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November 28, 2022
How can companies make money in aerospace? These panelists shared their insights

By Jacob Maranda – New Mexico Inno Reporter

November 23, 2022

Speaking at the recent Hyperdrive Space Summit, Leon Alkalai (left) said raising money for his Mandala Space Ventures fund has slowed down “tremendously” amid fears of a recession. Alkalai was joined on the panel “How to Make Money in Space?” by George Pullen of Milky Way Economy and Cody Willard with the 10,000 Days Capital Management Fund. Bill Goodman

There’s a lot of money in space. The Bureau of Economic Analysis shows that the space industry was worth nearly $200 billion in 2019. And some — including George Pullen — estimate that the industry could grow to over $4 trillion by 2040.

“We’re going great places,” said Pullen, the chief economist at the space industry think tank Milky Way Economy. “It’s going to involve great tech and great infrastructure. That’s why I’m here — to hear about the great tech and infrastructure solutions you provide.”

Pullen spoke to a room full of aerospace startups and industry enthusiasts at the Hyperdrive Space Summit, which took place in Albuquerque from Nov. 15 to Nov. 17. Pullen joined a panel that focused on ways startups can make money in the growing aerospace economy.

One way is by meeting certain aspects of venture capital firms’ investment goals.

“If you see words like ‘deep tech’ in their vision or mission statement, you should be talking to them,” Pullen said regarding sources of capital. “Space is deep tech, full stop.

“There’s been a lack of communication around the subject,” he continued. “This is hard science. Space is deep tech. So if you see that when you’re looking out for [venture capital] and you’re cold calling, cold emailing, whatever it is, if they have the words ‘deep tech’ in there, they need to see your pitch. Because right now they might not have any exposure to space. You might be their first space pony.”

Because established VC firms may not currently have a lot of exposure to aerospace companies, Pullen said that the bar to entering their portfolios may be higher. That’s why he said it’s important to “make sure your finances are in order.”

“You guys have wonderful technology, but make sure you keep an eye on that ball,” Pullen said. “Make sure you’re getting as many at-bats as possible.”

A key reason aerospace startups should keep an eye on the ball is that space is a “secularly growing” industry. That’s what Cody Willard said about the industry’s future.

“Everybody knows that,” said Willard, a panelist alongside Pullen and founder of 10,000 Days Capital Management LLC. “Every CEO, whether it’s Coca-Cola, IBM, Hewlett-Packard or Intel, they’re all sitting there looking and coming up with space strategies and knowing that over 5, 10, 15 or 20 years, you’re going to have to be using space in your businesses.”

But that doesn’t mean that these large companies are going to be ready to pump money into every aerospace startup right away — especially with the looming threat of a recession on the horizon.

“That doesn’t alleviate the fact that capital is going to be hard to come by for a little while as we go through this part of the cycle,” Willard added. “But space is the only place I want to be investing right now.”

The threat of a recession is also on the mind of Leon Alkalai, Ph.D., the third member of the Space Summit panel.

“We found that fundraising into the fund has slowed down tremendously,” Alkalai said. “It was really ramping up until the summer, and then from the summer until today it slowed down considerably.”

Alkalai started a fund called Mandala Space Ventures after retiring from NASA’s Jet Propulsion Laboratory in 2021. Although money coming into his firm might have slowed, that trend hasn’t been mirrored in terms of money going directly to startups.

“On the other hand, we’ve seen continued investment in early-stage companies,” Alkalai continued. “We don’t think that has slowed down at all.”

Companies should still “adjust their internal [spending]” to deal with worst-case scenarios “if this recession or this economy persists,” he said. But, he noted, the industry as a whole may be well-positioned to deal with the uncertainty posed by economic downturn.

“Space is inherently dual use,” Alkalai said. “That means it has both commercial and defense applications. That inherently makes it more resilient.”

“A company that has a technology or product that’s applicable to both commercial applications and defense, at this time defense products could be more opportune,” he continued. “They could get revenue from a defense contractor and then survive the recession, and then later build their commercial business. It’s more of a resilience built into the business model.”

When the economy becomes more stable and when capital starts to flow more freely again, support between sectors could be central to maintaining the aerospace industry’s growth, he said.

“I believe there’s untapped potential in the U.S. in a public-private partnership between the national laboratories and the startup community,” Alkalai said. “That is not intended as a criticism. It’s intended to be more of an opportunity.”

Full Article here: https://www.bizjournals.com/albuquerque/inno/stories/inno-insights/2022/11/23/how-can-companies-make-money-aerospace-panel.html

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