Chad previously worked on the UK national space strategy for 18 months to grow the sector in the country. There he led a team, which wrote the economic case for a UK spaceport. He also now serves as Non-Executive Director for the UK Space Catapult. Prior to his current position, Chad enjoyed a successful career at JP Morgan Chase, where he managed a $50 billion real estate portfolio for five years through the Great Recession.
During the Space Forum in Luxembourg, Spaceoneers caught up with him to learn about Space Angels Network and what it takes for angel investors to get behind a space startup.
Spaceoneers: What does Space Angels Network do?
Chad Anderson: We are an angel investment network with over 180 accredited investors across the world and we invest exclusively in space start-ups. So, we’re really looking for early-stage companies to invest in and leverage our network connections to help those start-ups succeed.
We are very global, with 20-25% of our investors outside the US. Many are in Europe. We have people from Seattle to Seoul, Korea. We’ve had members join from Indonesia and in Africa recently. There are a lot of successful business people out there who have a strong interest in space. That’s part of the idea behind our network is to bring those people together, bring the best deals forward and make sure those deals get the investment they need.
Spaceoneers: Is there much lobbying you have to do to get these people involved in space? Or do they come to you, if they are already interested in doing something involved in space?
Chad Anderson: Less so now than we used to five years ago. The more successes we see in the industry, the more people see a SpaceX rocket landing on autonomous barges etc. the more that mainstream people are getting interested in the sector and you don’t need to do so much convincing. That said, education is a big piece of what we do, helping people to really understand the real risks and opportunities in the sector. So, for investors new to the space sector, it can be a little intimidating to jump into a sector they know nothing about. It sort of seems like “rocket science” from the outside. But there’s a lot of commonalities between good business models whether it’s block-chain, bit coin, software, mobile or space. There’s a lot of similar elements, so what we do is bridge the gap and help them understand those common elements and demystify the rocket science and break it down for people so they can understand what is going on and what the real opportunities are.
Spaceoneers: Do investors have to wait longer for a return on investment? Are they happy with that? Compared to just an app, the scale is much more different.
Chad Anderson: I think that’s a common misconception. I spoke about this a little bit yesterday in my talk – showed some case studies of Planet Labs and Sky Box, and some of these companies that have found success and had skyrocketing valuations or exits within five years. I think that’s important to highlight these proof points. So, in space, the 5-7 year time horizon is realistic. If maybe you’re talking about launch it can be a different story. That’s what a typical VC looks for in an investment – 5-7 years and their fund lifetime is usually 10 years.
Another common misconception is that it takes a lot of money. If you are comparing hardware companies to mobile companies you are always going to get this disparity, whether it’s space or not. Entrepreneurs are finding ways to do a lot more with a lot less. We’re saying to entrepreneurs, raise a small amount of seed money and do an incredible amount with it, get customers and move on to build bigger businesses.
Spaceoneers: Your fund is made up of Angel Investors, so Angels usually like to get also involved in the business side of things compared to VCs who are thinking of an exit strategy. Would you like to comment on that?
Chad Anderson: Yes, so I think for starters it’s important to recognise that there are better and worse VCs. The best VCs are also the ones that provide more value than just money to the companies they invest in. They have other portfolio companies that will complement that company and can benefit from each other’s services, and business and customer connections. We like to think we do the same. Because we are industry-focused that gives us a bit of an edge. We have access to suppliers, partners and customers that can help an entrepreneur execute their business model.
Spaceoneers: How do you connect angels if they really want to get their hands dirty in their business?
Chad Anderson: All of our investments go through a process where we set up a Space Angels Network vehicle, pull together investors’ money and make one investment into the company. This provides a lot of benefits to the entrepreneur in the sense they don’t have a crowded cap table with a whole bunch of investors. They have a common point of communication and we can help and manage that communication process. So, that being said a lot of the benefit is efficiency gains and having access to your investors, them participating and helping where they can. We make those connections, which are the beauty of an investment from Space Angels Network; you get access to all 180+ members and all of our partners we are connected with.
Spaceoneers: What makes a good start-up? What do you look for?
Chad Anderson: At the angel stage, we’re not really looking to fund technology. We’re looking to fund a business with a solid business model that is well thought out, that they have a good understanding of who their customer would be and how they are going to address that market; that they have a prototype or a demonstration, not to prove to us but to prove to your customers that you have something they want. Then your customers will either pay you money or show a strong interest this is something they will definitely pay for. “I have a problem and you’ve got a great solution to my problem.” That’s really what we are looking for. We’re looking for a company that has a solid technical foundation but also a strong management and business development because getting your technology out there is really a sales job.
Spaceoneers: Do you have any good, recent examples you could provide?
Chad Anderson: We closed an investment recently in Planetary Resources. We’re in Luxembourg, so that’s very relevant. They’re focused on asteroid mining and prospecting, understanding which asteroids are valuable. There’s a long-term proposition getting satellites out there and having the technology to be able to scan these asteroids and be able to look beneath the surface. It turns out that if you turn these satellites back on the Earth using they can get a lot of valuable data that is important for existing terrestrial industries, such as mining and agriculture etc. They have very interesting technology on there, so they are finding a way to finance that with customers today who are willing to pay for it, which means they don’t have to raise hundreds and millions of dollars in equity. They make it through customer revenue. That’s the kind of endeavour we’re really looking at. I like that as an example because in our network, I think that’s what people look for – a company with a big vision and practical plan on how to get there.
Spaceoneers: Do you focus on upstream, downstream or both?
Chad Anderson: Both. As long as it’s within space we are focused on it: anything from launchers to satellites, ground stations and networks to the data applications that come on the back of that; to asteroid mining, planetary resources, you name it.
Spaceoneers: What are the biggest failings in start-ups you have seen so far?
Chad Anderson: In space, I think the most common is being very technically sound but not having the business side covered. In the sense that, ‘I’ve got this great technology and it’s so great it’s going to sell itself’. If you want that technology to be used, get out to customers and build a business, it’s a sales job and you need to be able to sell. And you also need to be able to manage and grow the company. From an investor’s perspective that’s what we’re looking for. Everyone looks to Elon Musk as an example but he’s a very special example, I think. I don’t think most people have that combination of technical and managerial prowess.
Spaceoneers: How can start-ups connect with your network?
Chad Anderson: The best way is to send us a pitch presentation – an overview of what you are trying to do. The pitch is an introduction, so 10-15 slides that cover the bases of what problem are you solving, what’s your business model, how are you intending to make money, what’s your traction to date, and what’s the competition? What we’re looking to do is get an understanding of the general idea of what you’re trying to do and make you have a good idea of the competitive landscape you’re going to be operating in. I would say a pitch presentation is the best way to start the conversation; it’s a great way for us to review your business and use that as a starting point for the conversation. Then from there, if it’s a promising idea we’ll start to have more detailed ideas. We’ll get into technical aspects and start drilling and asking different questions. From there we’ll either lead the round or work with someone to lead the round, help to put together some terms and put a deal together.
Spaceoneers: What’s the time frame usually from sending in the proposal to getting an investment?
Chad Anderson: From first contact to money in the bank is 60-90 days. It can happen faster depending on how much diligence information you already have prepared. In our experience it’s usually 60-90 days, which is actually very similar to most VCs and much faster than most angel groups.
Spaceoneers: Is there a template you provide to handout?
Chad Anderson: Yes, so we try to make it as easy as possible. We know what information we’re looking for, so if we reach that point in the discussion we’ll send over an outline of what we need and use that as a starting point. It’s not a lot of back and forth. We really try to streamline the process, so entrepreneurs can focus on building their businesses.
Spaceoneers: What technologies and trends do you think will drive the biggest changes in the industry over the next few years?
Chad Anderson: Two years is a short amount of time in space but a lot is happening really quickly. I’d say there are a lot of sensors that have gone up, so the immediate need is the rest of that value chain. So, it’s the ground networks and clever solutions using modern technology such as cloud technology to deliver data to customers. It’s the analytics, the platform layer on top of all the sensor data. I’d say that’s the most immediate opportunity. Longer-term, I think manufacturing in space and the Moon are both really hot right now. I’d say that’s the next step. I think there’s a lot of opportunity there, so I’d say in the next 5 years we’re going to see a lot of developments there. Again, sending something to the Moon and landing a lander on the Moon and rovers doing cool things is an interesting first step but there’s a whole ecosystem around the infrastructure there. The Moon needs to be developed as well as the infrastructure between here and the Moon. NASA’s focusing on it, and willing to work with commercial ventures, so that lends more credibility and feasibility to that segment. I think there’s a lot of opportunity there as we expand out.
Spaceoneers: What got you started? What were your influences and how did you get involved in Space Angels Network?
Chad Anderson: I don’t come from a technical background. I’m a business guy; a finance and economics undergraduate with an MBA from Oxford. I went to do my MBA to find something meaningful to do with my career. I’d been following the space industry and developments for a while. I’d been watching SpaceX and what Musk was doing. It was all very exciting. I was watching Virgin Galactic being successful in their tests and getting outside funding. I saw where the industry was going and I started to do what I think any entrepreneur would do. I asked questions and said ‘is there a place in this industry for a guy like me?’ Everyone I meet has a technical background, so I thought ‘is there a place for me?’ The answer I got was a resounding yes. There are a lot of technical people in the field already but it needs business people to manage the growth and I wanted to help make that happen. So then it was a matter of me being able to apply my specific skillset to the industry. I knew a lot about entrepreneurship and innovation systems and investment, so this was the perfect place for me.
Spaceoneers: What advice would you give to others who are interested in starting their own space start-up, even if they are not an engineer?
Chad Anderson: Well, entrepreneurship is a tricky thing. It takes a special kind of person, a special kind of crazy, I think, to subject yourself to the kind of stress and pressure of things. Entrepreneurship is not for the weakest of us, I think. There are a lot of ups and downs – the highs are very high, the lows are very low. If you see an opportunity that no one else sees and it becomes more and more concrete in your mind, and your idea is getting validation from the market, then just keep doing it regardless of what any naysayers say. When I starting building Space Angels Network, I definitely got laughed out of rooms of investors when I told them that I was going to invest in rockets and that they should too. But the laughing has slowly stopped with more and more successes, more people paying attention, more opportunities presenting themselves. Now a lot more people want in, so the tables have definitely turned. If you have a really good idea the chances are you’re ahead of the game, so you’re going to get that type of pushback and it’s fine. Maybe it’s an indicator you’re on the right track. I guess the biggest advice is, the answer is inside yourself (and in market validation). So look inside – trust yourself and your customers.
Spaceoneers: What makes you a spaceoneer?
Chad Anderson: I guess it’s because I’m a space entrepreneur. Space Angels Network is a company that I’m building. I think it’s a necessary component of space and this new entrepreneurial space industry. I think it’s a key enabler of it, so I like to think I’m playing my part in that way.