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Blue Origin and the 2021 Space Landscape (with Rob Meyerson)

Limited Partner Episode

December 6, 2021
December 4, 2021

We’re excited to have a longtime friend of the Acquired family on the LP Show, Rob Meyerson. Rob was the President of Blue Origin for 15 years, and today is an investor and advisor to space industry startups. Ben recorded this interview live at the fantastic aerospace industry conference, ASCEND, where Rob is the Executive Producer.

In this interview we cover:

  • How Blue Origin started, and what it was like in the early days (spoiler: they weren’t yet building rockets!)
  • Rob’s experience working directly for Jeff Bezos
  • What’s changed about SpaceX since May of 2020, when we did our Acquired episode on the company
  • Rob’s theses about what sectors of commercial space are poised for growth in the next few years

We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten. You can listen to the full episode (above, which includes honorable mentions), or read our quick blog post below.

Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!

10. Marvel

Purchase Price: $4.2 billion, 2009

Estimated Current Contribution to Market Cap: $20.5 billion

Absolute Dollar Return: $16.3 billion

Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…

Marvel
Season 1, Episode 26
LP Show
1/5/2016
December 6, 2021

9. Google Maps (Where2, Keyhole, ZipDash)

Total Purchase Price: $70 million (estimated), 2004

Estimated Current Contribution to Market Cap: $16.9 billion

Absolute Dollar Return: $16.8 billion

Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!

Google Maps
Season 5, Episode 3
LP Show
8/28/2019
December 6, 2021

8. ESPN

Total Purchase Price: $188 million (by ABC), 1984

Estimated Current Contribution to Market Cap: $31.2 billion

Absolute Dollar Return: $31.0 billion

ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”

ESPN
Season 4, Episode 1
LP Show
1/28/2019
December 6, 2021

7. PayPal

Total Purchase Price: $1.5 billion, 2002

Value Realized at Spinoff: $47.1 billion

Absolute Dollar Return: $45.6 billion

Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.

PayPal
Season 1, Episode 11
LP Show
5/8/2016
December 6, 2021

6. Booking.com

Total Purchase Price: $135 million, 2005

Estimated Current Contribution to Market Cap: $49.9 billion

Absolute Dollar Return: $49.8 billion

Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.

Booking.com (with Jetsetter & Room 77 CEO Drew Patterson)
Season 1, Episode 41
LP Show
6/25/2017
December 6, 2021

5. NeXT

Total Purchase Price: $429 million, 1997

Estimated Current Contribution to Market Cap: $63.0 billion

Absolute Dollar Return: $62.6 billion

How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.

NeXT
Season 1, Episode 23
LP Show
10/23/2016
December 6, 2021

4. Android

Total Purchase Price: $50 million, 2005

Estimated Current Contribution to Market Cap: $72 billion

Absolute Dollar Return: $72 billion

Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.

Android
Season 1, Episode 20
LP Show
9/16/2016
December 6, 2021

3. YouTube

Total Purchase Price: $1.65 billion, 2006

Estimated Current Contribution to Market Cap: $86.2 billion

Absolute Dollar Return: $84.5 billion

We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”.  With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.

That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.

YouTube
Season 1, Episode 7
LP Show
2/3/2016
December 6, 2021

2. DoubleClick

Total Purchase Price: $3.1 billion, 2007

Estimated Current Contribution to Market Cap: $126.4 billion

Absolute Dollar Return: $123.3 billion

A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...

1. Instagram

Purchase Price: $1 billion, 2012

Estimated Current Contribution to Market Cap: $153 billion

Absolute Dollar Return: $152 billion

Source: SportsNation

When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.

Instagram
Season 1, Episode 2
LP Show
10/31/2015
December 6, 2021

The Acquired Top Ten data, in full.

Methodology and Notes:

  • In order to count for our list, acquisitions must be at least a majority stake in the target company (otherwise it’s just an investment). Naspers’ investment in Tencent and Softbank/Yahoo’s investment in Alibaba are disqualified for this reason.
  • We considered all historical acquisitions — not just technology companies — but may have overlooked some in areas that we know less well. If you have any examples you think we missed ping us on Slack or email at: acquiredfm@gmail.com
  • We used revenue multiples to estimate the current value of the acquired company, multiplying its current estimated revenue by the market cap-to-revenue multiple of the parent company’s stock. We recognize this analysis is flawed (cashflow/profit multiples are better, at least for mature companies), but given the opacity of most companies’ business unit reporting, this was the only way to apply a consistent and straightforward approach to each deal.
  • All underlying assumptions are based on public financial disclosures unless stated otherwise. If we made an assumption not disclosed by the parent company, we linked to the source of the reported assumption.
  • This ranking represents a point in time in history, March 2, 2020. It is obviously subject to change going forward from both future and past acquisition performance, as well as fluctuating stock prices.
  • We have five honorable mentions that didn’t make our Top Ten list. Tune into the full episode to hear them!

Sponsor:

  • Thanks to Silicon Valley Bank for being our banner sponsor for Acquired Season 6. You can learn more about SVB here: https://www.svb.com/next
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

Ben: Hello, Acquired LPs. We are excited to share an interview that I did with Rob Meyerson, the former president of Blue Origin. We recorded this one virtually for the aerospace industry conference, ASCEND, which is a great event if you are curious about the space industry.

You'll notice a little bit of audio hiccups on my side since I actually recorded this while I was in Lisbon for the Solana Conference, and I did not have my normal Acquired home studio. So thank you for bearing with me on that, and enjoy this very special episode with a friend and Acquired community member, Rob Meyerson.

Rob: Okay, good morning. I'm Rob Meyerson, executive producer for ASCEND. It's my pleasure to introduce Ben Gilbert, co-founder of Pioneer Square Labs and co-host of Acquired. Those who know me well know that I'm a huge fan of Acquired. I love the show because Ben and his co-host, David Rosenthal, bring in-depth research, compelling storytelling, and a great sense of community to the Acquired audience. I met Ben in 2018 and I considered him to be a friend and a mentor.

Ben: Rob, so great to be here with you. Thanks for doing an interview together. This is going to be great. It is my great pleasure, everyone who's listening, to introduce longtime friend and aerospace veteran executive, Rob Meyerson. Rob is best known for his time as president of Blue Origin for the 15-year stretch from 2003 to 2017.

He grew the team size more than 100X, added new facilities, managed the development and production of New Shepard, the reusable launcher you created with the team, liquid rocket engine business, and managed the design of New Glenn while achieving financial and organizational goals, all reporting to Jeff Bezos. Before that, Rob was an aerospace engineer at NASA Johnson Space Center (JSC) for 12 years and the Senior Program Manager for Reusable Launch Vehicles at Kistler Aerospace, which obviously became a very important part of the industry that private space is in today.

These days, Rob is an independent angel investor and advisor to space and hypersonics companies like Hermeus, an operating partner at C5 Capital, where he leads the space practice and invests in companies like Axiom Space. Of course, Rob, as he mentioned, is the executive producer here at ASCEND. Welcome and thank you for my kind introduction, too.

Rob: You bet, Ben. It's really great to be here. We have these conversations often, but I'm glad to be sharing this one with the audience.

Ben: We've got, I think, an hour here together. We're going to try and spend 45 minutes and then open up for some Q&A at the end. First, I want to just ask, how did you find out about Blue in 2003? Because it wasn't exactly a well-known or even publicly known-at-all company.

Rob: No. Blue Origin was completely stealth. They were operating out of a small warehouse in South Seattle. I was working at Kistler Aerospace and I had regular chats with a friend of mine who happened to be consulting for Blue Origin. He said, Rob, I'm working for this company and you just love what they're doing, but I can't tell you anything about it. He had signed an NDA.

After he told me this, I really pushed a little further and said, okay, I'll send you my resume, and can you get it into the right hands because it just seems so interesting? So I sent my resume into literally a black hole, completely sight unseen. I didn't know who the backer was, I didn't know what they were doing. I had no idea, but I got a call within a week, and invited to come into an interview, and I did a group interview in South Seattle out of East Marginal Way at the original Blue Origin facility.

I interviewed with Jeff Bezos in 2003, in April. After that interview, I left with a very strong feeling that the vision that Jeff had, that if I join the company, I'd have a seat at the table and have a role in building something special, building the company and making decisions. I came in as an individual contributor. Within about three months of joining in about October of 2003, Jeff asked me to lead the company.

I will point out within maybe a week or two after I interviewed, Brad Stone came out with an article about this secret company, which is just kind of interesting, but there was nothing out there.

Ben: I didn't realize Brad broke the first news about Blue.

Rob: He did. Yeah, he sure did.

Ben: Let me get this question out of the way early and I figured I have to ask it, but what was it like directly working for Jeff and running a company that was so much of an important pillar of his life? I know he was very into space starting even in high school and college. I think he was the president of the Aerospace Student Organization at Princeton.

Rob: Yeah. He led up SEDS, the Students for the Exploration and Development of Space. Working for Jeff was great. He has a thirst for learning about the space industry, about the notables. He loved meeting folks from the industry, industry leaders. He was well read. He would textbooks.

We took regular field trips to important aerospace locations around the country, the NASA centers, the universities, related companies. We did really anything we could do to go and gather lessons learned about what makes a good company and the phase we were in, and what we needed to do to grow. He's super smart and really just literally blew me away technically. That point never changed.

He could participate in just about any technical discussion. Someone who can devour a report or a memo and ask great questions drilled down to the point where the company needed to go. This is something I watched every day while I worked for him and heard repeatedly from other folks at Blue who interacted with him as well.

He did get busier over time, especially after buying the Washington Post, and opening Amazon Studios, and all the other things that took up his time. But he always managed to make time for Blue Origin and that's really something that was great about working for him.

Ben: Was it always a reusable launch company? What was the original thesis, at least, at the time that you joined with Blue before it started evolving to what it is today?

Rob: When I joined Blue, it was like a think tank. It was an exploratory mode, it was looking at concepts and technologies that Jeff could invest in that might have a 20-30–year timeframe. The team was looking at non-traditional concepts like really primarily for application for launch, like laser beam propulsion is one idea or air launch from a large flying platform.

Back in those days, Neal Stephenson was a key member of the team, the author and writer of Snow Crash and later Seveneves, Cryptonomicon. He contributed so much to those early efforts. He stayed on and transitioned into an advanced concepts role and stayed involved with Blue until 2006. I watched Neal just contribute greatly to early architecture studies that led to New Shepard and New Glenn.

One of the early ideas, this air launched flying platform led to the development of a vehicle called Charon. It's Charon, the moon, not Karen the pandemic era, crazy person. Charon was a legacy program that was going when I started at Blue back in 2003. It was a jet engine–powered, vertical takeoff, vertical landing vehicle that was envisioned to demonstrate this air launch platform.

When I came on board, I just went to hiring, filling out the team. It was about 15 people to lead and execute on the effort. They designed and built the structure, the propellant systems, control actuators, the electronics, and the software. The vehicle itself was powered by these four Rolls Royce Viper jet engines that were modified to run vertically.

We trucked the vehicle out to Moses Lake Washington at Grant County Airport in Central Washington and flew it for the first and only time on March 5th, 2005. We knew that was a legacy program. We wanted to fly it and demonstrate it and have that great rallying cry for the team, but we wanted the team to focus on rockets. So we retired it and put it in the Museum of Flight for a little while.

Ben: Did that work right out of the gate? I'm imagining something with four jet engines strapped to the bottom of it. Did it go up and come back down successfully?

Rob: It did. Yeah, absolutely. It worked perfectly. It went up to a few hundred feet, about 300 feet, but it worked perfectly and we took the lessons we learned from that and applied it to everything we did afterwards.

Ben: Amazing. You were talking about the team then. Now we have tens of thousands, if not, hundreds of thousands, let's call it high tens of thousands of people working in privately-funded commercial space companies, Blue, SpaceX, Virgin Galactic, and a very long tail of others. That, I imagine, was not the case when you first joined Blue. So what was it like recruiting folks to join what seemed unprecedented and crazy in 2003 to 2006 or 2007?

Rob: All those new people you refer to, they're all new. The aerospace industry is roughly the same size as it was back then. Back in 2003, first off, my top priority was always recruiting, hiring. I consider that a privilege. I look back and one of the things I'm most proud of is having the opportunity to work with such a talented and amazing team. We had one of those at Blue.

The thing that challenged us in recruiting was we are so quiet. We are a company that chose to talk about things that we had done versus talking about what we're going to do. We were in a building phase and there was really not much to talk about. So there weren't any press releases. There weren't a lot of visits to a podcast or Good Morning America for that matter. There wasn't much as far as social networks, either.

LinkedIn was created in 2002–2003 timeframe, but not really widely used. Whereas I would hit LinkedIn today for almost any question about talent. You look back and LinkedIn reached 10 million users in April of 2007.

Ben: Yeah, that really puts things in perspective, that this was a pre-LinkedIn era.

Rob: Yeah. I looked back on my account recently. I joined in November of 2007. You can mark this down as the one situation in my entire life where I was a fairly early adopter. But it's now got 800 million users, so many people are on LinkedIn.

The other point about recruiting in those days is there weren't a lot of commercial space success stories to talk about. This was before SpaceX. SpaceX had been started in 2002, but people didn't point to SpaceX as the commercial space success story. There was one negative space story, which was Beal Aerospace. Andy Beal was a Dallas area banker. He made a lot of money. He started an aerospace company. He famously grew it to about 200 people, and then he shut it down on a weekend in 2000.

We still had that hangover from that, where you'd be recruiting people that might have been interested in coming to a commercial space company, but they said, why should I trust this person that really wasn't accessible to them, given the Beal experience? We often had to explain why Blue wouldn't become another Beal. That was a story.

Given all those strengths, how do you find high quality people? It's like eating an elephant one bite at a time. There was just one step one, one position. I had to create the story of the company, what we're doing, how we're going to do it, what types of people we're going to be hiring, how we'd be funded, developing personal relationships with universities, setting up a great internship program and a new graduate development program, and then just a lot of hard work. We had a great team doing it.

I look back, there's a great team there at Blue. The folks that aren't there anymore have started really cool companies. Like the one you mentioned, Hermeus or Starfish Space that you and I know well, companies like Ursa Major, STOKE Space, Relativity Space. People from Blue that have gone on to work at SpaceX, and Astra, and Spaceflight. It's cool to see them seeding the growth of the industry and hiring that next 10 to 20 to 100,000 people in the space industry.

Ben: As someone who's looking to invest more and more in commercial space, that's part of my investment thesis. At this point, it's kind of a self-fulfilling prophecy that the talent density, if you think about it, there were probably hundreds or maybe single thousands of people 20 years ago working on privately-funded commercial space. You were working for defense, you were working for government contractors, you were working for these enormous companies that had 10+ year timelines on the products that we're shipping.

At this point, it really is this talent flywheel or self-fulfilling prophecy of whether or not you have high conviction in any specific opportunity that someone is pursuing as a startup. There are 100,000 brand new people to this ecosystem that bought for Blue and the other companies alongside you, it wouldn't have gotten catalyzed.

Rob: Yeah, that's exactly right. I don't know if we're at 100,000 yet, but certainly tens of thousands. That talent density is a really interesting way to think about it. Then you think about all the companies that have gone public via SPAC, all the new startups that are being created with venture investment, there's a lot of money going towards hiring people. The billions of dollars, a good proportion of that, maybe half of it is going to go to hiring talent, and that's new talent.

So they're going to be competing with the traditional tech industry. Space is just one sector in the hard tech area that's growing. There's also high-speed flight, there's urban air mobility, and there's nuclear power fission and fusion reactors. Huge amounts of money are going into new private companies that are taking on these hard problems. The talent pool is going to get really competitive for new people. So, a good time to go get an engineering degree.

Ben: I bet. I've recently seen a video of the dozens and dozens of times that SpaceX blew up a rocket trying to land it in a reusable way. I think it's a public video, so anyone out there can go and watch it. I have never seen such a video for Blue Origin. I don't think that is just because you didn't decide to release one. I think it was a little bit of a philosophical difference.

Can you talk us through what the timeline was before successfully landing the first New Shepherd or New Shepherd-like vehicle? Did it work out of the chute or were there a lot of explosions just like there were over at SpaceX?

Rob: I wouldn't say it worked out of the chute. But I think what you're referring to, it's kind of an architectural difference in the way Blue Origin approached vertical powered landing compared to SpaceX. We felt there was a strong emphasis in throttle ability of the rocket engine.

If you think about a car that goes from a standing stop immediately to 50 miles an hour, and then you can accelerate to 100 miles an hour, that's what rocket engines did in the past. They wouldn't go below 50% throttle because it's just quite hard and most of them didn't really need to. Most rocket engines don't need to throttle even down to 50% of full thrust percentage.

What we did at Blue is we put a lot of effort into throttle ability because we wanted to be able to essentially hover and land our vehicle. We felt that was the best chance at recovering the stage. SpaceX took a different approach, where they went in with software, and they did something called the hover slam, where you're sensing and coming up with a very precise landing maneuver that would put the rocket on the pad or the drone ship in many of their cases where they're landing over water.

It understandably took them a while to perfect it, but they were perfecting it. They are meeting all their mission objectives because landing wasn't a mission objective for them. Delivering the satellite, delivering the Cargo Dragon to the space station was their mission objective and landing the rocket was a secondary thing that they were trying to do to save money and improve their business. Reuse rockets is the holy grail, as we've heard many times.

Blue was pursuing this deep throttling approach with New Shepard. SpaceX was pursuing this hover slam approach, resulting in an amazing video that's on YouTube that you referred to. It's fun to watch, only because they were so open and sharing the work it took to get where they are today. Today with their approach, it's fantastic. It's highly reliable. They're landing boosters all the time.

Blue Origin, from the very first flight in April of 2015, we didn't get to land. There was a failure in the hydraulics. But every flight since then, New Shepard has successfully landed using that deep throttling approach that we designed in. That's an architecture decision that was made. They both look very similar, but as with all things, there's some nuances under the hood.

Ben: Yup. It's amazing how these decisions you make about what type of fuel or architecturally, how do we want to be able to do a reduced throttle, how that defines capabilities for a decade plus.

Rob: Absolutely, yeah.

Ben: I want to talk a little bit about the space ecosystem today. I think we've got a nice framework for a conversation here. In November of 2018, three years ago, you left Blue Origin. I'm curious where we are in the state of the private space ecosystem today versus where you imagined we'd be three years ago.

Rob: I think I'm pleased to have watched the space industry continue its steep growth curve over the past three years. Private investments by most measures is more than tripled in that time. Now over $10 billion a year. We've seen 10 or 12 companies go public via SPAC, which is interesting in adding a lot of investment into the growth curve. We've seen government investment maintained or even increased. That's always going to be a little bit incremental, but NASA's budget is $22-ish billion a year, and it's maintained or gone up a little bit.

Ben: Wow. So there's a chance that in the next few years, private investment into commercial space could exceed NASA's budget. If it continues to grow at this rate, did you say at 3X in three years to get to $10 billion?

Rob: To get to $10 billion? Yeah, it has. When you look at the Satellite Industry Association model or the measure of the size of the global space economy, it's roughly $360 billion a year. Only about $80–$85 billion is government space programs, whether it's NASA, ESA (the European Space Agency), the Japanese Space Agency.

Most of the global space economy is coming from satellite services, services provided from space, and ground equipment supporting those networks. The last measure, I saw $5 billion of that $360 billion was launched, 12 is about satellite manufacturing. Already commercial space greatly out is larger than the NASA budget. But you're right, the private investment side is growing rapidly and it could eclipse. It probably should.

Ben: Yeah. In some ways, those aren't apples-to-apples because the NASA budget is really revenue for the ecosystem. NASA is a customer, whereas these private investors are buying equity at these companies to fund them. They're not customer revenue.

Rob: Yeah. You can see, going back into the 40s and 50s, the NACA—the predecessor to NASA—really did all the fundamental research that seeded the modern aviation industry today. Aeronautics is a relatively small chunk of that annual NASA budget now, but the aviation industry is a trillion-dollar-industry. So I see the future, a similar future.

Ben: Speaking of seeing the future, I'm curious, you and I have talked a lot about investing philosophy that you have in your angel investments looking forward. I know you have these seven pillars of, here are the types of things that I think are going to continue to grow and want to invest in. Could you pick a few of your favorites and talk about them here?

Rob: Sure. I think one I would bring up is that probably by the end of this decade, we'll have competing transportation services that we can buy in every leg of the transportation network between the Earth and the Moon. We'll have competing landers, we'll have competing transport services to get from the Earth to the Moon. We already have competing rockets that can launch satellites, cargo, and people. We'll have competing space tugs that can move satellites, and goods around, the cislunar volume. Now you get to a point where these services are kind of a commodity that you can buy and there are businesses that can be built on top of that.

One of the pillars of the philosophy is to look for companies that are building on infrastructure that are provided by others. I think people who are building rockets and building satellites, I have great respect and want to buy their services, but I'm not looking to invest or create a new rocket company or a satellite company.

Ben: Just because there are already so many players there and so many folks who have honed their capabilities really well?

Rob: Absolutely. There are some great teams out there. There's a lot of funding through private venture investment, but also through the SPAC market. A lot of companies with hundreds of millions if not billions of dollars on the balance sheet, that are looking to go build their business and figure out what the fundamental problems are to growing that $5 billion wedge of the total space economy and then go solve them.

That leads to the other part of the investment philosophy that some may think that there's a bubble in launch and that there are too many launch companies or there are too many satellite companies. I don't. I think there's a lot of competition out there. I think that over time, that's going to lead to great new services and products that can make our everyday lives better, more efficient, more productive, more connected.

If that's the case, whether there's a bubble or not, there's still a lot of rockets and hardware to build. I look at the defense industrial base and the supply chain, and I think that companies that are building tools, that are creating machine shops, creating new components, that is an area that's really important.

I think companies that are mature digitally, that are going to create digital enablement of all these things, things that the aerospace industry has done that is by pen and paper with Excel spreadsheets, with phone calls that can be transformed and made more efficient. I think that cybersecurity is an interesting pillar of that, making things more secure, more resilient. In the defense industrial base, I think it's a big thing.

The bottom line is, there are so many great passionate people working in the aerospace industry, but to become more efficient and compete, like grow to a trillion dollars like the great people at Morgan Stanley predict, we're going to have to be more efficient. We're going to have to take advantage of all this private money and start to grow things. We've seen a great transformation in the last 10 years with SpaceX, Blue Origin, and other private companies that are coming out there. We need to take the next step and take advantage of the lower cost that's been brought in, but even drive it down further with supply chain efficiencies and other things. Those are two things that I think about. There's more, but that's a good start.

Ben: It's funny that you mentioned launch. It's a nice market to juxtapose against. So if you want to start a launch company, you will require billions of dollars of capital in order to fulfill the mission and reach the sustainability of the business. There are lots of businesses that won't require that in particular, because there's already such good horizontal integration that's developed throughout the ecosystem, where you have different people biting off little chunks and offer the ability to have parts of your value chain outsource to them.

I'm curious, because there are all these different providers of services for new startups, what are capital-light opportunities in space? I don't necessarily mean light the way that I would for building a web app, but what are some interesting categories where it won't require a billion dollars to get you to a sustainable business?

Rob: I think there's a couple of companies that are coming to ASCEND next week in Las Vegas. One of them, I met through the Techstars Space Accelerator Prewitt Ridge. They're doing a model-based systems engineering application. They're working with a lot of early-stage startups to build tools that can tie requirements to the core analytical tools that developed them and track those throughout the process.

They're competing against some of the big incumbent companies out there that all the giant aerospace companies use. There's another one called Epsilon3 that's doing electronic operational procedures and checklists that are historically done in Microsoft Word. Time's up on doing these things with pen and paper and moving into using the digital tools that we're all used to today with iPads and tablets. So those are two examples.

I think a third is Hadrian, a company that you and I talked about, that I made an angel investment in. They're creating a digitally-enabled machine shop. Chris will be out in Las Vegas next week. I'm looking forward to seeing him.

Ben: That's great.

Rob: They're building their first shop in Hawthorne, California and working with their partners to create something that's much more efficient than what's out there today.

Ben: I'm going to set you up for a two-part question here. One will help lay groundwork for folks that aren't super familiar with the space market today. Then I want to ask you about the next set of opportunities. Of the total addressable market of space, what are the biggest three or four categories? If you think about telecom or defense, how do you think about how the big chunks of the space total addressable market break down?

Rob: Like I mentioned, there's launch and satellite manufacturing, which are our chunks. They're in the billions. I think the Earth observation, remote sensing is a multi hundred-billion-a-year market.

Ben: That's like satellites that are taking pictures of the planet in various ways.

Rob: Satellites that are taking pictures of the planet using cameras, using synthetic aperture radar, measuring RF signals, thermal imaging, other types of technologies that support agriculture, climate change, weather prediction, insurance, all kinds of things. There's also a smaller but growing area around resilient alternatives to GPS. GPS supports tech and all kinds of other industries.

Where do you characterize those industries that are supported by GPS and take GPS? Are they space companies? I'm not going to argue that or say that they aren't, but there are alternatives to GPS, which is a US government–developed constellation. There's a European constellation, there's a Russian constellation, and a Chinese constellation. So all of those go into this envelope of GNSS, Global Navigation Satellite Solutions.

There are alternatives like Satelles, which runs in low Earth orbit on the Iridium network. There's Xona Space Systems, which is based out of the Bay Area creating their own alternative to GPS. There are other companies out there that have to build the infrastructure, the ecosystem, where a chip right now that receives a GNSS signal and gives you a time and a location, you need to update those chips to receive either the Satelles signal or different signals. That's a big choice that companies have to make whether they're going to buy that or not, but that is a growing business because GPS is something that we rely on every day.

Ben: And absolutely take it for granted.

Rob: Absolutely. It's relatively easy to spoof or even hack. So having a resilient alternative is a good thing.

Ben: What chunk of the revenue generated from space companies falls under the category of things like Telecom, what DirecTV is doing, and moving information around for consumer purposes?

Rob: That's in that sort of wedge of the $360 billion global economy that's right around $120–$130 billion a year. That includes global broadband, which is arguably one of the fastest growing sectors. There's a great conversation just before ours with Carissa Christensen and team on what realistically the size of that market is.

I am a big fan of providing global access to help people all around the world to have broadband, but can they pay for it? Is there a business model in remote parts of the world to buy that service, but should it be provided anyway? So it's a different way of thinking about it.

We see four major companies, Telesat, Amazon, SpaceX, and OneWeb building out global constellations, all using slightly different approaches, different technologies, different orbits, but they're spending tens of billions of dollars to put those things into place. I think broadband becomes one industry sector on its own. I think commercial human spaceflight is the most recent.

Just in the last few months, we're seeing people flying into space now. What is the size of that market? Space tourism, ultimately, is about going to space and experiencing space ideally in orbit, or going for a walk on the moon, and taking a tourist trip to the Apollo 11 landing site, that might be like what your end goal is, but where do you start?

You start with maybe taking your family to the Kennedy Space Center Visitor Center, and maybe you go fly in an airplane that flies parabolas and gives you access to weightlessness, or you fly in one of these high performance military airplanes, or you fly in a balloon with a company called Space Perspective, which takes you up to about 120,000 feet and gives you a first look at the curvature of the earth and gives you an understanding of the fragility of our ecosystem.

Then the next step is a New Shepard flight or a spaceship to fly on Virgin Galactic, priced in hundreds of thousands of dollars. The next step is a three-day mission like Inspiration4. Then the next step is a flight to the International Space Station on a company like Axiom Space, which I'm on the board of. Space tourism, unfortunately, it's not available to everybody. It's too expensive, but reusability of launch is a first step towards lowering the cost.

There are other things like fine tuning the supply chain can help to lower the cost. What are the other things that we can do to lower the cost of space missions? One of my other investment philosophies is around space resource utilization. The next lever for lowering the cost of space missions is don't launch things that you don't have to launch, build those things in space. So use resources that you can source, and use 3D printing and manufacturing in space to build those products there, and then only focus on flying the people.

Ben: I think you can tell where I'm leading the witness here. I asked the question of laying the groundwork of the current market because the more I get excited about investing in the space market, the more I realized that the common criticism is, okay, there's a market that's well-understood today, and then there's a big future market that sure, it could be many trillions of dollars if there's actually people living and working on Mars, and what in between.

I think I like all the things you just laid out because it's a lot of different plausible things that could create a lot of value for people and allow companies to capture some of that value in revenue in the next 10 years before we are in that sort of far future of people living and working in space or on other planets.

Rob: There's a lot of ambiguity on getting there. I think at ASCEND, we can do a really good job of helping people understand how to connect the dots from here to there. One of the big things about this event that I'm so passionate about is attracting adjacent industries that aren't in the space industry yet to see not only how can space technology help them improve their business today, but how they can contribute to building this off real future, which is a decades-long vision, but something I'm willing to put some time into.

Ben: Before we get to some audience questions, I have a general thing that I want to catch up with you on. About a year ago, maybe a year-and-a-half ago, June of 2020, Acquired, on the podcast, we did a deep dive on SpaceX. I'm very curious to hear what you think has changed since then. Thank you for providing the perspective you did to prepare for that episode, but it's been an unbelievably year and three months since.

Rob: Yeah, it has been. I think you told me that's one of your most popular episodes on the podcast.

Ben: For sure.

Rob: I'll give you my answer, but what I'm hoping is that our audience can reach out to Gwynne Shotwell, and get her to come on the show, and get her answer. What do you think?

Ben: We would love that to be stellar.

Rob: I'll ask her myself again, as well. Since that time, first off, SpaceX has just continued to crank on their business doing what they do, which is launch things into space. They've had, I think, something like 40–45 launches since last June of 2020. All successful, so that's more than two launches a month.

Ben: There is a reliable scheduled thing that we have to transport items to space, where, if you miss this one, you'll catch the next one. We live in the future.

Rob: Yup, we do. It's only going to get better and more routine, because we're really still in the barnstorming age of reusable rockets. We're still very, very early. They're building Starlink outside of Seattle here in Redmond. They're building Starship in South Texas. I've seen reports, they're over 2500–3000 people living in Boca Chica. They're building rockets in tents on the beach, which defies anyone's thoughts about what is their "right way" to go build a rocket.

It's an amazing lesson and exercise in agile development. They're also practicing, building, and operating at scale, not just with Starlink satellites where they launch 60 of them or 53 of the current ones with a laser optical links in them. They're launching 53 at a time. So they have an assembly line where they're building satellites, which is not the first time. Motorola did this with Iridium at a smaller scale, but now they're building 50 or 100 of these things at a time.

Ben: Which actually, I should point out for anyone who's not in the space ecosystem listening, it seems to me at least that nearly everything made for in the space ecosystem is purpose-built and it's a 1 of 1, or a 1 of 3 or 4, and the 3 or 4 get made over the course of a few years. The idea that they're making thousands of these Starlink satellites regularly in an assembly line fashion is something that's well-known in consumer electronics, but really not as much in space.

Rob: Yeah, and it's a scale that's not really been seen in the industry before, so I think it's quite remarkable. My last trip down to Hawthorne earlier this year, I saw the Raptor rocket engine line. They're building multiple raptor engines per day, which is a 500,000-pound thrust complex rocket engine that powers the Starship. So they're getting really, really valuable practice at operating and building at scale.

I remember reading a quote of Elon's vision for having 1000 Starships flying people and payloads up to the moon. Every Starship, the second stage has 37 Raptor engines, so they have to build 37,000 Raptor engines. They want to get great at this at scale. I think that's really different. It brings different skills.

As you get back to this influx of talent into the space industry, it requires many more folks with operational and industrial engineering experience, business experience, production, just different types of skills and experiences to build that factory of the future.

Ben: It's crazy. The one thing that always jumps out at me is they've already done 20 Starship prototypes of at least the first stage. They're not waiting to see the results of the first one before they go, and manufacture, and redesign for the second one. They're lined up.

Rob: Yeah, they're lined up. The value you get in building, having multiple vehicles in process on the floor. Jet Propulsion Lab does this with every Mars lander. They have two and they can take advantage of that in many ways. SpaceX is doing it, but they have 6 or 10 or some big number. You have to believe that what you learned from the flights, if you learned something that requires you to make a significant change to the next prototype, you're going to be able to make that change and still fly it. You're still getting value from the process moving as fast as you can.

Ben: Lawrence Wynn from the chat asks, "What could make rockets obsolete for access to space?"

Rob: I'm laughing because way back when, getting back to your recruiting question earlier, people would ask, what if this doesn't work? I always thought about pulling together the smartest group of people so that if the space elevator were invented and rolled out tomorrow, we had a company at Blue that could take advantage of that. What could make rockets obsolete? I haven't seen anything on the drawing board that's ready to push them to the sideline, but I do think that Starship, a fully reusable launch, is the next logical step. I think it's going to greatly disrupt what we're doing today because there's an opportunity to reduce the cost by one to two orders of magnitude.

Ben: That's great. What about other potential means of propulsion? It's ludicrous to propose like, how close are we to the warp drive, but how close are we to a nuclear engine on rockets?

Rob: I think we need to get comfortable with nuclear on Earth. For modular nuclear reactors, I think there's a lot of investment going into the advanced fuels, gen 4 fission reactors and infusion reactions that are aneutronic, that create no neutrons, no nuclear waste. Companies that are raising significant amounts of money and making great progress in those areas, but they're still 5–15 years away from demonstrating a terrestrial power station that can support that.

I think once you have comfort on Earth with that, then we'll be able to push for nuclear propulsion in space. I think there's a number of companies that have interesting ideas. The key is that you can shorten the transit time from Earth to Mars from 210 days to 110 days and maybe even 39 days. I think the other thing about interstellar propulsion, there is some investment going into that.

Kim Ghaffarian, who will be at ASCEND next week, founder of Axiom Space, Intuitive Machines, and X-energy has founded the Limitless Space Institute out of Houston, where he is trying to fund research into interstellar in our lifetime. So I think the Limitless Space Institute is the area to look in supporting research at universities around the world.

Ben: That's great. Rob, this has been really fun to learn about early Blue stuff and get your state of the landscape today. If folks want to follow up, what's the best way for them to find you on the internet or potentially reach out?

Rob: I am on Linkedin under Rob Meyerson. I'm happy to connect and answer questions. I'll be in Las Vegas next week Monday through Wednesday at ASCEND. I hope you all can join me.

Ben: Awesome. Thank you, Rob.

Rob: Thank you, Ben. It's a pleasure.

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