Betting on Space, featuring Chad Anderson of Space Capital

Episode Transcript
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Chad Anderson (00:00):
The future of geospatial intelligence is not

(00:01):
like I log into a platform and Ilook at pretty satellite
picture; it is an insurancecompany, someone in an insurance
company just come to theiroffice and they log into their
intranet, and they're going todo their normal job. But there's
going to be geospatial datathat's piped into that through
API's that makes them much moreefficient and much more
effective. And those companiesare going to make a ton of

(00:23):
money, and no one's going tohear about them. That's why we
call it the invisible backbonethat powers the world's largest
industries just because it'sthere, but it doesn't always get
the recognition that itdeserves.

Announcer (00:38):
Welcome to Tough Tech Today with Meyen and Miller.
This is the premier showfeaturing trailblazers, who are
building technologies today tosolve tomorrow's toughest
challenges.

Forrest Meyen (00:51):
Welcome to Tough Tech Today with Meyen and
Miller. Right now we are kickingoff our second theme of the
year. In this theme of theseason, we will be talking about
space as a tough technology andwhat it's going to take to
capitalize on this brave newfuture. Today, kicking off this

(01:12):
segment, we have Chad Anderson.
Chad is a founding and managingpartner of Space Capital, where
he has managed and pioneeredinvestment in the space economy
for over a decade. He's also the

auth (01:25):
Capitalize on the Greatest Business Opportunity of Our
Lifetime." Chad is featured as amedia expert across many
publications, and as well as onnews, podcast, radio. He also
serves on the board of manystartups. He's also on the board
of directors of The ExplorerClub, so we'll have to dive in a

(01:48):
little bit deeper. The ExploreClub is a nonprofit that
promotes a scientificexploration of land, sea, air
and space. Prior to SpaceCapital, Chad led a successful
career at JP Morgan where hemanaged a $50 billion real
estate portfolio through theGreat Recession. He also has an
MBA with a focus onentrepreneurship and innovation

(02:09):
from the University of Oxford.
Chad, we're super excited tohave you here to kick off our
session on space. I'd like tostart with just kind of asking
you a little bit about yourselfand how you got interested in
space.

Yeah, thanks, guys. Happy to be here. So my
story... you probably picked upa little bit on the intro. I'm a
finance and economics undergradand an MBA. So I'm a business
guy. So what is a business guydoing in space? This is a
question that has needs lessexplanation today than it did 10

(02:51):
years ago when I got started.
But yeah, I mean, I was managinga large real estate portfolio,
commercial real estate portfolioand did that through the Great
Recession. And I came out theother side having survived that,
and had a nice job waiting forme, you know, sort of cushy
corner office with a nicepaycheck. But that wasn't really

(03:11):
sort of satisfying for me. I waslooking to do something that is
a bit more meaningful to mepersonally in my career. And so
I decided to go to businessschool and I went to Oxford to
do it, sort of get a change ofpace to expand my network more
broadly. But also Oxford has areputation... has The Skoll

(03:33):
Centre for SocialEntrepreneurship, but the idea
is investing for impact,investing for monetary gain, but
also for in return oninvestment, but also for driving
impact and change in the world.
Which was very attractive forme. So I went to Oxford, and I

(03:55):
was reading about SpaceX andwhat they were doing, and it was
a, you know, a hobby of mine; itwas very, very interesting to
sort of follow along. And thatwas in 2012, which is the year
that SpaceX just launched theirfirst customer a few years
prior, they launched to thespace station that year,

(04:17):
delivered cargo and broughttheir spacecraft safely back to
earth under contract for NASA.
And in doing so they became thefirst private entity—well, the
first outside of the threenational superpowers that had
ever done that before. And sofor me, I mean, this was really,
really interesting, but it wasalways a hobby. It was never
like something that I thoughtsomeone with my background, like

(04:39):
that there was a careeropportunity for me here. So I
was actually... while I was atOxford, I was studying nascent
markets under Professor MarkVentresca, who teaches at
Stanford and Oxford, about hownascent markets develop, you
know, and we've seen this happenthrough many, many industries
throughout history where thereare some incumbents and some

(05:04):
structural barriers that arepreventing new entrants from
entering the market. Theincumbents, you know, are living
very happily, getting fat on theprivilege that they have the
unique access that they have.
And then something structuralchanges and the barriers to

(05:24):
entry are removed. And then yousee this rush of innovation and
entrepreneurship flood in. Andthat's exactly what we're seeing
happen with SpaceX, right? We'vebeen operating in space for
decades. But it only became acategory for investment and
entrepreneurship, on the heelsof SpaceX removing those
barriers to entry. So recognizedthat we had seen this pattern

(05:47):
before, seeing that it wasplaying out, kind of reading the
tea leaves a little bit. Andknowing that all of these new
startups that were coming inwere going to need finance. And
there weren't a whole lot ofserious people, you know, that I
could find that were helping tomanage the growth that I saw

(06:07):
coming. So it was a hugeopportunity, a big gap in the
market that I saw, starting toform. And I was a bit early. So
there wasn't a whole lot ofthere wasn't enough bill flow or
investor interest back then tosupport a venture capital fund.
So actually stayed in the UK fora few years, to help them stand

(06:28):
up an innovation center that wasfunded by the government with
the goal of growing the spacesector in the country. Did that
during the day in UK hours, andthen at night, I was busy
building this fund and buildingthe foundation for this fund.
And then in 2015, you know,things have picked up to the
point where I could do thisfull-time, move to New York.

(06:50):
2016, partnered up with TomIngersoll, we launched our first
venture capital fund and sort ofthe rest is history.

JMill (06:57):
Something that I found interesting is how, when you
have the patience, and thewillingness to be able to say,
you know, like maybe it's notquite right yet to stand up a
fund, but finding other ways tocontribute to sort of the growth
of the sector that you saw wasthat, some of that growth, was I
guess, maybe sort of inevitableor bigger than you, but finding

(07:18):
a way to help support it in adifferent way. How are you
finding now, over the past twoyears or so... we've had terms
like "new space" and or "space2.0"... are you seeing a change
in the way that the youngcompanies that are starting to
get their legs, a change in whatthat kind of cohort looks like

(07:43):
across the vintages?

I mean, there's a massive transformation in
mindset over the last 10 yearsfor sure. When I... you know, in
business school, what you do islike you always sort of go
around the table, and wheneveryou have an event or a gathering
or whatever, and it's like, Hey,so what are you guys, you know,
what are you going to do afterthe program? And, you know, I
told people that I was going tostart a fund to invest in space,
and people would laugh, likethey thought I was... So yeah,

(08:11):
and I mean, in those early days,I had to convince myself,
actually, right. So like, I wasfollowing along with SpaceX, and
I thought it was reallyfascinating. It was interesting,
you know, as a hobby. But wasthere really an opportunity
here? Right? Is this really likesomething structural changing?

(08:32):
Is this really a new innovationS-curve that we're on? Or is
this sort of like a flash in thepan? Is this just a lot of hype?
You know, I spent a lot of timeconvincing myself, pulling
together a lot of data tounderstand, okay, well, what
companies are being founded,who's getting funded, who's
investing in them and why? And,funny enough, that database that

(08:57):
I pulled together that convincedme that we were on the front end
of a nascent market, which Ithen used that data to go out
and convince others to help seewhat I was seeing, we still to
this day, use that database.
It's now become our SpaceInvestment Quarterly, which we
publish every quarter and whichgets picked up by, basically,
every media outlet looks to itas the source of record for

(09:22):
startup activity and investmenttrends in the space economy,
which now shows by the way, thatthere's been $270 billion of
equity investment into 1700unique space companies over the
last 10 years, right? So datahas been our friend,
particularly early on, whenagain, it was very new and

(09:43):
people had a hard time gettingtheir heads around the
opportunity or seeing theopportunity that we were seeing.
Data was our friend. And that'sbeen a key part of our strategy
from the beginning. We've youknow, you may have seen the GPS
playbook, the GEOINT playbook,the SATCOM playbook, these are
key areas that our fund focuseson, you know, we dive into these

(10:05):
thesis areas, and we get smarterourselves and do our own
internal research. But then wepackage it up and publish it.
Because that market, educationis still a key part of our
strategy. It also helps foundersto understand how we view the
world, where they see themselvesin our portfolio, and why they
would want to work with a fundthat is thesis-driven and has

(10:30):
some ideas on the market. Ican't tell you how many times we
get inbounds from founders whowere like, well, we can skip the
first two conversations, becauseyou guys clearly know what
you're talking about, we can getstraight into the good stuff.
You know, and that's like,immediate rapport building. So
it helps us, you know, allacross the board, this
information and this data, andit's been hugely valuable to us.

Can you tell me a little bit about your mission,
you raise money for the fund,talk a little bit more about
your first investment? What kindof was the indicator that that
led you to make the investmentand how did it go?

Yeah, our first investment was actually in
Planet Labs. So we had knownthem, they came out initially at
the seed stage under a codename,Cosmogia, and we knew them then.
And it was, you know, it's veryinteresting, like, what's the

(11:27):
first thing that happens afterthe barriers to entry are
removed? SpaceX removes thebarriers, suddenly, you know,
startups can come in andinnovate and experiment and try
new things in an area that wenew things haven't really been
tried in a long time. And one ofthe first areas was in
satellites, you know, peoplecoming in, and instead of having

(11:49):
one giant, monolithic satellite,that goes around the Earth every
couple of weeks, and takes apicture of an area of interest
every couple of weeks. By theway, these are huge, very
expensive; they were essentiallymainframes flying around in
space at the time, becauseeverything had to have flight

(12:13):
heritage back then, because itwas so expensive to build and
launch and operate the satellitesystems, right, like hundreds of
millions or billion plusdollars. They absolutely had to
work when they got there. And wekind of get that now, like,
we've come a long way in ashort, you know, handful of
years. But it wasn't that longago, when there was triple

(12:34):
redundancy built into everysingle component. And because,
you know, you didn't want to flyin the new hardware, because
what if it doesn't work? Right?
Well, this flew on the lastmission, which we know that it
works. So the problem is, isthat design cycles back then
were like 10 to 15 years todesign and build the satellite
and get it launched. So thosedesign decisions were made 10 to
15 years ago, right? And thenthat satellite probably had to

(12:56):
use flight heritage as well. Soyou see what I mean? Like, there
just wasn't any advancement in,like... technology was advancing
on Earth, but it was nottranslating into orbit. Which is
just so so fascinating, thissort of think on now. So the
promise of Planet Labs was welaunched an iPhone, and it
worked; had way more computingpower than any of these like,

(13:19):
massive satellites, right? Ithink that's a bit of, well,
quite an exaggeration, actually,like, you know, there needs to
be more than an iPhone to liketo produce valuable data. But it
was a sort of foundationalchange in the way that we viewed
risk instead of likeconcentrating it all into one

(13:42):
asset, a distributed network ofsmall satellites that not only
distributed the risk, theoperational risk, but it also
provided unprecedentedtimeliness in terms of like
data. So they were the firstcompany, so we made our first
investment in 2015. They hadalready, like by that time, they

(14:03):
had already raised an A and Bround, we invested at their C
round. But yeah,it's interestingto sort of think on back then,
and think how far things havecome since then. But no, that
was a good early investment forus to cut our teeth on. And

(14:27):
obviously, they went public acouple of years ago, and we can
see them out on the publicmarkets bringing in record
revenue all the time, so.

JMill (14:39):
You mentioned... if I recall correctly, Space
Capital's focus that you bringis predominantly on seed, and
maybe some a Series A stage,both of which are very early

(15:00):
stage by startup standards. Sowalk us through some of that
thinking that you bring in termsof with a seed stage company,
from my experience, I'm sureyours echoes it, these are often
incredible teams. But they'renot necessarily be able to show

(15:21):
the evidence that the visionthat they have is something that
can work. It's too early stagefor that. And so how do you
start to make some of thoseevaluations when working with
these really sort of likediamond-in-the-rough kind of
ideas?

That's right. I mean, we get involved very
early, we're typically the firstinstitutional money into a
company, right outside of maybefriends and family. And even
sometimes we are the first moneyat all into the company. So
yeah, we get involved veryearly. And it's a particular
skill set investing at thisstage, right, it's a lot more
art than science, like the moremature the company is, the more

(16:03):
revenue it has, the morecustomers, the more revenue, the
more sort of metrics, right? Youcan then start to look at the
company and assess what it'sdone, its growth prospects, and
you can start to do somevaluations and understand the
value of the business and thatsort of thing. Like, you can

(16:24):
apply some some math to it,right, it's a bit more science,
early on, they don't have any ofthat, when we're getting
involved, it's typically afounding team. And they might
have a prototype or something,right? What we like to see is a
founding team that has all thecapabilities that you would need
on the business side and thetechnical side. And then they

(16:47):
also have a prototype that theyare out talking to customers
with like something, somethingthat allows them to have real
meaningful conversations withcustomers that are
referenceable, right? That wecan talk to these customers, and
we can say like why are youinterested in this thing, and
they can clearly articulate whythey need this thing and why
they're... as soon as they buildit, they're gonna buy it, right.

(17:11):
That would be ideal. But weactually even get involved
sometimes earlier than that,when it's just the team. Just
the team and an idea; sometimesif the team is strong enough,
it's good enough for us.

Excellent. So one thing that you know, makes
investing in space a little bitdifferent is the time horizons.
Can you touch on a little bitabout how that plays into your
strategy when investing at theearly stage?

Yeah. And I mean, I'd like to push back on that a
little bit if I can. These arecommon sort of misconceptions, I
think. The space economy isvast, it is all encompassing.

(17:58):
And I think if there's one thingthat I try to communicate to
your audience today is to sortof open your mind a little bit
in terms of how you think aboutthe opportunity in the space
economy. For us as a fund, it ismuch more than just rockets and
satellite hardware, the spaceinfrastructure, and in our
seminal thesis paper, the "GPSPlaybook," we really dive into

(18:21):
this. And we provide someframeworks for how to think
about how space technology canbe innovation can enable
innovation on a global scale.
For example, GPS, the satellitesare built by Lockheed Martin,
you know, by the government, forthe government, paid for by the
government. Like this is whatmost people would think of when

(18:42):
they think of space technology.
And it's like these satellitesthat are in orbit;
manufacturing, operatinglaunching these satellites. But
that signal was... is creating avery valuable signal clearly,
but it was off limits, likeinaccessible to you or I or most
enterprises, basically, anyoneoutside of the government,

(19:04):
military customers that it wasdesigned for, until companies
like Trimble and Magellan andGarmin and TomTom in Europe,
they built commercial receiversthat allowed them to harness
this really valuable signal fromorbit, and make it easily
accessible to the tech communitywho then built location-based
services on top of this. So Imean, GPS is the most successful

(19:30):
space technology in existence.
It's generated trillions ofdollars in economic value and
some of the largest ventureoutcomes' return on investment
that we've ever seen. And we usethis framework of
infrastructure, distribution andapplications to help us
understand the breadth of thespace economy. So the way that
we like to think about it isthat... well, for one, space

(19:53):
technologies are the invisiblebackbone that powers our global
economy today. GPS powers ourfinancial markets, and everyone
uses them every day in almostevery aspect of their life. The
Russian invasion of Ukraine hasreally put a spotlight on the
growing capabilities ofcommercial space companies in
geospatial intelligence. Earthobservation satellites that are

(20:16):
going around the planet likePlanet Labs and others. in the
steepest decline of thefinancial markets last year, in
Q2, we saw the NationalReconnaissance Office, one of
the big five US intelligenceagencies make their largest ever
purchase of satellite imagery.
And so in the steepest marketdecline, we're seeing record

(20:37):
revenues for Earth observationand geospatial companies.
Because when the world becomesmore dynamic, and uncertain,
enterprises and governments wantmore information, not less.
SpaceX's Starlink satelliteskept the Ukrainians connected
throughout this entire conflict.
And the entire defensedepartment is now sort of
evolving to be able to takeadvantage of these new

(21:01):
capabilities. And so actually,these areas are really
showcasing how the space economyis counter-cyclical and
recession proof, which is greatfrom an investor's perspective,
but also it's showing thebreadth of the opportunities
that are available. What we liketo say is, in the same way that

(21:21):
every company today is atechnology company, every
company of tomorrow will be aspace company. And what we mean
by that is that, you know, inthe 90s, you could invest in
technology, right? Like youcould diversify your portfolio
by investing in a handful ofpublicly traded technology
stocks. But today, that monikerdoesn't make any sense, it's

(21:45):
lost all of its meaning becauseevery company integrates, you
know, and uses technology insome way. Space technology is
following the same path. It isalready, like I said, powering
the world's largest globalindustries and is going to
continue to do that for decadesto come. It just doesn't get the
credit it deserves, because mostof the time it's operating in

(22:08):
the background. Like we don'tappreciate how GPS is involved
in everything that we do. Thesame thing is happening with
geospatial intelligence andsatellite communications. And
we're just talking about thesatellites industry right now.
Right, there are several otherindustries like launch and what
we call emerging industries, andsome of these more sort of
frontier markets as well, thatwe're looking at and, and

(22:29):
investing in. But this is areally, really, really massive
opportunity. So, you know, todirectly answer your question
about the long time like, yeah,I mean, if you're building a
launch vehicle, or if you arelooking to address lunar
markets, or you're building aspace station or something, then
yes, your timeline, like yourcapital requirements are going

(22:53):
to be higher, your timelines torevenue are going to be longer.
But that takes up a smallpercentage of the overall space
economy today.

JMill (23:05):
It sounds like that we're seeing a transition... and
I think there's some data tosupport it that we're moving
from the space curious as apredominant focus to maybe now
we might call the space informedin that there are more
companies, younger companiesthat are looking at carving out

(23:28):
sort of more niche... likeniche-ification of the space
industry, looking atapplications that are going to
return that attention back toEarth and to what those of us
who would not necessarilyconsider ourselves space or even
space-adjacent in our lines ofwork, but many enterprises,
small, medium, and largebusinesses on the Earth are

(23:48):
going to find themselves soon,where it'd be prudent for them
to come space informed, andthere's a lot more companies
that are going to be there toserve them, to help them make
that transition in being ableto, I think, see how that there
are new capabilities that arecoming online, space-based

(24:09):
assets that are actually gonnabe directly relevant to the
average company here on Earth.
Is that a roughly accurateassessment?

Yeah, certainly.
I mean, the leaders of thesebusinesses and enterprise
government agencies shouldcertainly be aware of the new
capabilities that are becomingavailable. No doubt about it.
But it's not like it needs to beunderstood at the operational
level, necessarily. There's onethought exercise that I like to

(24:40):
do is, if you were to go intoUber headquarters, and you just
walked into the cafeteria andstarted randomly serving people,
you could go up... you talk to awhole lot of people that if you
ask them if they work for aspace company, a lot of them
would be like, no, of coursenot. You know, I like do UI/UX
and I don't know anything aboutsatellite. What are you talking
about? Right? Like, no, I workfor a software company. But

(25:02):
there's a lot of people like youwould probably run into, like
30-40% of the people that yourun into that are focused day in
and day out on the GPS signal.
Like they're trying tounderstand how it's bouncing off
of buildings and creating anurban canyon that is costing
them money. That's... you know,pickups are in the wrong place,

(25:24):
drop-offs are in the wrongplace, customers are unhappy.
They're losing rides, becausethey're getting canceled when
actually they're right there.
You know, it's a real issue. Andso there's a lot of focus and
attention right now on on GPSaugmentation, how do we make a
signal better? How can we usesoftware and other hardware to
augment the signal. But that'shappening across the board. And

(25:45):
you know the reason why GPS isso valuable and so powerful is
because it operates in thebackground. It's powerful,
because it's taken for granted.
And the same sort of thing ishappening in in geospatial
intelligence. I mean, we talkedabout this in the GEOINT
Playbook; we've got all thesenew satellites, this

(26:05):
unprecedented amount of newdata, we've now got it on the
cloud. It's being structured,and it's very easily accessible
through an API, and we're nowstarting to see how the first
applications are being built bynew companies who understand the
customer's very intimately. Theyunderstand the markets and the

(26:26):
use cases of these endcustomers. And they're selling
products that are designed forthem. And it's not going to be
like the future of geospatialintelligence is not like I log
into a platform, and I look atpretty satellite pictures,
right, or I order a book that'sfull of really pretty satellite
images. It is an insurancecompany, someone in an insurance

(26:50):
company just walks in... they'rean underwriter, right, and they
walk into their office, and theylog into their intranet, that is
their insurance company brandedintranet. And they're going to
do their normal job. But there'sgoing to be geospatial data
that's piped into that throughAPI's that makes them much more
efficient and much moreeffective. And those companies
are going to make a ton ofmoney, and no one's going to

(27:11):
hear about them. So that's whywe call it the invisible
backbone that powers the world'slargest industries, just because
it's there and it's more andmore there, but doesn't always
get the recognition that itsdeserves.

So GPS, that was really the first killer app for
space. And you're getting a lotof movement and geo-intelligence
imagery of the Earth's surface.
What's next?

Satellite communications is another key
area we've got. This is probablyone of the most, outside of GPS,
one of the most established,right, we've had satellite
communications, been relying onit for TV and remote
communications for a long time.
But it's been pretty poor. Yougot challenges with
geostationary satellites,they're so far away from Earth,

(28:03):
but it gives you good coverage.
And so you've got the issueagain of these huge monolithic
satellites and the expensethat's involved with them. With
SpaceX Starlink coming online,and Amazon's Kuiper satellites
coming online, we've got largeconstellations of Low Earth
orbit satellites. And we'reessentially building an internet

(28:25):
backbone in space, which offersincredible bandwidth and latency
at pretty reasonable prices. Andso we're now seeing that
rollout. SpaceX has just movedon from sort of their beta
program. And so they're stillearly in the development of

(28:45):
their constellation, but we'realready connecting to remote
places on the planet. And youcan start to think all the
different ways in which this isgoing to be used and leveraged,
it's going to allow emergingeconomies to leapfrog
infrastructure investments, likethey don't have to lay copper

(29:07):
cable anymore. It provides someresiliency to the fiber optic
cables that are under the waterand are now the target of
attack. You know, if you look atthe countries that have invested
in that infrastructure and ownthat infrastructure and the
other countries that are gainingpower that don't have that

(29:27):
infrastructure, right, you cansee how those could be targets
in the course of geopoliticaltensions. So having a redundant
backbone in orbit is reallyinteresting from that
perspective, but it enables allkinds of new things. We have a
lot of remote business andremote operation here on Earth

(29:50):
for example, aquaculture farms.
We get a lot of our fish fromaquaculture farms, but they're
essentially data silos, youknow, they don't share
information. So very sort oflimited tunnel vision, but at
the same time, there's not a lotof information for, you know,

(30:11):
insurance companies, forexample, to underwrite policies
for these folks. Right? So a lotof good is gonna come from this.
You can also like... a coupleyears ago, there was in the
highlands and islands ofScotland, there was a train that
came around a bend, and it justdrove straight into a mudslide.
And you're like, how in 2021?
Can a train just drive straightinto a mudslide? And the answer

(30:33):
is because there's noconnectivity up there. Right?
It's as simple as you put alittle box that connects the
satellite. You shine a laseracross the track. If the laser
is blocked, you send someone outto look at it right. It's as
simple as that. But there's awhole lot of low hanging fruit
here on the Satcom side. So thatcovers Satcom. Happy to get into

(30:55):
some of these other areas aswell, the emerging markets to
launch.

JMill (31:02):
I'm curious.... on reviewing Space Capital's list
of public investments thatthey're for, I think, for our
listeners, or watchers, thatthere may be some non-obvious
connections I'd like you toelaborate on. For example,
company like Rendered.ai, withsynthetic data generation, or

(31:23):
the company's investments inQuantum Exchange and Spectral
doing post-quantum cryptographyand quantum key exchanges. Can
you elaborate how thesedifferent.... they don't look
like space companies,certainly... but how is there a
connection? Is that part of thatemerging sort of frontier,

(31:46):
space-adjacent ecosystem that'sdeveloping?

Well, so our whole thesis really kind of fits
in this three-by-three matrix,right, where you've got the
infrastructure, thedistribution, and applications
as the rows. And then you've gotthe satellite technology stacks,
GPS, geospatial intelligence andsatellite communications, right.
So you got this three-by-threematrix, which really encompasses

(32:10):
like 90% of the value in thespace economy today. And that
informs how we view theopportunity set for us Rendered
sits squarely in the geospatialintelligence distribution box.
So this is really interesting.
So they're a synthetic dataplatform, a common application

(32:32):
framework. So anyone who wantsto use synthetic data, you no
longer have to hire all thevery, very technical, very
expensive folks that it takes tospin up a synthetic data set.
They've done essentially all thewhat we call "undifferentiated,
heavy lifting," like all of theunsexy stuff that you have to do

(32:54):
every time that's very common tosort of every time you pull up
an application, right? They'vedone all that for you. So you
can really just sort of get inand get started. And so,
synthetic data is very importantbecause you use data to train
AI. AI is software. It issoftware that you replace code

(33:15):
with data, like that's a verysimple way to sort of think
about it. And you need to trainthis data, your algorithms using
data and you need a whole lot ofdata to do that generally,
right? Well, using satelliteimagery, depending on what type
of data you want, satelliteimagery can be very expensive.
There's a real example, where ifyou wanted to use synthetic

(33:40):
aperture radar, right, this islike the radar data that's
coming off of some new sensorsthat we put into orbit. If you
use optical imagery, RGBimagery, it's great, but you
can't see at night and you can'tsee through clouds. Radar allows
you to do that. So radar is veryinteresting, especially for the
defense community, right? Theylike radar. Radar imagery is

(34:03):
very expensive, for severalreasons. But one, there's not a
whole lot of supply right noweither. So if you want to train
up a synthetic aperture radardataset, an algorithm for your
AI to detect things using SARdata, it will be very expensive.
In this particular case, it waslike $8-10 million. If you use

(34:24):
synthetic data, you can do itfor thousands of dollars, like
huge cost savings. But alsosynthetic data is really helpful
in cases where you, for example,don't have the data. Let's say
that the US Department ofDefense is very interested in
like China has a new fighter jetand they would really like to

(34:46):
see if that new fighter jet ison an aircraft carrier in the
South China Sea. Right? Well,we've never seen that before.
We'd like to know if it happens,but we haven't seen that before.
So you can use this syntheticdata to train your AI to find
those things in the data.
There's also like new sensorsgoing up, right? So Maxar's CEO

(35:13):
has said that synthetic data isthe new gold. And the reason why
he says that is because he'slooking at this new
constellation of satellites,highly capable satellites much
anticipated that are going to belaunched very soon. And before
rendered or synthetic data, youwould build, launch the

(35:34):
satellites, you'd commissionthem, and then you'd start to
get data down. And then youwould use that data to train up
your AI. And then eventually,you would have enough that you
could turn it on and startselling that data to customers.
But you've lost 9 to 12 monthsof revenue, right? Whereas you
can use physics-based syntheticdata to train your AI using the

(35:57):
data that you think you're goingto get so that as soon as the
satellite is commissioned, youcan immediately start
generating. And it's also justas basic as there's just way too
much satellite data to combthrough and to annotate and to
make sense of, so anyway, I'monly covering off some of the
use cases, but synthetic data isreally, really powerful. And

(36:21):
their market is actually AIbroadly, like they are working
on several different, very, veryimpactful use cases, using X
rays in schools to help keepguns out of schools and keep
schools safer. They're workingwith a company to remove racial

(36:42):
bias from AI and healthcare.
This is a massive, massivemarket and a massive
opportunity. It just so happensthat like the market's gonna
need some education, becausethis is a new technology, but
the geospatial folks, you know,the people who are launching the
satellites operating thesesatellites, and are trying to

(37:02):
make this data valuable anduseful, they already see the
opportunity, so they don't needany education. So it's a
fantastic beachhead market. Andthen they've got the whole world
at their fingertips, you know,once they get that sorted out.

Literally the whole world. So, that's awesome.
So that's a very, very clearconnection. And that makes
sense. And then as far as theother company, I don't know if
we need to go as deep into that.
But I think we kind of get thetheme of how as you've
reiterated so many companies areeither tangential to the space,
directly serving the space, or,you know, this company, as an

(37:41):
example is really increasing theiteration cycle of developing AI
tools for space assets, as wellas other assets on Earth. I
wanted to talk a little bitabout our theme, tough tech. And

(38:02):
what you kind of see as the thetoughest technology challenges
to solve within the space area.
And also if there's some thatpeople are trying to solve that
maybe you think aren'tnecessarily worthwhile, like,

(38:23):
where are people digging theright mine, and then where
people kind of just diggingwhere there's no ore.

That's a fun question. So launch, let's start
with launch. We are tracking...
in our dataset, we are tracking$28 billion that has gone to
100-plus launch companies. Thisis not like launch companies
that have an idea and have apitch deck like these are

(38:52):
companies, unique companies thathave convinced external
investors to put money behindtheir idea. So that's how they
hit our radar. It's like that'sthe point of seriousness where
they've convinced someone elsethat they've got something. We
have two, two of those areoperational, SpaceX and Rocket
Lab. That is it. I mean, if youwant tough tech, that is launch.

(39:15):
Incredibly, incrediblydifficult. And not just from a
technology perspective, notjust.... it's like getting a
launch vehicle to orbit isextremely difficult. SpaceX
makes it look easy. It is not.
So getting to orbit is onething, but then mass-producing

(39:38):
launch vehicles and like doingit on an operational cadence, on
a regular operational cadence,safely and reliably. There's two
companies, right. So this isabout as tough as it gets. And
anyway, even if you get thetechnology to work, the business
is incredibly difficult. Themarket is limited. It's growing,

(40:02):
but you know, the margins aren'tgreat, which is why so many of
these launch companies, as soonas they get to orbit, starting
with SpaceX, Rocket Lab the samething, is you quickly get into
other things to generaterevenue. SpaceX wants to go to
Mars and set up colonies onMars, right? Like that is their

(40:24):
long term vision, like that istheir....

Is that a revenue-driving vision?

No. So that's why... I mean, how do you pay
for that? Right? How do you payfor that? You pay for that with
satellite services, you pay forthat with Starlink. Starlink is
the moneymaker. SpaceX's revenueprobably taps out at like, I
don't know, $5-6 billion a year,like they're already covering
most of the globe doing most ofthe commercial launch globally.

(40:54):
Starlink is supposed to bring inlike 10 times that amount of
revenue, right. Like that is themoneymaker that's going to fund
their larger ambitions, whichhave tougher margins and tougher
tech and tougher economics aswell. Rocket Lab did the same
thing. You know, as soon as theygot to orbit and were launching
reliably, then they quicklymoved to satellite services

(41:16):
where, you know, they acquiredSinclair. Sinclair has put a lot
of satellites into orbit thatwork. And so they've now turned
it in their second stage.
They've turned that into asatellite as a service; you
know, if you want to launchsomething, they'll help you do
that. So and everyone elsethat's trying to get to orbit is
also like expanding out intoother areas, preemptively. So
that's one thing. So we're kindof at this rubber-meets-the-road

(41:40):
moment with launch. But we'realso kind of at the
rubber-meets-the-road momentwith satellites. So everyone's
now sort of like coming to therealization like, oh, launch is
really tough, right. We're alsocoming to that realization with
satellites. So SpaceX removesthe barriers to entry, we start
to see all these new entrantscome in, experimenting with new

(42:02):
business models, and it's a lotof fun, and it's very exciting.
A lot of these folks were, youknow, not a lot of experience.
Getting out a little bit aheadof their, getting out in front
of their skis, or whatever itmight be... this
rubber-meets-the-road moment forlaunch, right? Well, we're also

(42:22):
kind of at thisrubber-meets-the-road moment for
satellites. Because on the heelsof SpaceX increasing access,
we've seen all these newsatellites get launched, right?
A lot of companies have goneout, raised capital, said, you
know, hey, look Planet Labs didit, you know, they launched an
iPhone, right? Like, how hardcan it be? Right, and there was

(42:43):
a lot of money that went to alot of new companies to build
satellites and operatesatellites, and really focus on
low cost, you know, we can dothis at much lower cost than all
the incumbents. And so that wasthe big selling point. But it
turns out that customers don'tactually... like low cost is

(43:04):
nice, but that's not... the needto have is the data, like you
need the data. We're at thismoment now, where a lot of those
satellites that got funded; theyspent the next few years, so
they raised the capital, theyspent the next few years
building the satellites. Well,now we're at the moment where
they're starting to getlaunched. Right, and where
either these satellites are nowgoing up on rockets that are

(43:28):
either blowing up on the pad, ornot making it to orbit or ending
up at the bottom of the ocean,because of the tough tech in the
launch vehicles, right. But evenif they successfully, like if
they ride on SpaceX, forexample, and they actually get
to orbit, they're turning themon and their radios not work, or
their reaction wheels don'twork, right. Like they can't

(43:52):
point the thing, where theywant, so they can't get the data
that they need. And there's allkinds of these issues. And so
the failure rates in a lot ofthese satellites is actually
pretty high. And so you know,launch, like, who knows it was
so difficult, right? Like SpaceXmakes it look easy. It's not.
Satellites, you know, some folkshave come out and built some

(44:15):
really capable satellites for alot less cost and a lot faster.
And so everyone else is saying,you know, like, look, we're
gonna do that, too. It's justnot that easy, right? The number
of people on the planet that canbuild and launch a launch
vehicle company is very limited.

(44:38):
And the number of people who canbe able to launch satellites
that work and bring downvaluable data is also very
limited. So we're kind of itthis... you know to the tough
tech question, we're kind of inthis moment where we're starting
to realize like, I don't know,Gartner's Hype Cycle or
whatever. A lot of people gotreally excited, threw a lot of
money at this without doing alot of diligence. And now we're

(44:59):
starting to realize that it isquite difficult. It's really
great when it works. And thereis a lot of promise out there,
but you still need to do thediligence and be focused on
teams that can execute. Forthose that can execute, there's
massive opportunity here, butthere's fewer of them out there
than you think.

JMill (45:17):
That's really interesting. And I think with
the time we have, I think we mayhave a question for you from me
and from Forrest... one that.. Iwant to understand more is...
there's a quote I have, from aninterview did recently with the
Federal News Network, and it'sabout.. so that geopolitical

(45:40):
tensions have been a primarydriver in growth in the space
category for several decades,rising political tensions,
particularly China, drive anincrease in US government
funding to meet the occasion.
Lunar plans and lunar timelinesfor Washington and Beijing are
essentially.... they're racingthere to establish a foothold
and permanently crewed outposton the lunar surface to get to

(46:01):
the ultimate high ground endquote. How should folks,
listeners, and viewers.... we'reseeing stuff in the news, and I
imagine we're going to hear moreabout this as the years goes by,
but from your vantage point asan investor, as someone who
really talks about the who'swho, within industry? How should
we think about and what shouldwe do about this potential

(46:25):
geopolitical aspect that's alsolike a subtext for the
commercial endeavors to, in thiscase, look at the moon as the
next footstep in the pursuit ofthe frontier.

Yeah, so I talked about this quite a bit in my
book, "The Space Economy." Italked to folks who are a lot
more knowledgeable about thisthan I am. And one interview
that I did was with PeterMarquez, he's head of Space
Policy at Amazon. He workedthrough, I think, four previous
administrations, advising theWhite House on space policy, was

(47:03):
heavily involved in writingspace policy and was the the
brains behind the propertyresources act in space, really a
powerhouse, right, that's beenaround and done a lot of really
meaningful things on theregulatory front. He says that

(47:23):
you look back at every majordecision that was made in the US
space program, and it was allgeopolitical driven. Like all of
it, like he says, that the USspace program is very easy to
understand once you unlock thesecret code, and the secret code
is political will, realpolitik,like that is it. And it's really

(47:46):
interesting. I mean, we have alot of really interesting
examples in the book where, youknow, the race to the moon, and
when the US won the race andlanded humans on the moon. And
then Russia admitted defeat, wehad a proliferation problem,
like we didn't want all thoserocket engineers and things like
going off to Afghanistan andother places. And so we

(48:08):
essentially created a whitecollar welfare program to sort
of keep them all employed. Andthis sort of.... this explains
the sudden involvement in theMir Space Station and the
International Space Station, andlike this collaboration that
continues on to this day. Soit's a really interesting

(48:28):
undercurrent for every majordecision that has been made in
space to date. And it continuesto be with where we are
currently. Like I said, youknow, with that quote, it's this
race for the ultimate highground, that US and China are
both racing to the moon, bothwant to set up a permanently

(48:51):
crewed outpost, you know, set upinfrastructure there to house
people with a rotating crew,similar to what we do with the
space station today, but on thesurface of the moon, and there
is limited real estate, likeprime real estate on the South
Pole. And the reason for that isbecause there are scarce

(49:12):
resources on the moon, sunlight,the South Pole, like you can get
access to 24 hour, well all daylong sunlight. And also there's
water ice that we know about,right? So the idea is to get
there and set up camp therebecause there's resources that
you can use; sunlight for power,you can harvest the water ice,

(49:33):
you can split it into hydrogenand oxygen and use it for life
support and fuel. So everyonewants to get there and set up
camp, you know, land, use thatlander as the first
infrastructure on the moon tosort of deploy some solar panels
and provide power to thepayloads and the rovers that are

(49:53):
there, to provide someconnectivity, you know, a link
back to earth so you cancommunicate with your robots and
what's going on there, and thenmobility and you start to work
out from there, right. But thereis, you know, thinking about the
moon as an eighth continent,potentially full of resources
and strategic vantage point,right? You can see why there's a

(50:16):
lot of interest there. And soboth the US and China are racing
to get there as quickly as theycan. And they're both going for
the same place. So this is veryinteresting from a funding
perspective, because Artemis isthe key driver here, right? Like

(50:36):
the lunar market, the lunarindustry is still very nascent.
And like most nascentindustries, it's primarily
government driven. Most of themoney that's going here... like
there are some commercialcompanies, and there are some
commercial customers, there issome of that happening. But the
reason why we're seeing so muchdevelopment on the moon at the
moment is because of NASA'sArtemis program, and because
they've committed billions ofdollars to achieve this aim,

(51:01):
right? Well, you see, like, NASAgoing to Congress to try and get
funding is always a slog, it'salways very difficult. And
particularly in this USpolitical climate, where they're
making cuts across the board,and people don't want to fund

(51:21):
Earth science and some otherthings, right. Like, it's really
difficult for NASA to make thecase for more funding to fund
this type of activity.
Meanwhile, the Space Force,relatively new, it's been around
for a few years, their budgethas now surpassed NASA for the
first time this year. And infact, NASA is going and has to

(51:41):
argue for every penny that theyget, you know, the Space Force
goes out to NASA and says we'dlike to request this amount of
money, and Congress said, youknow what, have an extra $2
billion; they gave him more thanthey asked for. And that's only
going to increase going forward.
And so that kind of, I think,speaks to... if you want to get

(52:02):
funding for these types ofactivities, if you play the
defense angle, and if you playthe geopolitical angle, you
know, that's an easier route tofunding it has been historically
and will continue to be.

Yeah, for full disclosure, Space Capital's
investment in my company LunarOutpost... we're definitely
capitalizing on this rush to themoon. And, and really, you know,
helping enable the Artemisprogram, as well, as you know,
do a lot of interestingcommercial things on the side,

(52:38):
as well.

That's right. And has supporters and investors.

Thank you very appreciate it. Before we close,
I did want to touch on somethingin your bio. That was pretty
interesting to me, like youmentioned that you're not just
an explorer. You're on the boardof The Explorers Club, and I was
reading some of the things thatyou did. And one of the things

(53:04):
that kind of struck me as superinteresting is your Mezcal Trail
Ferment adventure. Can you canyou tell us what this was? And
kind of what motivated you tocarry this giant oaken container
full of a wonderful fermenteddrink through the rainforests?

Well, so I am, I should say that I'm no longer on
the board of The Explorers Club,but I have been. Actually when I
moved.... to start back at thebeginning of this conversation,
when I first moved to NewYork... I'm not from New York,
so it was new to me. And one ofthe only people I knew when I
moved here was Richard Garriott,who's a second generation

(53:47):
astronaut as a privateastronaut, made a movie about
it, first person to make a movieabout it. Anyway, very
interesting character, greatguy, and a good friend of mine,
who had a welcome to New Yorkevent at his house and invited a
lot of really interestingpeople. And I got plugged into

(54:07):
The Explorers Club basically,straightaway. Very, very
interesting, nonprofitorganization that's over hundred
years old that is focused onsupporting exploration, land,
sea, air and space. And yeah,Richard Garriott is now the
president of the club. Weactually had... our book launch
event was at The Explorers Cluba couple of weeks ago, and

(54:31):
Richard interviewed me and wehad a great conversation there,
but it's a fantastic venue herein New York. If you're ever
here, you know, you shoulddefinitely check it out. But,
yeah, so there's, you know, someof the most storied explorers
expeditions in history... allthe Apollo missions to the moon

(54:52):
have carried and Explorers Clubflag. There's a great story that
Apollo 13 had an Explorers Clubflag, and they wrote a note back
and said, you know, sorry, wecouldn't take this down to the
surface and it's still in itsplastic bag. But anyway, their
members have done a lot ofreally, really amazing things.

(55:12):
And so this is kind of the sideprojects that I do. So, me and a
team of folks, a guy namedJustin Fornal that I normally
partner with, we swam around theisland of Islay, Scotland, where
the world's greatest whiskeycomes from. Tiny little island.
100-mile coastline. Has eightdistilleries there. We swam

(55:35):
around that 100-mile coastline.
And we collected whiskey fromall the different distilleries
and then made a blend, sold itoff for charity. And we made a
documentary about it called TheGreat Islay Swim. And then the
mezcal was like the nextadventure together where we took
that sort of blueprint andapplied it again, this time in
Oaxaca, Mexico. And so we wentout and we harvested our own

(55:58):
agave, we chopped it, cut it,roasted it, smashed it using
horse wheels and mashers, and weput it into a barrel. And
there's only three things thatgo into mezcal, there's the
agave, there is water. And thenthere's yeast, and the yeast is
airborne. And so you can onlymake mezcal in Oaxaca. And it's

(56:20):
a super interesting, diversestate in Mexico. And so what we
did was we took the barrel ofagave while it was fermenting
all around the different placesin Oaxaca, and it absorbed the
yeast from all those places. Andso it's got the spirit of the
entire state of Oaxaca, and theflavor for the entire state of

(56:41):
Oaxaca. And then we made amovie, a documentary slash
cinematic feature, which we justdid our premiere at The
Explorers Club. And it actuallyjust won two awards, Best
Documentary Feature and BestIndie Feature at the Vegas Movie
Awards. So yeah, fun sideprojects.

Yeah, that's, just quite a fun adventure. And
it's exciting that you'rebringing in different elements,
rather than just a hike orconquering a peek.

JMill (57:16):
We are coming near the end. Chad, if there are anything
that you'd like to plug orpoints to reinforce? This is
your time.

Yeah, I mean, this has been great, thanks.
Good conversation, I would justsay that, you know, again,
market education and helping,you know... we do this day in
and day out, there is a lot ofhype and a lot of noise
happening. But if you cutthrough all that, and you see
what's actually happening,what's actually being done, the

(57:49):
opportunity is massive. Theteams that can execute. We are
still on the front end of avery, very interesting growth
curve here. And we make a lot ofinformation available. Like I
said, all of those researchreports are available on our
website at spacecapital.com. Andwe've consolidated all those

(58:12):
things into book form. So "TheSpace Economy" is available at
your favorite bookseller andhopefully this can be a useful
primer for anyone who's lookingat investing, starting a
company, or working for acompany.

JMill (58:32):
Awesome. Thank you so much, Chad. Boy, this was a
great primer on the spaceindustry, and Chad's vantage
point is really providing afascinating perspective into the
efforts to explore one ofhumanity's great frontiers. It's
a great setup for our nextguest, who is an entrepreneur,
and she's building an earlystage space startup that is

(58:55):
aiming to peer back at Earth ina new way, looking inside
storms, hurricanes, and otherweather systems in a way that's
previously impossible byleveraging a new form of sensing
technology that's being loftedinto geosynchronous orbit. Our
episode premieres next monthwith her so be sure to like,
subscribe, and join our newmailing list so you can get the

(59:17):
episode as soon as it releases.
Until next time, stay tough.

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