Thanks to Kevin Strait of Rockies Space Fund and the Rockies Venture Club team for hosting an engaging Aerospace and Defense investing panel during today’s Angel Capital Summit. This is a great lead in to discussions at the upcoming Space Symposium.
Panelists: Kevin Strait, Andy Merritt, Debra Wilcox, Roger Toennis
Discussion Notes
Aerospace Investing Opportunities and Considerations
Andy Merritt
– Prime defense contractors are more like “integrators” nowadays, because there are so man advanced manufacturing companies supplying parts
– University system in Colorado is great for aerospace and defense – mentro state, school of mines (have a graduate venture fund), cu boulder engineering, Colorado springs – all of these universities have aerospace engineering programs etc.
Debra Wilcox
– Supporting oppoortunitis for companies to talk to each other
– advanced industries grant progrma – imporant
– Nasa has space for contracts for small companies
– Colorado attracting companeis from other countries to setup in colorado.
– Colorado huge platform for succeess
Roger Toennis
– LASP at CU Boulder is a great place for talent and aerospace engineers.
– For investors, look to the universities in colorado for an excellent aerospace talent pool.
Narrowing startup focus in order to grow in aerospace
Roger Toennis – Narrow your focus is hard, but really important to be able to grow as a startup in teh aerospace field.
Debra Wilcox – People getting more realistic about the numbers that it takes to go to space – they are large numbers, but the costs are coming down. Needs laser focus on what you’r;e getting to as a startup. Need a good focus.
Why hasn’t venture industry embraced aerospace fully?
Andy Merritt – generally think the sector is too small, or they are scared of the budgeting process and all of the convolutions. SBIR programs are a great tool for developing technology. Non dilutive – it’s great.
Roger Toennis – Non-dilutive grant funding (SBIR) is a really great tool to use.
CSBR is aerospace advocacy – how to draw box around aerospace and not get into defense, aviation, etc
Debra Wilcox – It’s very fluid. Lots of people are building business centers for space. Commercial ventures supporting space are very very multidisciplinary – everything from engineering to medicine.
What are you looking for in your dealflow?
Andy Merritt – We;re looking at speciric critical technologies. Companies we are looking for have a technology that’s in some stage of development beyond proof of concept. Scaling issues are find, as long as they are world class in their technical products.
Roger Toennis – Looking for companies into our subscription model.
Roles as advisors and mentors
Andy Merritt – we love mentoring companies. They’re usually good at one or two things that they are good at, and how do we help you with the things you are not good at?
Discussion Summary
In an insightful panel discussion centered on aerospace investing, industry experts delved into the complexities and evolving dynamics of funding space ventures. They emphasized the shift towards a more grounded understanding of the substantial costs associated with space projects, juxtaposed with the decreasing expenses and increasing commercial opportunities that mark the contemporary aerospace landscape. The conversation illuminated the misperception that the aerospace sector is predominantly government-centric, highlighting the expanding realm of commercial ventures that offer significant investment opportunities beyond traditional government contracts.
Panelists discussed the essential nature of strategic partnerships and the criticality of demonstrating viable paths to space for startups, pointing out the financial and technological hurdles prevalent in the sector. They underscored the necessity for aerospace companies to be laser-focused on their objectives and to secure partnerships that can facilitate their journey into space.
Addressing the barriers to entry for potential investors, the discussion shed light on the fears and misconceptions that often deter investment in aerospace. The panelists advocated for a deeper understanding of the sector, spotlighting the U.S. government’s Small Business Innovative Research (SBIR) program as a prime example of non-dilutive funding that supports technology development. They stressed the importance of looking beyond the surface to recognize the myriad opportunities that lie within the Space Force, NASA, and other agencies, each offering distinct funding sources for diverse needs.
The upcoming decommissioning of the International Space Station in 2030 was mentioned as a pivotal moment for commercial space initiatives, indicating a future rich with commercial ventures, including business centers in space and advanced medical research in microgravity environments. The discussion also highlighted Colorado’s vibrant aerospace community, showcasing the state’s role in fostering an ecosystem where aerospace companies thrive.
Furthermore, the conversation ventured into the realm of critical technologies shaping the future of aerospace, such as artificial intelligence, machine learning, and human-machine interfaces. Panelists elaborated on the challenges small companies face in navigating International Traffic in Arms Regulations (ITAR) and the importance of forming strategic international partnerships, especially with allied nations, to mitigate potential issues.
Concluding on an encouraging note, the panelists called for broader participation in the aerospace industry, from direct investment to leveraging individual skill sets to support space startups. They pointed out the industry’s need for diverse talents to address the multifaceted challenges of space exploration and commercialization. The discussion underscored the aerospace sector’s untapped potential for innovation, economic impact, and contribution to human knowledge, inviting a new generation of investors, entrepreneurs, and visionaries to partake in the next frontier of exploration and development.
Thanks to Notta.ai and ChatGPT-4 for transcription and summarization services.
Panel Discussion Content Development Exercise
Finally, before the panel discussion, I created a sample panel discussion outline and background info list using ChatGPT-4. Of note, this was not used in the actual discussion, and was simply created by me with ChatGPT as a learning exercise.
Prompted and assembled by Jeffrey Donenfeld. However, all text is taken directly from ChatGPT4, with absolutely no editing or checking of data. Just for fun and ideation.
Panel Discussion Outline: Venture Capital Investing in the Aerospace and Defense Industry
ChatGPT4 Prompt:Write an outline of 8 topics with 4 sub-bullets each for a panel discussion about venture capital investing in the Aerospace and Defense industry, focusing on angel investors, emerging technologies, industry risks, and key players. Executive, authoritative tone. Include links to sources.
- Introduction to Venture Capital in Aerospace and Defense
- Overview of the current landscape of venture capital investment in aerospace and defense.
- The role of venture capital compared to traditional funding sources in this sector.
- Key trends driving venture capital interest in aerospace and defense.
- Historical investment patterns and their impact on industry growth.
- Angel Investors in Aerospace and Defense
- Profile of typical angel investors in aerospace and defense: background, interests, and investment criteria.
- Success stories of early-stage investments leading to significant advancements or acquisitions.
- Challenges faced by angel investors in this sector: technical, regulatory, and market risks.
- Strategies for angel investors to identify and support high-potential startups.
- Emerging Technologies Shaping the Future of Aerospace and Defense
- Unmanned aerial vehicles (UAVs) and autonomous systems: advancements and investment opportunities.
- Space exploration and satellite technologies: commercialization and private sector participation.
- Cybersecurity in aerospace: addressing the growing threat landscape.
- Next-generation propulsion systems and materials: potential breakthroughs and their implications.
- Industry Risks and Mitigation Strategies
- Regulatory challenges and compliance requirements: navigating a complex global landscape.
- Intellectual property (IP) protection and technology transfer issues.
- Market dynamics: dealing with cyclicality and the impact of geopolitical tensions.
- Risk mitigation strategies for investors: diversification, due diligence, and strategic partnerships.
- The Role of Government and Military Contracts
- Understanding the significance of government and defense contracts in the industry’s ecosystem.
- Public-private partnerships: examples and opportunities for venture-backed companies.
- The impact of government policies and defense budgets on venture investments.
- Strategies for startups to secure government contracts and navigate procurement processes.
- Key Players and Innovators in Aerospace and Defense
- Leading venture capital firms and angel investors active in aerospace and defense.
- Profile of successful startups and their contributions to the industry.
- The role of incumbents and traditional defense contractors in fostering innovation.
- Collaboration between startups and established players: case studies and lessons learned.
- Investing in Space: Opportunities and Challenges
- The commercial space industry: current state and future prospects.
- Investment trends in space startups: what’s hot and what’s not.
- The challenges of investing in space: technical, regulatory, and market risks.
- The role of international cooperation and competition in the space sector.
- Future Outlook and Predictions
- The potential impact of AI and machine learning on aerospace and defense.
- Forecasting the next big breakthroughs in aerospace technologies and their investment implications.
- The evolving landscape of international security threats and opportunities for defense innovation.
- Final thoughts: preparing for the future of venture capital investing in aerospace and defense.
For each topic, it is essential to incorporate real-world examples, data-driven insights, and expert opinions to foster a rich and informed discussion. Engaging with actual case studies, recent investments, and emerging startups will provide practical perspectives and actionable advice for participants.
Top 5 growing aerospace technologies in the past year
ChatGPT4 Prompt: Write a 5 item list of the top 5 growing aerospace technologies in the past year.
1. **Electric and Hybrid Propulsion Systems**: The aerospace industry has seen a significant uptick in investments aimed at developing electric and hybrid propulsion technologies. These systems promise to revolutionize air travel by reducing carbon emissions, noise pollution, and operating costs. Advances in battery technology and electric motors are making electric planes more viable for short to medium-haul flights, positioning them as a key technology for sustainable aviation.
2. **Unmanned Aerial Vehicles (UAVs) and Autonomous Flight**: UAVs, including drones and autonomous aircraft, have seen rapid growth and diversification in applications ranging from cargo delivery to aerial surveillance. The push towards fully autonomous flight systems is driving innovations in AI, machine learning, and sensor technologies, enabling UAVs to operate in more complex and varied environments with minimal human intervention.
3. **Advanced Materials and Manufacturing Techniques**: The adoption of new materials like carbon-fiber composites, along with manufacturing techniques such as 3D printing, is transforming aerospace design and production. These technologies offer significant advantages, including weight reduction, increased durability, and design flexibility, leading to improved performance and fuel efficiency of aerospace vehicles.
4. **Space Exploration and Satellite Technologies**: The past year has witnessed a surge in space exploration activities and satellite deployments, fueled by both government space agencies and private companies. Innovations in satellite technology, such as miniaturization and improved communication capabilities, are enhancing Earth observation, global communication networks, and navigation systems. The burgeoning space tourism sector is also driving advancements in spacecraft design and safety.
5. **Cybersecurity for Aerospace Systems**: With the increasing digitization and connectivity of aerospace systems, cybersecurity has emerged as a critical technology area. Efforts are being concentrated on developing sophisticated cybersecurity solutions to protect aircraft, UAVs, and satellite communication systems from hacking and cyber-attacks. This includes advancements in encryption, anomaly detection, and secure communication protocols to safeguard against the evolving threat landscape.
These technologies not only represent the forefront of aerospace research and development but also highlight the industry’s commitment to innovation, safety, and sustainability.
Aerospace and Defense Venture Investors
ChatGPT4 Prompt: Write a list of the top 5 early stage venture investors in the Aerospace and Defense industry. Include the amounts they have invested and a few of their key investments.
As of my last update in April 2023, the landscape of venture capital in the Aerospace and Defense industry is highly dynamic, with numerous firms actively investing in early-stage companies. Below are five notable early-stage venture investors known for their significant contributions and strategic investments in this sector. Keep in mind that the exact amounts invested and the portfolio may have evolved.
1. **Space Angels**
– Investment Focus: Space Angels has a focused investment strategy on early-stage space ventures. They are one of the most recognized names in space and aerospace investments, supporting companies that push the boundaries of space technology and exploration.
– Key Investments: Astrobotic, which is working on delivering payloads to the Moon; Planet, a company specializing in Earth observation with a constellation of satellites; and Made In Space, known for its innovations in manufacturing technology for space environments.
2. **Bessemer Venture Partners**
– Investment Focus: Bessemer Venture Partners has a broad investment portfolio, but its contributions to the aerospace and defense sector, especially in early-stage startups, have been noteworthy. They invest in a range of technologies including propulsion systems, satellite technology, and unmanned aerial vehicles.
– Key Investments: Rocket Lab, a leader in rocket systems focusing on small satellites; Spire Global, a data and analytics company that uses a large constellation of satellites; and Skybox Imaging (acquired by Google), which developed small satellites to capture high-resolution images and video of the Earth.
3. **Lux Capital**
– Investment Focus: Lux Capital specializes in backing emerging science and technology ventures at the outermost edges of what is possible, including aerospace and defense. Their portfolio reflects a keen interest in companies developing groundbreaking technologies.
– Key Investments: Saildrone, which designs and manufactures wind and solar-powered autonomous surface vehicles; Anduril Industries, focused on building advanced defense technology; and Planet Labs, another investment in Earth-imaging satellites.
4. **Founders Fund**
– Investment Focus: With a penchant for investing in companies that tackle difficult challenges, Founders Fund has made significant bets in aerospace. They are known for backing companies with the potential to disrupt traditional industries, including aerospace and defense.
– Key Investments: SpaceX, one of the most successful private space companies, focused on reducing space transportation costs and enabling Mars colonization; Palantir Technologies, specializing in big data analytics; and Anduril Industries.
5. **DCVC (Data Collective)**
– Investment Focus: DCVC invests in deep tech companies that leverage compounding computational technologies, including those in the aerospace sector. Their interest spans a wide array of technologies, from AI and robotics to aerospace and defense.
– Key Investments: Rocket Lab; Capella Space, which operates a synthetic aperture radar (SAR) satellite constellation to provide Earth observation data; and Saildrone.
The amounts invested by these firms can vary widely from one deal to another, often ranging from a few million dollars in early stages to tens of millions in later rounds. Given the rapid pace of development in aerospace and defense, these investors are continually seeking out new opportunities that promise to revolutionize the industry.