it you gave Me the last answer but we're out of time Uh thank you very much for joining us it Was great thank you

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