I often find myself wondering – “Where do Venture Capital (VC) firms go for independent technical advice when they are being pitched a new proposal”? So far, I have found no satisfactory answers from a rocket scientist point of view (Also applies to firms offering insurance for either on-orbit operations – or launch).
1. An explanation I often get is that VC firms go back into their own “library/data banks” of anything similar – which to me seems rather like a self-licking ice cream cone. 2. It is rather impossible to use “actuarial table” kinda calculations for a new technology (e.g. xenon ion propulsion, a new solar cell, laser communications ([lasercom] …). 3. VC firms rely upon the technical experts at the very firms that are behind the offering for technical advice (HARDLY “independent”).
To wit, I recall many years ago, when Globalstar was a gleam in Loral’s eye, and I read in Aviation Week & Space Technology (AW&ST) that the company was seeking VC funding. At the time, they were proposing (1) 6 lasercom heads per satellite for inter-satellite communications, and (2) an orbital altitude of 1.400km for their constellation.
At the time, I, and many of my colleagues, were astonished: 1. Uh, inter-satellite lasercom has not been demonstrated – at the time – it was at an experimental basis at best (by Japan and the EU) – and 6-way per satellite with the corresponding “network control” aboard relatively small satellites was unimaginable 2. 1,400 km was at the HOTTEST pat of the Van Allen radiation belts – the “ambient” radiation there would DESTROY electronics SO quickly …. UNLESS you used especially built- and designed- RadHard electronics – VERY expensive - (normally only used for DoD or NASA missions – which could/had to afford them) and I am sure that would have busted their financial model
Nevertheless, Globalstar got funding – went to market ….. (I happened upon a banker who had knowledge of his firm’s involvement in putting up $200M in funding. I asked him how they could have DONE that – given the 2 points I described above: His answer (quoting as best as I can recall): “It was Bernie Schwartz – we figured he knew what he was talking about.”
So the bankers took the offeror at face value – since they figured he/they knew more about space stuff than the bankers did.
What is wrong with this picture?
Way less than their design life, in their altitude of 1,400 km, the Globalstar satellites began failing– due to a failure of their S-band electronics (never explicitly admitted to be radiation damage) Globalstar went bankrupt Eventually reconstituted At whatever cost (unknown to me), had to replenish their entire constellation YEARS ahead of “plan”
To my point: Where do the VC “folks” being asked to put of hundreds of $M go to for independent technical advice? (Also applies to the insurance industry) Asking the technical expert from the company who is behind the proposal ? Actuarial tables for something never tried before – that’s an oxymoron
There is a body of people out there – who know what has been done – what has worked – why and why not – in all commercial, military and classified realms of space operations – US and foreign; they can give a simple “thumbs up/thumbs down”, or they can at times go into technical dissection of a proposal (they all of, course, respect their nondisclosure responsibilities) Anyone could have told the financial community that at the time Globalstar was proposing: 6 lasercom heads per satellite – NOT 1,400 km orbit - CRAZY
I’m not a financial kinda guy – but I would think that the folks with the $ would want to know such things – so maybe they could consider (pardon my crude verbiage here): Different payback terms, higher interest rates, maybe not take part-ownership, ….
I often find myself wondering – “Where do Venture Capital (VC) firms go for independent technical advice when they are being pitched a new proposal”? So far, I have found no satisfactory answers from a rocket scientist point of view (Also applies to firms offering insurance for either on-orbit operations – or launch).
ReplyDelete1. An explanation I often get is that VC firms go back into their own “library/data banks” of anything similar – which to me seems rather like a self-licking ice cream cone.
2. It is rather impossible to use “actuarial table” kinda calculations for a new technology (e.g. xenon ion propulsion, a new solar cell, laser communications ([lasercom] …).
3. VC firms rely upon the technical experts at the very firms that are behind the offering for technical advice (HARDLY “independent”).
To wit, I recall many years ago, when Globalstar was a gleam in Loral’s eye, and I read in Aviation Week & Space Technology (AW&ST) that the company was seeking VC funding. At the time, they were proposing (1) 6 lasercom heads per satellite for inter-satellite communications, and (2) an orbital altitude of 1.400km for their constellation.
At the time, I, and many of my colleagues, were astonished:
1. Uh, inter-satellite lasercom has not been demonstrated – at the time – it was at an experimental basis at best (by Japan and the EU) – and 6-way per satellite with the corresponding “network control” aboard relatively small satellites was unimaginable
2. 1,400 km was at the HOTTEST pat of the Van Allen radiation belts – the “ambient” radiation there would DESTROY electronics SO quickly …. UNLESS you used especially built- and designed- RadHard electronics – VERY expensive - (normally only used for DoD or NASA missions – which could/had to afford them) and I am sure that would have busted their financial model
Nevertheless, Globalstar got funding – went to market …..
(I happened upon a banker who had knowledge of his firm’s involvement in putting up $200M in funding. I asked him how they could have DONE that – given the 2 points I described above: His answer (quoting as best as I can recall): “It was Bernie Schwartz – we figured he knew what he was talking about.”
So the bankers took the offeror at face value – since they figured he/they knew more about space stuff than the bankers did.
What is wrong with this picture?
Way less than their design life, in their altitude of 1,400 km, the Globalstar satellites began failing– due to a failure of their S-band electronics (never explicitly admitted to be radiation damage)
Globalstar went bankrupt
Eventually reconstituted
At whatever cost (unknown to me), had to replenish their entire constellation YEARS ahead of “plan”
To my point: Where do the VC “folks” being asked to put of hundreds of $M go to for independent technical advice? (Also applies to the insurance industry)
Asking the technical expert from the company who is behind the proposal ?
Actuarial tables for something never tried before – that’s an oxymoron
There is a body of people out there – who know what has been done – what has worked – why and why not – in all commercial, military and classified realms of space operations – US and foreign; they can give a simple “thumbs up/thumbs down”, or they can at times go into technical dissection of a proposal (they all of, course, respect their nondisclosure responsibilities)
Anyone could have told the financial community that at the time Globalstar was proposing:
6 lasercom heads per satellite – NOT
1,400 km orbit - CRAZY
I’m not a financial kinda guy – but I would think that the folks with the $ would want to know such things – so maybe they could consider (pardon my crude verbiage here):
Different payback terms, higher interest rates, maybe not take part-ownership, ….