– Why he says that VCs have a moral obligation to fund companies that help keep America a step ahead of its adversaries.
– Why space matters for him personally and why expanding the economic bounds of humankind is the best way to achieve all of humanity’s other goals.
– The current state of the space economy and the space supply chain, and how he sees them evolving in the future.
– Why the US is in a new space race with Russia and China.
– His advice for aspiring founders on building a space company.
Delian is a principal at Founders Fund and co-founder and president of Varda Space Industries, which is building the world’s first space factories.
Before joining Founders Fund, he was a principal at Khosla Ventures, head of growth at Teespring, and founder of a healthcare company called Nightingale. Delian is Bulgarian, attended MIT, and likes to ski and play soccer. Delian, welcome.
Thanks so much for having me, guys. I love… Sometimes it’s funny to be out of body and hear somebody else read your bio.
Hey, it’s a good bio. You have done a lot. And actually, speaking of all of the things that you’ve done, we just mentioned, you’ve founded Varda, you’re an investor at Founders Fund. You run a podcast. You’re working on a lot of different things.
You were part of the major reason that there’s this massive move to Miami, thanks to one of your tweets. Given all of that, what takes up most of your mind share? On a daily basis, what are you thinking the most about? Is it all of those at once? Is it broken up? What goes on in your brain?
I tend to believe that most of the time doing these various jobs requires being a bit of a firefighter. So unfortunately, I’m in a mode right now where I can’t afford too much call it proactive work. I’m in a very sort of reactive mode.
Life has ebbs and flows, right? At the very beginning of Varda, when I was more in the ideation phase and trying to find the team, it was a very sort of proactive effort. Nowadays, most of the sort of fires that need to be fought are around Varda.
There’s occasional things that come up with some of the various portfolio companies that I have over at Founders Fund. But day-to-day, it’s everything from, gosh, DoD customers, to upcoming media stories, to fundraising, to you’re catching me at 15 weeks before we need to ship out the first hardware for our first mission.
Today is actually CDR, critical design review, which is basically sort of the last design review with all of our sort of key vendors. So it’s 12 hours of basically lots of engineers every single nitty gritty little aspect.
And so we’re in the midst of structural qualification campaigns and how to make sure that the primary structures can survive the vibrations of the launch environment, amongst many other things.
Well, we’re lucky we’re pulling you out of that for a few minutes to chat with you about all of this. But that’s a massive milestone for any hardware company, especially you guys. So congrats on hitting that today.
Super excited about it.
And Delian, as a fellow immigrant, you’ve always talked about the importance of investing in building companies that either work with the government or that are in the defense and space industries. What drives you? And why is that important to you?
I think it comes from like a sort of multitude of motivations. The sort of core and primary one being that I feel very grateful that I was born in a country that is effectively still very much so a second world country. Bulgaria’s GDP per capita is roughly $14,000 even today, let alone when I was born, when I was far, far lower with the fall of the Soviet Union.
My parents were able to immigrate out to the United States and get sort of first class education at the California Institute of Technology, sort of claw their way up from moving to the states with $500 to eventually being very comfortably sort of upper middle class. And then got to get educated at one of the preeminent engineering institutions myself, the Massachusetts Institute of Technology.
I think that whole path and transition from sort of middle of nowhere second world country to getting to have a very comfortable life and studying at a top tier institution is only really possible in America. I think the things that I’ve been able to sort of accomplish are only possible in America.
But fundamentally, that requires the institution and idea of America to continue to persist, which is largely dependent on sort of Western values and democracies being the sort of predominant power structure of the entire world. I think at the moment that that’s started to shift towards autocracies and totalitarian regimes, I think for people to sort of go through that same experience.
And so over the course of my life, I think I’ve become in some ways even prouder and prouder to be an American and want to believe more in defending those ideals. At the same time, over the course of call it the last 20 years, the shift towards more Western democratic values is actually reversed.
Right now, if you study since roughly 2005, there have only been more cities in a larger percentage of the population on earth that is currently being ruled by an autocratic regime. The default is not that the world will end up being democratic and free, let alone as we start to introduce more and more technologies and potential sort of spheres of influence.
One of the things that I recently tweeted was that one of my primary motivations for waking up every single day is to ensure that the language spoken on the moon is mostly English, not Mandarin. That has little to do with the languages and more so to do with the sort of values that those languages represent, English being the sort of Western democratic values and Chinese being the values of the CCP.
Well, how does one ensure that those types of values persist? I tend to believe in that the only way that the sort of peace and democratic values get spread is through strength. And strength today comes through technological superiority. We have two near peer adversaries, China and Russia. They’re incredibly competent and they’re incredibly technologically advanced.
The only way to say ahead of them is to be one step ahead of them on technologies. Right now, there are certain areas of technology where we’re actually fighting from behind. Both China and North Korea supposedly have now demonstrated hypersonic targeted weapons, glide vehicles that the United States currently does not have the ability to fly, let alone actually shoot down or prevent from hitting a target on US soil.
What people don’t appreciate is that the China hypersonic glide vehicle with a little bit better targeting could hit the white house, kill the president, and we would’ve no way of defending against that. And so we need to catch up to them technologically both in areas that we’re behind and maintain a step ahead.
At the same time in Western capitalist democracies right now, the sort of tip of the technological sphere and where sort of the boundaries get pushed is no longer within national labs, the DoD, DARPA, et cetera. That is where it was for a very long time. But now if you say it across AI, quantum, material science, aerospace, et cetera.
Most of the boundaries of technologies are currently getting pushed through largely private industry and largely venture-backed startups. And so I think it’s sort of fundamental to sort of protecting our way of life.
I think actually VCs have a sort of moral obligation towards funding these types of dual use companies that are both working on technology commercially that provides large scale venture returns, but also allows us to stay a step ahead of these near-peer, very competent and evil adversaries that we face in the world. So yeah, a long-winded answer to Bulgarian immigrant believes that we should all be funding dual use.
No, I love this. And as you mentioned, it turns out we haven’t reached the end of history and it’s up to us to actually build these things. And out of all the things you could be doing in the industry, what made you want to start Varda?
It was an idea that I had been fascinated with quite some time. I admit that the like sort of earliest versions of it didn’t quite look exactly like what Varda looks like today. It originally honestly got kicked off of the Lunar XPRIZE.
I was in a high school, Google launches this prize for like, okay, go to the moon, do something useful, take a photo, mine something, bring it back, and you get sort of prizes along the way.
And I think it mostly sort of kicked off this line of thinking that I’ve been sort of obsessed with ever since, which is if you actually study the human exploration over the course of our history, the settlements and the frontier has only ever become a sort of sustainable or had a sustainable human presence when there’s been some wrong economic incentives.
The analogy that I like to give is the way that California became California, it wasn’t because Lewis and Clark came here on a very large boat or lots of Lewis’ and Clarks’ came. Fundamentally, what ended up making California, California was the gold rush, the economic incentive. And that while it was great that there was a lot of people thinking about, how do we explore this stars?
I felt like there was not enough people thinking, how do we industrialize or commercialize the stars? And so the early versions of the idea were largely predicated of let’s say the Lunar XPRIZE, where there was asteroid mining, lunarized mining, lunar exploration, light sales, things like that.
But over the course of spending call it roughly a decade sort thinking about the idea, I ultimately realized that while many of those ideas had potential promise, most them just were not in the sort of near term timeframes going to be commercially viable.
And that the only one that really made sense was the sort of very first industrial step, which is basically what Varda’s now doing, which is take raw materials from earth, bring them up to a very, very low part of orbit that is relatively cheap to get to, fabricate them into a finished product that has higher performance because you’re at micro gravity, and then bring those materials back down.
And once one creates an industrial process and supply chain that sort of supports that, then those future ideas could become possible, right? Whether it’s lunarized mining or asteroid mining, et cetera. But those just aren’t possible. The way that I like to sort of explain it is, look, asteroid mining is exciting, but who’s buying water in orbit? You know what I mean?
It’s basically just the ISS. It’s like, yeah. Okay, cool. You can sell tens or maybe hundreds of kilograms maybe a month or something like that at best. It’s just not that large of a market, difficult to imagine venture scale.
But if you have space manufacturing platforms or orbital stations that are operating, that are a much larger scale than the ISS, well, then all of a sudden something like asteroid mining makes a lot more sense because there are people that actually want to purchase water in low earth orbit.
I originally largely wanted to tackle this from sort of like an investment perspective, given that there were a variety of people that had thought of this idea of take raw materials from earth, bring them up to micro gravity, fabricate them into a higher performance product.
But I actually spent sort of the last half of 2019 and early of 2020 right before COVID meeting with all these various groups that were working on it and ultimately came away deciding that I didn’t think that any of them were taking the appropriate approach that actually would lead to sort of venture scale.
And there’s sort of two primary factors that I was sort of disappointed by. The first was most of these groups were more interested in sort of publishing research papers around the materials that they were working on more so than actually finding a commercial customer for what they were producing.
And then the second, and in some ways more importantly, was none of these companies had the ambition to shift the supply chain of their production in micro gravity off of the ISS. The ISS does do on a very regular basis this type of material production. Merck spends $15 million a year entirely on microgravity pharma experiments.
Unfortunately, they can send very, very few of them and it takes a very long time from like start to finish of any one particular experiment. Because the ISS fundamentally is like a bureaucratic research institution that is run by multinationals. And there’s geopolitical implications for any decision that is made on there.
That is not a step in a supply chain that is reasonable for any commercial customer. If you actually need to be producing things at scale, nobody’s going to be waiting on the timelines and the costs that the ISS provides. And going independent of the ISS to me felt like, yes, a tricky challenge, but not impossible. Versus all these groups that I talked to effectively felt like it was impossible.
Until ultimately I started to realize sort of summer of 2020, I was like, unless I actually just do this myself. I fear that in 2025 I’ll be sort of in this same situation where I’ll be looking around and being like, “God damn it, still nobody has quite done this the right way.” I figured out how to make the supply chain sort of independent of the ISS.
So that’s kind of the high-level reason why I ultimately decided to rather than invest in something, start the company myself, was: one, believing that sort of the only way that humanities presence in the stars actually became sustainable was through industrialization.
And then two, the best and nearest term way to industrialize was this micro gravity production of certain materials. But then nobody really had the appropriate approach on that. And so I was like, “Well, I got to just go after it the right way myself and put together the right team to go after it the right way and the funding as well.”
That’s awesome. And to double click on the point that you made, there is dozens of reasons why space matters. There’s the Elon Musk argument that it’s the only way for humankind to actually prosper in the millions of years to come.
There’s the JFK argument that is aspirational. And there’s dozens and dozens of other arguments, both economic and geopolitical, that generally are under discussed. For you personally, why is space so important?
I probably come at it, I’m sort of like a brutal economist. There was one time where an investor was asking me, what is sort of my motivation for working on Varda? And I think they were a bit taken a back when I was like, “I just want to make a fuck ton of money. And most importantly, I want to show that it’s possible to make a fuck ton of money off of space manufacturing.”
And I don’t think that’s the answer they were expecting, like a much more hilly-billy, alla-balla, mission-dition kind of fucking answer. I didn’t provide that to them. But I kind of leaned on it sort of from that capitalistic perspective, which is just like, fundamentally, I actually think that capitalism is predicated on sort of a nonzero sum game.
And ultimately while, yes, we have clearly shown that we can extract productivity and resources and beauty, you don’t have the Milton sort of like overpopulation crowding problem that people feared in like the seventies. But then fundamentally there is some sort of economic cap to what is possible on earth.
And that if all of a sudden sort of capitalism becomes a zero sum game, I think it actually either spirals in a direction that is not great for society. And the best way to sort of keep it as a non-zero-sum game is to expand sort of capitalism into sort of the solar system and then ultimately the galaxy and then the universe.
And so I come at it from a truly sort of capitalistic perspective, which is partially why if you look at the sort of the one-liner mission of Varda that we define and repeat on a regular basis is Varda’s core mission is to expand the economic bounds of humankind.
It is not the explorative bounds. It is not the physical bounds. It’s not the spiritual bounds. It is not the multi-planetary make sure that we can survive an asteroid bounds. It is the economic bounds, partially because I actually think that’s the fastest way to accomplish all of those other things.
As much as people might want to become multi-planetary because they believe in some core mission, I think people much faster become multi-planetary if they think it’s going to make them really rich.
Amazing overview. To help people who are listening to this podcast better understand kind of the space economy and all of the different aspects, I think on one hand, people… Obviously Elon does an amazing job with SpaceX visualizing these launches and the returns of the rockets and all of that.
We have the satellite industry. We have people who are doing things for earth observation, actual manufacturing, et cetera. Can you help break down the space economy? What are the different aspects in your mind?
Where does Varda fit into that? What aspects of it are you touching, are you not touching? And then we can go in a little bit more after that into where you think there might be other opportunities for people, et cetera.
I mean, anytime that there’s sort of a nascent new industry getting built up, it can be propped up with sort of massive amounts of funding and interests and engineers. But ultimately in order to become long-term sustainable, it needs to connect into the rest of the economy.
Part of why the early sort of dot-com bubble crash happened was that these dot-com companies didn’t have a connection back to sort of the “core” economy at the time. Versus when those ideas were in some ways repeated 15 years later, they were much more integrated into sort of like the “rest” of the economy.
And the same thing is very much so true in space. I like to sometimes bucket companies into you, are they space companies that are sort of selling to other space companies? Or are they space companies that are connecting to the rest of the economy?
And while both are necessary, you should really track the growth of the latter to ensure basically, how healthy is this ecosystem? And sort of how long will it survive if there were call it suddenly a collapse in investor interest?
And so in the first sort of bucket companies of, who are the space companies that largely sell to other space companies? There’s effectively sort of two types there. There’s the first, the rocket launchers, right? So SpaceX, Rocket Lab, Astra, et cetera, down the line.
Those companies obviously sell to other space companies and that they sell to largely satellite operators and give them basically rides up to orbit as well as sell into DoD an asset and also give DoD an asset to orbit. The second is what I call the sort of supply chain of space.
That, again, all of the things that are getting built, whether it’s the rockets or the satellites or Varda’s orbital manufacturing stations, those companies obviously don’t build every single little thing from scratch.
And it turns out everything from the people that make fasteners, to aerospace flight computers, to solar panels, all of those are very important components of that space economy and all of them largely sell to space companies. We’ve invested in some of these.
One example sort of in our portfolio is this company Hadrian parts. It turns out I need like an aluminum bolt as a part of our sort of spacecraft at Varda. I can’t just buy an aluminum bolt off the shelf, because it turns out I need to know the tolerance is basically how precise that bolt has been manufactured needs to be far, far more precise than even like an automotive bolt or something like that.
And so the sort of machine shop that makes my bolt needs to be a very particular type of machine shop. And there’s basically not that many of those. They’re largely predicated off of sort of the Apollo era level of production.
And it turns out in today’s day and age, there are so many more companies in the Apollo era that that current sort of supply chain of aerospace machine shops is falling apart. So there’s old school versions of that type of supply chain and new school ones that are funded by us. The second category of companies are what I call the sort of connection to the rest of the sort of economy.
So the two sort of largest versions you somewhat touched on. So there’s earth observation, companies like Planet Labs, ISI, ASPIRE. A couple of those are some of the sort of largest players around sort of visual photographs, as well as synthetic aperture radar and infrared.
Those companies basically effectively sell the photos of the earth to everything from the DoD to hedge fund traders that are trying to look at, okay, how many ships are leaving Chinese ports as a way to predict economic demand and to give them alpha, to methane gas pipeline operators that are trying to look for methane gas leaks using satellite images, rather than trying to fly a helicopter or a plane over their pipeline every couple days.
The next category of ways to sort of monetize in space that people have discovered that allows you to connect to the rest of the space ecosystem is basically sort of satellite communications. So Starlink obviously being right now the most prominent example.
It’s basically rather than trying to connect to a cell tower or trying to run some sort of fiber, instead, why don’t you just use basically the sort of satellite above you in the sky as a relay and use that to communicate?
Those types of satellite communications companies primarily don’t sell to you or I sitting in downtown Miami, San Francisco, New York, et cetera, given that those cities have really dense sort of communications infrastructure.
But it typically means that you’re in a more remote area. So whether it’s sort remote individual using sort of Starlink in the middle of Yellowstone National Park to a maritime voyager or a cruise ship or something like that using SES’s sort of satellite constellation.
And those are basically the only two ways that people have figured out how to monetize in space. Now, there are sort of upcoming sort of business models. So let’s maybe shift back to the upcoming business models that are sort of space companies for space.
Now that there’s basically so many satellites up there for the first time, you can kind of think about it as there’s enough cars on the road that you could actually justify building a gas station rather than everybody basically having their own big gas tank.
And there’s a handful of companies basically working on sort of building those sort of both orbital refueling stations, orbital servicing. So if your “car” has a leak, if your satellite has a leak, you can go get that fixed rather than having to discard the satellites. So that’s some of the more nascent business models that I think are near term and exciting on the space company, they’re selling two other space companies.
And then the sort of new business models that our space company is selling it to the normal economy, I’d like to think that sort of Varda is obviously one of the most interesting in that we are not selling to other space companies, we’re selling to people that purchase fiber optics, pharmaceuticals, semiconductors, these materials, where we can produce them in much higher quality versions. But obviously most of our customers could give less of a shit about us being a space company.
They just really like our materials. They don’t know anything about aerospace. So those are kind of the sort of rough breakdown of both the current and future business models in space and also sort of the two categories of, is it a space company just selling to other space companies? Which is great. It’s infrastructure that’s necessary.
Or is it a space company selling to the “real” economy, which is like, great, because that’s what makes space sustainable in the long term. Because it turns out there’s a lot more customers and capitalists on earth than there are in space.
Incredible overview. So just to go a little bit further within that, one thing I’m curious about is, what areas do you think are overhyped? And what areas do you think are almost a little ignored or under hyped? And to dig in specifically on some things that resonated from you, what you said is, I think for example, there’s a lot of earth observation companies that have now popped up.
Do we need more? Do we need more launch companies? Is that overhyped, under hyped? Similarly, when we talk about things like Starlink and satellite communications, there are several companies working on all of that. Do you think that we’re at the point of saturation or we should still be thinking about, what are other opportunities in those areas?
I think I would generally say that I think just like the first category is generally over hyped and overinvested into and the second category is one that actually people are under appreciating sort of how much promise there is. And so I’m actually more of the opinion of we don’t really need many more launcher companies.
At this point, I think there’s like almost a hundred companies that have raised north of $10 million of venture capital. And so I’m somewhat skeptical and especially as sort of Starship starts to come online that there’s going to be more than three or four players. There’s a reason that there’s only Boeing and Airbus and maybe a small handful of others of aero frame manufacturers.
And yes, there are more operators in that. You’re right. United, Delta, etc. And maybe at some point regulators will step in and say there needs to be a different manufacturer of the like rocket versus who operates the rocket, et cetera. But we’re probably ways away from that.
But fundamentally, it seems unlikely that there’ll be more than call it three, maybe four players. And so I think that area is sort of like massively over hyped. I think the area of supply chain, actually, sort of for call it satellites editor is massively under hyped.
I think VCs are under appreciating sort of if you may call it the best sort of aerospace grade solar panel or power system and make it cheaper cheap and make it at the cost of off the shelf consumer electronics. That’s actually sort of a massive venture scale market, but it’s not something that people pay attention to because there’s just sexiness around sort of I feel like firing off rockets that people appreciate.
And then on the second half of the economy, both in earth observation and in sort of satellite communications, I actually think that while, yes, there are a lot of companies who’s doing this, I actually still think there’s sort of like a massive untapped potential here.
And part of it just comes to there’s just so many different use cases and there’s just a lot of different industries where they haven’t thought through, what would I do if I had this type of satellite data? And then each individual industry’s needs is actually wildly different.
To double-click on one of the use cases that I sort of mentioned earlier, if you’re a methane gas pipeline that is specifically trying to replace your once-a-week helicopter tour that you have to do over your methane pipeline to make sure that there’s no leaks for either regulatory reasons and instead want to replace that with a satellite.
Well, that satellite design looks wildly, wildly different than the hedge fund that is trying to look at how many ships are leaving Chinese ports, both the wavelength that you’re looking for. Methane has very particular wavelengths that it reflects. And so the basically “camera” that you need to design to look for methane looks widely different than the camera that you need to design to look for ships leaving Chinese sports.
Where those satellites fly, how those satellites are designed, how big they are, what orbit through them, et cetera. It’s kind of hard. People think like, “oh, you throw up a satellite and you can kind of go all over earth.” And it’s like, “No.” You kind of get stuck in one particular lane.
And unlike driving a car, it’s actually pretty fucking hard to shift lanes. And so once you’re up there, you’re kind of up there before that particular use case. And I think there’s actually a long, long tail of use cases for that type of earth observation. And then same thing actually with sort of satellites.
Starlink is great for the sort of Yellowstone and maybe maritime use case, where you need sort of real-time but relatively low bandwidth. But let’s say you’re like Netflix and you want to do sort of like massive transfer of data and have a backup to call it like the undersea fiber optic cables.
There you’re actually much better off having like a mid geo or full geo sort of satellites, something that like Astra is building. It’s a very different-looking satellite than what Starlink is building that is really optimized for having much, much more bandwidth, but much higher latency.
Where it turns out the Netflix’s the world, they don’t really care about latency. It’s not like you’re trying to play a video game in real time like you are in Starlink. But they do care about, how cheaply can you get my bandwidth? And Starlink bandwidth is in some ways kind of expensive because they do fly so low and they have to refresh their satellite constellation on a super regular basis because they fly so low.
And again, why do they fly so low? Because they want sort of much tighter latency to compete for those types of consumer use cases. And so I think people actually underappreciate just how much more value there is to I think be had in earth observation and satellite communications. I wouldn’t say it’s quite as underappreciated as that sort of supply chain that I mentioned earlier. But in the grand scheme of relative to rockets, let’s say, it’s definitely nowhere near the level of hype of rockets.
I think that’s a great overview. So shifting away just from startups building and space, what do you think the general public misunderstands the most about the space and the space economy right now?
I think it’s just exponential equations are just really hard to predict across a variety of different industries, whether it’s people underappreciating how quickly we went from like super computers requiring full rooms to everybody having a personal PC. Space is going through that sort of same transition right now.
The example that I kind of like to give is way before starting Varda and even starting to think about even investing in a company like this, in 2016, I was still working on my first company. I actually had to bet with a couple of my friends from MIT. We were like out to dinner and I was explaining to them like, hey, launch costs are dropping faster and faster.
Yes, the Falcon 9 is not reusable yet. But the fact that they even got it to land and crash on a barge means that they’ll be able to land it and land it without blowing up one day. Now, is that going to take a year, or two years, three years? Unclear, but it’s going to happen.
And then the moment that happens, it’s a massive drop in launch cost. And once that happens, people want to continue to drop it and there will continue to be this sort of Moore’s Law type decrease in launch costs. And what that means is that one day the sort of like manufacturing in space is not just going to be done on the ISS, but it’s going to be done independent of the ISS and commercially done.
This is basically like October 2016. I made the bet that basically by January 1st 2022, there would be a company that manufactures something in orbit and brings it back down for a profit. Unfortunately, I ended up obviously losing a bet. Varda has not yet done that. But I wasn’t that far off.
I’m going to be about 15 months off on like a five and a half year long bet, which is I think not the worst sort of margin of error. And so I think people underappreciate the implications. I felt like I had a decent understanding. And even then, I’ve been maybe surprised by how sort of quickly and reusable sort of Falcon 9 has become.
But I think now people underappreciate what is going to happen over the next decade. So my next bet… When I tell the story, I caution that sometimes I take these bets so seriously that I end up starting the fucking company to win the bet, even if I was to bet 15 months. But the next bet that I have going is actually with my wife, where by 2032, I believe that year, in 2032, there will be at least a hundred humans on earth that spend over a day in space.
So it’s not just like a quick sort of rollercoaster ride. And that those people aren’t billionaires, but they have less than a hundred million in net worth. So they’re centi millionaires that are scraping by rather than just the billionaires. And I did caution my wife though that if the bet is starting to come to close to fruition, I may have to start the company to go ensure that.
But just with Starship and some of these other vehicles coming online, I think people underappreciate just how cheap it’s going to be to be able to run a sort of like commercial LEO sort of space station and eventually turn that into a hotel. And how quickly the number of humans sort of in space will ramp up.
We already had a point, I think it was this sort of past summer, where there was a couple dragons in orbit, the Chinese station was in orbit, and we had these sort of Blue Origin sort of rocket going up. And I think at one point there was actually 24 people in orbit. And so it’s like, okay, we’re currently at 24 at one time.
If you raise that exponentially and then eventually say, okay, beyond just astronauts, who are these a hundred people that are there just for tourist basis, it almost feels certain that by 2032, I was like, no question. I might even take that bet on a shorter time frame.
So I think that’s the type of stuff that people underappreciate. And it’s not just the launch cost. It’s the fact that as more rockets are built, rocket engines get cheaper. As rocket engines get cheaper, being able to move around in space gets cheaper.
As people have the cheaper moving around in space, people send more satellites. More satellites, the solar panels get cheaper. As the solar panels get cheaper, people send more and more. You send up these manufacturing stations.
And so it’s not just the launch costs, it’s all aspects of the ecosystem just massively dropping in costs and increasing in cadence as it becomes just a larger and larger commercial economy.
I think hearing Elon last week announced that at scale, Starship will end up costing around a million dollars a launch was mind blowing. Think of sending a hundred people up for a million dollars. I mean, the equations completely change.
So last question for you on kind of the space industry and economy as a whole, we’ve talked about all of the amazing positives that come out of that. What are the risk factors here? We saw Russia with their ASAT. China’s done that before.
Do you worry about that? Do you think that’s something that’s top of mind for you when you’re… Even for Varda, are you worried about those risk factors? Or do you think the danger of all of that is somewhat overblown?
While obviously the Russia ASAT test has led to real operational challenges, there are multiple constellations that have had to sort of move out of the way. The ISS has had to do some maneuvers. I think in the grand scheme of things, I still think it’s like a largely overblown worry.
I think the combination of both just as there’s sort of like a carbon credit sort of system that we built up over time that has made it so there’s actually capitalistic incentives for eventually going sort of “green.”
I think there’ll soon be a set of regulation that does the same thing around sort of orbital debris and even provide sort of bounties for people for sort of deorbiting debris. And at least specifically for Varda, we’re flying in such a low orbit that any debris that is up there deorbits quite quickly. And so it’s actually a relatively clean area of space.
There’s for sure risk that come to space. But I think more of it is going to be like, is there not enough of a economic demand for people going to orbit or sending satellites to orbit such that like Starship doesn’t have enough cadence and they build it into a operational muscle and that makes it so that Starship goes by the wayside like the space shuttle did, where there just wasn’t enough demand to actually sort of justify either sort of keeping it up on a regular basis.
That’s the type of stuff that keeps me up at night and worried is just like, can we grow that sort of space economy quickly enough to connect with the rest of the economy while we’re building up all this infrastructure? You don’t want to just let the infrastructure languish. The reason the railroad succeeded is because people had oil to transport on them because there wasn’t enough people to transport it on them and actually justify.
And that’s how sort of the railroad system in the United States eventually grew. Same thing with space. Yeah, sending a hundred people up is interesting. But at the end of the day, you got to build the oil because the oil’s going to be 99% of the sort of justification for going up and down, not just tourism.
At a geopolitical level, I would imagine that you probably agree with the statement that we are in the space race right now. Can you help level set the state of the discussions and where we’re at now relative to the CCP, relative to Russia? And how concerned are you that we may not be that far ahead.
I mean, China last year effectively launched almost as much as the entire rest of the world combined. And they effectively managed to get their hands on Falcon 9 designs and effectively build an exact replica. They haven’t figured out how to make it reusable yet because it turns out that comes with a little bit more software and avionics and sensor know-how.
But they clearly have a willingness to just pump tons and tons of dollars into it. Now, we did actually sort of send up more mass than they did. So in total, the United States is still sort of far ahead of China on a mass basis, but not by like a massive amount. Not by like 10X or anything. And China’s sort of mass to orbit is growing quite quickly.
China’s also decided to actually send up their own independent space station. They have a rotating crew of two, three astronauts at a time that are operating it. And they’re sort of the first country outside of the ISS to basically be able to run their own independent space station.
Hypersonic glide vehicles that I discussed earlier are effectively a space technology. Those glide vehicles go up on an actual rocket and then purposely deorbit themselves from space to choose and land on a target. And so I absolutely think we’re sort of in this space race and I think it’s ever more important than before given that this adversary has shown a willingness to drive tons of capital and has a much, much larger economy than sort of the last space race ever did.
And so I think that’s why you’re starting to see a lot more counter reactions of there’s a congressional committee on hypersonics now. People are talking about the United States landing on the moon again soon. I could see these sort of combined sort of NASA plus space force budget over the course of the next decade actually starting their approach, the Apollo era in terms of a percentage of GDP.
I think part of it being that the sort of the DRD budget on space has so massively increased, even if NASA necessarily hasn’t massively upsized. So we’re still currently ahead. I think we have a chance to sort of maintain being ahead. But it is not like it was a decade ago, where we effectively had no competition. And Russia is still doing some things, but they’re not I think a particularly large star right now in the space ecosystem. But China very much so is.
I’m sure you’ve heard this sort of stupid nihilistic criticism that back in the Cold War, we sort of just spent all this money, that the space race was just a distraction between two nations that just wanted to spend all this money to compete with each other. If we don’t actually win this out and if we don’t get ahead, what are the potential consequences for the US to lose the space race? Why should people care?
I mean, I think you can categorize sort of space expenditures into two buckets. The first is I think commercial companies and private companies should be able to do whatever the hell they want. So if venture capitalists want to pour a lot of dollars into it because they see that there will be returns in it, I don’t think that the public should have sort of much of an opinion or input into that.
I think it’s only entirely a question of sort of, where do public dollars go? And so I think I sort of share the Elon philosophy here, which is, I’m not suggesting that call it 10% of our GDP should be spent on the space race. I do think there’s a lot of problems down here and at home that should to be focused on. But it’s not clear to me that the right answer, which is today at like 0.01% of the GDP is the right answer.
It’s probably worth upsizing that by either roughly 10X. And I still don’t think that that sort of hampers our ability to make progress in the problems that we have down here. And there’s just been so much proof of just like every public dollar spent on aerospace and space exploration has had massive implications and benefits for down here back at home, whether it’s power systems that are built or medical devices that are based off of aerospace technology.
There are so many sort of tangential benefits to sort of having that sort of inspired generation of engineers working on these types of very difficult problems that has such tangential sort of benefits down for life down here on earth. And then obviously companies like Varda, where there’s pharmaceutical drugs that literally aren’t possible to be made down here on earth. You need to make them inside the micro gravity of space.
Yeah. While I think there’s some merit to that argument, if you know, take it to the extreme case of like 50% of our GDP getting spent on space, I don’t think that’s what most folks in space are suggesting.
And maybe up until three years ago, people would look at this industry and they would say, “Well, this matters.” But when you look at the founders that can actually start these are Elon Musk, who was a billionaire before he started SpaceX, or Palmer Luckey that had Oculus before he started Anduril.
And now we’re seeing a new generation of space companies with you at Varda and with Chris at Hadrian. What has changed? I mean, one obvious thing is the three of us on this call are dying to fund the next Hadrian, to fund the next Anduril. But from a playbook and founders starting these companies, what is different today than up until a few years ago?
Yeah. And I think it’s two factors that are sort of playing both to the benefit of folks like Chris and I, which is, first, just the fundamental infrastructure cost. I was touching on this earlier of call it Varda’s first mission that we’re sending up that is a demonstration of our orbital manufacturing and sort of reentry system.
Our budget in a sort of version of the world that existed call it even three, four, or five years ago to send up that first mission probably would’ve been like a minimum $150 million, $175 million versus now we’re basically doing that same equivalent mission and it’ll probably be on the order of like $20 or $25 million.
And yes, while that is expensive, that is still very much so in like venture scale of… Hell, there are enterprise SaaS companies that build sort of fundamental infrastructure software that burn through that much on R&D as well. And so it’s in the world of sort of venture scale.
And then the second is not only have the sort of costs gone down, but also investor appetite has massively grown as that sort of initial set of billionaire founders have proven that there are returns. SpaceX now on the secondary market trading north of $100 billion means that there’s a lot of people now that have made a lot of money in SpaceX.
And it turns out, just like I was saying, the best way to get people to Mars is convincing them they’re going to make a lot of money. The best way to get people to invest into space more is to convince them they’re going to make a lot of money and the best way to convince them they’re going to make them a lot of money is make them a lot of money.
And a lot of people have made a lot of money in SpaceX investing over the past decade. And so I think the combination of those two factors is leading to the sort of call it barrier entry or the bar that is required for a founder wanting to start a space company being massively lower.
Is it as easy as like starting a consumer social company or an enterprise SaaS company? No, not quite yet. But it is no longer only in the realm of billionaires.
Right. So the bar is lower. What is your advice to young founders who want to build something in the space? Is there a playbook here that you think they can follow?
Yeah. The thing that I always say is if you’re going to make a space company, study the current business models and meet with a variety of the companies first, especially if you’re in that first category of like if you’re a space company selling to other space companies, it’s a pretty nascent ecosystem.
I think there’s approximately, at this point, maybe 25 companies that have raised north of call it $10 million in like the last three or four years. So it’s not like some infinite set of customers. And so if the product that you’re building isn’t going to be purchased by one of those 25 people, then you don’t have a business model.
And if it is, then you do, and a lot of investors will very enthusiastically end up funding you. And so I typically encourage people, if you can’t necessarily or have the interest or the patience or ability go join a commercial space company and learn it from the inside of a preexisting player, then go and meet with as many of the preexisting players, understand their business models, and use that type of feedback to formulate it.
I think a lot of people will say like, “Ah, I want to start a space company.” And they sort of start in like a sort of vacuum, where they haven’t really sort of considered sort of what is out there and who is building successful sort of commercial space business models today.
And I think I benefited, let’s say, from the fact that by being an investor in commercial space companies, I basically got paid to study commercial space business models for like three and a half years, four years before deciding to pull the trigger on Varda. But you can definitely do that sort of same work by sort of making it your nights and weekends hobby project.
That’s probably the primary thing. And then the second thing is sort of once deciding on and narrowing in on your area, I think sort of recruiting from sort of the preexisting aerospace sort of networks is sort of the right way to go. I think a lot of times I see certain teams where it’s like they have a really great idea. They actually thought through the business model.
But then they have a core avionics risk and none of the founding team is avionics engineers. And it’s like, okay, well, I mean, as much as I like seeing three fresh out of Stanford grads tackle all these type of problems, it’s like, you probably should at least try and find one co-founder that has a core area of expertise around this. So yeah, those are probably the two biggest things is think through the various preexisting models, study them, and then find the right team.
So as we think about making it easier for more people to dive into the space, I think launch cost going down is one major factor. Another question about a potential factor that would make it easier to start in the space is, how do you think about government funding going into this?
So programs like AFWERX, SpaceWERX, et cetera. Do you think that’s a distraction for most companies? Do you think it helps them and gives them some initial revenue in the beginning to fund some of this development?
And then in the same vein, how have you thought about that with Varda, both keeping you in line with your actual mission objectives and preventing it from becoming a distraction?
My answer for Varda and both my suggestion to sort of other founders is roughly the same in that I think they can be an extremely valuable customer. Unlike most customers, the DoD, AFWERX, SpaceWERX, DIU, et cetera, is willing to pay for R&D as opposed to just being willing to pay for basically like a finished product that you deliver to them.
And that I think has a lot of advantages if you can make it so that the R&D that the DoD is interested in funding aligns… It’s typically impossible to make it align perfectly, but call it at least it has like 90% or 95% overlap with what you would’ve been doing for your commercial customers in the end game anyways.
I think where some companies run astray is when they too much pivot back and forth towards various like SBIRs and phase ones and phase twos, and just like keep sort of going on that track and keep sort of pivoting their product line to try and focus on what is the latest sort of DoD solicitation and what is sort of AFWERX asking for.
As opposed to having a sort of preexisting sort of strong viewpoint on like this is what we are building. And then we will apply for DoD grants or convince the DoD to create grants around the type of technology that we’re creating that we’ll then sort of go apply to. So yeah, I think I’m generally very pro. They are shifts in the right direction.
Is it the perfect end all or has the DoD shifted enough? Still not yet. I think programs like AFWERX and STATFI do now provide a path towards call it $40 million, $50 million, $60 million of sort of DoD funding that offsets R&D dollars. But I still don’t think there’s a great path to the wards from taking those sort of R&D programs and then eventually translating that to an operational program of records.
So there’s this sort of classic sort of what’s called the “value of death” between these sort of R&D arms of the DoD versus the actual operational arms where they don’t end up despite giving these sort of startups lots and lots of capital to work on this R&D, they ultimately never end up giving that same startup any type of operational contract.
And so the startup ends up folding because that, because they ended up focusing too much on the DoD. So still lots of work ahead of us. But yeah, definitely something that we think about actively at Varda in that we do have a variety of programs going to the DoD on a couple different pieces of technology.
But they are, again, very much in the roadmap of what we were building for our own commercial needs. And they’ve been phenomenal supporters, not only in dollars, but also it turns out like when we needed a heat shield material or we needed a hypersonic modelling data around, what would it look like when we went through re-entry?
It turns out sort of the Air Force and NASA were able to massively speed up our engineering roadmap. And so it was somewhat a two-way street of like not only did they help us with sort of capital and offsetting R&D, but it wasn’t just the capital, it was also the expertise that they were bringing to us. And then vice versa, the expertise and product and eventual technology that we were bringing to them.
Delian, how can founders help push the space industry forward even if they don’t have a deeply technical background?
I mean, I think building a company is building a company. Every aerospace company has a lot of the same challenges that enterprise stuff does. Whether it’s FPNA, whether it’s fundraising, whether it’s comms, whether it’s base ops, customer engagement, customer success, all these things that exist at like a Splunk or a Snowflake also exists at a SpaceX or a Varda. These same types of challenges exist.
And so there are plenty of folks sort of on the Varda team that have come from very sort of nontraditional “deep tech” backgrounds. And so I think sort of joining one of these companies is by far sort of the best way to do it. And then sort of starting a company with a set of maybe…
I think there are a lot of founders in Silicon Valley position that maybe understand fundraising and team building super well and a lot of SpaceX engineers that don’t necessarily understand fundraising and team building super well, but understand a very, very particular piece of technology super well.
And sort of pairing up with somebody like that to sort of help bring their technology to market is I think another way that people can really focus. There’s definitely a whole cadre of folks that grind through their time at SpaceX and then you don’t want to start a company, but don’t necessarily know how to.
Today we covered a lot of the challenges, both in the industry, but also at a geopolitical level with an adversary that perhaps presents the biggest challenge that the United States has ever faced, which is manifesting itself in the space industry, but also in many other ways. What keeps you optimistic?
I think fundamentally, if you study all the underlying inputs into the space ecosystem, whether it’s the dollars that are flowing into it, the number of engineers that are getting trained up, Cornell’s and Purdue’s aerospace program graduates per year, all these things are only continuing to increase.
Yes, there are certain areas where we’re a bit behind. China actually has better hypersonic PhD programs than we do. But fundamentally, we are much more likely to have a Starship online way, way earlier than they have anything like that online.
And the fact that we have Starship online will make it so that any other technological advantage that they have will effectively be negated when we can send a hundred tons to orbit. You don’t need a particularly precise hypersonic vehicle if you can just send a massive one that is sort of the size of a semi truck.
And so I think the combination of just both the underlying inputs as well as there is this sort of shifting tune in the DoD to try to work with more of these sort of commercial-backed players. And there’s more of an understanding with the DoD that what they have is fundamentally an adoption problem, not an innovation problem.
DoD used to need to pay for innovation versus now the innovation is happening and now the DoD just needs to optimize their adoption of these sort of fundamental new technologies that startups are bringing to market. And if they are sort of early sort of strong signals for that as well, right?
Programs like STRATFI just didn’t exist three, four or five years ago. Being able to give a sort of startup RD&T offset funding on the order of $30 million just wasn’t possible. Before you sort of either got capped out in a sort of $3 million, $4 million, $5 million, maybe max $10 million range.
I hope that then get increased to future programs that are on the order of $300 million. But the fact that we’ve gone from $5 million to $10 million to $30 million in just three, four years is a really promising signal as well.
Not only DoD, but also Congressional representatives and senators, etc, are also starting to pay attention to this world as they start to realize how important it is for us to maintain this technological advantage. So while there’s definitely stuff that spooks me or I get worried about, in the grand scheme of things, I think America is the greatest country on earth and I think we will continue to be.
I love that. So for all of our listeners who care about Western ideals, the future of our country and all of these values, if you were to give them some advice, knowing that some of them might already have their own company that they’re building or going down their own path, what advice would you give them on how to kind of further those underlying values that drive all of us?
Yeah. I mean, sometimes one of the simplest thing that I like to say is just hang up a damn American flag in your office. I think too many times right now, whether it’s like patriotism or nationalism, or just the American flag are somehow seen as this like non cache thing.
And I think it’s incredibly important that we’re all proudly sort of patriotic. It’s an incredible country that we built at a very short period of time. And yet somehow you walk around sort of liberal San Francisco to Silicon Valley and you can’t see a single damn sort of American flag hanging in any office or any home. And so that’s one of the simplest ways.
And I think the other is just vote for the politicians and donate to them that sort of represent these underlying values. The ones that are sort of pro America, pro skilled immigration, pro-technology. Not the ones that think that sort of humanity is a blight on the earth and needs to be removed.
I think that’s the exact sort of opposite sort of form of thinking that we need today. And so I think there’s sort of plenty of ways to have that effect and start to sort of contribute even if you’re not necessarily working in aerospace or dual use defense.
Delian, this has been incredible. Every time we chat, I feel like I learned something new. So thank you so much for taking the time. We’re really excited to get this out.
Thanks so much for having me.