But Then I Remember John Powell

On a recent Space Show, John Powell of JP Aerospace admitted he was forced to seek patent protection for elements of his upper-atmosphere balloon technology to prevent potential competitors from procuring a patent for HIS technology and forcing John to either stop work or pay his competitor a royalty (this topic comes up about 36:30 into the Space Show episode).  Although John was pleased to have the patent, John was more interested in maintaining his ability to work
on his technology free of interference.

I have been thinking about innovation lately and how to encourage innovation within the New Space Family. The latest innovation research has some interesting implications for New Space. Here is a short summary (4 min) of Steve Johnson’s book, Where Good Ideas Come From.



It really is simple math:

Talk MORE about Ideas (inside and outside the company) +
Talk EARLY about Ideas (and early "hunches") =
MORE Innovation

If an entrepreneur approached me and wanted to start a new space company focused on innovation and expanding the “new space market pie”, the Johnson's innovation research from the video above would direct me to prescribe a culture of openness: open about company plans, open about ideas (especially the embryonic ones), open about company successes, open about company failures, etc. Be as open as possible. If the innovation experts are correct this openness would:

1. Allow others to stand on your ideas (allowing their embryonic ideas to mix with yours to generate new ideas)
2. Encourage the openness of other firms (allowing your embryonic ideas to mix with theirs to generate new ideas)
3. Help the firm solve problems through the free input of outside sources (enlisting free engineering help from weekend warriors and the growing army of semi-retired professionals)
4. Produce tremendous marketing and loyal followers for the company (positioning the firm as the honest broker putting the interest of the industry before the interest of the firm)

But then I remember John Powell – John was forced to seek patents for defensive purposes. Patents don’t seem very open. Does this mean I can’t share an idea (especially embryonic ideas) until after I have a patent? If the most valuable time to share an idea is when the idea is half-baked, then how could I dare do that outside the company and risk losing the idea altogether to patent-wielding technology poachers. The best time to share the idea is before the idea is complete enough to patent.

Hypothetically, if there were no such thing as patents in the aerospace industry, my innovation firm would be just fine. Their continued competitive advantage would come from out-innovating the competition, utilizing an open exchange of ideas to magnify their advantage, and through open sharing of ideas, helping neighboring firms grow their ideas and the industry as a whole. But then I remember John Powell.

Here is a longer (17min) Ted Talk where Steve Johnson speaks about the value in sharing what he calls “hunches.”

The Power of Video to grow New Space

Do you remember the early updates Armadillo gave on their rocket development progress?  They were open about both their successes and failures.  First the updates were text based.  Then pictures were added.  And then, with flame in the machine shop, came Video.  And video. And Video.

We not only watched the Lunar Lander Challenge live via the web, but in the months leading up to the official attempts to win the prize, Masten and Armadillo both posted videos showcasing their progress.  These videos became bragging rights, milestones, marketing opportunities, insights into their technologies (you better believe Masten and Armadillo disected each other's videos looking for any advantage).  And even after the LLC, the videos continue (maybe not as many as we would like), but..

Armadillo to an altitude of 2,959 feet.  Video.
Masten first to do in-air restarts.  Video.
Armadillo second to do in-air restarts.  Video.
Armadillo first to use retractable landing gear. Video.

And the video is not poor quality.  These companies recognize the marketing power of these videos.
Multiple camera angles.  Video.
High Quality recordings.  Video.

Video has power.  Video connects a community in a way text and pictures cannot.  Below is a Ted Talk by Chris Anderson on the power of video to promote innovation in a community especially those communities whose finished product cannot be emailed to others (think software).  Chris's talk is 18 minutes.  Watch it and ask yourself, just like Masten and Armadillo, how can New Space use this medium to share more and push humanity out to LEO and beyond.  Thanks Chris.  Good stuff.

Artificial Gravity & Summer Reading

I occasionally take a break from reading value-add leadership and Business books to read books that let me dream a little. My latest dream book (good summer reading) is Pirate Sun, book three of Virga. The adventures take place in an planet-sized fullerene bubble on the edge of a distant solar system. The bubble is filled with breathable air and other natural resources. The only gravity is generated from spinning cylindrical “town wheels”. The series is probably inspired by Larry Niven's Ringworld or Bob Shaw's Orbitsville.

A fascinating character from Pirate Sun is a short muscular man raised from an infant by an authoritative regime on a town wheel with 2g’s constant gravity. Although such a high gravity permanently shortened his stature, the effects of heightened gravity gave him a significant strength advantages when, as a soldier, he attacked those from town wheels with lesser gravity.

This fantasy got me thinking about artificial gravity applications of spinning a spacecraft. As I hear scientists discuss artificial gravity they mention 1g as a formula that for sure works for humans. And they discuss the desire to test long term impacts of one-sixth and one-third gravity for obvious reasons (moon and Mars), but I would be interested in evaluating the health impacts from sustained increased gravity. Okay, so we don’t send infants into orbit to prepare them for a life of forced service as an “Atlas”. But could some level of increased gravity prior to a long-duration mission outside of LEO give astronauts any heightened resiliency to the ravaging effects of micro-gravity?

And while we are on the topic. I really don’t see significant orbital tourism taking off until space stations offer artificial gravity in the bedrooms (as a minimum). Sure it’s fun to float around during the day, but high-paying space tourists (the kind that want a romantic second honey-moon, not the kind that have already climbed Everest) will want and expect their meals and personal bedroom cabins to contain 1g. The successful space hotels will offer gravity as a the norm with weightlessness as an optional activity to enjoy.

Now…back to my business books.

Altius Space Machines

I see today, Jonathan Goff announced the creation of the latest new space company, Altius Space Machines. Jon was one of the founding members of Masten Space Systems, winner of NASA’s Lunar Lander Challenge and Masten’s lead propulsion engineer. Now Mr. Goff is leaving Masten to start his own aerospace company.  Masten’s blog highlights their new talent they hired both to replace recent departures and arm the company with the talent to climb to 100KM and beyond.


After reading of these developments, here are a few thoughts:

1. I can’t wait to read more details of what Jon Goff has planned for Altius Space Machines. Jon’s blog, Selenian Boondocks, has long been a source for innovative space commercialization ideas. I look forward to Jon implementing many of his innovative ideas at his new company.
2. I mentioned in a past post how much the new space industry, as a whole, gains by having an increase in the total number of firms. I have described how an increase in the number of new space firms should increase liquidity opportunities for new space investors. In Jon Goff and Altius Space Machines we see a second industry advantage for an increased number of firms – experience in the employee base for the industry. Those employees that were on Masten’s winning team – some are still with Masten (inspiring the next generation of engineers), some are now with Armadillo, and some are starting new firms - all have leveraged their LLC experience for the future benefit of the industry. I love it.

Good Luck Masten.  Good Luck ASM.

Plymouth Rock - Asteroids here we Come

Lockheed Martin this week pitched a Manned Asteroid mission utilizing two linked Orion Spacecraft currently being developed by the company. Although LM admits asteroid mission planning is 100% internally funded, many within NASA have expressed an interest in the Plymouth Rock presentation. The basics:

• Two linked Orions
• 6 month round trip
• 100kg sample return
• 3 Astronauts
• No new tech required
• With funding could make the trip within 10 years
• Several asteroids being considered for the 2015-2030 time frame from small to very large

The proposal is intriguing. A space entrepreneur has only has to read Mining the Sky to salivate over the potential of extraterrestrial resources available to us on asteroids. But in the near term, what I am most interested in as an entrepreneur is Lockheed’s plan to leave one of the two Orions in orbit after the manned asteroid mission - able to reused over multiple trips. This “stretch” Orion would forgo the heat shield in favor of modifications making it more conducive to long duration space flight. One Orion capsule (the one with a heat shield) would reenter with Crew and samples after each mission. The stretch Orion would remain in orbit ready for future asteroid missions or to serve as a long duration space lab in LEO.

This trend towards reusability is important and I am glad to see it promoted for three reasons:

1. Philosophical Logic: The debate over “reuse” or “launch new” continues to rage (or at least simmer). For LM to recommend a solution that contains such a large reusable component, this means the largest defense contractor on the planet has given the nod toward near-term technologies like depots and space tugs as well. Although not mentioned in the Plymouth Rock presentation, such technologies like propellant depots and space tugs would be needed in order to prepare the stretch Orion for a follow-on mission. We have already seen companies like ULA and Boeing make recommendations for depots and tugs, but to date we have not seen much from Lockheed Martin on the subject.
2. Altruistic Logic: For humans to become truly space faring, cost minimization of permanent space logistics must become more important than capability maximization. Reusable components are essential to create sustainable space logistics solutions.
3. Profit Logic: A clever risk-tolerant company could make a lot of money with a reusable man-rated asset in orbit (especially if LM retains ownership after the primary mission with NASA concludes).

Here are a few secondary missions for a stretch Orion (with profit potential):

• Become a Lunar/Mars cycler ferrying missions to and from the moon or Mars (the stretch Orion will already be capable of remote rendezvous and docking)
• Analyze the earth using the same instruments used to analyze Asteroidal surfaces and sell the data to the science community
• Sell experiment space on-board as a long-term space lab (much less vibration than on the ISS) – dock with ISS to take on experiments, but fly remotely without crew for long durations.
• Fly to the moon: Commercial Lunar fly by’s (One Stretch Orion and one Dragon or Soyuz attached)

How would you make money from a stretch Orion?

The Astronaut Company

My mother tells a story that when I was six years old, I told her I wanted to own an “Astronaut Company”; not “be an astronaut” but own an astronaut company. No surprise, years later, I work on the business side of the aerospace industry. And so I have been following with interest the start of Astronauts for Hire, a non-profit organization tasked with preparing the next generation of commercial astronauts.

It is not hard to imagine a future where Bigelow stations dot low earth orbit and business owners are evaluating opportunities in orbit on such facilities. One big question for businesses will be the human question: as a business owner, how will my efforts on orbit be carried out?

• Who will maintain my experiment on orbit? 
• Who will run my camera for the film shoot? 
• Who will pack the latest batch of protein crystals for their return trip to earth? 
• Who has the micro-gravity experience to serve as Butler and maids at my hotel?
• Do I bring these resources up to station with me or purchase a more turn-key solution where I provide the mission and others provide the space station and astronaut solution?

Astronauts for Hire offers a piece of that puzzle. Bigelow will no doubt hire/train a core group of astronauts themselves, especially initially. But if another company(s) can provide astronaut services at a lower cost, down the road, Bigelow may happily subcontract this portion of their service.

Additionally, I can envision a day where the rich and powerful own space yachts made out of customized Bigelow modules that they purchase for hundreds of millions of dollars each. Such yachts may need to be tended when not in use and serviced with the owner on board. An astronaut company could offer such a service. Such a need for a commercial crew, will expand the scope of the “astronaut” from scientist and pilot to include, perhaps, any human service performed on earth – all carried out in micro-gravity.

Currently, Astronauts for Hire’s service is limited to training the next generation of space pioneers. This training could grow to actually offering scientists on orbit as needed, and eventually for A4H or another company to offer any “LEO Human Service” on orbit. Scientists, pilots, repairmen, construction workers, cooks, maids, and more. This would be the true Astronaut Company.

This only confirms: all my best ideas I had by age six.

5 out of 100 - Deal with It!

If you invested in 100 start-up companies, how many would you expect to be “winners”?  A recent study by Right Side Capital Management consolidated seven recent Angel Investment reports to ask that very question. RSCM's consolidation shows interesting trends:

• Only 5-10% of a portfolio’s investments provided the majority of the returns (most of the remaining firms were a total loss) – 5% winners/95% losers.
• Average IRR (Internal Rate of Return) was 27% across the portfolios (in spite of the fact 95% of companies within the portfolio were losers)
• Portfolio size: at least 100 investments to mitigate risk.

What about space firms? So if you were managing a Space Angel Fund, could you find 100 quality space firms in which to invest? In an earlier post, I encouraged young space firms to develop their companies less like defense contractors and more like Silicon Valley startups by establishing separate companies for each product/service.

For example, New Space Ventures (NSV) invested $$ millions in their micro-launch vehicle system and a year ago also started work on low-cost TPS solutions. With the micro launcher now complete and flying successfully, NSV has attracted several interested buyers for the technology. NSV partitioned the firm into two separate companies, one continuing to pursue micro launch vehicles and one investing in TPS solutions. NSV eventually sold one company and used the proceeds to fund TPS research with additional cash in reserve.

This multi-company approach will grow investment/liquidity opportunities in the industry, but is such an approach really feasible for firms so heavily influenced by their contracting cousins?

Attractiveness:

• Liquidity events generate cash for the business selling allowing them to reinvest in future projects (providing an alternative to additional outside investments or loans).
• More frequent liquidity events are good for investors, and as such make the industry as a whole more attractive.
• More interest from investors encourages entrepreneurs to start companies within the industry further enhancing a virtuous cycle.

Challenges:

• This approach assumes firms have a second product/market they wish to pursue which they believe attractive enough to forfeit a cash payout to their investors and instead reinvest their funds in a subsequent effort (doubling down effectively)
• With many young space firms under-capitalized, they supplement their income through Government contracting. Such an income stream delays the development of even an initial product/service because through contracting you are largely developing the Government’s toys and not your own. 
• Do date, the value of young space companies is arguably the experience and knowledge base of its people and less in company products or IP. If this is true, buyers will want to keep the core team intact when making a purchase. Internet startups often begin this way. Many of Google’s acquisitions over the last few years are companies with an interesting technology demonstrator and a small core team of employees. Google bought the companies’ potential – the product potential and people potential. For example, if a suborbital provider like Masten or Armadillo were purchased right now by Boeing or Northrop Grumman, I assume these industry giants would want to purchase both the IP and the engineers behind the IP. Both firms have demonstrated interested technology, but their real value (since none has yet reached 100KM) is in the risk-taking innovators at both firms. I hope to see this “people-focus” change over the coming year as suborbital firms reach 100KM and begin the switch from R&D shop to operations. At this point, the IP becomes much more valuable as a stand-alone (and marketable) item.

To grow the industry, we need to help new space firms overcome these challenges:

• Guard against income streams too heavily polluted with Government contracting
• Cross-train to ensure the loss of a person to sale is not the loss of a company skill-set
• Develop more than one product line (perhaps not all at first) to prepare for the eventual sale of the company. 
• Start companies with the sale in mind (stop starting firms intending them to grow and prosper for a century!) – this is one of the top questions investors will ask: “where is my liquidity event?”

For the New Space Industry to grow, we need more firms in which to invest. Only 5-10% will be successful. Deal with it. And then start another company…

1,900 Launches for Vandenberg!

Congratulations to the men and women of Vandenberg AFB for this week’s 1,900th launch.  That’s an average of three launches every month for 53 years! It will be exciting to see Vandenberg's launch pace increase even more with Iridium’s announcement to use Vandenberg and SpaceX to launch NEXT, Iridium's new LEO Constellation starting in 2015 - exciting times ahead.

For some history on VAFB and its transition from Army base to launch range, here’s a great summary.

Suborbital Crashes and Oil Spills

Last week a Federal Judge in Louisiana struck down the Obama Administration’s six-month moratorium on off-shore drilling. The President wanted the ban to give time for a blue-ribbon panel to study ways to increase drilling safety. The logic the Federal judge used to overturn the drilling ban gave me hope the space tourism industry can survive the inevitable crash and death of space flight participants. In his ruling, U.S. District Court Judge Martin Feldman, said this:

"If some drilling equipment parts are flawed, is it rational to say all are? Are all airplanes a danger because one was? All oil tankers like Exxon Valdez? All trains? All mines? That sort of thinking seems heavy-handed, and rather overbearing.”

Although I have every confidence the Administration will appeal and may get the moratorium reinstated over the coming weeks, I was still impressed with the level-headed approach of Judge Feldman. If suborbital companies face legal battles due to tragic crashes, I hope their gavel man is another Judge Feldman.

Demand for a Nano-Launcher?

After my interview with Craig Clark of Clyde Space, we continued our dialogue.  Here is one market demand question, you may find interesting:

Q. Being a business blog, I am always interest in market demand. The US Army’s SMDC Nano-Launch Vehicle program agreed to pay $1M per launch for a responsive 20-kg LEO capability. Using this price point, based on your experience, what annual demand do you see for such a capability should a dedicated nano-launcher become available?
 
Craig Clark: For the $1m launch vehicle. I’d love to see that happen. I think that whoever develops that system needs to aim to carry a 50kg payload into orbit, otherwise the cost is still too high ($250k per 3U CubeSat is too much). My main concern is price creep. SpaceX wanted to provide a $1m small satellite launch vehicle, this quickly turned into a $4m vehicle and now it is about $10m per launch. I am really interested to see how Virgin Galactic get on with their plans to air-launch small satellites using the White Knight 2 – this could be the way forward for small sats.   In terms of demand, we will need this type of launch vehicle in order to place nanosatellites in the complimentary orbits required for constellations, so demand will be high IMO. It’s difficult to say exactly, but I wouldn’t be surprised if we are looking at multiple launches per month, especially if the business model is correct (i.e. no launch campaign, standardization, etc.).