From: Doug Jones (random@qnet.com)
Date: Sat Dec 30 2000 - 17:10:29 MST
GBurch1@aol.com wrote:
>
> For myself, at least, I've think I've finally gotten to the point that I
> won't be fooled again. The technology just hasn't gotten to the point that
> private venture investment can make a go of it. There aren't any
> intermediate steps to orbit to establish an incremental approach that
> smaller, private ventures can build on one step at a time: The initial
> threshold of success is just too high. Until material and manufacturing
> technology get to the point where a relatively small group of people can make
> a go of it n one relatively short push from start to finish, I think space
> access will continue to be the domain of governments and huge institutions.
> Go nanotech!
Au contraire, there *are* several lucrative steps along the way, and we
at XCOR intend to capitalize on most of them. What they are and how we
intend to address them are proprietary, of course. The issue is not
technology, but good business management. Allow me to quote my boss:
<BLOCKQUOTE>
From: "Jeff Greason" <jgreason@hughes.net>
Subject: Re: Private Space dead?
Date: 01 Nov 2000 00:00:00 GMT
Message-ID: <zOYL5.1214$iin6.36831303@news.randori.com>
Newsgroups: sci.space.policy
Jim Kingdon <kingdon@panix.com> wrote in message
news:p4wsnpcxsri.fsf@panix3.panix.com...
> > I saw a talk recently by Gary Hudson. He stated that one of the
> > problems was getting $ in "small" chunks and that several hundred
> > million would be enough to do the job, if it all came at once
>
> Sigh.
>
> There's a whole way of going about this. You figure you're going to
> need so much before you are profitable. Take Gary's estimate (which
> is probably mostly to build the hardware), throw in some marketing
> $$$, keeping the company alive while the sales ramp up, &c.
>
> Then you structure it into rounds. Seed financing at <$5 million,
> first round at $10 million a year later, second round at $100 million
> 18 months after that, then IPO (or private third round) for $200
> million, then profitable a year later. Or something like that.
There is quite a range of opinion, even inside the space entrepreneur
community, on the appropriate way to structure a space venture.
That is part of the reason there are multiple companies out there --
the differences of opinion on business models are *much* deeper
and harder to bridge than the differences of opinion on technology.
It's more fun (and easier) to talk about the technology, of course :-)
My current opinion, after watching and participating in the
1990's era of space start-ups, is that there is a very fundamental
reason why sophisticated investors greatly prefer step-by-step
financing of companies. If you give a large chunk of money to
a new company with a new team, you won't achieve the
desired result. Building a company is a multi-step process, and
you have to develop the engineering team, the business model,
the market, etc. as you go.
If a start-up gets too much money too soon, it tries to skip
engineering steps (to achieve too-short promised schedules),
and jump right into the biggest markets (with higher costs to
enter the market). The odds of hitting multiple home runs
(on technology, targeting the right market, etc.) with the
first time at bat for a new team, are very low.
Take a look at those ventures with lots of money (Beal, Kistler).
Did getting a lot of money solve their problems? Or
worsen them? Were their ideas about the target market and
technical approach sound? If they had been required to take
incremental steps, would they have been able to do
mid-course corrections to stay in closer touch with an evolving
market? I believe so.
In my career so far (inside and outside of the rocket business),
I've seen many attempts to save time by skipping steps --- they
seldom work. That lesson is the reason our company is focused
on achieving revenue from small, early steps. Once those are
achieved, we will be in a far better position, with more business
and technical experience, to move on to more ambitious goals.
Structuring a company so that each incremental step adds enough
value to the company to make a sound investment AT THAT
STEP is very hard. So far, nobody has proven they have
a successful approach for making a good investment case for
space transportation. Difficult though finding a deep-pocketed
angel has been, developing a business model that is a good
investment appears to be even harder. However, I believe this
is the only approach which will work, and that even if the
deep-pocketed angel is found, the results would likely be
unhappy.
Returning to the thread title, "Private Space dead?", I
strongly believe that it has never been healthier. I see an
increasing awareness of good business practices in the
space entrepreneur community. I see more and more
credible business plans being quietly floated around. I
see fewer and fewer people hoping for a deus ex machina
("If only NASA would..." "If only the Air Force would..."
"If only BMDO would..." "If only Bill Gates would..."
"If only Beal would..."). The trials of the marketplace
are forging stronger entrants. If we can keep from pursuing
false hopes for another few years, and keep our eyes on
the real prize (profitability!), the chances for private
space companies are good IMO. But they won't look
like the answer to your prayers ... at first.
----------------------------------------------------------------
"Limited funds are a blessing, not Jeff Greason
a curse. Nothing encourages creative President & Eng. Mgr.
thinking in quite the same way." --L. Yau XCOR Aerospace
<www.xcor-aerospace.com> <jgreason@hughes.net>
</BLOCKQUOTE>
I'm quite confident that we will do *very* well, thank you...
-- Doug Jones, Rocket Plumber XCOR Aerospace
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