Vertical Integration and the Space Stack

Despite advances in recent years, the space industry still has it’s major challenges. Namely, launch, remains the biggest challenge. There’s the cost of launch including the payload, the risk that your payload blows up, and the timing of launch; many have to wait long durations to get their payload into a launch queue. Another challenge has to do w/ the human biological hazards of space. David thinks this may be one of the hardest problems to solve. And finally, there’s the ideological challenge of the “Space Stack,” so to speak. The leader in the sector, SpaceX, has found success by adopting a vertically integrated model. Similar to what he’s done w/ Tesla, Elon aims to build the components, sub-systems, systems, integration, and assembly all in-house. And it’s this approach that has driven much of their success, allowing them to re-think and re-design rockets from the ground up. But it also can be limiting. David discussed the technology ecosystem required to achieve objectives like inter-planetary travel and asteroid and moon mining. These are not easy challenges and, as with any industry, it’s unrealistic to think that one company can solve them all. I’d imagine many tech companies grapple with the choices of vertical integration, and ask the question, “Do we bring things in-house or do we leverage services and/or components that allow us to focus on our strengths?” It’s common for leadership to consider this when building a solution that addresses a specific problem. What’s more unique is a company asking their-selves this question about an entire sector. And Elon’s mission Mars is much bigger than solving the problem of launch. To illustrate the scope of this mission, we did an entire interview about w/ Tim Urban. So, in a way, David believes that Elon’s approach is limiting the advancement of Space 2.0 While Elon attempts everything in-house, David roots for technologists anywhere with both his voice and his wallet. It is reasonable to believe that, regardless of what Elon does, creators will continue creating. Building solutions to both narrow and broad problems. And regardless of how this plays out, I couldn’t be more excited to see how the Space Stack evolves and what the frontier holds.

 


125. Space Tech Investing, Part 2 (David Cowan)

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Today we cover Part 2 of Space Tech Investing with David Cowan of Bessemer Venture Partners. In this segment we address:

  • Why is SpaceX moving the industry forward in the wrong direction?
  • I recently read a Fortune article titled ‘VCs Invested More in Space Startups Last Year Than in the Previous 15 Years Combined.’ An excerpt from the article states “50 venture capital firms invested in space companies in 2015, signaling that venture capital has warmed to a space industry it has long considered both too risky and too slow to yield returns.” David, Why do you think now is the right time to be investing in space?
  • The amount of data that can be collected and analyzed now via satellites is an order-of-magnitude greater than it was only a short time ago. How do you think about the data opportunity and what role does data play in driving space tech forward?
  • When you look forward to the next 10-20 years, what are your thoughts/predictions on how space tech will evolve and impact society?

Read More…


124. Space Tech Investing, Part 1 (David Cowan)

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David Cowan of Bessemer Venture Partners joins Nick to cover Space Tech Investing, Part 1. We will address questions including:

  • First off, David what was the thought process that led you to invest in this area?
  • You’ve written in the past about the roadmap approach toward investing.  Was it this approach that led you to space tech?
  • What are the major categories or sub-groups within space tech?
  • It seems that there has been a recent surge in space tech investing. Was there a catalyst or a series of factors that has driven the opportunity for VC investing in space technology?
  • Are the risk/return profile and capital intensity of investing in this area fundamentally different than that of other tech sectors? Why or why not?

Read More…


123. Cram Session, Episodes 61-66 (Nick Moran)

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Welcome back to TFR for another Cram Session. In these special releases, we have aggregated the takeaways and tips from previous episodes. In this installment, we will be recapping the following episodes:


Investor Stories 57: Exceptional Founders (Wilkins, Mason, Benaich)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Peter Wilkins

  • Galen Mason

  • Nathan Benaich

Each investor describes an outstanding entrepreneur that

they’ve worked with and what key traits and behaviors

make for the best startup leaders.

FULL TRANSCRIPT

Wilkins Startups What's Next


Read More…


What Makes SaaS so Special?

Many articles are written, every week, about how to succeed in SaaS. But less often do people write about why SaaS is so special. It’s a business model, applied to a product type that has become a massive focus area. Venture has not seen a category of startups like it before. Some investors create an entire thesis, just focused on software as a service. So, rather than spending this week’s tip on another top ten list of HOW to win in SaaS… instead, let’s explore WHY the category, itself, is so special.

It boils down to three simple reasons: Proximity to customer, measurables and value focus.

1. Proximity to Customer: Part of the brilliance of SaaS is that companies develop a direct relationship with end-users. They often sell directly to them and have an ongoing feedback loop with them. While this provides numerous product and versatility advantages, maybe the biggest advantage is in what this eliminates. Proximity to the customer dis-intermediates traditional channel players. Wholesalers, distributors, resellers, retailers… what intrinsic value do these players provide? None. They reduce margin, for the value creators, and they increase price, for the value consumers. By removing layers upon layers of mouths to feed, the only transaction necessary is between the creators and the customers… thus all the value resides with them.

2. It’s Measurable: When I think of metrics I recall Peter Drucker’s famous quote, “You can’t manage what you don’t measure.” Or you may remember this one from Dwight Eisenhower, “Plans are nothing; planning is everything.” The set of standardized metrics available makes the category much easier to assess. Problems are more easily uncovered. Best practices are readily transferable. This gives both founder and investor a playbook to work from. It helps each identify the root cause of issues and take action against them. The forecast itself may be terribly inaccurate but it drives the right discussions and allows for fast reaction.

3. Value Focus:  SaaS business typically charge upfront and ongoing. Strong value must exist from customers to pay for the product. And this value must sustain or the customer will select out. With many businesses, the value transacted ends after the initial sale. With SaaS, it’s the opposite. The first transaction is the beginning of a long, healthy annuity. This puts pressure on the startup to provide real, increasing value. And, as I wrote about in a post called The Customer-volume value curve, the startup can share in this value as they expand it over time.

It’s no secret that my strategic focus area is not SaaS. I’m a hardware investor. I hunt for compelling startups developing IoT with a recurring revenue stream…. for now, I’ll refer to this as IoTR, standing for Internet of Things w/ recurring. So, why would I knowingly choose something other than SaaS, when I’m aware of its massive advantages over other types of businesses? Read More…


122. Customer-centric Startup Investing Down Under, Part 2 (Niki Scevak)

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Today we cover Part 2 of Customer-centric Startup Investing Down Under with Niki Scevak of Blackbird Ventures. In this segment we address:

  • Niki Scevak customer-centric startup investingWhat’s your take on water and the water crisis in Australia?  How do you see innovation happening around water in the country?
  • Would a company like Instacart be within your thesis or not because it requires some localized presence to build out new markets in the short-term?
  • In your estimation, are some companies better off being founded in the valley vs. one of the tech centers in Australia? If so, what type of companies?
  • What advantages do startups founded in Australia have over startups founded elsewhere?
  • What advice would you give to founders starting up in regions outside of the states?

Read More…


121. Customer-centric Startup Investing Down Under, Part 1 (Niki Scevak)

Download_v2Nick Moran Angel List

Niki Scevak of Blackbird Ventures joins Nick to discuss Customer-centric Startup Investing Down Under, Part 1. We will address questions including:

  • To start off… in your estimation, what are the key factors that make a startup investable?
  • What are your thoughts on a company like Box? At the seed stage the team didn’t seem to have domain expertise, it doesn’t look like a passion project and they were going after a completely different customer set than what they eventually had success with. How would you assess companies like this at Blackbird?
  • You’ve written before about how you look specifically for startups w/ happy customers who come back again and again. Can you expand on why this is such a key focus area?
  • How do you think about early customers, the innovators/early adopters so to speak, vs. the early and late majority… and if those innovators are going to be representative of the mass market?
  • What role does the degree of homogeneity of the customer base play in your assessment of whether an early product can cross the chasm?
  • What are some of the customer-centric metrics that you are looking for when reviewing startups?
  • Do you have a bias toward sales-driven or marketing-driven startups? If so, what’s the bias and why?
  • Do you invest any companies that do not have a SaaS business model? Why or why not?

Read More…


120. Cram Session, Episodes 55-60 (Nick Moran)

Download_v2Nick Moran Angel List

Welcome back to TFR for another Cram Session. In these special releases, we have aggregated the takeaways and tips from previous episodes. In this installment, we will be recapping the following episodes:

 


Investor Stories 56: My Investing Strategy (Mohnot, Mougayar, Tunguz)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Sheel Mohnot

  • William Mougayar

  • Tom Tunguz

Each investor describes their investment thesis and

how they evaluate startups for investment.

FULL TRANSCRIPT

Sheel Mohnot What's Next in Fintech Venture Capital

Mougayar Blockchain Investing

Tunguz exceptional founders venture capital

Read More…


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