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From: (Henry Spencer)
Subject: Re: Private Space dead?
Date: Mon, 23 Oct 2000 22:02:44 GMT

In article <8t23ie$edv$>,
Andrew Tubbiolo  <> wrote:
>	It looks like the death of Beal rings the end of the private, non
>government subsidized, space program...

I wouldn't say that...  It's the demise of an attempt to compete with the
dinosaurs on their own turf.  That's definitely the hard way to do things.
Better is to find some niche they aren't occupying -- there are some --
and plan to move out of it later, after gaining some money and muscle.

>	The Republican's say they want a private enterprise. Just what do
>they mean by that? Success of their chosen enterprises (Boeing, Lockmart)?

The Republicans are *generally* friendlier to private enterprise than the
Democrats.  They do have a bad habit of tossing favors to their dinosaur
buddies, but in between doing that, they sometimes help the mammals too.

Both parties are preoccupied with the care and feeding of dinosaurs, but
when they do spare a thought for the mammals, the Republicans scatter
Purina Rodent Chow here and there haphazardly, while the Democrats set out
cheese in rat traps.
Microsoft shouldn't be broken up.       |  Henry Spencer
It should be shut down.  -- Phil Agre   |      (aka

From: "Jeff Greason" <>
Subject: Re: Private Space dead?
Date: Wed, 1 Nov 2000 09:58:24 -0800

Jim Kingdon <> wrote in message
> > 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

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
   <>                <>

From: (Henry Spencer)
Subject: Re: Who should fund primary R & D? [Was Concorde (was Shuttle 
	Mistakes etc)]
Date: Tue, 30 Jun 1998 18:06:56 GMT

In article <>,
Jan Vorbrueggen  <> wrote:
>> No body would ever invest in R&D without it being a government project!
>If I look at R&D happening at, for instance, Siemens, the second-largest
>German corporation, I would indeed say so.

Look at the smaller German corporations instead.  Big corporations tend to
act more like government bureaucracies than like entrepreneurs.

As a good example of private R&D, take a look at what has happened lately
with LEDs.  Oh, there's been lots of government-funded LED research... but
the recent revolution in LED technology bypassed it completely.  A single
medium-sized Japanese company (Nichia Chemical) funded a single researcher
(Shuji Nakamura) with a bee in his bonnet, and that small and rather risky
investment (Nakamura had no PhD and no published papers) has turned into a
licence to print money.  Nakamura's GaN LEDs have obliterated all
competing blue-LED technologies and are well on their way to doing the
same in green.  Laser diodes are next; Nakamura gives his talks nowadays
using a blue laser pointer, although the technology isn't quite far enough
along (last I heard) to be a commercial product yet.

>While some things in research have become much cheaper and
>better, mainly because of computer developments, nobody is going to start a
>billion-dollar company in his garage anymore.

To the extent that that's true, it has much more to do with the business
environment -- especially the regulatory side -- than with any great
decline in opportunities.  Oh, sure, you can't get rich selling audio
oscillators any more, but that's because today's market opportunities are
in different fields.  The claim that "everything easy has already been
invented" has been heard for a long time, and it's never once been true.
Being the last man on the Moon is a |  Henry Spencer
very dubious honor. -- Gene Cernan  |      (aka

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