Why are Tech VCs Rushing into Space Investing October 12, 2016
Today s Goal We Will Not Stop Accelerate the space ecosystem by providing a clear picture of the VC model
About Me How VC works Why VC works Implication for Space 2.0 startups Sunil s Space 2.0 Wish List
About Me Sunil Nagaraj sunil@bvp.com @sunilnagaraj
Lifelong space nut July 2001: Waiting on the NASA causeway to watch the STS-104 launch November 2013: Minutes from observing a total solar eclipse off the coast of Africa (with protective glass in a fun holder) 4
And I m creating a space nut 5
Bessemer by the Numbers
We have a long history of making mistakes too BVP's Pete Bancroft never quite settled on terms with Bob Noyce, who instead took venture financing from a guy named Arthur Rock. "Stamps? Coins? Comic books? You've GOT to be kidding," thought BVP s David Cowan. "No-brainer pass." Incredibly, BVP passed on Federal Express seven times. Cowan s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to these two really smart Stanford students writing a search engine. Students? A new search engine? In the most important moment ever for Bessemer s anti-portfolio, Cowan asked her, How can I get out of this house without going anywhere near your garage? Facebook Co-Founder Eduardo Saverin spent his summer chasing down BVP s Jeremy Levine who thought, a social network for college students? Who needs that?!. bvp.com/portfolio/anti-portfolio
Three space investments to-date Small sat imaging constellation to offer high-res, high-revisit imagery Open space for business with weekly launches of 150kg payloads Small sat constellation to listen to sounds (RF) from Earth, initially to track marine vessels and gather weather prediction data 8
2 nd stage Stack Test: link Launch site: link 9
About Me How VC works Why VC works Implication for Space 2.0 startups Sunil s Space 2.0 Wish List
We steer LP capital into attractive companies Sources of capital Startups 11
By the numbers: our funnel 500-1,000 10 1-2 12
Something you should know I hate jargon
Decisions decisions: Sunil s framework Key questions 1) Does anyone want it? 2) Are there a lot of those people? 3) Can you find them? 14
Decisions decisions: Sunil s framework Key questions Investment theme 1) Does anyone want it? Product market fit 2) Are there a lot of those people? 3) Can you find them? 15
Decisions decisions: Sunil s framework Key questions Investment theme 1) Does anyone want it? Product market fit 2) Are there a lot of those people? Market size/tam 3) Can you find them? 16
Decisions decisions: Sunil s framework Key questions Investment theme 1) Does anyone want it? Product market fit 2) Are there a lot of those people? Market size/tam 3) Can you find them? Unit economics Go-to-market strategy Sales effectiveness 17
Startups are actually a set of hypotheses/experiments Idea MVP Product Scaling sales Friends & Family / Angel Seed Series A Series B 18
How we help our investments Strategy Partnerships Recruiting Fundraising Peer group Whatever you need 19
How we help our investments Strategy Partnerships Recruiting Fundraising Peer group Whatever you need For VCs, this is a repeated game 20
About Me How VC works Why VC works Implication for Space 2.0 startups Sunil s Space 2.0 Wish List
Why VC works Portfolio of investments 20% stake in 10 companies 1 winner is responsible for most of the gains Bimodal outcomes distribution Cash flow curves 22
Cash flow curves Cash Time 23
Business Type 1 Cash Time 24
Business Type 2 Cash Time 25
Other considerations VCs have Return threshold Cash on cash multiple Dollars returned IRR Almost no firms change their hurdle for space vs. tech 26
About Me How VC works Why VC works Implication for Space 2.0 startups Sunil s Space 2.0 Wish List
Why are tech VCs hanging around space? More companies find space strategic Big data world loves space Winner take all dynamics We seek companies with a good chance of generating a lot of return very quickly Agile Iteration Low-cost Shorter lead More launch Standardsbased community innovation 28
Decisions decisions: Sunil s framework Key questions 1) Does anyone want it? 2) Are there a lot of those people? 3) Can you find them? 29
Decisions decisions: Sunil s framework Key questions 0) Does it work? 1) Does anyone want it? 2) Are there a lot of those people? 3) Can you find them? 4) Is timing realistic? 30
Space business models Upfront cash-consumptive period of building, followed by period of harvesting high-margin product Can iterate quickly Attractive time to market 31
About Me How VC works Why VC works Implication for Space 2.0 startups Sunil s Space 2.0 Wish List
Sunil s Space 2.0 Wish List Chase new customer wallets Flywheel of innovation comes to space Big Aerospace becomes more acquisitive More collaboration More diverse talent 33
Thank You sunil@bvp.com @sunilnagaraj More at: http://www.sunilnagaraj.com/startups