Tess Hatch joins us at TC Sessions: Space this December

This year has been one of the busiest yet in terms of new commercial launch companies coming online, with companies like Astra and Firefly Aerospace actually getting rockets up and running (if not flying as designed quite yet), and with landmark human spaceflight missions from Blue Origin, Virgin Galactic and SpaceX. And with more constellations in operation, built out of satellites equipped with sensors capable of providing new and more detailed data for commercial use back on Earth, the timing is right for startups everywhere to leverage a new data Gold Rush to build businesses based on in-space resources that just weren’t available before.

Joining us at TC Sessions: Space happening December 14-15 is Tess Hatch, partner at Bessemer Venture Partners, who focuses largely on frontier technology and specifically on the commercialization of space, drones, autonomous vehicles and the future of agriculture and food technology.

Hatch brings a lot of expertise to the table. She studied aerospace engineering at the University of Michigan before earning her Master’s degree in aeronautics and astronautics engineering from Stanford. She then continued on to Boeing, then SpaceX, where she worked with the government on integrating its payloads with the Falcon 9 rocket.

We’re excited to hear from her at TC Sessions: Space. Grab your tickets to join us and save $100!

Bessemer’s Tess Hatch will join us as a judge at TechCrunch Disrupt 2021

Tess Hatch, vice president and partner at Bessemer Venture Partners, will join us at TechCrunch Disrupt 2021 as a judge for our Startup Battlefield competition. By the way startups, you can still apply now until May 27 to take part in the competition here!

At Bessemer, Tess spearheads frontier tech investments, including the scaling and commercialization of revolutionary technologies, including drones, space-based observation and launch, agritech and much more. She’s focused on sourcing and reproducing tech bets that have the potential to significantly improve society in fundamental ways.

Some of Tess’s investments and board positions include Rocket Lab, Spire, DroneDeploy, Iris and more. Before her time at Bessemer and work as an investor, she worked for both Boeing and SpaceX as a payload integrator and aerospace engineer, building on her aeronautics and astronautics education from the University of Michigan and Stanford. Tess was also recently named one of Forbes’ 30 under 30 in VC.

We’ve been lucky enough to have Tess onstage at prior Disrupt events, and our TC Sessions: Space event as well. She’s definitely one of the best people in the world to talk to about cutting-edge technologies, and companies looking to solve even the most ambitious technical challenges, so she’s sure to bring great perspective to the Startup Battlefield judging panel this year.

Make sure to book your pass to TC Disrupt on September 21-23 to watch 20+ startups compete for $100k in Startup Battlefield and enjoy over 100 hours of content and thousands of enthusiastic startup fans — all for under $99! Secure your seat today!

Bessemer Venture Partners closes on $3.3 billion across two funds

Another major VC firm has closed two major rounds, underscoring the long-term confidence investors continue to have for backing privately-held companies in the tech sector.

Early-stage VC firm Bessemer Venture Partners announced Thursday the close of two new funds totaling $3.3 billion that it will be using both to back early-stage startups as well as growth rounds for more mature companies.

The Redwood City-based firm closed BVP XI with $2.475 billion and BVP Century II with $825 million in total commitments.

With BVP XI, it plans to focus on early-stage companies spanning across enterprise, consumer, healthcare, and frontier technologies. 

Its Century II fund is aimed at backing growth-stage companies that Bessemer believes “will define the next century,” and will include both follow-on rounds for existing portfolio companies or investments in new ones.

BVP XI marks Bessemer’s largest fund in its 110-year history. In October 2018, the firm brought in $1.85 billion for its tenth flagship VC fund. This latest fund is its fifth consecutive billion-dollar fund, based on PitchBook data. 

Despite being founded more than 100 years ago, Bessemer didn’t actually enter the venture business until 1965. It’s known for its investments in LinkedIn, Blue Apron and many others, with a current portfolio that includes PagerDuty, Shippo, Electric and DocuSign. Exits include Twitch and Shopify, among many others.

With more money than ever before available for backing startups, the challenge now for VCs is to see how and if they can find (and invest in) whatever will define the next generation of tech. 

“As venture capitalists, we pay too much attention to pattern recognition and matching when in reality, the biggest opportunities exist where those patterns break,” the firm wrote in a blog post today. “Our job is to make perceptive bets on the future, especially those that others will dismiss and ridicule. We are fundamental optimists and strong believers in the power of innovation; our life’s work is putting our reputation, time, and money to help entrepreneurs realize a different future. They’re the ones pioneering something entirely new and obscure – a technology, a business model, a category.

In addition to announcing the new funds, Bessemer also revealed today that it’s brought on five new partners including Jeff Blackburn, who joins after a 22-year career at Amazon, alongside the promotion of existing investors Mary D’Onofrio, Mike Droesch, Tess Hatch, and Andrew Hedin.

Most recently at Amazon, Blackburn served as senior vice president of worldwide business development where he oversaw dozens of Amazon’s minority investments and more than 100 acquisitions across all business lines – including retail, Kindle, Echo, Alexa, FireTV, advertising, music, streaming audio & video, and Amazon Web Services.  

“Having been part of Amazon for more than two decades, I’m excited to begin a new chapter helping customer-focused founders build breakthrough companies,” said Blackburn in a written statement.  “I’ve known the Bessemer team for many years and have long admired their strategic vision and success backing early-stage ventures.” 

With the latest changes, Bessemer now has 21 partners and over 45 investors, advisors, and platform “team members” located in Silicon Valley, San Francisco, Seattle, New York, Boston, London, Tel Aviv, Bangalore, and Beijing. 

“At Bessemer, there’s no corner office or consensus; every partner has the choice, independently, to pen a check. This kind of accountability and autonomy means a founder is teaming up with a partner and board director who thoroughly understands your business and can respond quickly and decisively,” the firm’s blog post read.

Bessemer’s task is all the more difficult because there is more competition than ever before to get into the best deals.

TCV closed on a record $4 billion fund to invest in e-commerce, fintech, edtech, travel and more in late January.

Last November, Andreessen Horowitz (a16z)  closed a pair of funds totaling $4.5 billion. The firm raised $1.3 billion for an early-stage fund focused on consumer, enterprise and fintech; and closed a $3.2 billion growth-stage fund for later-stage investments.

And, last April, Insight, the firm that has backed the likes of Twitter and Shopify and invests across a range of consumer and enterprise startups, announced it had closed a fund of $9.5 billion, money it said it would be using to support startups and “scale-ups” (larger and older startups that are still private) in the coming months.

Although BVP is one of the older firms in the valley, there have been a new wave of investors, some like SoftBank with very deep pockets, and others will less money but a lot of credibility, so it will be interesting to see how these next two funds play out for the firm.

3 VCs discuss space junk and what else they’re betting on right now

Space may be the final frontier, but in terms of investment, VCs are just getting started. With that in mind during TC Sessions: Space 2020 last week, we spoke to three investors who’ve been actively funding what could become tomorrow’s biggest companies to learn where they might focus next.

Sustainability is a major issue for all of their portfolio companies.

Our guests — Tess Hatch of Bessemer Venture Partners, who has long focused on the commercialization of space; Mike Collett of Promus Ventures, a venture firm that invests in deep tech software and hardware companies; and Chris Boshuizen of the venture firm DCVC and a cofounder of Planet Labs — had a lot of intriguing observations on topics, including the dangers of orbital debris, space manufacturing, and how they’d rate the U.S. government when it comes to fostering space-related innovations.

For those who missed the event, we’ve posted a video of our conversation below.

Space junk could affect long-term sustainability

Hatch, who recently co-authored an informative piece on the topic, said there’s little consensus about whether space junk is a critical matter that deserves more regulatory attention or an issue that will resolve itself through tech advancements, even while startups like Astroscale and D-Orbit are focused on the issue. The commercial industry’s expectation seems to be that space companies can regulate themselves and launch constellations without leaving pieces of launch vehicles or rocket stages in space, she said.

For her part, Hatch said it’s something to potentially invest in within a “handful of years.” At the moment, she added, “it’s not at the top of my list just due to looking for a shorter return on my investment for my LPs in the fund.”

Collett and the others stressed that in the meantime, sustainability is a major issue for all of their portfolio companies. “Everybody wants to do their job as a corporate citizen to make sure they’re not leaving anything else up there that doesn’t need to be there. Indeed, Boshuizen noted that at Planet Labs, best practices were taken very seriously.

Still, Boshuizen noted concerns about newer capital sources that might be less focused on the issue of space debris. “I don’t think everyone necessarily has the same space background,” he said, explaining that “we’re seeing a lot of outside investment from new people joining the industry, which is exciting, but also they don’t really know how important this is [and] it’s important for people to realize that they’ve got to pay attention to this.”

Iris Automation raises $13 million for visual drone object avoidance tech

It’s only a matter of time now before drones become a key component of everyday logistics infrastructure, but there are still significant barriers between where we are today and that future – particularly when it comes to regulation. Iris Automation is developing computer vision products that can help simplify the regulatory challenges involved in setting standards for pilotless flight, thanks to its detect-and-avoid technology that can run using a wide range of camera hardware. The company has raised a $13 million Series B funding round to improve and extend its tech, and to help provide demonstrations of its efficacy in partnership with regulators.

I spoke to Iris Automation CEO Jon Damush, and Iris Automation investor Tess Hatch, VP at Bessemer Venture Partners, about the round and the startup’s progress and goals. Damush, who took over as CEO earlier this year, talked about his experience at Boeing, his personal experience as a pilot, and the impact on aviation of the advent of small, cheap and readily accessible electric motors, batteries and powerful computing modules, which have set the stage for an explosion in the commercial UAV industry.

“You’ve now shattered some of the barriers that have been in aerospace for the past 50 years, because you’re starting to really democratize the tools of production that allow people to make things that fly much easier than they could before,” Damush told me. “So with that, and the ability to take a human out of the cockpit, comes some interesting challenges – none more so than the regulatory environment.”

The U.S. Federal Aviation Administration (FAA), and most airspace regulators around the world, essentially break regulations around commercial flight down into two spheres, Damush explains. The first is around operations – what are you going to do while in flight, and are you doing that the right way. The second, however, is about the pilot, and that’s a much trickier thing to adapt to pilotless aircraft.

“One of the biggest challenges is the part of the regulations called 91.113b, and what that part of the regs states is that given weather conditions that permit, it’s the pilot on the airplane that has the ultimate responsibility to see and avoid other aircraft,”  That’s not a separation standard that says you’ve got to be three miles away, or five miles away or a mile away – that is a last line of defense, that is a safety net, so that when all the other mitigations that lead to a safe flight from A to B fail, the pilot is there to make sure you don’t collide into somebody.”

Iris comes in here, with an optical camera-based obstacle avoidance system that uses computer vision to effectively replace this last line of defence when there isn’t a pilot to do so. And what this unlocks is a key limiting factor in today’s commercial drone regulatory environment: The ability to fly aircraft beyond visual line of sight. All that means is that drones can operate without having to guarantee that an operator has eyes on them at all times. When you first hear that, you imagine that this factors in mostly to long-distance flight, but Damush points out that it’s actually more about volume – removing the constraints of having to keep a drone within visual line of sight at all times means you can go from having one operator per drone, to one operator managing a fleet of drones, which is when the economies of scale of commercial drone transportation really start to make sense.

Iris has made progress towards making this a reality, working with the FAA this year as part of its integrated pilot program to demonstrate the system in two different use cases. It also released the second version of its Casia system, which can handle significantly longer range object detection. Hatch pointed out that these were key reasons why Bessemer upped its stake with this follow-on investment, and when I asked if COVID-19 has had any impact on industry appetite or confidence in the commercial drone market, she said that has been a significant factor, and it’s also changing the nature of the industry.

“The two largest industries [right now] are agriculture and public safety enforcement,” Hatch told me. “And public safety enforcement was not one of those last year, it was agriculture, construction and energy. That’s definitely become a really important vertical for the drone industry – one could imagine someone having a heart attack or an allergic reaction, an ambulance takes on average 14 minutes to get to that person, when a drone can be dispatched and deliver an AED or an epi pen within minutes, saving that person’s life. So I really hope that tailwind continues post COVID.”

This Series B round includes investment from Bee Partners, OCA Ventures, and new strategic investors Sony Innovation Fund and Verizon Ventures (disclosure: TechCrunch is owned by Verizon Media Group, though we have no involvement, direct or otherwise, with their venture arm). Damush pointed out that Sony provides great potential strategic value because it develops so much of the imaging sensor stack used in the drone industry, and Sony also develops drones itself. For its part, Verizon offers key partner potential on the connectivity front, which is invaluable for managing large-scale drone operations.

Space investors will see into the future at TechCrunch Sessions: Space

If the projections are to be believed, the amount of money swirling around the space industry is poised to grow considerably over the next decade. Consider that the aviation giant Boeing estimates that the aerospace market will reach $3 trillion in market size between now and 2029.

It’s most certainly in Boeing’s best interests to produce a big number, but it’s also in line with other projections. Among the many areas of investment where Deloitte anticipates continued growth over the next decade, for example, is electric propulsion systems and aircraft, urban air mobility, and fully automated flight decks.

Some questions for investors center on how to make money off all this expected activity — and where. China has the fastest-growing aviation market globally. France and Germany have been boosting their defense budgets. Meanwhile, passenger traffic is rising in India, Japan, and the Middle East, which could create demand for all kinds of new aircraft.

Of course, many of these projects will require more time and money than make sense for some VCs, and even for those who lean in, there are challenges from supply-chain issues to profitability to potential capital constraints.

To dive into this vast space (ahem) and its promise, we’re thrilled to be talking with three savvy investors who think about little more and who will be sharing their researched perspectives on what’s coming — and what has been overhyped — at our TC Sessions: Space event coming up December 16-17.

If you want to understand which schools are producing some of the top talent, which regions of the world have the most advantages, and whether supersonic jets make any more sense this second time around (among many other things), you won’t want to miss this special conversation.

More from TC Sessions: Space

Joining us for this morning session on Wednesday, December 16, is Tess Hatch, a vice president at Bessemer Venture Partners who focuses largely on frontier technology and specifically on the commercialization of space, drones, autonomous vehicles, and the future of agriculture and food technology.

Hatch brings a lot of expertise to the table. She studied aerospace engineering at the University of Michigan before earning her Master’s degree in aeronautics and astronautics engineering from Stanford. She then continued on to Boeing, then SpaceX, where she worked with the government on integrating its payloads with the Falcon9 rocket.

We’ll also be joined by Mike Collett, the founder and managing partner of Promus Ventures, a venture firm with offices in Chicago, San Francisco and Luxembourg that invests in deep-tech software and hardware companies in the U.S., Europe and New Zealand.

Collett, a Vanderbilt grad, has been investing in software and hardware for more than 15 years, across areas such as artificial intelligence and machine learning, space, fintech, robotics, synthetic biology, computer vision and connected cars. Among Promus’s most recent investments is +Earth AI, a mineral exploration startup, and the spectrum mapping startup Aurora Insights.

Last but not least, Chris Boshuizen, an operating partner at the venture firm Data Collective (DCVC), will be joining us. Boshuizen previously co-founded and spent five years as the CTO of Planet Labs, a nearly 10-year-old company that was among the first of its kind to provide daily, global mapping of Earth from space. He was also once a Space Mission Architect at NASA Ames Research Center,  and he co-created Phonesat, a spacecraft built solely out of a regular smartphone.

A native of Australia, Boshuizen has a PhD in physics from the University of Sydney and strong thoughts about what’s interesting out there right now. But we’re thrilled to welcome all three, and we’re excited to see you, too.

We’ve launched early-bird pricing, and $125 gets you access to all live sessions, plus video on demand. Don’t procrastinate. Buy your pass now before the early-bird reenters Earth’s atmosphere (and prices go up) on November 13 at 11:59 p.m. (PT).

More ways to save: Go further together with early bird group tickets ($100) — bring four team members and get the fifth one free. We also offer discount passes for students ($50) and government, military and non-profits ($95). Looking for out-of-this-world exposure? An Early Stage Startup Exhibitor Package ($360) includes four tickets, digital exhibition space, a pitch session to attendees and the ability to generate leads. Bonus savings: Extra Crunch subscribers get an additional 20 percent discount.

What’s next for space tech? 9 VCs look to the future

Space is a special category of VC investment in the best of times — and the COVID-19 pandemic is not the best of times.

Still, investors focused on and familiar with space see a lot of opportunity in the market, regardless of any prevailing global economic difficulties. One big reason why is that regardless of how tight pursestrings get tied, space still represents a significant — and growing — source of government and defense spending. It’s also the source of some of the most important technological development since the advent of the internet, including the satellite-based Global Positioning System (GPS), which has revolutionized any number of businesses and industries.

That’s unlikely to be an exception in terms of the potential commercial impact of space — more like a model for future innovation, according to our respondents, who include:

Chad Anderson, Space Capital

What are you looking for in your next investment?

The mass distribution of Earth Observation (EO) data has begun. Much the same way that Trimble, Magellan and Garmin distributed the GPS signal in the 1980s and ’90s and ultimately gave rise to Location-Based Services (LBS). Companies like Waterloo, Ontario-based SkyWatch are aggregating supply and making EO data easily accessible through an API, which will give rise to millions of new applications. We are just now beginning to see the first of those applications come online, focused on serving large markets like agriculture, insurance, energy and more. Once this unprecedented amount of new data gets into the hands of consumers, it will fundamentally change the way we interact with our planet. We believe the investment opportunity in this segment will be as big, if not bigger, than LBS.

With roughly a decade of exponential growth in GPS applications, this is only the beginning. Even while GPS infrastructure and distribution continues to improve, the next generation of applications are testing its technical limits, with the need for persistent coverage in dense urban areas, centimeter location accuracy for both indoor and outdoor environments, alternative solutions in GPS-denied environments, and protection against GPS spoofing attacks. Computer vision and GPS are combining to enable a new level of precise positioning and we are actively looking at these new use cases.

We are also very interested, and actively investing, in cybersecurity. Ten years ago, the number of actors in space was extremely limited, so security was clearly less of a concern. There is an old adage with regards to commercial sat comms — it’s not that their security is bad, it’s that they have no security (of course, military assets are a different story — e.g., GPS is very secure). With the sudden entrance of hundreds of new companies and dozens of new space agencies operating in space, cyber threats suddenly pose a very real risk to business continuity and government operations. Combine this with new technological advances being applied to the space domain and there is clearly a lot of catching up to do. Fortunately, companies like Singapore-based SpeQtral are leveraging quantum technologies to offer a secure, scalable solution for distributing symmetric encryption keys using satellites as trusted key exchanging nodes. We continue to look at this area.

What advice do you have for your portfolio companies in terms of new and emerging opportunities?

Bessemer’s Tess Hatch on the evolving aerospace market and COVID-19 adjustments

The aerospace market is evolving quickly and merging with other segments of tech, making it an exciting space for both startups and investors — but the complications of the global pandemic are being felt by both.

Bessemer Venture Partners investor Tess Hatch has been helping guide companies in their portfolio through these strange times, and has been rolling with the punches herself.

Hatch recently spoke to us about the investment advice she’s been offering, which companies are being hit hardest and where opportunity still lies in the frontier tech world. (This interview has been lightly edited for length and clarity.)

Pandemic preparation

TechCrunch: To start off with, I’m interested in how the virus is affecting things in the investment world. Have you made any official accommodations, like a change of strategy, or putting off key investments, things like that?

Tess Hatch: Of course, we’re advising startups on things to do, like their employee safety, and implementing working from home, and tools and tips and tricks that can help that. Especially when it comes to hardware companies — it’s kind of hard to work from home when you’re manufacturing.

We’re advising them to really watch their burn, because their top line is not going to hit where they expected it to hit, like a double or triple revenue, it’ll maybe stay the same. If it increases even a little bit, they’re winning. We’re having these individual company-to-company conversations, just advising them on getting through, hopefully just these next couple of quarters, but it could be next year plus.

“We’re advising them to really watch their burn, because their top line is not going to hit where they expected it to. If it increases even a little bit, they’re winning.”
There is the question of deals that we were looking at, at prices when this wasn’t an issue. And we’re looking at those prices now being kind of out of market. But we’re still taking new pitch meetings, new deals, we’re still busy, just doing it in the comfort of our pajamas rather than at the office.

So would you say that it has affected the frequency or the cadence of your investments, on a larger scale?

There’s really been like three partnership meetings since craziness happened. And the number of deals that we’ve talked about in the presentations we’ve had, those have remained the same, but ask that question in three more weeks, and I’m sure it I’ll have a better answer.

One of the funny things we’re talking about is that investors, one of their favorite things is to be able to predict how the future, at least the next year or two, is going to go. But this is one of the greatest times of uncertainty we’ve all lived through. So how are you approaching that when there’s so much that’s uncertain, but there’s so much that you need to know in order to effectively manage your portfolio, give advice and make sound investments?

Right now, it is shaking everything that we’ve believed in so strongly. However, we still are looking out, let’s say two to five-plus years. The real question is if this is going to be, with quarantining and lowering the curve, a little bit more under control by let’s say the summertime, or if this is going to be more than a couple of quarters, say a couple of years.

“It is shaking everything that we’ve believed in so strongly. There are partners at the firm who have been here 20-plus years and this is new for them.”
So the only thing we really can do if we can’t look out that much further, we can advise our companies perhaps to raise a bit of extra capital now while the water is shut off, but there’s still a little bit trickling from the showerhead… To be able to last, hopefully, just a couple of quarters but perhaps even a couple of years. I have not seen anything like this in my small career, but there are partners at the firm who have been here 20-plus years and this is new for them as well. It’s like you said, the uncertainty of just not knowing how long or how drastically this is affecting everything.

Sensors are the next big thing in space, not starships

Understanding the opportunities available in the space industry — especially for early-stage companies and new founders — isn’t easy.

The pool of people who have deep aerospace technical expertise isn’t huge, and like any community that requires a high degree of specialist knowledge, it’s a tightly-knit field that relies on social connections. But space is increasingly opening up, and we’ve already reached a point where the most valuable new entrants might come from industries that aren’t specifically aerospace or aerospace-adjacent.

In fact, we could be reaching a stage where the parts of the space industry requiring actual rocket scientists are more or less saturated, while the real boon is set to come from crossover talent that develops new ways to leverage innovations in other areas on space-based operating platforms.

“We have enough low-Earth launch vehicles, we have enough rockets,” Bessemer VP Tess Hatch told me in an interview at the FAA’s Commercial Space Transportation Conference last month. “In 2020, we have even more coming online and a lot of the ‘fantasy’ ones [an industry term used to describe spacecraft that have been conceived and designed but not yet flown] are planning to launch, and I think maybe one of them will come to fruition.”

Hatch says she still sees much of the demand side of the industry cluster around existing and proven suppliers, even if new entrants, including Astra and Firefly, actually begin flying their rockets this year, as both have been planning. Companies like Rocket Lab (in which her company has a stake) will increase their volume and cadence and benefit from having a proven track record, taking up a lot of the growth in launch vehicle demand. “I don’t think there’s room for any more rockets in the industry,” she said.

Instead, Hatch is looking to payload variety and innovation as the next big thing in space tech. Satellites are becoming increasingly commoditized, and companies like Rocket Lab are looking to take this further by providing a satellite platform (Proton) as part of its launch offering. There’s still immaturity in the small-satellite supply chain, which is what led small-satellite operator Kepler to build its own, but the bigger opportunity isn’t in building satellites — it’s in equipping them with new, improved and radically redesigned sensors to gather new kinds of data and provide new kinds of services.

All eyes are on the next liquidity event when it comes to space startups

At the FAA’s 23rd Annual Commercial Commercial Space Transportation Conference in Washington, DC on Wednesday, a panel dedicated to the topic of trends in VC around space startups touched on public vs. private funding, the right kinds of space companies that should even be considering venture funding, and, perhaps most notably, the big L: Liquidity.

Moderator Tess Hatch, Vice President at Bessemer Venture Partners, addressed the topic in response to an audience question that noted while we’ve heard a lot about how much money will flow into space-related startups from the VC community, we haven’t actually et seen much in the way of liquidity events that prove out the validity of these investments.

“In 2008, a company called Skybox was created and a handful of years later Google acquired the company for $500 million,” Hatch said. “Every venture capitalist’s ears perked up and they thought ‘Hey, that’s pretty good ROI in a short amount of time – maybe the space thing is an investable area’ and then a ton of venture capital investments flooded into space startups, and all of these venture capitalists made one, or maybe two investments in the area. Since then, there have not been many — if any – liquidity events: Perhaps Virgin Galactic going public via the SPAC (special uprose vehicle) on the New York Stock Exchange late last year would be the second. So we’re still waiting; we’re still waiting for those exits, we are still waiting for companies to pave the path for the 400+ startups in the ecosystem to return our investment.”

Hatch added that she’s looking at a number of companies who have the potential to break this somewhat prolonged exit drought in 2020, including five who are either quite mature in terms of their development, naming SpaceX, Rocket Lab, Planet and Spire as all likely candidates to have some kind of liquidity event in 2020, with the mostly likely being an IPO.

Space as an industry was described to me recently as a ‘maturing’ startup market by Space Angels CEO Chad Anderson, by virtue of the distribution of activity in terms of the overall investment rounds in the sector. There is indeed a lot of activity with early stage companies and seed rounds, but the fact remains that there hasn’t been much in the way of exits, and it’s also worth pointing out that corporate VCs haven’t been as acquisitive in space as some of their consumer and enterprise technology counterparts.

The panel touched on a lot more apart from liquidity, which actually only came up towards the end of the discussion, which included panelists Astranis CEO and co-founder John Gedmark; Capella Space CEO and founder Payam Banazadeh and Rocket Lab VP of Global Commercial Launch Services Shane Fleming. Both Gedmark and Banazadeh addressed aspects of the risks and benefits of seeking VC as a space technology company.

“Not every space business is a venture-backable business,” said Banazadeh earlier in the conversation. “But there are a lot of space businesses that are specifically going after raising venture money, and that’s dangerous for everyone – because at the end of the day venture is looking at high risk, high return. The ‘high return’ comes from being able to get substantial amount of revenue in a market that’s big
enough for those revenues to be coming from. But if your idea is to go build, maybe, some very specific part in a satellite, then you have to make the case of why you’ll be able to make those returns for the investors, and in a lot of cases, that’s just not possible.”

Banazadeh also concedes that doing any kind of space technology development is expensive, and the money has to come from somewhere. Gedmark talked about one popular source, government funding and grants, and why that often isn’t as obviously a positive thing for startups as it might seem.

“Small government grants can be great, and obviously a fantastic source of non dilutive capital,” Gedmark said. “But there is a little bit of a trick there, or something to be aware of: I think people are often surprised how much time is spent in the early days of a startup refining the exact idea and the product, and if you’re not certain that you have the that product market fit […] then, the government grant can be extremely dangerous, because they will fund you to do something that is sort of similar to what to what you’re doing, but it really prevents you changing your approach later; you’re going to end up spending time executing on the specific project of the program manager on the government side and you’re executing on what they want.”

VC funds, on the other hand, come with the built-in expectation that you’re going to refine and potentially even change direction altogether, Gedmark says. Depending on the terms of the public funding you’re seeking, that flexibility may not be part of the arrangement, which ultimately could be more important than a bit of equity dilution.