The SpaceX IPO and the New Space Economy

Welcome to Beyond the Benchmark, the EFG podcast with Moz Afzal.

Moz Afzal:

So today we have a very special guest given the very interesting topic of the SpaceX IPO, but welcome Alex Vidyuk for joining us on the podcast. Alex, welcome.

Alex Vidyuk:

Thank you so much for having me. This is indeed an exciting week for space industry.

Moz Afzal:

So Alex is CEO and founding partner of a firm called Beyond Earth Ventures. Very, very relevant. So Alex, tell us a little bit about Beyond Earth Ventures.

Alex Vidyuk:

Beyond Earth Ventures is a VC fund. We invest in early stage companies in deep tech, including sectors such as space, energy, robotics, compute, and material science.

Moz Afzal:

And maybe tell us a little bit about your background before you started Beyond Earth Ventures.

Alex Vidyuk:

Yes, sure. So I studied physics as a kid and have a degree in physics and always wanted to become a scientist. Unfortunately, somehow I ended up in banking and spent 10 years in global banking in London and Hong Kong. And at some point I realised that's gave me a very good understanding of capital markets and global finance ecosystem. But at some point I wanted to combine my passion for science, but also my international capital markets experience. And deep tech we see was actually a perfect combination for that. Before that, I also did quite a couple of years of FinTech entrepreneurship, which gave me a taste of what is to be a founder of a company. So kind of my current job combines all these three passions, entrepreneurship, physics, and science and banking.

Moz Afzal:

So obviously we have the SpaceX IPO sort of coming out, obviously creating a lot of interest around space. And obviously Elon Musk is a very unique individual. People sometimes forget, I think SpaceX has been going on for about 18 years or so, 19 years. So it's not a new company. And it's been sort of in some respects, Tesla's kind of taken all the interest in, I guess, more recently X and then suddenly SpaceX comes along. How do you see space today relative to that 18 or 19 years ago, which is, I guess it was just purely a concept at the time. 20, 30 years ago it was like mainly government driven industry. So you had like NASA, European Space Agency and a lot of big government style companies such as Boeing, Airbus and so on. Now with SpaceX and now we call it new space, which bring in a lot of commercial, fast moving companies. That's a whole new era and the space became commercial and now we have so many entrepreneurs coming from all different source of industries, ex lawyers, ex bankers, X, I don't know, other industries trying to come and found businesses in space industry, which is great. I think this is basically very similar to what was happening in Silicon Valley in 1990s with the internet and we are going to see the same wave today in space industry.

Moz Afzal:

And talk us through when you're looking at some of the investments that you've made or some of the investments, I'm sure loads are coming to your way to analyse. What are sort of things that you're looking for? I mean, obviously commerciality and profit making is obviously the key objectives, but it's not always consistent with if you like government agencies that NASA and others have been in the past.

Alex Vidyuk:

So we are early stage investors. So we invest in basically seed, pre-seed series companies. So that moment we don't have much product or much commercial attraction yet, but we can analyse the market, the problems which company is solving and also the team. The team is actually the most important for our business. Can the team pivot? Can the team understand the problem and potentially move fast? Can they understand competitors, what actions they will take? So that's one of the most important parameters for early stage investors.

Moz Afzal:

So standing back a little bit and then thinking about space and thinking about SpaceX and the IPO, any thoughts on the future and how do you break that up? I guess there is some near term kind of revenues that come from, I guess, AI foundry model, which is essentially they've created now with Anthropic. That's kind of one part of the business. Then you've got X which is the second part of the business and then you've got the real space business, if you like. So it's kind of a conglomerate.

Alex Vidyuk:

The most important change which SpaceX brings to the whole industry is access to space. It's a launch price which is going down. So 20 years ago it was $100,000 to send one kilo of something to space. Now using Falcon nine rocket is like 3,000. When the starship will be flying regularly with cadence, that would be, I mean according to some analysts, it will be like less than $500. That's changing the unit economics of the whole industry. Imagine if you want to send something regularly, build something in space. No, now I think the hot topic of today is data centres, but in the future it might be something else. We have a lot of research going on, a lot of companies doing semiconductor production space or some pharmaceutical products or some new materials, right taking advantage of zero gravity in space. And we do have a lot of companies trying to build private stations in space to do labs, to maybe even build small factories.

So I think that's the main. It's basically allowing a lot of people think differently about, okay, if I can reliably and regularly send something to space and then bring it back, what I would build there. But the secondary effect of SpaceX IPO for us is a lot of loyal capital into space industry is being released and a lot of people will have a liquidity event. But another important thing for us, which is super important for my fund is a pipeline. A lot of people will be like X SpaceX Mafia, similar to PayPal Mafia. So a lot of people now they free, they got their liquidity event and they will think about building their own company in space. So we'll see hopefully in the next six months, you'll see a lot of super smart founders from SpaceX building a lot of cool startups.

Moz Afzal:

So that's kind of the key point is that maybe going back to fundamentals is getting the price per kilo into space at such a low level that you can then create a lot more innovation going forward. I'm saying things, cloud and data centres became much, much more viable, which allowed AI to be what it is today, right? It's kind of a prerequisite to business or AI business. So similar type of kind of model is that you get the cost down low enough, then it allows a whole new scale of innovation to come out specifically on space where it's moon or Mars or maybe in the future. So as those costs go down, you talked about what data centres in space is obviously the one that everyone's talking about, but maybe explain labs. You talked about, I guess, mineral extraction from the moon.

Alex Vidyuk:

So ISS International Space Station has been around for 26 years or so. So we have around 3000 experiments has been conducted up there. So this database is open. So anyone can go and look what new materials, new medicine, new effects of how, because in orbit we have different gravity. So it's basically almost zero gravity, deep vacuum and extreme temperatures. This is a condition that's very difficult to simulate on Earth, especially, I mean zero gravity, you can't because it's physics, right? Liquids behave differently, crystals form differently. Some of the molecules have formed differently. So let's say one of the companies which I have invested in the past trying to build antibody cancer treatment in space. So it's molecules which geometrically oriented and they collapse under gravity when they build built on Earth. But in space they can grow bigger, more symmetrical and more pure. So that means like for a cancer patient, for example, instead of having IV drip, you can do an injection at home. So that's the way how we change the structure of the liquid.

It was impossible to build it 20 years ago because let's say if one kilo of medicine costs, let's imagine 100K and it takes 100K to send it to Earth, to space then the margin doesn't make sense. But now if it costs only 3K or maybe even less when we have Starship, then you actually have commercial margin. And if you can do it regularly, then you have a business. So that's just one example, but there is many experiments like this, many scientifically proven results, which a lot of people now going through and trying to build having logistics send something to space and bring it back or potentially hosting it in orbit for a couple of weeks or months depending on a specific project or material that's changing the entire industry and this is the industry that's called in space manufacturing.

Moz Afzal:

Oh, that's absolutely fascinating. Any other industries that you think? Obviously you talked about healthcare, what other investments have you made that look or sound like that?

Alex Vidyuk:

So another company in the UK, they producing compound crystals for semiconductors. In space, the crystals grow three to five time more pure and 10 times longer. And the semiconductor produce from these crystals use 50% less energy. So imagine it's solving basically the energy crisis we have.

Moz Afzal:

Absolutely fascinating. And then in terms of as the rockets start to go up on a much more regular basis, IS versions start to kind of proliferate. Do you see this as government owned or do you think there'll be privately owned companies? Because I think that's kind of the key thing. And one of the questions I had certainly for you, who owns space and what problems will that create in the future?

Alex Vidyuk:

I think it depends on the country. So I think like for example, one of the biggest space engines we have in the world is NASA and NASA budget is around 30 billion a year and then we have Space Force, which is like 30 billion off and going up to 50 billion. And a lot of people I think don't fully understand how this budget work. It's not the budget for NASA to build something. It's a budget for NASA to distribute this budget between different companies. That can be primes such as Airbus, Boeing, Lockheed Martin, but that can be an innovative startups as well. And I think what happened recently, like last 20 years, that more and more budgets are going allocated to startups. So for example, last week we had an announcement about new NASA budget for the moon and some of the contracts have been allocated to very early stage companies, which is that because they're moving faster, they rode can be more innovative. I think the government would like to support these companies to grow as well.

Moz Afzal:

So obviously that's in the US, but what about say China? Obviously that's also the big player you've seen India, you've seen Europe, of course, and even Russia. How do you see that sort of developing? Because in the end, and again, I'm thinking about Silicon Valley and so and so forth, it's always going to be follow the money, right? Essentially, that's where it's probably going to go.

Alex Vidyuk:

I think what's happening now between US and China competition and unofficial moon race to the moon. So everyone wants to go back to the moon. So you've probably seen Artemis mission recently going around the moon. And one of the reasons why this happening is because both China and US have this ambition to build a base on the moon. And I always have this joke, nothing interesting or innovative happening in space during peace time. Remember Cold War between USSR and US we had Sputnik, we had Gagarin, we had Apollo mission to the moon and then for 20 years we only had ISS, which is like super old and going down in a couple of years. And now we have this unofficial competition again between US and China, which is now driving back. Everyone wants to have their own being control of launch people sending something to the moon and that's I think for our industry is good because national pride drives a lot of attention, lot of capital, lot of talent.

So in Europe, you have European space agency, which is a combination of multiple budget, multiple countries kind of budget, which is I think around 16 billion budget. India is another country which is driving space agenda globally. So they're especially very strong in launch. And I think they also have ecosystem around 500 startups building in space. But most of the programmes, for example, Artemis is actually multinational. So this is still kind of almost like civilization wide effort to build something on the moon.

Moz Afzal:

So you kind of see like a NATO of space, right? Obviously my imagination is going crazy now in terms of how many different types of industries could be impacted. Obviously you talked about healthcare and semiconductors. Any other industries that you think will really be impacted by either what happens in the moon or space labs?

Alex Vidyuk:

I mean, maybe we just go to very basic practical example, right? So satellite data and satellite images, which is very popular now. And I think we have many different satellite installation up there providing different spectrum. You have optical, you have SAR, you have hyperspectral, multi-spectrum images. Previously it was not easily available and mainly used by the government, high price, long multi-month procurement contract. Now we have products and marketplaces where you can buy a lot of images and build your own business. And of course, I still think one of the main use cases is national security, but we can see a lot of, for example, commodity traders, hedge funds using them to predict, oh, okay the energy trading or the shipping industry agriculture, how do we understand the harvest, when to harvest, what's happening with the crop insurance companies, navigation monitoring of greenhouse cases. So the climate is a huge impact because how can we understand the current state of emissions?

 

It's only from space or you can use drones, but it's more expensive and you can't cover a lot of territories. I think one of the biggest impact, of course, there's a lot of different opinions about data centres in space, but if you think for a moment that the biggest offenders of climate today is data centres. And if you make them to move, at least to some extent, to move them to orbit, that's a huge effect on our environment. And here you go. Again, we are helping climate using space technology.

Moz Afzal:

Yeah. This is not something someone would have thought about 10 or 15 years ago. I think that's quite key because obviously what we're starting to see even with data centres and AI and its impact has been quite substantial and you're starting to see communities really uprising against it and cancelling a lot of these projects that had sort of started or think about starting where incentives were usually given to these companies to bring a data centre to your neighbourhood. So it certainly does bring the data centre in space model into interview as a result of that.

Alex Vidyuk:

Yeah, exactly.

Moz Afzal:

Yeah. Now thinking about the investments you're making, what prism do you look for when you're analysing a company, new ideas come along? A, how are you sourcing them? It must be much more easy today than it used to be, but how you're sourcing them, how you're analysing them and what sort of framework do you use for that analysis?

Alex Vidyuk:

So our job is to find the best product before other investors find them. Right. The early, the better and try to build relationship because early stage investors, not like public markets, it's like people like to make sure that we share the same values, we can help them apart from the capital and something like, it's almost like a part of the family. The first couple of investors on the cap table is very important to make sure they aligned. So the way how we build, we spend years building our pipeline and the methods and the system, how we collect and sources data, everything starting from grants applications and we see, okay, where the government money flowing, National Science Foundation, one of our partners that mentor there. So before companies becoming companies, we would like to meet them and we say, "Okay, what are these innovative researchers who are building something who might be doing some researchwich might turn into a company a couple of years later?" So we like to see, we look at philanthropy as well, because a lot of in the US especially we have a lot of philanthropic donations to science and that can also lead to at some point formation of some IEP and some intellectual property basically.

So some patents, which can turn at some point to companies. I mean, of course accelerators, incubators, demodays, recommendations by other founders. We work with RocketLab, which is like one of the ... And many other companies, but I think the Rocket Lab is kind of our main partner as of today. So a way we can also exchange some insights about where the industry going and what type of stealth companies we can find. Now you can also do a lot of AI and data search. So AI agents automate and see who are the people on LinkedIn who changed title yesterday to stealth founder. So we get an alert immediately and we can contact them and say, "Hey, listen, let's have a chat how we can help you. " So we see around 200 deals a month.

Moz Afzal:

200 deals a month. Wow. Okay.

Alex Vidyuk:

Yeah. And we try to make one investment a month. So it's a lot of generations. It's a lot of work. Yeah. So it's basically, I think deep tech is very specific because most of the companies which we see, they're spinoffs of universities. So it's about being plugged to the right ecosystem. So we have invested in companies. It's been also Stanford, Princeton, Oxford, Cambridge. So that's being in the right ecosystem present and building relationship with that researchers and yeah, it's very busy for us.

Moz Afzal:

So obviously you talked about some of the good ideas. Has there been any ideas you've come across that, okay, there's no way that I can invest in that.

Alex Vidyuk:

So I think that's a big problem about deep tech. So I think I mentioned about running a FinTech company in London at some point and all my peers were ex- bankers all aggressive, know how to pitch, know how to do nice presentations, like basically very commercial people. A lot of deep tech founders, they're ex engineers or ex scientists. That's not exactly the type of entrepreneurs you would think of. So it's probably a cliche, but what we normally see in good deep tech teams is when you have researchers who become CTO or chief science officer and we have a friend who's a serial entrepreneur who's like, "Oh, you have a nice IP, you have a good patent. Let's build a company together. I will be CEO. We'll be fundraising sales and everything." So that's probably most of the people think about when I think about successful deep tech team. I recently changed my opinion that if you look at top three, most transformative companies we have today, SpaceX, DeepMind, Nvidia, all the founders, so Jensen and Demis, they both have PhD and Elon was accepted to PhD programme, but he decided to do PayPal instead. So this is the people who PhD level and they still built a multi-billion trillion size of companies. So I think we have also a new wave of entrepreneurs coming like instead of like a Stanford dropout, we have a postdoc dropout.

Moz Afzal:

I remember when we first met a conversation I had with you and we're talking about defence and you came out with a very insightful comment, which suddenly I remember at the time is that defence is one of those areas where the founder makes money, but shareholder was never due. I think that was a comment you made to me. Maybe elaborate on that and the thought process around that.

Alex Vidyuk:

Yes. I think there's a couple of areas which we are monitoring very closely as such as steroid mining, for example, or like Helium free mining on the moon, which we know is developing a lot of RNGs happening, but not exactly became like venture capital focused yet. So I think maybe two, three, five years from today, it will be more commercial. In terms of defence, I mean it's most of the things which we have today in deep tech somehow related to defence. And I always say we like founders who understand how to work with defence budgets and they can use some of defence budgets for dual use products, but they still have North Star for their bigger commercial markets. But if they can pivot around that, that's great. Defence budgets, defence business is very difficult. I think it's a little bit like a black box and we don't really know exactly what's happening in procurement areas and we can't predict.

We don't have crystal balls to understand how long the current war situation will happen. So a lot of budget, lots of budgets, lots of contracts. Exit is a problem, right? So who will buy them? Are they going to go IPO? Have you seen many IPO companies in defence? How long it will stay public if it come public? So again, but I'm not a defence expert, so it might not be like.

Moz Afzal:

So you make a good point. Then moving on to my Mars question, obviously we're talking about moon and mining on the moon and those sort of things and maybe moon is the launchpad to Mars and beyond. How do you see those sort of stages in your mind at least of how will that migrate?

Alex Vidyuk:

Yeah. So I think most of the space industry is excited about the moon as of today, because there's definitely government budgets. There is a plan, there is ambition. And I think every company is involved in space. I think they're applying for grants, contracts and nothing happening in business if you don't have a use case or kind of a way to make revenue. Okay, the moon can be a launchpad. We can potentially harvest Helium free there, which we can use for quantum computing co-fusion energy on earth. Also, it's very difficult. It's super expensive, but so far it's still kind of I think a lot of conversations going about is it R&D or is it a real commercial business?

Moz Afzal:

Thinking about the moon for a second, obviously mining and some of those areas look, could be interesting. And do you think quantum computing is better suited to space than it is to Earth?

Alex Vidyuk:

That's an interesting question. I'm not a quantum computing expert, so we don't invest in from the fund, but I'm looking forward to see where this industry is going and it might be well, we use Moon for the build a big quantum computer. And we already have seen projects of data centres on the moon for resilience purposes. And I mean, that's even further away than the orbital data centres, but yeah.

Moz Afzal:

Yeah, because it's certainly something that was a bit of research I was reading was around that sort of point that obviously quantum computing on earth, certainly you need these very cold temperatures to cool things down and so and so forth. The natural evolution of that will actually is very hard to get the energy and everything else to sustain that for a long period of time. It probably make a lot more sense to have it in space or free. Yeah. Yeah. Correct. Yeah. Yeah. Absolutely. Absolutely. Great. Anything we've missed in this discussion around space today in your mind?

Alex Vidyuk:

No, I think it was all amazing. I think we discussed key points about that. I think energy is another area where space playing a huge role, not just climate, but also solar panels in orbit. So there's a lot of projects mainly to feed data centres with energy, but it can be also at some point can become a solution for us to harvest absolutely green energy from the sun.

Moz Afzal:

Yeah. Well, certainly I know my colleagues on the climate team would absolutely love that discussion as well, because it certainly would make quite a more significant impact as well. So Alex, thank you very much for coming on to the podcast. It was a real pleasure.

Alex Vidyuk:

Thank you so much for having me, Moz. Really enjoyed it.

 

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