The Rise of Commercial Space in Christian Davenport’s “The Space Barons”

Washington Post Reporter to Release New Book, “Rocket Dreams,” in 2025

Christian Davenport, a space industry and NASA reporter for The Washington Post, has announced a forthcoming book: “Rocket Dreams: Musk, Bezos, and the Inside Story of the New, Trillion-Dollar Space Race.” The new book, set to be released in the fall of 2025, picks up where his previous book “The Space Barons: Elon Musk, Jeff Bezos and the Quest to Colonize the Cosmos,” concluded seven years ago. While his journalism career began as a metropolitan reporter and editor covering local politics in Washington, D.C., it was Davenport’s experience as an embedded reporter in Iraq and Kuwait that enabled him to recognize a unique story idea that led to writing “The Space Barons,” during a 2014 press conference. 

“I was assigned to cover the military-industrial complex when, in 2014, Elon Musk held a press conference at the National Press Club in Washington, D.C., to announce he was filing a lawsuit against the Pentagon, specifically the Air Force, for the right to compete for national security launch contracts,” Christian Davenport said. “But Musk started the press conference by talking about building a re-usable launch vehicle that would bring the booster back by catching it. I wrote the story about the lawsuit, but during my research into SpaceX’s efforts to develop reusable rockets I found that Jeff Bezos and Blue Origin were trying to do that, too.” 

At the time, the idea of a re-usable launch vehicle that would return to Earth was unproven. But Davenport took to heart an old journalism mantra that harkens back to Watergate: “Follow the money.” 

“If the richest people in the world are investing their money in space exploration and advancing state of the art launch technology, then we should be paying more attention to that,” Davenport said. “So I interviewed Elon, Jeff, as well as Richard Branson and Paul Allen, for ‘The Space Barons.’ But while each of them approached their space companies with very different mindsets, there is a common thread through all of them: to lower the cost of access to space.” 

A Starting Point for Commercial Space 

The billionaires’ ambitions were diverse: Musk wanted to colonize Mars, Bezos wanted to reduce human impact on the Earth and Branson licensed technology from Allen’s StarShipOne to establish suborbital tourism. Each of them self-funded their space company’s efforts to varying degrees, but it was Allen’s original aspirations to win the Ansari X prize that today is viewed as a catalyzing moment for commercial space. 

“The Ansari X Prize was a contest to see if a commercial venture can send a vehicle to the edge of space and back – twice – without government money,” Davenport said. “When Paul Allen and Burt Rutan, the famous inventor and aerospace engineer, came up with SpaceShipOne and won the Ansari X Prize, it was heralded at the time as a breakthrough moment for commercial space. But while it showed it could be done, we don’t have regular people going to the edge of space like originally envisioned.” 

Davenport’s “The Space Barons” also takes readers inside a 2006 Valentine’s Day conference where the billionaires gathered together to brainstorm how to move the commercial space industry forward.  

“Back then, it would have been fair to look at these space barons and say, ‘Commercial space is never going to happen,’” Davenport said. “Space is such an expensive and difficult proposition that requires immense expertise. So there were a lot of skeptics who thought space was always going to be an exclusively government enterprise. Yet, over time, the space barons persisted.” 

The motives behind the Valentine’s Day conference meeting have clear repercussions that still resonate today. 

“In a sense, they posed a question: ‘Is there a commercial space industry?’” Davenport said. “Well, the next book, Rocket Dreams, answers that question with a resounding ‘Yes,’ because anytime you put human beings in a commercially owned and operated rocket is a big deal. Today, we’re seeing a proliferation of a space market and a space economy beyond just the billionaires.”  

The Government’s Role in Commercial Space Growth 

A key shift in making today’s space market possible, however, was the actions government agencies made to facilitate the commercial space industry’s growth.  

“There was a willingness from the government, from NASA and the Pentagon, to outsource some tasks and space missions to the private sector,” Davenport said. “Today, that outsourcing seems routine, but that was a revolutionary change to trust the private sector with vital space missions that had always been part of the national enterprise. That was a significant paradigm shift that enabled the space industry to take off.”  

It took key government figures like NASA’s Mike Griffin or DARPA’s Tony Tether and Steve Walker to advocate for the government to embrace what was – at the time – a budding space industry.  

“In the context of the time, there were two space shuttle disasters and the end of the space shuttle program, which meant the United States government would rely solely on Russia to get our astronauts to the International Space Station,” Davenport said. “So government officials began thinking about doing something radically different to access space. It started with industry partners flying cargo and supplies to the International Space Station before flying astronauts – but it was an incremental approach that developed over time.” 

The Modern Commercial Space Industry 

Today, that once-emerging commercial space market has established itself as a projected $1.8 trillion space industry by 2035. As such, government agencies will be looking more and more to their commercial partners for a variety of space missions. 

“We’re seeing the space enterprise understand that if the commercial sector can fly astronauts to the space station, then maybe they should be the ones who land astronauts on the moon and build uncrewed spacecraft for scouting missions,” Davenport said. “The government can also get investors involved to help subsidize the cost of these missions. However, the commercial sector works by experimenting to move faster, which means at times they’re going to fail. So it will be interesting to see what the government tolerance level is for that.” 

The balance of success and failure can perhaps be described by two recent commercial space endeavors funded by NASA’s Commercial Lunar Payload Services (CLPS) program. In early March, Firefly Aerospace landed their Blue Ghost spacecraft for a successful two-week mission, but Intuitive Machines’ Athena spacecraft had an imperfect landing that left much of its mission goals unfulfilled. 

“It’s a balance of how much risk are we willing to take, because whether it’s astronauts on-board or even the cargo and supplies needed to service those astronauts – the government requires success,” Davenport said. “Even SpaceX has recently had problems with its Falcon-9, Dragon and Starship spacecraft. So while we often celebrate the success of American innovation, some of these setbacks call into question how much government oversight there should be.”  

A New Space Race 

The government has a vested interest in the success of commercial space companies, primarily because the United States has once again found itself in a modern-day space race. 

“China has shown amazing progress for moon landings, as they are the first country to go to and bring samples back from the far side of the moon,” Davenport said. “They have a space station in low-Earth orbit and have operated a rover on Mars. But what many people don’t realize is there are no longer American flags on the moon. The flags from the Apollo era have been bleached white by the radiation and vacuum environment, meanwhile China has planted two flags: one made out of composite material specifically designed for space and another made with in-situ resource utilization (ISRU) technology so it can withstand the harsh space environment.” 

In “The Space Barons,” Davenport catalogued how the commercial space industry rose up to meet today’s space race needs by delineating the book in three sections: Impossible, Improbable, Inevitable. But now that the commercial space industry is well on its way, “Rocket Dreams” will showcase how these companies will reach their destinations and achieve their goals in the modern space race. 

“‘Impossible, Improbable, and Inevitable,’ encompass the narrative of ‘The Space Barons,’ but also the journey of space exploration in the commercial space sector,” Davenport said. “This next book, ‘Rocket Dreams,’ takes a more symbolic approach to its three sections: on the ground, on-orbit, and to the moon and beyond. The book ends more on ideas, because there’s a lot of questions being asked and certainly progress that is being made, but these unpredictable variables are what makes it an exciting time to be a part of the space industry.” 

Elara Nova is a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain. Learn more at https://elaranova.com/. 

Episode 24: The Rise of Commercial Space in Christian Davenport’s “The Space Barons”

The Elara Edge: Expert Insights on Space Security

Intro/Outro: Scott King (SK) 

Host: Mike Dickey, Founding Partner at Elara Nova: The Space Consultancy; former Chief Architect of the United States Space Force (MD) 

SME: Christian Davenport, reporter at Washington Post; author of “The Space Barons” (CD) 

00:02 – 01:23 

(SK) Welcome to “The Elara Edge: Expert Insights on Space Security.” I’m your host, Scott King, and we have a new, special edition series to present to you today: “The Elara Epilogues,” where the space industry’s leading journalists and authors will join Elara Nova partners to discuss their published work covering today’s ever-evolving space environment. 

Founding Partner Mike Dickey, former chief architect of the United States Space Force, will be your host today. And joining Mike as our inaugural guest is Christian Davenport, space industry and NASA reporter for The Washington Post. 

Together, they’ll be discussing Christian’s 2018 book: “The Space Barons: Elon Musk, Jeff Bezos and the Quest to Colonize the Cosmos.” The Space Barons catalogues the rise of today’s commercial space industry, through the lens of the billionaires who founded – and funded – their own space companies at its outset. 

But the conversation won’t stop there, as Christian shares with us a few teasers from his forthcoming book: “Rocket Dreams: Musk, Bezos, and the Inside Story of the New, Trillion-Dollar Space Race.” The new book, “Rocket Dreams,” is set to be released in the fall of 2025 and picks back up where “The Space Barons” concluded seven years ago.  

With that, thank you for joining us and onto the show… 

01:24 – 02:09 

(MD) Christian, first. Thank you so much for coming on Elara Edge Expert Insights on Space Security. Our audience is primarily those who have a keen interest in the security and economic aspects of space, and certainly the role that the new space industry plays, [it] continues to be an important and a fascinating topic for a number of reasons that I hope we’re going to discuss today. I’m sure we will.  

And you wrote the book on this: Space Barons, and it captures those very early days of this new order. And we appreciate the opportunity to talk to you about the early days. Also I understand, spoiler alert that you might have a new book coming up, and I hope we can also use this time to talk about that and to bring Space Barons into current context seven years on, as we await the new release.  

02:10 – 02:33 

(CD) Yeah, Mike, thanks so much for having me. It’s a real pleasure. I’ve been following, you know, what you guys have been up to over there, and it’s just such a fascinating time, which has, you know, kind of what led me to write the books. But, you know, as I say, I’ve got one of the best beats in all of journalism. 

I just wish the news would slow down a little bit because there’s so much going on. But yeah, no, it’s a real pleasure to be here and I’m looking forward to the conversation. 

02:33 – 02:44 

(MD) Fantastic. Well, let’s rewind the tape and go back to the very beginning and what prompted you to write the book Space Barons and put it down in book form? 

You’re a newspaper journalist by trade?  

02:45 – 04:40 

(CD) Yeah, so I’ve been doing a lot of things at The Washington Post. I was a metro reporter. I covered local politics. I went into editing and was covering the military for a long time, [I] was embedded in Iraq and in Kuwait and was then assigned to a beat on the business desk to cover the military-industrial complex as it were. 

And in the 2014 timeframe, along came a guy named Elon Musk, who held a press conference at the National Press Club here in Washington, D.C., to announce he was going to file a lawsuit against the Pentagon, specifically against the Air Force, for the right to be able to compete for national security launch contracts. 

And I remember going to that press conference and thinking, ‘Who the heck is this guy? What is SpaceX? And why would you be dumb enough to file a lawsuit against the government agency that you want to get contracts from?’ And anyway, he started the press conference by talking about bringing back the Falcon-9 booster and trying to catch it. 

And in those days, they were trying to build the reusable vehicle. But by bringing it back to hover it over water at a specific spot in the ocean, and I’ll confess, Mike, I had no idea what he was talking about. But I thought it was really, really interesting and I ended up writing the story about the lawsuit, but ended up doing some research into SpaceX, into reusable rockets, and saw then, of course, that Jeff Bezos and Blue Origin was trying to do that. 

And you know, one of the key mantras in journalism is ‘Follow the money,’ right? That goes back to Watergate. And I said, ‘Well, if some of the richest people in the world are investing their money in space exploration and advancing the state of the art and the technology, maybe we should be paying more attention to that.’ 

And so that’s when I sort of decided I need to start covering this, so that’s how it came about. 

04:41 – 04:54 

(MD) Yeah, fascinating. How did you go about writing? I mean, those are pretty unique individuals. We’re going to talk about some of the other individuals in the book.  

Did they all give you access? Or, you know, how did you go about your research and your interviews and did everybody want to talk to you? 

04:55 – 07:15 

(CD) Yeah. For the first book, “The Space Barons,” I did interview Elon and Jeff and Richard Branson and Paul Allen at the time. I think it was one of Paul Allen’s last interviews before he died. But I did, and it wasn’t easy with Jeff, in particular. 

You know, I work at The Washington Post. He owns The Washington Post. I think a lot of people thought that, ‘Oh, he would get access because of that – with his ownership.’ In fact, we treat him the way we treat everybody else and he’s a very difficult person. 

He doesn’t do a lot of interviews. Blue Origin is very secretive, particularly then. So it took months upon months to get Jeff to sit down with me. In fact, and I tell this story in the book, what I ended up doing was I did a lot of research into Jeff and his fascination with space. I mean, he says now, ‘Space is the most important work I’m doing.’ 

And he’s focusing all of his efforts on Blue Origin, his space company. But at the time, he was still the CEO of Amazon. And people didn’t even really know anything about Blue Origin. But I knew that space was one of his key passions, from his very early childhood days and the time that he spent with his grandfather. 

And his grandfather – as it turns out, was working for the Atomic Energy Commission in the late ‘50s and early ‘60s and was one of the first employees ever over at ARPA, the predecessor to DARPA and he helped stand up that agency.  

And I do believe that Jeff’s passion for space and his desire to have his companies AWS and Blue Origin serve in the national interest and to work alongside the government and the Pentagon comes from his grandfather.  

Anyway, in my research about Jeff and his grandfather I had come across a press release, from I believe it was 1961 or 1962 when his grandfather left ARPA to go back to the Atomic Energy Commission and the press release even had a picture of Jeff’s grandfather on it. And anyway, he was in Washington, D.C., at some convention, and I kind of buttonholed him. 

And I showed him the press release, which he had never seen. And I said, you know, ‘I’m doing this research. I’m working on this book. I’ve been trying to interview you. Here’s the level of research I’m doing. I’m just trying to impress you.’ And then he finally relented to do it. So that’s the story of how I got that interview, but it took months to get it.

07:16 – 07:42 

(MD) Each of those early space entrepreneurs or early space barons had their own dreams and wishes and vision for what they wanted to do. Elon and a multi-planetary species. Bezos and saving the planet. Robert Bigelow wanted space hotels. Richard Branson wanted suborbital tourism. Andy Beal wanted a commercial heavy lift rocket. All of those things ended in very different ways.  

So what is it about either the timing or those individuals, you think, that led to those different outcomes?

  07:43 – 09:58 

(CD) Yeah, and it’s interesting. And they do come at it with very different approaches and very different mindsets. But there is a common thread through all of them. And that is to lower the cost of the access to space. I think there was a concern among all of them that the technology in space had not kept up with the advancements in technology that we had seen in computing power, you know, with the internet. 

And we saw so many different aspects of our society make these giant leaps forward that they were witness to and not only witness to, but that each of these quote unquote, “Space Barons” is to a certain degree, helped progress, and that we’re part of that. Whether it’s with Amazon or Tesla or what have you. They’re part of this technology movement and wanting it to move forward. 

But space is so difficult that it requires an enormous amount of capital upfront, which is one part of it. Elon famously funded SpaceX the first four launches with $100 million of his own money. Jeff was self-funding Blue Origin, actually, even to a large extent up until now. And so you needed that immense capital to come in because the barrier to entry is just so high when it comes to space. 

As Jeff says, ‘I could start an internet company because the phone companies had put down the cables that became the internet. There was an invention called the Postal Service that allowed me to deliver books to people’s homes. There was this invention called the credit card so that I could take their money.’ That infrastructure was in place. That’s not necessarily true in space, so I think what they’re trying to do is build the infrastructure.   

The other key part of it is, it was a willingness from the government, from NASA and the Pentagon to say, ‘You know what? We can outsource some of these missions to the private sector.’ 

And today, you know, I think we look at that and it’s routine. But back then that was something of a revolutionary change to allow the private sector to step in, in this way and trust them with vital missions that had always been part of the national enterprise that now were being taken over by the private sector and that is a significant paradigm shift that allowed this industry to take off. 

09:59 – 10:30 

(MD) Yeah, I definitely want to come back to that and spend a couple of minutes in a little bit, because as we get beyond “The Space Barons” book and probably into the field of your new endeavor, that becomes more and more important as we come to 2025. 

But back on the individuals. So there’s this sort of rivalry, either explicit-implicit, I’m not sure. But everybody sees some of these individuals as in a rivalry.  

Do you think that the rivalry is driving some of their behavior, or is it just that they have these overlapping passions that just end up sort of creating a rivalry? 

10:31 – 11:51 

(CD) I do think there is a rivalry and there has been between all of them. These are fierce competitors who have gone into various industries, whether it’s Amazon and taking on booksellers like Barnes and Noble or moving into retail to take on Target and Walmart and K-Mart. Elon with Tesla taking on Detroit. They’re fierce competitors.  

What we’ve seen, however, is a domination of SpaceX lapping Blue Origin. And Elon has said this, that he lamented the fact that for a long time he didn’t have a clear rival and was goading Jeff Bezos and Blue Origin to move faster. 

And he was urging Jeff to forget about Amazon. You know, ‘Amazon is set. You need to be focusing on Blue Origin,’ knowing that in the end, that would make SpaceX better to have some competition. I truly believe that. And I think that SpaceX’s success has been something of a roadmap for Blue Origin and for many other companies. 

That A: you can be successful. And B: Here’s one way to do it. There’s a lot of argument now that SpaceX has maybe gotten too successful, too big, and is there really a broad commercial space industry or is there just SpaceX? That’s sort of an interesting dynamic, but I do think in any business like this, there is real, real competition.

11:52 – 12:08 

(MD) Your book takes us inside a Valentine’s Day 2006 conference, where some of these eventual Space Barons got together and started talking about what the commercial space industry might look like.  

What are the kinds of things that they were dealing with, and how on-track do you think they were? Now, looking back on that and talking about the right things?  

12:09 – 13:48 

(CD) Yeah, you know, if you look back on it now, you can say like, ‘Oh, well, weren’t they prescient? And they saw this coming.’ Because we do have something of a commercial space industry. I mean, I think if the space barons, in a sense, posed a question, I mean: ‘Is there this commercial space industry?’ And I think the next book that I’m working on sort of answers it with a resounding “Yes,” because anytime you put human beings in a commercially owned and operated rocket could say, “Yeah, that’s a big deal.” 

You have a proliferation of a real market and a real space economy beyond just the billionaires that to some extent is self-sustaining. Businesses win, businesses some lose. They come and go and there’s some continuity of purpose with government being able to rely on them. That’s looking at it through the prism of today.  

If you went back to then, I think it’s fair to look at them and say, “You guys are nuts. This is never going to happen. Space is so expensive. It’s so difficult. It requires such expertise. I mean, getting a rocket to orbit is such an immensely difficult proposition. To think you can do it is – you’re either wildly arrogant or you’re just incredibly ignorant because you have no idea what you don’t know.” And yet, over time, they persisted. 

So I think you go back and you look at that. And there had been previous efforts to build a commercial space industry to move the technology forward. That had all failed. And I think there are a lot of skeptics who say, ‘You’re never going to do this, this is always going to be a national enterprise and it’s just sort of the one thing the government has to do and has to do exclusively.’ And now we’re seeing obviously that change.

13:49 – 14:21 

(MD) You talk about this public-private kind of relationship. Was there people on the government side that you would also highlight that allowed these kinds of things to happen, that were also prescient in: ‘Look, we need to start investing in some of these companies?’ 

And I think of people like Steve Walker at DARPA who gave SpaceX some money to do those first four launches. And then you’ve got, of course, all the NASA input, which has been huge. But Mike Griffin as the administrator has thrown his weight against it. The different program managers – who are the government people that you would put in this periphery of the space barons? 

14:22 – 16:34 

(CD) Yeah, and you named a few of them. I mean, you know, DARPA looking for innovative technologies, funding SpaceX early on and giving them some seed money. And there were people within NASA these – when I talked to Elon about it, when I interviewed him for “The Space Barons” there were sort of these rebels inside the alliance who was like, ‘You know what? We need to place a bet, at least. Not saying we should turn anything over to the commercial sector, but maybe we give them some seed money to see if they can make it.’ 

And if, you know, you go back again, put yourself in that context in that time where you have two disasters with the space shuttle and the sort of idea that the space shuttle is coming to an end, and we’re not going to have any way, the United States government, NASA, is not going to have any way to fly humans anywhere. 

And in fact, we’re going to turn that capability over to Russia. This country that we defeated in the Cold War space race to the moon is now going to be flying our astronauts, which nothing symbolizes the concerns about the lack and the complacency in the government enterprise in moving the technology forward, than the fact that NASA couldn’t fly astronauts. 

And so I think you saw people within the government saying, ‘We have to try to do something different, even radically different.’ And sort of a step-by-step approach, starting with, “Okay, is it possible that they could fly cargo and supplies to the International Space Station? Is that even something we could consider?” And you sort of see that beginning to come up in the Bush administration. 

At the time, you know, you mentioned Mike Griffin. There was this idea like, “Okay, maybe we’ll place a few bets to see if they can do that, but there’s no way we’re going to let them fly astronauts.” I mean, there was sort of a red line there.  

Then you see the commercial sector starting to fly cargo and supplies. It’s working. Obama comes in, there’s no space shuttle. We’re paying Russia $70-80 million a seat for rides to the International Space Station and then they’re saying, “Well, maybe we can do that.” 

So it’s not something that happened overnight. It was sort of an incremental approach that took place over time and I do think there were individuals within the agencies who saw that happening. And then, of course, companies like SpaceX were proving that they could do it and overcoming enormous skepticism to gain their trust.  

16:35 – 17:00 

(MD) So one of the earliest bits of seed money, and maybe you can’t even call it that, but it was the Ansari X Prize and Peter Diamandis, you know, kind of had that concept to create this prize and you can explain it for our listeners.  

But do you think that was necessary? Important? Useful? And would there be room for another X Prize of some sort, do you think, to continue it? It was supposed to be an accelerant for the industry. Do you think it did that?  

17:01 – 18:45 

(CD) Well, so that’s such a great question. So the Ansari X Prize is this contest to see if a commercial venture, [with] no government money can send a vehicle to the edge of space and back and do it twice. 

And there were, you know, a lot of stipulations about weight, mass and that sort of thing and it was successful. Paul Allen and Burt Rutan, the famous inventor, aerospace engineer, came up with SpaceShipOne and they won the Ansari X Prize and I think it was heralded as a moment, as a breakthrough, that, “Yes, this can be done.” 

If you go to the Air and Space Museum – you can see this winged space plane that looked like it had no business flying in the air or, you know, it looked like a paraglider. And yet here it was, going to the edge of space and back on these really hair-raising rides that I think recalled bold, ambitious, swashbuckling days of early aviation. 

I mean, these were incredibly dangerous and risky and edge of your seat, pushing the frontier, pushing the technology. And they did it. But did it touch off a greater revolution? I think the answer to that at the time is: “Not really.” It showed it could be done, but even today, we don’t have a lot of regular people going to the edge of space like they envisioned. 

We do have space tourism. We do have Virgin Galactic, which is Richard Branson bought the rights from Paul Allen and started Virgin Galactic, which has gone through many iterations and is going through another one now and isn’t really flying. Blue Origin is flying, but the cadence isn’t very fast. They’ve done a number of space flights, but they’re not flying people on a regular basis. It’s enormously expensive. 

So it didn’t touch off that revolution that I think a lot of people had hoped it could, but I don’t think it was a complete waste. It did show that it could be done, and in that sense helped pave the way for where we are today.  

18:46 – 19:41 

(MD) So I kind of want to zoom out now and just talk more about some of the things we’re already touching on the economic relationships between the government and these commercial companies. And I’ll go back to my generation considers the Apollo Era was the golden age of space and it was all about the competition, as you already brought up between the U.S. and the Soviet Union on putting a man in space and then putting a man on the surface of the moon. 

And you talk about in the book how the resolution of that competition in the favor of the U.S. ended up driving some complacency, at least on the side of the U.S. government.  

Now, it doesn’t feel like we’re in a complacent age, right? There’s just a ton of activity going on, in fact, two commercial companies put landers on the moon and so with that competition in mind: between governments, between companies. You know, what are the parallels and the differences between then and now in how we’re innovating in space?

19:42 – 21:54 

(CD) Now, that’s a great question. And here’s one of the things that just jumps out at me, Mike, because I do believe we are in a space race, as we were during the Cold War – really against China. 

China has shown amazing progress. Four for four [on] moon landings. First country to go to the far side of the moon. First country to retrieve samples from the far side of the moon. They have a space station in low-Earth orbit. They’ve operated a rover on Mars and one of the things people don’t realize is there are flags on the moon, and they’re not American flags. 

They’re Chinese flags. And I say that because obviously during the Apollo era, we planted flags on the moon, but they have been bleached white, according to NASA scientists, by the radiation environment, by the harsh environment of space and being in that vacuum, that they’re essentially reduced, maybe even to tatters, but certainly not recognizable as American flags today. 

China has now planted flags. One made out of a composite material designed specifically to withstand the harsh environment of space and to last for years, if not decades. The second flag they put up on the moon during the far side sample return mission, was actually done using an ISRU-like technique, In-Situ Resource Utilization, where you use the resources of the moon. 

And they were able to take a form of volcanic rock basalt, which is, you see a lot of on the moon. They use samples, obviously from Earth, melt it to lava and using that lava extract out these very, very thin threads, let it cool down and then weave the threads into a Chinese flag. 

That, again, is an ISRU technology and is designed to withstand the harsh environment of space. But here’s the thing. At least from where I’m sitting, and I may turn the tables and ask you this: to the American public, I think during the Cold War, we all knew we were in a space race with the Soviet Union. We all knew about Sputnik. We all knew about Kennedy’s charge.  

It just doesn’t seem to me that it resonates that we’re in this great power competition with China in space and it’s not just civil space, but clearly national security space. And I’m just sort of curious from your perspective, you know, why isn’t it resonating and what are the stakes for that? 

21:55 – 24:29 

(MD) Well, I mean, you’re absolutely right. It doesn’t get the kind of publicity that it got. There’s a million other things that the populations are worried about, now. It’s not really that bipolar world, it’s more multipolar and all the complexities that come with that.  

And the other thing is that a lot of the things that we do in space are information, right? It’s ones and zeros. You don’t see it all the time and where Elara Nova sits – our wheelhouse is the national security business and we understand probably more so than the general public of just how integrated space is into everyday life and the danger that comes with anyone who wants to interfere with those activities in space would interfere with everyday life. 

It would readily become apparent if things started to happen in space that were against our interests, and because of some of the things that have been going on that we’ve been talking about: the lowering the barrier of entry, technologies are getting smaller, you can put better things in smaller packages. It’s really allowed lots of countries now to become space-faring countries. 

China has obviously had the most resources to put to bear here, and they’ve created the ability to interfere with the things that the U.S. will do in space for the civil economy and for national security. So we worry a lot about our forces who are deployed all around the world suddenly being exposed to vulnerabilities that the Chinese can create by nefarious action in space. 

And really, that’s why, the first Trump administration created a United States Space Force is to begin to address that competition in the national security arena to make sure that we could continue to do what we need to do in space, and that if the day comes, we could disrupt what others might try to do to us in space that will affect, again, not only our forces, but all of the economy, not just for the U.S., but around the world.  

The interesting thing with China is because they’re doing so much in space, they’re also becoming somewhat dependent on that domain. And you hope there’s a bit of an understanding that we really don’t want to do something in space because it’s going to affect everybody equally. Now, more equally than probably in the past. 

So let’s go back to this idea of investing, putting investments in space. And you talked about [the] Commercial Orbital Transportation System – 2006. And now NASA has really upped their game, right? There’s commercial payload services, commercial cargo, commercial LEO destinations. They’re talking about doing a Mars return with commercial ideas.  

NASA is kind of all in here. 

Is that good? Is that bad? Is it tilting this the economics of the market at all in ways that we should pay attention to?

24:30 – 27:22 

(CD) Yeah, no. It’s such a fascinating evolution, and it shows the depth of this conversation that takes us from those early days of COTS and cargo delivery and then saying, “Okay, they can do that. Maybe they can fly astronauts to the space station. Okay, well, maybe they can fly astronauts to the space station. Maybe the commercial sector – they should be the ones who build the spacecraft to land astronauts on the moon and to build the uncrewed spacecraft to do the scouting missions under the Eclipse program to go to the moon. And maybe they should even build the spacesuits that the astronauts are going to wear on the moon.” 

And so you’re seeing the enterprise go, and it’s allowed, I think, of what Thomas Zurbuchen, who was the head of NASA’s Science Mission Directorate when Eclipse was born, saying ‘The commercial sector can move faster. NASA will make a relatively small investment. They can maybe get other businesses investing in them, wanting to do science, wanting to send payloads to the lunar surface that help subsidize the cost that allows NASA to quote ‘Take shots on goal.’”  

But some of those are going to miss. And you think of a national mission, and you’re going to put in a lot of work and a lot of costs and a lot of time to make sure that it works.  

Well, that’s not the way the commercial sector works. They’re going to move faster, they’re going to experiment, and they’re going to fail and you have to wonder if they fail. What is the tolerance for that?  

And we’ve now seen a company like Astrobotic didn’t quite reach the lunar surface. Intuitive Machines got there a year ago, first successful landing since the end of the Apollo era of an American spacecraft. First commercial spacecraft to reach the lunar surface. But it wasn’t a perfect landing. A leg broke. It ended up on its side. They tried again earlier this year. Again, it looks like they went into a crater. Maybe they toppled over. [They] were able to operate for a little bit. I mean, they reached the surface but [it] wasn’t perfect. So there is a trade-off there and that might be okay with experimenting on an uncrewed vehicle. 

But when you talk about astronauts on-board, or if you even talk about the cargo and supplies that have to go up and service those astronauts, you need success. And you need that to be reliable. And you know, even SpaceX, which is the leader in all of this, recently has had some problems with the Falcon-9, even some concerns about Dragon recently. Starship, the last two flights, the ship has come apart and you know there’s no emergency abort system with Starship the way there is with the Falcon-9 and Dragon. 

So I think people look at this success and they want to cheer it and, “Rah rah, way to go, American innovation.” But there have been some setbacks, and you are wondering what the appetite and what the right balance is supposed to be between government and between the private sector, and what sort of oversight should there be? And I’m sure there are a lot of people a lot smarter than me who can figure that out. For sure.

27:22 – 27:44 

(MD) Yeah, and I think you’re right. It’s those challenges are interspersed with successes, right? So Firefly got their [system] upright? They’ll get a whole lunar day of science and so that’s a win.  

So it’s a balance, as you rightfully say, of how much risk are we willing to take? How much failure is fine because you’re failing forward and you’re continuing to make progress, right? 

27:45 – 28:11 

(CD) Right, and let’s be clear. I mean, those failures, we use the term failure. But failure is actually a very positive term, particularly if you learn something and you get better and that you’re failing in a test environment, in a real world environment, in the vacuum in space, and you’re going to learn about the technology and the engineering in ways you just cannot learn when you’re on the ground doing simulations and so they will get better.  They have gotten better, and they’ve shown enormous progress. 

28:12 – 29:15 

(MD) You know, I’ll say on the national security side, it’s been a little bit slower on the uptake in terms of the big investments in commercial. You mentioned launch services? Got it. That one’s pretty well set just because of the frequency and now it’s very reliable.  

But it’s been nascent in other areas. You know everybody the Department of Defense talked about wanting to harness more commercial, but you know the remit for national security is you can’t fail in ways that are going to have catastrophic implications for either our forces or our objectives overseas and domestically. 

So it’s been a little bit my opinion, Mike’s opinion, has been a little bit tepid. I think actually, the leader here is the National Reconnaissance Office, who have been buying some of the commercial imagery and other types of products from space companies.  

The Space Force has some, again some of their own nascent ideas about how to bring commercial in. But the level of investment isn’t like what NASA has in terms of really sending a signal to the market that says, ‘If you build it, we will buy it.’ And we’re kind of not there yet. So I think that debate on the national security side is going to continue to unfold. 

29:16 – 29:32 

(CD) Yeah. Well, actually I’m curious about that. And if I could turn the tables just one more time, I’m curious why you think that is? Is it because the culture at the Pentagon is just more entrenched, that there weren’t those like, quote unquote, “rebels” that we saw at NASA early on, or it’s just a bigger bureaucracy. 

I mean, why do you think it hasn’t taken hold that way?  

29:33 – 31:42 

(MD) It’s certainly the culture is a huge part of it. And the culture being a couple of things: one is the requirements that the government has are a lot of times not tightly aligned with commercial market objectives, right? So the Department of Defense needs things that don’t have its own commercial markets. So maybe we have to do those things ourselves, is what the question is. 

And this idea of control when things are really getting bad, when countries are fighting with each other, when potentially economies are colliding with each other, right? In a big conflict like that, will the commercial companies still stand by their contract? I’ve seen no indication that that wouldn’t be the case, but those are some of the control issues. When you’re with the military, you want control on all parts of your system.  

Now we do other things with commercial within the Department of Defense – that we buy vehicles that come off of commercial product lines. We buy services in a lot of places but the closer you get to the actual combat itself, it just gets a little more dicey from a cultural perspective of how much you want to have within your own control, and how much you want to have in a contractual relationship with another entity? 

Certainly, the industry builds everything that the military has, so it’s really about that contractual relationship and who ends up owning and operating the end product at the end? So I think there’ll be more, but I don’t think it’s going to be as robust as some of the civil activities that we see going on.  

So, Christian, let’s talk about where the money come from. The Space Barons had money, right? They created companies, became billionaires and then were allowed to channel that money into their space dreams. Then you went into a world where a lot of these smaller companies tried to come in and be part of this market. 

They were mostly venture capital funded, so they were probably giving up a bunch of equity in the company for single millions and tens of millions of dollars. We went through this unfortunate period in 2021 of SPACs that were really more about the bankers making money for the bankers and not doing well by the companies. 

That sort of flushed out now and now we’re seeing a maturation in those capital markets where becoming more private equity, institutional investors and even now, banks getting into debt financing for companies that have good revenue. So how do you see that as part of this overall space economy and moving forward? 

31:43 – 33:00 

(CD) Yeah, I mean, I think early on it was that old adage, you know, the quickest way to become a millionaire in a space business was to start out as a billionaire. 

And you did see a lot of ebbs and flows. And it has matured. And that’s in large part because they see the way the government, NASA and to a lesser degree, the Pentagon, is investing in these companies and relying on them and providing a real service so that there is sort of a backbone for these companies. 

And, you know, there’s that other leg of the stool that the companies have shown the capabilities to be able to do it, which gives, I think, the markets a lot more confidence. I mean, I think initially, you know, space investment was for hobbyists, it was for enthusiasts. Now it’s become much more mainstream. Is it still incredibly risky? Yeah, I think it is. 

But I think it’s the upsides can be really high, particularly if the Pentagon gets involved, and particularly if these companies can dramatically lower the cost of access to space. And then you begin seeing what Jeff Bezos calls the ‘unleashing of an economic dynamism,’ like what he saw with the internet that allowed companies like Amazon to flourish, that there’s going to be a next wave of space companies building on top of the infrastructure that’s already there to do things like in-space resource utilization, mining, those sorts of things. 

33:01 – 33:38 

(MD) Let’s dig a little bit into the infrastructure piece. I mean, you’re right. Jeff Bezos has his story about: Amazon worked because the internet existed, because there were roads to everyone’s houses, there was a Postal Service that he could ship through, a payment system where people could sit on the couch and pay for merchandise. So now, if you think of infrastructure in the area of space, certainly launch, that’s got to be first. You have to have launch to be able to get to orbit. But there are probably other things that will help further unleash the space economy.  

What do you think those items are, and what kind of services could commercial market bring to create infrastructure that then all of a sudden makes it easy for everybody else?

33:39 – 35:45 

(CD) Yeah. I mean, I think and I’m guilty of this. A lot of us in the space press corps, we focus on launch. We focus on the rockets, we focus on the astronauts and we focus on the billionaires, too. But there’s a whole subset of issues that don’t get enough attention that are vital. 

And those are the technologies that we’re going to need to create a self-sustaining economy in space and a permanent presence in space. That’s power generation, transportation, habitation, mining, all of those technologies: solar cells, nuclear power, being able to get around. And I don’t think we see a lot of government investment into that and I don’t know that even we see a lot of private sector investment. 

And that, I think could be a hiccup at some point down the road. I mean, I think Blue Origin is focusing on that perhaps more than others. I mean, there is a story in the new book, “Rocket Dreams,” I actually visited. They have a secret laboratory outside of Los Angeles where they’re working to melt the lunar regolith, the moon dirt, and turn it into solar cells. If that technology can be achieved, that would really be amazing and help unleash all the other sorts of things that you see in space and have those technologies. 

The other one, from a civil point of view, is, I think, back to a time where I visited General Purdy when he was at the 45th Space Wing down in Cape Canaveral. And he said something to me that always resonated with me. And that was, for the first 50 or 60 years of the space age, we were focused on getting to space, perfecting the way of building the rockets and the spacecraft that could get us to orbit. 

Now, for the most part, that’s a soft problem, and what we’re focusing on now is being able to get through space, being able to change orbits, to move around, to go from one place to another, to point A to point B, service satellites, do reconnaissance, do all sorts of things in space that are very difficult, but that I think opens up a lot of possibilities, as well. 

And when he said that, the light bulb kind of went off in my head to sort of think about where we’re going in the future and what are the technologies that are going to be needed going forward. 

35:46 – 36:31 

(MD) Even the infrastructure we have in orbit today that allows you to communicate to the Earth and, and navigate because GPS signals are floating through space. But you get out to the moon. You don’t even have those basic things. So the companies were talking about Astrobotics, Intuitive Machines, Firefly, have to bring their own infrastructure to communicate all the way back to Earth. You know, that adds weight, and it takes away from the things that they’d really like to be doing on the surface of the moon. 

So yeah, having a communications infrastructure, navigation and timing infrastructure around the moon. All that could unleash that particular part of the space economy too, so really fascinating to think about. I’d add one more – regulatory environment for doing commerce in space, right? 

And having space hotels and doing all the other things. That’s going to have to advance quite a bit, too. I don’t know if you had thoughts there? 

36:32 – 37:07 

(CD) Yeah. I mean, I always look back. There’s a law passed in 2015 signed by President Obama that gives companies the right to the resources they mine on the moon or other celestial bodies, which I thought was an interesting breakthrough. It will be interesting when that’s tested. 

And then you talk about the regulatory regime, too. I mean, I immediately started thinking about space debris and just all of the stuff that’s up in space, too, that it’s space is vast, a lot of real estate up there, but it’s increasingly becoming congested. But I do think in a lot of ways the technology is outpacing the regulation. 

37:08 – 38:04 

(MD) The individuals we’re talking about have for 20 years, you know, decades have been sort of focused on what their end objective was, be that Bezos or Musk, Richard Branson, I mean, they’ve all been just plugging away for 20 years making this thing happen. 

The government, talk about the government again, isn’t quite as good as staying the course. So President Obama in 2008 canceled the Constellation program. And that was kind of one of the things that said, “Well, I guess we’re going to have to push more money forward into the commercial market to help get our work done without that government-owned and operated program.” 

We seem to be maybe at that point, again, with Artemis, lots of money going into Artemis, long schedules that seemingly are always delayed. 

You know, what would be the implications of making changes to that? And compare that alongside with these space barons who have been taking the long view for decades and slowly getting to where they want to be. Not as fast as they’ve talked about or wanted to in the beginning, but they’re getting there.  

38:05 – 40:21 

(CD) Yeah. I mean, so it’s a great question again, and I think it depends on sort of the context: and when you cancel Constellation, you know, there was this glimmer of hope that the commercial sector would be there, would be able to fill in the gaps and maybe take over. Now, fast forward to where we are today, and you see that. You see the Falcon-9 launching what? You know, 100 times last year, going from well over a hundred times this year. 

You know, Blue Origin finally got New Glenn off the ground. ULA with Vulcan flying. You’re seeing [from] a launch perspective, a lot more advancements. Starship had a couple of recent setbacks, but on the other hand, they’re now catching the booster with some frequency. So a lot of people have been concerned about today’s Constellation would be, right, the Space Launch System rocket, potentially Orion, which NASA has invested many billions of dollars in. Together they’ve flown one time.  

The GAO has said the cost is about $2 billion per launch. SLS is not a reusable rocket, relies on the RS-25 engines, which were used during the Space Shuttle [and] developed in the 1970s. But today you could see if SLS went away, and I do think people are starting to come around to the fact that SLS’ days may be numbered, I don’t think it’s going to be canceled tomorrow. 

I think they’ve already built it and paid for a number of these rockets. So you could see the Artemis II mission to launch a crew around the Moon on the Orion, potentially even Artemis III going on SLS in the ‘26-’27 timeframe. Then by then do you have some of these alternatives online, and not just online, but online in a way that they are, as we talked about earlier, safe, reliable?  

[You can] really can put humans on, have proven themselves. You have complete control over them, complete faith in them. You know, I think we might be closer to that. I mean, I thought it was eye-opening when someone like Scott Pace, who was the executive secretary of the National Space Council under President Trump in the first administration and a long proponent of SLS, said something to the effect of, ‘We need an off-ramp for SLS.’ When even he is saying something. I think maybe the writing is on the wall to a certain extent there.

40:22 – 41:13 

(MD) Yeah, just even if the means change, staying committed to the ends, you know, ends, ways and means I think is important. And NASA’s just been kind of jerked around back and forth over the years as administrations change and budgets change. 

But I think having a goal and if we’re able to bring in other technologies and commercial actors to help achieve that goal – that’s great. But maybe we should stick to the goal and be in it for the long term.  

So I’m going to give you a softball question here in “Space Barons,” you structured space barons in – there are three sections of the book. 

And you had a one word title for each section. And they were “Impossible, Improbable, and Inevitable.”  

So they seem to be three great words, you know, how did you come up with that? And now I’m looking forward to the new book. And what is the era between 2018 and 2025? What’s one or two words you’d use to describe the recent history?

41:14 – 43:31 

(CD) Yeah, I’m glad you caught on to that. I do think those three words encompass the narrative of the book, but also the journey of space exploration in the commercial space sector. Like, it’s never going to happen. Well, maybe it will. And yeah, it’s happening. And as I said earlier, “The Space Barons,” I think, poses this question like, ‘Is this really going to happen? Is it really inevitable?’ And this book, the next one, Rocket Dreams, answers that with, “Yes.” And you’re sort of seeing it take over.  

And so the new book is also broken up into three sections that sort of gets to that in a symbolic way: Earth, and then going to orbit and then going to the moon and beyond. That, you’re sort of on the ground, and then you’re going with people and extending this public-private partnership to low-Earth orbit with COTS, with astronauts, and then applying that with Artemis, building the landers and spacecraft that are going to go to the moon and beyond. 

There’s a lot of questions now: Are we going to the moon? Are we going to Mars? And these books have to sort of end on ideas, not events. And here I am trying to finish up a book that’s going to come out later this fall and position it for there, and where are we going to be? And in some ways the destination, while important, doesn’t matter as much as the means of ascent. 

And what I mean by that is the technologies that we have to be able to get to the moon, to get to low-Earth orbit or to get to Mars. And if we have a New Glenn, if we have Dragon, if we have Starship, if we have Neutron from Rocket Lab, if we have Vulcan, and we have Firefly and Astrobotic and all these companies, Intuitive Machines, building these technologies, then it’s like, are we going to the moon or Mars or low-Earth orbit? 

And then the answer becomes, “Yes, yes we are.” And we can go to all of those because we’ve built technologies that can go to all those. So that’s sort of the structure that I’m building here is building on that platform that we saw at the end of Space Barons, building through to go to low-Earth orbit and extending that out to the moon and to beyond, and not just on a civil space program, too. 

We tend to be so focused on big rockets and astronauts and all of that. But I think the national security space enterprise is incredibly important, as well. And you’re seeing much more of that as we’ve obviously talked about.  

43:32 – 44:28 

(MD) I’m struck by the fact that we’ve been talking here for about an hour now. And we don’t have real solid answers, right? We have questions and observations and certainly progress. And frankly, that’s probably what makes this business so exciting is there’s continued forward motion. Every once in a while, a backward step, but a really exciting time to be part of the space industry to be, I’m sure from your end, writing about the space industry and being in the middle of it in that way. 

Christian, it’s been a really fun conversation on a topic that continues to inspire and fascinate so many people. And it’s not only those of us who are close to the industry, but this whole new generation of space enthusiasts, who I expect they’re going to continue to make the impossible, inevitable. And I, for one, am excited to get my own copy of “Rocket Dreams,” as soon as it comes out. I hope you’ll come back on the Elara Edge to talk about it. 

And let me thank you again for coming on. And please, you take the last word.  

44:29 – 44:44 

(CD) Well, thanks for having me. It’s a real honor. I’d absolutely come back to talk about “Rocket Dreams.” And it’s fun to follow, you know, all of the work that you all are doing there. And I’m going to be calling you when I put my hat on for my day job at The Washington Post, for sure. But again, it’s a real privilege and an honor. So thank you.

44:45 – 45:29 

(SK) This has been the inaugural episode of “The Elara Epilogues,” a special edition series presented by “The Elara Edge: Expert Insights on Space Security.” As a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain, Elara Nova is your source for expertise and guidance in space security. 

If you liked what you heard today, please subscribe to our channel and leave us a rating. Music for this podcast was created by Patrick Watkins of PW Audio. This episode was edited and produced by Regia Multimedia Services. I’m your host, Scott King, and join us next time at the Elara Edge. 

Defense Science Board Offers Commercial Pathway to Integrated Deterrence

Study Recognizes the Value of Commercial Space Systems in Military Requirements 

In November of 2022, the Under Secretary of Defense for Research and Engineering commissioned the Defense Science Board (DSB) to study commercial space systems and how they can be leveraged in support of Department of Defense (DOD) objectives. As the Federal Advisory Committee to the Office of the Secretary of Defense, the DSB engaged government and space industry stakeholders to assess the opportunities and challenges to integrating commercial space systems into military requirements. The study’s resulting document, “Final Report on Commercial Space System Access and Integrity,” was published nearly two years later with five recommendations toward what the DSB called its bottom line objective: “Integrated Deterrence Requires Integrated Operations.” 

“The bottom line of ‘Integrated Deterrence Requires Integrated Operations,’ means we must budget and plan in advance to provide maximum capability to the warfighter,” said Dr. Brad Tousley, partner at Elara Nova: The Space Consultancy and a member of the Defense Science Board. “Economic power is a critical element to our military power. If commercial space capabilities exist that can support DOD objectives, they should be integrated into warfighter training now.” 

Dual-Use Technologies in Space 

The Defense Science Board’s findings come as an emerging commercial space market is increasingly developing “dual-use technologies,” or commercial space capabilities that can also be applied toward DOD objectives.  

“Commercial space systems bring the collection and distribution of information to the fight,” said Mike Dickey, Founding Partner at Elara Nova. “For example, the military needs satellite communications to transmit orders from commanders to troops in the field, ships at sea and airplanes in the air, which is the same technology that puts the World Series in every home. Further, commercial satellite images that support economic monitoring of crude oil movement through ports around the world can also find Russian convoys in Ukraine.” 

Commercial space systems have demonstrated their military value since the onset of Russia’s invasion of Ukraine in February of 2022. However, the Ukrainian military’s reliance on commercial space systems was not planned in advance, but rather came as a result of the inherent responsiveness of commercial space technologies.  

Understanding Commercial Space 

Now, the DOD is looking to understand how the commercial space industry – and the institutional investors financially backing it – can similarly be factored into their own warfighting plans today.  

“Prior to the pandemic, commercial investment in space technologies peaked at about $15 billion a year, which was essentially the same as the Space Force’s budget in Fiscal Year 2021,” Dickey said. “Leveraging that commercial investment becomes a huge opportunity for the Department to double its financial resources toward space capabilities for military operations.” 

The Defense Science Board defined “commercial space,” across four elements: innovation, development, products and services. But the report prioritized the two elements that can provide immediate value to a modern or future conflict: commercial products and commercial services.  

“From a near-term standpoint, the Defense Science Board’s goal was to offer a set of recommendations for applying commercial solutions to immediate DOD needs,” Dr. Tousley said. “There are a variety of commercial space products or services the DOD can buy now, as demonstrated by the use of commercial space systems in Ukraine.” 

Planning for Commercial Integration 

To this end, the Defense Science Board offered five recommendations toward facilitating the growth of commercial space markets in ways that also align to fulfilling DOD objectives.  

The first recommendation calls on the government to “implement an end-to-end framework to better integrate existing and planned commercial capabilities into national security architectures.”  

This recommendation stems from opportunities to utilize commercial space technologies that have already matured, much like the commercial satellite communication (SATCOM) networks that exist today.  

“United States Space Command has a Commercial Integration Cell that sits at Vandenberg Space Force Base primarily supporting satellite communications,” Dickey said. “By sitting with Space Command, those satellite communication providers are aware of ongoing operations and threats to their commercial systems, so they can translate those potential issues into enhancements, upgrades or defensive cyber operations to guarantee resiliency against the threat before a crisis emerges.” 

While the Commercial Integration Cell at Vandenberg is an example of integrating a mature commercial space capability at the operational level, not all commercial space markets have reached the same level of maturity that makes this collaboration possible. However, the DOD can apply the same financial strategies it uses to buy services from the SATCOM market to support the growth of other emerging capabilities, too. 

Budgeting and PPBE Flexibility 

One of the significant advantages of a mature commercial space services market is the ability to respond to the ebbs and flows of supply and demand. Long-term budgeting for these variations, however, is difficult to predict. In the SATCOM market, the government has solved this by making use of a Defense Working Capital Fund as a funding tool. 

“The working capital fund basically creates a checkbook that the government can use each year in the commercial market to support a certain requirement,” Dickey said. “DOD users can transfer money into that checkbook and have the purchases made on their behalf. With a multi-year funding process and the working capital fund, the DOD can get better market pricing that will drive the cost down for a service, while providing transparency to companies and their investors about the government’s buying habits.” 

The Defense Science Board further addressed challenges in the DOD’s budgeting process directly in its second recommendation: “integrate evaluation of and provision for commercial space services into institutional processes.” 

The DOD currently develops its budget through an institutional process known as Planning, Programming, Budgeting and Evaluation (PPBE). But the long-established PPBE process lacks the flexibility needed to keep pace with the rapid developments of commercial space technologies. 

As such, the Defense Science Board advocates for more flexible funding measures within the PPBE process. In addition to the working capital fund model found in their first recommendation, the DSB also supports the flexible reallocation of operations and management (O&M) funds that were similarly recommended by a Congressionally mandated Commission on PPBE Reform earlier this year.  

“Program executive officers need flexibility to move funds between program elements year-to-year, because sometimes one program might under-spend on a service or product, while another might have a greater need,” Dr. Tousley said. “So if the government can adopt a multi-year acquisition reform and leverage working capital fund-like models, the commercial market will have clarity on market demand. Then as long as Congress can review a multi-year appropriation in the appropriations process, their equities are served.”  

Guaranteeing Resilience of Commercial Space Systems 

A greater reliance on commercial space systems, however, presents its own set of risks for the DOD’s military requirements. These risks influenced the Defense Science Board’s third recommendation: “incentivize trust and build resilience in commercial providers.” 

“The government can include resilience of a commercial space capability as a quality-of-service requirement, while acknowledging that quality assurance is going to cost more,” Dr. Tousley said. “But as long as the additional price is factored in as part of the economic model, then the vendors know what they have to do to ensure resiliency, and the government can rely on the enhanced capability as a function of the increased pricing.”  

Commercially available space technologies also present the risk of adversaries leveraging them against the United States and its Allies. The Defense Science Board acknowledges this likelihood in its fourth recommendation: “develop suite of capabilities to monitor, assess and respond to adversary use of commercial space capabilities.” 

“Commercial partners and the government have to acknowledge that adversaries will want to use the same commercial capabilities that we would want to use,” Dr. Tousley said. “So commercial vendors must ensure the U.S. government’s interest is best protected in a way that does not damage the commercial industry’s international growth.” 

Government as Regulator, Investor and Customer 

Navigating the complexities of the commercial space market may be a challenging endeavor, but the state of each market can inform how the DOD develops its policy. This dynamic created the Defense Science Board’s fifth recommendation: “account for maturity of the commercial market when making decisions on how it regulates, invests and buys commercial space services.”  

The Defense Science Board proposes the DOD do this by avoiding over-regulation, while investing for “market creation, not market monopolization.” As an example, Dr. Tousley points to how the DOD actively relies on the GEO commercial satellite communications market today, while understanding the more nascent proliferated Low-Earth Orbit (pLEO) and cislunar markets will require a more calculated investment to facilitate their growth. 

“Over-regulation can restrict a robust domestic market, while inhibiting commercial competition internationally,” Dr. Tousley said. “Competition in the commercial space market serves the DOD’s best interest in the long term with more competitive pricing, so the government must account for market maturity when it evaluates how it’s going to regulate, invest and buy these commercial space services.” 

This final recommendation highlights the key challenge for the DOD as it looks to engage the more nascent industries within the commercial space market.  

As an “anchor tenant,” the DOD can provide critical, early-stage funding for emerging space companies to grow their capability into a total addressable market. But the government’s influence can also inadvertently prevent other competitors from entering the market by creating “vendor lock” with a single provider, thereby also reducing the resiliency for a given military requirement. 

“There are ways to navigate the government’s role as an anchor tenant while avoiding vendor lock,” Dickey said. “The government can put down the first investment in an emerging space technology as its first and majority customer, but the government also needs to mitigate the risk of vendor lock by creating on-ramps for other providers into the market and off-ramps for those who fall short of mutually agreed expectations.” 

Achieving Integrated Deterrence 

With each of these recommendations realized, the DOD can apply the lessons learned in Ukraine to achieve “integrated deterrence.”  

“‘Integrated deterrence’ means the United States must integrate commercial capabilities into its military operations upfront,” Dr. Tousley said. “What happened in Ukraine demonstrates the agility and responsiveness of the commercial space market, but we must remember that wasn’t planned in advance. The government needs to plan for integrated operations now by developing contracts with the commercial space sector, because the DOD can’t just hope that a commercial space company is going to be there in an emergency.”  

Now, partners at Elara Nova: The Space Consultancy, are positioned to provide their expertise to stakeholders similarly exploring solutions at the cross-section of military requirements and commercial space capabilities. 

“Elara Nova lives at the intersection of the government, industry and the investment market,” Dickey said. “Elara Nova partners have direct experience in each of these sectors of the space economy, so we offer a unique opportunity to support the implementation of the Defense Science Board’s recommendations.”  

Elara Nova is a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain. Learn more at https://elaranova.com/. 

Episode 19: Defense Science Board Offers Commercial Pathway to Integrated Deterrence

The Elara Edge: Expert Insights on Space Security

Host: Scott King (SK) 

SME: Mike Dickey, Founding Partner at Elara Nova: The Space Consultancy (MD)

Dr. Brad Tousley, partner at Elara Nova: The Space Consultancy and Defense Science Board member (BT)

00:02 – 01:43 

SK: In November of 2022, the Under Secretary of Defense for Research and Engineering commissioned the Defense Science Board – or DSB – a Federal Advisory Committee serving the Office of the Secretary of Defense, to study the commercial space market and how their systems can be leveraged to support Department of Defense – or DOD – objectives.

The study came in direct response to Russia’s invasion of Ukraine earlier that year, when commercial space systems provided critical capabilities in support of Ukraine’s defense. The use of these commercial space systems in Ukraine, however, was not planned in advance – but rather occurred organically at the onset of the invasion.

Now, the DOD wants to apply the lessons learned and capitalize on similar opportunities to integrate commercial space capabilities into their own military requirements.

The study concluded in May of 2024, when the Defense Science Board published its “Final Report on Commercial Space System Access and Integrity,” which provided five recommendations toward what the DSB determined to be its bottom line objective: “Integrated Deterrence Requires Integrated Operations.”

Welcome to “The Elara Edge: Expert Insights on Space Security.” I’m your host, Scott King, and today we’ll be exploring the Defense Science Board’s Final Report and how its recommendations offer a pathway toward integrating commercial space capabilities into military requirements. 

Returning to The Elara Edge today is our first guest: Mike Dickey, Founding Partner at Elara Nova: The Space Consultancy and the former Chief Architect of the United States Space Force. 

Mike, welcome to the show!

01:43 – 01:44  

MD: Well thanks, Scott. Glad to be back. 

01:45 – 02:01 

SK: We’re happy to have you.  

And our second guest today is Dr. Brad Tousley, who in addition to being a partner at Elara Nova, is a member of the Defense Science Board and directly contributed to the Final Report we’ll be discussing today.  

Dr. Tousley, thanks for taking the time to join us today.  

02:02 – 02:03 

BT: Thanks, Scott. It’s a pleasure to be here. 

02:04 – 02:29 

SK: Now, the Defense Science Board’s Final Report comes at a time when the budding relationships between the military and the emerging commercial space market is drawing more and more attention. 

I’d like to begin by understanding how we reached this point. Why are commercial companies – and the institutional investors financially supporting them – entering the space domain? And why has this development captured the DOD’s attention? 

Mike, let’s start with you. 

02:30 – 04:03 

MD: Yeah and it’s very interesting. This is what we call dual-use technology. Those technologies that the commercial world is maybe focusing for commercial purposes can be transitioned into military use and vice versa. 

Just a couple of examples, in the communications business, the military needs communications worldwide so that they can transmit orders from commanders to troops in the field, ships at sea, airplanes in the air. But it’s also the same technology that brings you the World Series, for instance.  

And in the imagery market, the imagery can be used to find Russian convoys on highways in Ukraine. And it can also be used to monitor crude oil movement through ports around the world, which has obviously important impacts on the market.  

PNT – positioning, navigation and timing. You use that to put bombs in very precise places to limit collateral damage. You also need that for precision farming, so farmers can increase yields in their crops by knowing where exactly to put fertilizer.  

So, all of these technologies have a whole bunch of markets they can address. So when you’re an investor, you look at total addressable market and, by doing both military and commercial things with your technology, you get access to much bigger markets and coupled with the reduced barrier in access to launch, has made it cheaper to get to orbit so now something that’s more doable from an investor’s capital.  

But those are the kinds of things that have driven the ability for commercial to come in and play in this world and not just sovereign governments. 

04:04 – 05:11 

BT: I would just add two minor points to that. 

Number one, there’s a physical attribute within space that’s a little bit unique here, and that is that in other, I’ll say, warfighting domains, you can separate capabilities, military and commercial capabilities. But in the space domain, because of orbital dynamics, everything is intermingled. So what that means is – if I already have commercial capabilities in space and they’re growing because of the market pull, like Mike talked about, those systems are going to be physically GEO-located with military needs. So I think that’s one reason why you’re seeing this growth.  

The other is the cost of launch, particularly in the last 15-20 years, has come down so much that as interest rates stay low, the private capital that’s always seeking the maximum return in a capitalist society – that return is going to be seen as promising. 

And I think space has seen that. And when the fact that when launch comes down by a factor of ten and interest rates drop, all of a sudden you see these opportunities, venture capitalists are going to take that money, they’re going to flow it wherever they think there is a return. And space has been really arguably the hottest area of growth the last five years and all of the market projections indicate it’s not going to slow down for 10 to 15, 20 years.  

05:12 – 05:52 

MD: In the government’s Fiscal Year of 21, which was kind of the peak of where commercial investment was before the pandemic and a bunch of other things, the commercial market was investing in those dual-use technologies about $15 billion a year. 

The Space Force’s budget in Fiscal Year 21 was $15 billion a year. So you literally had two Space Force’s worth of budget that you could apply to the problems that that the military had if you did that in the right way. And so that’s a huge opportunity for the Department of Defense to leverage that kind of investment. 

And we’ll talk about all the different ways that they can leverage it. So I think we’re still in a long period here of a lot of outside money coming into the space business. 

05:53 – 06:22 

SK: These market developments have sparked a series of commercial space strategies across various DOD organizations. 

But effectively integrating commercial space capabilities into military strategy also presents complex challenges, the first of which is the somewhat broad understanding of what actually defines quote – unquote “commercial space.” 

Dr. Tousley, can you explain how the Defense Science Board defined “commercial space?”  

And how does this understanding influence the government’s relationship with the commercial space market? 

06:23 – 07:12 

BT: Within the Terms of Reference and within that study, we really defined “commercial” in four buckets. We defined things as commercial innovation, which is more on the research end – which think of AFWERX and SPACEWERX and DIU and the things they are funding. 

Then the second bucket we kind of identified is commercial development. So think of commercial systems that are being built and the government is trying to buy them in bulk for government use.  

Then the third thing is essentially buying a commercial product, which means systems the commercial world is already building, and we just want to buy copies of it. 

And then the last is services. The commercial world always builds things and offers them to customers for services, in this case the Department of Defense, the Space Force, the intelligence community.  

They want to be acquiring these services, so we think of them in terms of those in bulk: innovation, development, products and services.   

07:13 – 08:26 

MD: The language here is really important because companies will come in and say, ‘Well, I’m a commercial company.’ So they think that that opens up a new world for them. But again, the language is important. What makes you a commercial company? If the government wants to think that when you say you’re a commercial company, you have something with a big market and you want the DOD to be one extra buyer in that market, and so you can just kind of buy at the margins. 

That’s typically not been the case with some of these space companies, because the commercial markets in space have still not truly matured except in communications, probably, you can say that that’s a mature market.  

But all the other markets, it’s still not mature. So really what these companies typically want is for the government to kind of be an anchor customer, to be their first customer, to be the biggest buyer of that product or that service. 

And then allow that to be a demand signal to the rest of the world that a commercial market is possible through these products and services. So, it really starts the conversation, perhaps in a bad place because you can be one of those where you’re just one of many buyers or you could use the Federal Acquisition Regulations to buy in a commercial way and I think a lot of times that conversation will kind of spiral and slow down the progress between the commercial companies and the government.  

08:27 – 09:33 

BT: With the emergence of this robust commercial market. We think it’s important for the government as a wise customer to understand how they can affect the market in a good way or a bad way. 

You have these companies, they want to grow into all these addressable markets. And yet the government what you really want long-term is you want a good, robust ecosystem of competitors. 

So the prices stay in a margin range that’s acceptable. You can understand it. And so as some companies succeed and some fail, you aren’t totally reliant on one company. So the concern is that depending upon how the market unfolds, the government needs to be careful not to get themselves locked into a vendor lock.  

Now, if I’m a commercial vendor, I want vendor lock. I want you to buy everything I have and don’t buy anything from my competitor. That’s capitalism. That’s my market drive.  

But on the government side, when you’re supporting the warfighter and delivering operational capability. You want the capability, you want the best, but you also don’t want to be dependent on one vendor because you don’t know what will happen down the line. 

You want prices to stay in control, and you want competition. I mean, that’s good. So there’s that balancing act that the U.S. government has to be concerned about and that’s kind of what we call out in terms of being careful of vendor lock. 

09:34 – 10:40 

MD: There are ways to navigate through that. It can get complicated and it’s tough, but an anchor tenant really means that, ‘I’m going to go in and I will put down the first investment in this technology. I’ll be the first customer. You know, I’ll be 51% or more of what you’re doing with the anticipation that other markets, the other markets are going to mature, other customers will come and you’re part of that customer pie will reduce over time.‘ 

You know, the government’s been bitten by this a little bit. And even in space with the first commercial imagery contracts, there were a couple of providers for that. As the government’s fiscal situation changed over time, the government couldn’t be anchor tenants for two. That sort of reduced to one and then now you get into this conversation, well have I created vendor lock because I was an anchor tenant? 

So there’s a real concern, I think some of that gives the government pause on wanting to do that again. But I think they can find ways to back out of that. 

You can have on-ramps for other vendors. You can switch to a different type of a model where, ‘Okay, the government’s going to have to start just defining requirements,’ kind of like we used to do back in the day. But those things are all sort of painful for all parties, but it’s a necessary part of maturing what it is we’re trying to do here.

10:41 – 12:49 

BT: One of the other things that we discovered in the course of this study was there is not unanimity of understanding across the Department, and I mean all the services of what the law and what the policy allows the United States government to buy or to leverage. 

And what I mean by that is we actually went to some of the general counsels of the services and said, ‘What do you understand as inherently governmental functions in space? And you did not find agreement across the board. And specifically what we discovered was it was very explicit in the law, in that pretty much the only thing required for the U.S. Air Force, I’ll say with the Air Force is nuclear command and control is a military and a government function. Period. 

That will never, ever be commercial. But there are a host of other things that said, ‘No, that could be commercial, no it can’t.’ And what we discovered was that the difference in interpretation comes down to what’s the law say versus what is your policy. And unfortunately right now there’s not complete concurrence across the Department that’s causing part of the concern. 

For example, is missile tracking, is that only military or could there be elements of that that could be commercial? Well, in fact, there are elements of that could be commercial. The law doesn’t specify missile tracking as being only military, and but the policy does. And so if there’s commercial entities out there, for example, that are developing infrared sensors for crop monitoring – is that commercial? Well, no, that’s only military.  

So the reason I bring it up is that it’s important in understanding the emerging market dynamics for the government to be able to understand and operate that way. And unfortunately, we’re not there yet. But one of the things that we recommend is that there being careful look at the integration of capabilities. 

And the other term we came up with was, integrated deterrence, which means that capabilities of the entire United States between military and commercial requires integrated operations early on. 

We’ve identified that integrated operations are not happening in the planning phase upfront. So what happened in Ukraine. It wasn’t planned in advance. Our recommendation is these sorts of capabilities are emerging quickly now. Let’s think about integrated operations, upfront integrated contracts, all that. Get that laid out now and not try and have to respond later. 

12:50 – 13:05 

SK: And within those four definitions to “commercial space,” the Defense Science Board placed a specific emphasis on what it described as the more near-term elements: commercial products and commercial services.  

Dr. Tousley, can you explain why this emphasis was necessary? 

13:06 – 14:12 

BT: Frankly, when we started digging in on it – in those four buckets we identified from a near-term standpoint. There’s tremendous opportunities, particularly in commercial satellite communications and communications as a service. 

There’s particular opportunities there right now. There’s still questions about how that service model operates and how much the Department should leverage. There was concerns about essentially multi-year funding and color of money and working capital funds in terms of how those models could be implemented.  

The second was there was a variety of products that you can buy right now. And in fact, whether you consider it a product or a service the, you know, what was going on in Ukraine was very clearly something – it’s happening quickly – so from an near-term standpoint, helping the Department arrive at a set of recommendations to implement that right now, you could think, ‘Well, why didn’t you go into more refined evaluation of Space Development Agency with commercial development or DIU and SpaceWERX and innovation’ like that’s already going on quickly. 

We’re not necessarily going to stop or change any of that or we don’t have major recommendations at the moment. But on the services and the product side, there’s stuff already happening and we thought the Department needs to address that quickly.

14:13 – 14:40 

SK: Now, to this end, the Defense Science Board – led by retired General Ellen Pawlikowski and Mandy Vaughn – published five recommendations toward integrating commercial space capabilities into military requirements. 

The first recommendation calls on the government to “implement an end-to-end framework to better integrate existing and planned commercial capabilities into national security architectures.”  

Dr. Tousley, can you elaborate on how the DOD can do this? 

14:41 – 16:05 

BT: The most direct one is to work within a working capital fund within a commercial services market – do the integrated operations upfront and tie those into the warfighting Combatant Commander’s plans – those are not done today. 

When a commercial company wants to set up a service-based contract, that’s typically a multi-year process. Yet within the, you know, Plan, Program, Budget, Evaluation process. We do that every year. There’s colors of money, there’s appropriations within Congress, all that’s very carefully prescribed by law. The problem is when the law sets it up this way. 

But the commercial world operates in a multi-year service contract. How in the heck do you make that work out? General Pawlikowski was very explicit that that has been worked in the past. She had to work that in her time as the head of acquisition for the Air Force and the phrase she uses is ‘working capital fund.‘

There are working capital funds that have been set up across various parts of the Department of Defense that are used for just this purpose: to establish, essentially, funds that allow services to be executed in a multi-year process where the equities of the government’s appropriation process are respected.  

And her recommendation is that – the Board’s recommendation is that – it more broadly gets adopted by the Department and really robustly attack the working capital fund as a model to operate that. But it’s color money, color money, it’s appropriations. It’s the way our government operates, the commercial world just doesn’t operate that way. How do you get the benefit of both? 

16:06 – 16:27 

MD: So General Pawlakowski is certainly right. I mean, in space, the commercial, the communications market over which 80% of the Department of Defense communications travels is all done under a defense working capital fund that in the last few years, that’s been on the order of $8 billion for a bunch of different communications services, so that model is there and it’s a good way to proceed.  

16:28 – 16:54 

BT: And I think part of the reason that we we picked up on the near-term challenge and opportunity in SATCOM because as Mike said, the commercial SATCOM leveraged by the Department of Defense is such a dominant point, that getting that more integrated upfront is, to us from a model standpoint, that’s the number one recommendation we came up with. 

Can be done, should be done. There’s an example of how it works financially. It will leverage the most out of the commercial market and it will provide the biggest benefit to the Department of Defense. 

16:55 – 17:14 

SK: The second recommendation is to “integrate evaluation of and provision for commercial space services into institutional processes.” 

This recommendation ties back to the PPBE process that Dr. Tousley – you referenced earlier – so in what ways might commercial space services be factored into the DOD’s budgeting process? 

17:15 – 18:26 

BT: Part of what’s happening is from a Combatant Command perspective. That is not necessarily done upfront. It’s done after the fact. And so from an annual standpoint, if they’re going to budget within the support of working capital fund, that it needs to be prescribed by law in a way that the Department recognizes it as part of the Space Force budget. It’s identified appropriately. It’s also clearly understood by the commercial market as an addressable market. 

Part of how you get the best out of the commercial marketplace is to make sure that the addressable market, which is how they evaluate what they’re going to spend money on, make sure it’s clear to them what the addressable market is. In many cases, there have been not necessary communications, but in other, I’ll say, remote sensing, sometimes the commercial markets, like I don’t actually know what the Department’s going to spend. 

Or they’ll say one thing and then six months later, when the actual budget actions go through, it’s one-tenth of what they said. And so that lack of transparency makes it difficult for public or private investors to figure out just how big is the market going to be and how much capital can I deploy. 

Given that this is an emerging market and the United States has a tremendous amount of private and public capital that can be brought to bear. It’s the government’s interest to leverage that to the maximum effect. 

18:27 – 18:57 

SK: Now, the PPBE process was the topic of our previous episode on The Elara Edge, when Elara Nova partner Shawn Barnes discussed the findings of a Congressionally-mandated Commission on PPBE Reform. 

The Commission on PPBE Reform advocated for the creation of a new budgeting process it called the “Defense Resourcing System.” But whether or not the Commission’s findings are implemented, how do the recommendations similarly coming from the Defense Science Board remain relevant to whatever budgeting process the DOD adopts? 

18:58 – 20:22 

BT: So I’ll be going on a limb here because we didn’t actually look at that. But here’s one way to think about it: If they’re able to adopt a multi-year acquisition reform and they’re able to tie into working capital fund-like models, I think it’ll be great because I think coming back to the point, the commercial market just needs clarity of what the market is. 

So that’s their interest here and you always want to think of this in terms of constituencies within our system of government. So, the industry partners would like the clarity. So if it’s able to be laid out as a multi-year approach, it’ll more carefully align with services. From a Congress perspective, as long as the appropriations process, they get to review it and look at it as a multi-year appropriation. 

And they get to assess and evaluate it. I think their equities are served. The Department’s equity is going to be served. If we can set up a working capital fund model, because that means they’ll understand year-over-year what’s the burden on their budget.  

And you know, from a Combatant Commander’s perspective, or the supporting command’s perspective, if they know what’s going to happen over a multi-year process, it allows them to support the operations plans better. 

I’m sure they don’t want to go through the process wondering every year, ‘Well, Congress appropriated this, but not that. How does that support my need? I don’t have it.’ So I think it’s great all around.  

I just I think the PPBE annual process was set up long ago when technology did not innovate as quickly, but now the technology, particularly in space, is innovating so quickly. 

How do we respond to that? So I think it’s great.  

20:23 – 21:00 

MD: And I’ll say another aspect of the multi-year. So we talk about working capital funds. So the working capital fund basically creates a checkbook that the government can use each year, but it’s using at, in the spot market basically. So a requirement comes up. And now, we go ask the commercial servicing providers to give bids and then we select one. 

But that bid is for today and you don’t get the best pricing. If you can say, ‘Look, I’m going to do this, but I’m going to, I want to do it for two or three years.’ You’re going to get much better pricing. The cost will go down for that service to the government and it provides the benefit of giving transparency and clarity to the investors and the companies. 

21:01 – 21:40 

BT: Scott one other thing I think was in, in our recommendation, in terms of working more effectively within PPBE, was the ability to allow program executive officers to move funds in between program elements year-to-year, because sometimes one program might under-spend on a service or product, the other might have a need. 

And so that was one of the things we recommended that within a broader portfolio, the Department go to Congress and say, ‘We’d like to have more latitude of shifting funds from one to the other, because in many cases, the funds were underneath the program executive officer in total, but not within specific elements, because some programs are doing better than others.’ So we recommended – provide that flexibility. 

21:41 – 21:59  

SK: This leads us to the Defense Science Board’s third recommendation: “incentivize trust and build resilience among commercial providers.” 

How does trust factor into this budding relationship between the military and its commercial space partners? And are there any examples of how the DOD can effectively do this? 

22:00 – 23:05 

BT: We identified a few things. 

Number one it’s kind of a top level framework on the resilience and trust. The government has concerns about whether or not they can trust the performance and the security and the reliability of a commercial system. On the other hand, the commercial world knows that they depend on the government to help provide some clarity about the threat situation. 

So there’s a need to work together on both sides. And we thought that one way of thinking about it is from a market perspective, include resilience as a quality of service requirement. The government and the contractors acknowledge it’s going to cost more for that. But as long as that’s priced in and considered a part of the economic model, then the vendors know what they have to do. 

The government knows, ‘Okay, I’m going to get this enhanced capability as a function of increased pricing.’ I think that’s good and that’ll establish that market for premium pricing, which doesn’t exist today. There’s – it’s a gap in understanding. 

And then I think, you know, without getting into further specifics, just to improve sharing of indications and warning, because the government has an awareness from a rapid timeline of what’s happening more than the commercial world does. Having said that, as proven in Ukraine, many aspects of the commercial world, once they know the situation, they can respond very quickly.

23:06 – 24:36 

MD: The Department specifically, U.S. Space Command has a commercial integration cell that sits at Vandenberg that’s been very focused, for obvious reasons on SATCOM over the years it’s been in existence. 

And in that case, there are representatives from some of these commercial communication providers that sit with the U.S. Space Command and are aware of ongoing operations, are aware of threats. They have clearances and so they are able then to go back and translate those potential issues into enhancements or upgrades or defensive cyber operations or whatever on the commercial side to be able to continue to provide the service.  

That has got to grow and they recognize that has got to grow. There’s now, I think some remote sensing providers in that, as well. 

In addition to that, which is probably the deepest level of integration, there’s also the Space ISAC. There’s a set of these ISAC information sharing organizations across a bunch of different infrastructure elements within the U.S.  

Space is one of those – the Space ISAC is the Space Information Sharing and Analysis Center – and they share things that they’re seeing amongst themselves, at an unclassified level to help everybody sort of up their game in defense and understanding what’s, what’s coming at them so they can provide a more robust product. So there’s a lot of data-sharing that has to go on. 

It is happening and, U.S. Space Command is going to expand as the markets expand for more access to these different mission sets with remote sensing, PNT, whatever else we get, is going to expand to commercial integration cell, too, in response.  

24:37 – 25:04 

SK: Now, the fourth recommendation requests that the government: “develop a suite of capabilities to monitor, assess and respond to adversaries and adversaries’ use of commercial space capabilities.” 

This recommendation explicitly acknowledges that just as the DoD wants to leverage the commercial space capabilities available today, there is a risk that our adversaries can do the same.  

Why is this acknowledgement important and how can the DOD mitigate that risk? 

25:05 – 25:57 

BT: Yeah. So this is one where most of our discussions and recommendations are not in the open document. There’s some classified stuff, but, I’ll put it this way. The commercial world and the U.S. government acknowledge that adversaries will also want to use some of the same commercial capabilities that we would want to use.  

That’s pretty obviously known because if part of the commercial market for a commercial capability happens to reside over a foreign territory of concern to the U.S. government, then you have to know that multiple parties are going to try and use that capability, so that was an acknowledgement – everybody knows it. And yet the commercial vendors, particularly those in the United States, are very concerned about making sure the U.S. government is happy – happy in general. 

So I think other than that, we’ve acknowledged that and there were a variety of discussions happening behind the scenes about how to best protect the U.S. government’s interest in this area and not damage commercial industry. I’ll just leave it at that. 

25:58 – 26:21 

SK: The fifth and final recommendation of the Defense Science Board’s report states the government must: “account for maturity of the commercial market when making decisions on how it regulates, invests and buys commercial space services.”  

In what ways can the maturity of a given space capability influence how the government approaches its relationship with those relevant commercial partners?

26:22 – 29:02 

BT: This is all in the vein of how can the U.S government leverage this capability while not damaging it and at the same time support the robust growth in the commercial sector?  

I think the first thing is the DOD has got to account for maturity. And I’ll give you an example of the commercial market: the GEO commercial SATCOM market. It’s pretty mature. I think the government knows that. The government relies on it. pLEO market a little less mature. Cislunar market, very immature.  

So my point in making those three comparisons is that when the government is making decisions on how it’s going to, you know, regulate, invest and buy these services, the government as a wise consumer of the commercial market needs to account for the maturity of those systems. 

It’s just important for the government to constantly do that maturity assessment of these different markets to figure out if it’s going to regulate, invest or buy because the government is a dominant player. As Mike said, if the government’s 51% of your customer, that’s very important to the commercial sector. So that also means the government can be a damaging influence if it’s not careful. So I think that’s the first thing – account for maturity. 

The second is I think just to avoid over-regulation, the commercial sector is always going to complain about regulation and anything that can inhibit their approach to work to obtain as much of the addressable market as they can because that’s their capitalist tendency. But avoid the over-regulation because a lot of commercial entities in the United States are concerned about over-regulation inhibiting their competition internationally. 

You know, because if the government’s concerned about over-regulation, because there’s a perception of, ‘I got to do this, I go do that to protect my own equities,’ but then you damage the very commercial company you need to depend on. 

Then at the end of the day, you’re left with an international company and nothing domestically. And I’ve talked about this with the vendor lock. Invest for market creation – now that’s a very sensitive statement. Not market monopolization. You don’t want market monopolization, not because of any particular vendor, I don’t think and I don’t think anybody the DSB believes that a dominant vendor is – without competition. 

I don’t think anybody would think that’s in the best interest of the Department of Defense in the long-term. Maybe in the very short-term – it’s fine. But long-term, I don’t think anybody would think this ever works out well where you have a monopoly. It isn’t. So I think the government as a wise consumer and customer needs to think about ‘How do you invest for market creation and not market monopolization?’ 

And then the last thing is, this gets back to the law-policy, ‘what’s inherently governmental?’ Be careful and try and minimize unique requirements when you’re buying commercial services. In order to maximize the commercial service, you’ve got to keep the requirements within what’s feasible, as close as possible to that commercial product, or the commercial service, because that allows you to keep the costs down. 

29:03 – 29:18 

SK: The Final Report concluded with a specific emphasis on what it viewed as its bottom line: “Integrated Deterrence Requires Integrated Operations.” 

Dr. Tousley, how do each of these five recommendations align to that bottom line objective?  

29:19 – 30:39 

BT: The bottom line about ‘Integrated Deterrence Requires Integrated Operations’ means I’m gonna put myself in the Combatant Commander’s shoes. In order to do an effective job of planning in advance, because you always want to have your plans all set to deal with potential contingencies. 

If I’m going to have my plans well-crafted and articulated in advance, the commercial sector, if I plan on using them, needs to be a part of that plan upfront. It can’t simply be something I’m going to respond to.  

For example, in Ukraine, that only happened as a happenstance. That was not planned in advance. The whole point of integrated operations and integrated deterrence means all kinds of capabilities like that. We ought to be doing plans, the budgeting and the work in advance, to provide the maximum capability to the warfighter.  

The way I view it is, economic power is a critical element of our national and our military power. And if the commercial sector has capabilities that can support the United States Department of Defense and the intelligence community, we’re going to want to do all this planning and the work upfront to have the capabilities integrated.  

You should be doing warfighter training right now. I don’t believe that we do a lot of training with the warfighter on the leverage of commercial communications in all of our war games today. But we should. So that’s kind of the foot stomp. Let’s get to work. Let’s we’ve got a lot of capabilities that could be integrated today. Let’s get to work and do it. Let’s do all the work upfront. And let’s not just wait for the next conflict to figure it out on the fly. 

30:40 – 31:01 

MD: Yeah, kind of the bottom line is that several of the military leaders have expressed is you want the adversary to look up into space and say, ‘Wow, that’s a lot of stuff I have to deal with and it’s frankly too hard. I’m gonna have to pursue my objectives in other ways and not take the fight to space.’ That’s the integrated part of this. We could have the same conversation about partnering with Allies as well.  

31:02 – 31:25 

SK: Going back to the purpose driving the Defense Science Board’s study, to facilitate the DOD’s understanding of the emerging commercial space market and how it can serve national security objectives – how does this also pertain to the expertise found at Elara Nova: The Space Consultancy? 

And how can Elara Nova partners support these efforts at the cross-section of commercial space capabilities and military requirements? 

31:26 – 32:09 

MD: Elara Nova lives at the intersection of the three things we’ve been talking about here today: the government, the industry and the investment markets. And also with international partnerships is another part of integrated deterrence. The people that we have on the Elara Nova team and all of our partners, Doctor Tousley and many others. 

They spent time in government and or they’ve spent time in industry and or they’ve spent time in the investment markets and that expertise, all of that expertise doesn’t exist in any one place, either in the government or the industry. And so we offer an opportunity for those different players in this space, to have that conversation to mature the discussion to come up with specific recommendations and I think that’s where we can help out. I hope Brad sees it the same way.  

32:10 – 32:25 

BT: Absolutely. Yeah. No, I think that Elara Nova, we’re a bunch of like-minded people that really want to see us, know U.S. capability pushing forward for integrated deterrence. We want to support the marketplace. And obviously, in order to do that, we are laser-focused on helping our customers achieve maximum success in doing that.

32:26 – 33:02 

SK: This has been an episode of The Elara Edge: Expert Insights on Space Security. As a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain, Elara Nova is your source for expertise and guidance in space security. 

If you liked what you heard today, please subscribe to our channel and leave us a rating. Music for this podcast was created by Patrick Watkins of PW Audio. This episode was edited and produced by Regia Multimedia Services. I’m your host, Scott King, and join us next time at The Elara Edge.

LITTLETON, Colo., Aug. 1, 2024 /PRNewswire/ — Elara Nova: The Space Consultancy is excited to announce Colonel (Ret) Pete Trainer, USAF, as the Managing Director of Industry Practice. In this new role, Trainer will oversee the execution and delivery of consulting services to Elara Nova clients across its portfolio.

Mr. Trainer is uniquely qualified to serve at the cross-section of military and industry partnerships. With three decades of military and civilian leadership experience, he will leverage his expertise to facilitate new opportunities and secure client success within the national security space enterprise. In a civilian capacity, Mr. Trainer’s extensive leadership experience includes several senior executive roles at industry-leading companies such as BAE Systems, SAIC and Scitor Corporation. Retiring as a Reserve Colonel with the United States Air Force, Trainer served as the Senior Individual Mobilization Augmentee (IMA) to the Director of the National Reconnaissance Office (NRO), where he designed the NRO’s Corporate Decision Process and Secretariat. Pete Trainer’s proficiency in business strategy, as well as coordinating and implementing government contracts, will strengthen Elara Nova’s mission to elevate the strategic relevance of commercial space capabilities in military operations.

“We are pleased to welcome Pete to the team,” said Major General (Ret) Kim Crider, Founding Partner at Elara Nova. “His extensive experience and strategic vision will be instrumental in guiding our industry practice and helping our clients navigate the complexities of the space sector. Pete has been in our clients’ shoes, and coupled with his government experience, is ideally suited to the task of delivering unparalleled expertise and innovative solutions to our clients.”

Mr. Trainer’s position demonstrates the emerging success of Elara Nova’s business services and operations on behalf of its industry-based clients. His leadership experience, reinforced by his military and industry expertise, will ensure Elara Nova continues to provide cutting-edge solutions to meet the evolving needs of national security space.

“I am thrilled to join Elara Nova and contribute to its mission of advancing the space industry,” said Pete Trainer. “The national security space enterprise is at a pivotal moment in history, with tremendous opportunities for innovation and growth for our clients. I look forward to working with the talented team at Elara Nova to drive client success and push the boundaries of what is possible.”

Now in its second year of operations, Elara Nova is already renowned for its expertise in national security space. With the addition of Pete Trainer as the Managing Director of Industry Practice, the firm is poised to accelerate its trajectory of excellence in providing strategic guidance and technical solutions to commercial, government and international space clients around the world.

For media inquiries, please contact:

Scott King
Manager, Strategic Communications
Elara Nova: The Space Consultancy
scott.king@elaranova.com

About Elara Nova: The Space Consultancy
Elara Nova is a global professional services firm advancing business and government agencies to maximize their strategic advantage in national security space. Elara Nova creates unparalleled value for our clients and the warfighter, allies, and partners they serve. The team is comprised of Senior Leaders that have decades of government and private sector experience in space strategy, operations, acquisitions, engineering, technology and policy to build comprehensive solutions that support our clients’ success.

For more information about Elara Nova: The Space Consultancy and its services, please visit www.elaranova.com, contact info@elaranova.com, or sign up for our Elara Nova Weekly newsletter at https://elaranova.com/elara-nova-weekly/.

Commercial Launch, Proliferation Creates Investment Opportunities in Ancillary Space Markets

Dialogue Between Private Equity and National Security Can Jumpstart Future Space Economy

Two barriers to entry have historically defined the relationship between capital markets and the space sector: the need for significant upfront capital and long return on investment (ROI) timelines. These barriers have created a hot-and-cold dynamic between capital markets and the space sector, as demonstrated by Space Capital’s Space Investment Quarterly: Q4 2023 report that found the space economy witnessed a private equity investment of $17.9 billion in 2023, a year-over-year decline of 25 percent compared to 2022. 

But projections for the space economy not only remain high, they are quickly accelerating. A recent report by the World Economic Forum and the McKinsey & Company found that the space economy will reach $1.8 trillion by 2035, half a decade sooner than the $1 trillion projection set out by Morgan Stanley last year. As a result, new business opportunities are quickly emerging as a commercial launch market enables cheaper access to space and the Department of Defense (DOD) shifts toward a proliferation of assets across the next warfighting domain.

“The space industry has gone through cycles,” said Kirk Konert, managing partner at AE Industrial Partners. “With budget declines at NASA and other government-driven programs, space hasn’t been the best place to invest private capital. But the ability to get assets on-orbit cheaper and quicker is creating opportunities for different business models within space and has allowed investors to make more returns on investments, which is increasing overall interest in the market.”

A New Frontier Requires Infrastructure

With respect to the current state of the space economy, General Stephen Whiting, Commander of U.S. Space Command, likens it to the days of the Lewis and Clark expeditions across the American West. Like those frontier expeditions, NASA’s historic Apollo missions to the moon generated excitement for what’s possible in a new domain. But without an infrastructure in place to go back, commercial opportunities remain limited. So what the space economy needs today is an equivalent to the combination of infrastructure and incentives that kick-started the settling of the American West: railroads and the gold rush.

“The railroad analogy is interesting because the accelerant to drive traffic faster was the gold rush, and so these little towns popped up along the railroads to get out West,” said Eddie Papczun, founding partner at Elara Nova: The Space Consultancy. “Similarly, we need infrastructure in space, but building infrastructure in space is a lot harder than building a train track across the country. But that infrastructure will be a force multiplier and an accelerant to the space economy, because as soon as you can get to the moon, cis-lunar and beyond, everything changes.”

As the visceral entryway into space, launch tends to dominate the public’s perception of the space industry. But the start-up days of the launch market have largely settled, as a handful of reliable mainstays are now providing cheaper and more frequent access to the space domain. However, this access to space can enable these other, necessary infrastructure elements to take shape. 

“If you’re looking to start another launch company, you’ve already missed that opportunity,” Konert said. “Entrepreneurs looking for seed capital to start a space company should project where the market will be in ten years, versus where it is today. Instead, you should focus on the lunar economy, on-orbit-servicing and decommissioning of satellites because the trends are there with proliferation.” 

Opportunities in the Proliferation of Space

The word ‘proliferation’ is quickly becoming the defining mantra of the developing space economy. Due to the historically unreliable and expensive nature of launch, the DOD traditionally prioritized getting a few, large assets on-orbit to facilitate space-based capabilities. But as space started to evolve into a contested domain, those few assets became what Gen (Ret) John E. Hyten, former Vice Chairman of the Joint Chiefs of Staff and senior principal advisor at Elara Nova, referred to as “big, fat, juicy targets,” for adversaries to attack and disable.

“This shift toward proliferation was primarily driven during General Hyten’s time at the Air Force’s Space Command,” Papczun said. “He hired Mike Dickey, one of the founding partners at Elara Nova, to architect the future of space from a national security perspective with the idea of proliferating the orbits. That demand signal essentially initiated the berthing of the Space Force.”

Proliferated architectures create resiliency in that if a space-based asset is attacked or disabled, the DOD can adapt its architecture to maintain its national security capabilities. In turn, this shift toward highly-populated and proliferated space architectures can also generate future business opportunities. Through programs like the Space Development Agency’s (SDA) Proliferated Warfighter Space Architecture (PWSA), the ancillary markets supporting the Space Force’s proliferation efforts have already caught the attention of the investment community. 

“There was always a niche in the space market, like producing composites for a space project,” said Konert. “But suddenly, companies started getting orders for not just one component, but dozens of components for this whole proliferated constellation of space activity. As a result, private equity firms started seeing an opportunity to invest in the space sector.”

A SPAC Bubble in the Space Market

Excitement generated by the proliferation of space however, has not always led to successful returns on investment. This particularly rang true after what proved to be a SPAC-bubble in 2021, from which the investment community is still recovering today. Special Purpose Acquisition Companies, or SPACs, are a common means of raising capital through an initial public offering (IPO) to acquire or merge with an existing company. For a capital-intensive industry like space, SPACs became prevalent as a series of space companies went public in 2021.

“The SPACs caught us by surprise in that every space company that had momentum or a good story to tell was going public,” Konert said. “The market cap and interest in space from retail and institutional investors exploded. But the business models weren’t worthy enough to justify the valuations they were receiving and that led to bankruptcy or near-bankruptcy for many of them.”

According to Papczun, the SPAC-craze of 2021 compromised what is an otherwise effective means of raising capital for emerging market opportunities in sectors like space.

“SPACs are a great tool because it’s an acceleratant that raises money quickly for a company that has sound business fundamentals in place. In 2021, we had bad actors who saw an opportunity to take this tool and leverage it for personal gain, and the companies were the ones that suffered because they weren’t ready to go public.”

Incidentally, the 2021 SPAC-bubble and its subsequent fall-out reinforced the risk-averse and cyclical approach the investment community has traditionally held toward the space sector. But Konert says the interest from the investment community still exists.

“Institutional investors are curious and interested in the space sector, but space is not yet considered one of those vertical sectors like industrials, business services and technology. Frankly, there needs to be more wins and over the coming years, you’ll see increased interest from institutional investors because there will be some tremendous success stories to come.”

A Future Space Economy from the Ground Up

One potential success story may come from an often overlooked, but critical component to the space economy: ground networks. According to a recent White Paper released by Elara Nova, the current Satellite Control Network in place today is outdated and overburdened to appropriately support the proliferated future of national security space. The White Paper generated a broader call-to-action, co-written by General Hyten and Elara Nova founding partner Major General (Ret) Roger Teague, to develop solutions for a new ground-based network to support the future space economy. 

“Space-based assets are useless unless they can communicate through ground-based, terrestrial networks,” Papczun said. “We need hardened antennas that are cyber-protected and enable resiliency on the ground, so we can communicate with these satellites. Ground systems cannot just sit out of sight and out of mind until the moment that you need them, just to find their capability compromised.”

Upgrades to the Satellite Control Network, like other ancillary market opportunities defining the future space economy like orbital debris and on-orbit servicing, can generate the success stories sought for by the investment community. These success stories, however, may not always be directly related to national security space. That’s why, through its recently-released U.S. Space Force Commercial Space Strategy, the DOD is using its influence to cultivate a commercial space market that will also indirectly develop the national security space solutions of the future.

“The DOD’s commercial space report envisions how the DOD should leverage the national defense industrial supply chain and private capital to be a force multiplier,” Konert said. “The investment community should be listening to the national security customer about their problems and how portfolio investments can address them. If commercial companies can attract government funding to solve the DOD’s problems as a program of record, that creates more successes and portfolio wins that will attract even more capital.”

Now, after its first full year in operations, Elara Nova: The Space Consultancy is also evolving to not only facilitate conversations between the government and industry, but to bring the investment community into the fold as well.

“Sometimes it’s difficult for the government to move quickly because it’s very hindered by regulatory oversight,” Papczun said. “The idea for Elara Nova to be an entity on the other side of that ‘frozen middle’ to help pull solutions through to support national security space. Now, we’re talking to the investment community, because we are an interlocutor between so many different parts of the traditional economy and how it sees space.”

Elara Nova is a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain. Learn more at https://elaranova.com/.

Episode 9: Commercial Launch, Proliferation Creates Investment Opportunities in Ancillary Space Markets

The Elara Edge: Expert Insights on Space Security

Host: Scott King

Subject Matter Experts: Eddie Papczun, founding partner at Elara Nova (EP); Kirk Konert, managing partner at AE Industrial Partners (KK)

00:02 – 01:39

While investment opportunities in the space economy are quickly emerging, the need for significant upfront capital and long return on investment timelines are creating a hot-and-cold dynamic between the capital markets and the space sector.

According to Space Capital’s Space Investment Quarterly: Q4 2023 report, the space economy witnessed a private equity investment of $17.9 billion in 2023. This figure marks a decline of 25 percent from the previous year. 

But projections for the space economy remain high, and their timelines are accelerating. A recent report by the World Economic Forum and the McKinsey & Company found that the space economy is projected to reach $1.8 trillion by 2035, half a decade sooner than the $1 trillion projection set out by Morgan Stanley last year. 

Driving this projected growth is an increasingly affordable commercial launch market, and a Department of Defense push toward proliferation of space-based assets.

Welcome to “The Elara Edge: Expert Insights on Space Security.” I’m your host Scott King and we have two guests joining us today, to discuss the evolving dynamics of capital markets and the space economy, and how private equity might be leveraged to support national security space needs. 

Eddie Papczun is a founding partner at Elara Nova: The Space Consultancy. He served ten years in the United States Air Force, with experience as a nuclear weapons officer, before launching his career as a serial entrepreneur and executive leader, including as a senior consultant to the Air & Space Forces Association.

Eddie, welcome to the show!

01:39 – 01:41

EP: Thanks for having us, Scott.

01:42 – 02:02

Kirk Konert is a managing partner at AE Industrial Partners, a private equity firm founded in the late 1990s with a focus in aerospace and includes a $6 billion portfolio of middle market capital. Kirk has been with the firm since 2014, specializing in the national security and space markets. 

Kirk, thanks for taking the time to join us today.

02:03 – 02:06

KK: Thanks, Scott. Looking forward to the conversation.

02:07 – 02:14

Kirk, let’s start with you.

How have the capital markets historically viewed or approached the space sector as an investment opportunity?

02:15 – 04:30

KK: The space industry through history has had different cycles. We’ve seen more recent history, the dot.com, telecom bubble and then the decline in budgets across NASA, and sort of this large, big government driven programs in space, that wasn’t necessarily the best place to invest private capital. I think what’s changed over the last decade has been access to space has gone down.

That has led to increased opportunities for different business models within space, that’s increased the ability to get things in orbit much more cheaply. That’s allowed investors to make more returns on space investments and it’s increased interest overall for the market. So what we saw was we had a portfolio of companies in aerospace defense and space was always a part of it. You’d have a company that was making a composite part for a space project. But it was always kind of a niche. It was kind of a one-off project. It wasn’t really a huge driver of the overall business.

But we started to see that change. We started to see companies in our portfolio get orders for not just one component, but dozens of components and what we saw was a couple of things.

One, this whole proliferated LEO constellation wave of activity and realized that there was the beginning of an industrialization of the space market. That – it wasn’t just one program over ten years for $1 billion that the large primes were doing on a one-off basis. This was dozens of assets that were being procured and wanting to be delivered into space.

So we decided as a firm that we need to invest in the space sector, and we need to find a way to invest in this trend of increased budgets globally for space by governments. This new commercial activity and I think we were one of the first firms to really say that private equity can make investments in this sector.

And we saw, was a lot more followers as it relates to the space investing market and that’s sort of pre-2020. What happened between 2020 and 2022, in terms of the amount of activity in sort of the SPAC-craze, but from a pre-SPAC, I think we saw this different activity of opportunity to invest in the space sector.

04:31 – 05:00

EP: It seems like Kirk, that drove a lot of people to come piling in that didn’t do their homework, which led to an unfortunate situation with regard to that SPAC-market and I think we’re just starting to see the other side of that equation where capital is starting to look at space again in a big way and I know since 21, it seems like we’ve had a bunch of down years as the segment being invested in. 

What’s your take on what the SPAC market did to the – not only the institutional investor, but even the retail investor?

05:01 – 06:04

KK:Yeah, I mean, you see this in a lot of sectors, right? You have this hype cycle. Everybody piles and valuations go up, substantially. Capital flows freely. You see businesses get funded that shouldn’t get funded and you see business models that look good on paper, but ultimately don’t really have substance behind them.

Space happens to capture the public interest and a lot of companies in the space market that were very early stage went public via the SPAC bubble.

And I think that what’s happened is a lot of institutional investors got burned by that. A lot of retail investors got burned by that, as they’ve seen companies that had great ideas, potentially great technology, but didn’t necessarily justify the valuation, the amount of capital they raised for those ideas. So what we’ve seen over the last 18-24 months is sort of the pendulum swing the other way and now it’s harder for the good companies and the great business models to raise capital. 

That’s starting to thaw to your point, Eddie, but I think that’s been a challenge over the last year for companies to raise capital, especially in the growth equity stage.

06:05 – 06:23

Kirk, you described seeing companies with small components for space projects start scaling those orders pretty quickly – which contributed to this influx of SPACs in 2021.

As you watched this unfold, were you surprised by this development? And what lessons do you think the investment community learned from this SPAC-bubble experience?

06:24 – 08:16

KK: We were very surprised. So we, we had this thesis at RedWire Space before SPACs were a thing. 

This is 2019 we said, space is an investable category. I think it’s a generational opportunity to invest in the sector. I think honestly, Virgin Galactic was probably the reason why. They were the first ones to do it. It was kind of ho-hum and then all of a sudden it was like, the market cap exploded, retail interest exploded into the company. And I think that got these SPAC vehicles were starting to make money.

You know, there’s all this retail interest in these companies that were capturing the public’s imagination. It was in the middle of COVID. It was interest-free money. You had stimulus. There was a lot of different factors that went into this money piling in from the retail sector and the institutional investors were also piling in. 

And the market had different things to say after the interest rates started rising. SPAC interest started waning and valuations came down. So it hasn’t played out exactly as we had hoped. Valuations went up a lot higher than we had expected, so it was harder to get deals done. 

But, I think, from our perspective, the SPAC thing caught us by surprise and that so every space company that had some momentum or a good story to tell was going public. So you had a dozen space companies go public and prior to that, there was zero, pure-play space companies. 

Since then, since 2021, over the last few years, we’ve seen, you know, companies weather the storm of valuations coming down, but still be highly successful. But you’ve seen other companies, other companies, sort of see that the business models weren’t worthy of being either its own company or justification of the valuation they received in 2021, so that’s led to a bankruptcy, a near-bankruptcy. Take private at a very low price versus where they were before, and I think that’s led us to what I think now as a healthier place in the space market.

08:17 – 10:19

EP: I tell you, Scott, from my perspective, what’s unfortunate is that SPAC is actually a really good tool, for the investment community, because it’s an acceleratant, right?

You’re going to raise money quickly, but that money needs to be raised for a company that has sound business fundamentals in place. So you want to accelerate growth. It becomes a corporation, it’s publicly-traded, but you’re going to accelerate it, it’s going to merge or be acquired.

And then kind of what Kirk’s saying, the SPAC market blew up. What happened was, we had bad actors, people that saw an opportunity to take a tool that is a useful tool and leverage it for personal gain in many cases.

And I truly mean personal gain, like there were some very wealthy people that became much more wealthy as a byproduct of SPACs. And the companies were the ones that ultimately suffered because they weren’t ready and we had these crazy valuations to Kirk’s point – where companies were being way overvalued when they had a paper product.

What I mean by that is, say you got a paper rocket and you are raising money through a SPAC and you don’t have a customer, you don’t have a revenue stream. You may be years away from getting approvals that you need and they just burn through the cash when they failed.

You know, so they were buying and spending money, yet they did not mature their service and their product to a point where they could generate revenue and I think, they were counting on the federal government, i.e. the Space Force and others like them in the IC community to come forward and say, ‘Hey, we’ll be your customer. This is a great idea.’ 

Well, that’s not how things work. You know, number one, budget cycles are 36 months long and the government wants to see proof of concept. And to Kirk’s earlier point, the price of launch was coming down and the price of access to space was dropping at the same time that the SPACs were coming up.

I think what we’ve seen now with regard to SPACs is that maybe at some point, we’ll see them used for what their rightful purpose was to accelerate a company with sound fundamentals and get them to a place where they can grow faster and achieve their strategic objectives sooner.

10:20 – 10:36

As mentioned at the top of this episode, Space Capital found private equity investments declined by 25 percent in 2023. 

Eddie, do you think this is a reflection of the fall-out from the SPAC bubble that we’ve been discussing and why else might the capital markets be a little bit wary of the space sector?

10:37 – 12:52

EP: Well, they don’t understand it to start with. Like a lot of equity and capital markets really don’t understand space.

You know, General Stephen Whiting who’s the Commander of U.S. Space Command. He talks about space in a very interesting way. 

He talks about Lewis and Clark. And he says, ‘Lewis Clark, go West. They map a lot of the West, and then they come home and everybody’s excited. Well, this is what’s going on with space.’

We went to the moon back in the late 60s, early 70s, and we said, ‘Wow, there’s the moon.’ And then we came home and we shared all of this, and we all were excited. And then we lost interest in it because there wasn’t a way to get out there.

There wasn’t a way for anybody to go West when Lewis and Clark came home. So the first thing they did is they started thinking about, ‘Let’s build some infrastructure so we can go West, right?’ So we saw the advent of trains and stuff. The analogy is we’re in the same kind of place. It’s just that space is a lot harder than building a train track across the country.

We need an infrastructure and that infrastructure is going to be a force multiplier, an accelerant to the space economy, because as soon as you put an infrastructure in place and you can get to the moon and beyond and cislunar and all the things that come with it – suddenly you got a way to get back and forth, and that’s going to change everything.

Institutional and even retail investors are looking at space and trying to understand, ‘Wait, how does that work? You’re talking about mining the moon. How does that work? How do you get that back?’ 

We’re thinking through that as a space enterprise and NASA and private companies across the space economy are thinking about this. But the investor world really doesn’t understand it and until they can see it, I think capital is going to be very suspect of – ‘When am I going to see return on investment?’

I can tell you, and I think Kirk would agree, that the venture capital market wants nothing to do with this, because they want to see an ROI on their investment in 2 to 3 year time horizons. And that’s not space. 
We see that ultimately this is going to be a massive part of the overall economy. Forget about space. When we talk about the GNP of the United States. Space is going to be a massive contributor to that. So that’s my perspective. I’m interested in what Kirk thinks.

12:53 – 15:19

KK: No, it’s a good perspective. And it’s interesting and it’s almost surprising to me. I get at least an email or call a week from institutional investor XYZ. They have questions about space. They are definitely curious and interested in the sector. A lot of them did invest in sort of that 2021 timeframe.

But I’ve seen again a renewed interest in, ‘How can we participate in the sector in a smart way and make return on our investment?’ What needs to happen is just frankly, more wins in this space investing sector.

So I think as you start to see more of those success stories, then you’re going to see increased interest from those large institutional investors that can find the opportunities in space and I think that’s starting to show the maturity but it’s going to take five years for that to really play out.

Where we’re going to see, generalist firms that talk about industrials, business services, tech – space is not one of those verticals. I think over the coming years, you’ll start to see that change, because I do believe there will be some tremendous success stories.

It’s interesting to talk about, like, ‘How does the national security customer play a part in that?’ Because I think there’s a lot more conversations going on. I mean, obviously, DoD released their report about commercial space and how they should leverage that. DoD had talked about the national defense industrial supply chain and how to leverage private capital. I think those conversations are also a force multiplier, because we should be listening to the customer.

‘What are your hardest problems? How should our portfolio address those? Where should we be investing to help you?’ If those companies can solve their problems and attract programs of record and attract government funding to deliver those products or solutions that creates more successes, more wins with those portfolio companies.

That attracts investment from the large institutional investors to invest in the space sector. So it’s – I’m not saying it has to be a truly coordinated, ‘pick winners’ type of mentality, but just having the conversations like to the private capital between national security and say, ‘Here are our problems. You go figure out how to solve those via your portfolio companies.’ Again, I’m starting to see those conversations happening and that gives me a lot of encouragement that we’re going to see increased collaboration and some opportunities to deliver great solutions to the customer.

15:20 – 16:59

EP: Hey, Kirk. So when we think about national security space and then a commercial company that’s trying to figure out, ‘Okay, where is my revenue going to come from?’ I think there’s a disconnect.

A lot of these companies are basically saying, ‘Hey, I have this great tech, or I have this great service or this great capability, and it’s a perfect fit.’ They have a conversation with somebody in the Space Force and it’s probably not a big decision maker. And they’re like, ‘Yeah, that’s great.’ And what I’ve heard from senior leadership of the Space Force recently is, ‘Don’t look to us to be your customer because you’re going to have to be sustainable as an enterprise, so go find other customers, create a business. And oh, by the way, as you’re maturing, that business and you want to come and talk to us about possibly becoming one of your customers, well, let’s have that. But that’ll be after proof of concept, after application.’

And this mentality if I build it, spend all this money. The government’s going to be at the front of the food chain. Well, again, 36 month budget cycles. Ultimately, we need these small companies to be thinking about like, ‘Okay, how am I going to succeed in the marketplace? And oh, by the way, down the road somewhere – I want the government as a customer.’

I think to your point, you need to be listening to what the government is signaling because they are telling us, but they’re not going to write the requirements for you and then say, ‘Hey, we’re going to fund your development of this.’

It’s not going to work that way. That’s where they’re talking about commercial to the degree they are. And I guess my question back to you is, are you seeing all of this? As you guys look at your overall portfolio and how you’re investing that you just can’t look to the government to be the reason why you’re going to be successful?

17:00 – 18:09

KK: I maybe have a provocative view on this – let’s be real. The government is the biggest buyer of space. They are the customers. We can talk about commercial activity and there is commercial activity. But by far the government is the biggest buyer of space assets.

So, I think the Space Force and the government space community needs to be real in that, if they want a certain capability fast, because of what they’re currently facing from the adversaries, and one particular adversary. 

Then they need to step up and be a customer that says, ‘We have this problem. We need this technology solution, hey, commercial industry, you go fund the technology to go do that, but we’re going to be there as a customer.’ And that’s an important shift for the Space Force and DoD to think about.

I think that the SDA is doing that. Good example of like, ‘Look, we have this proliferative LEO constellation. It’s a necessary architecture for space assets. We need this now and they’re creating a marketplace to go address those problems faster.’

But ultimately, like, if the national security community is going to rely on the commercial space industry to take shape and then we’re going to just acquire technology from that. It’s gonna be too late.

18:20 – 19:45

EP: SDA is obviously a vehicle that the government is using to accelerate deploying assets on orbit that are functioning way faster.

But then when you talk about big government, it’s still very slow moving. The acquisition bible is, you could literally stand on it and fall off and break your legs. So we need to skinny that down. I don’t think our pacing threat in China has the acquisition regulatory oversight that we have in this country, which isn’t necessarily a net positive for getting things done quickly. 

But it was fascinating. I was at the SatShow or one of these recent events and every investor that was on the stage for the investment segment wanted to talk SDA. That was where everybody wanted to, you know, what is Derek Tournear thinking?

And it is fascinating how that has got everybody’s attention. It’s kind of like when we went from big, exquisite targets as General John Hyten liked to call them, ‘satellites,’ which were billion-plus dollars. 

And suddenly you looked at the industry and said, ‘We’re going to move away from that model because those are big, juicy targets and our adversaries are investing in ASAT capability, and we don’t want to put a big, juicy target up there and then we lose it and we degrade the system by multiples. We’re going to proliferate these regimes with a lot of spacecraft, so that you could knock out up to a third of it, and we’re not going to lose any capability.’ 
And I remember people that were leading lines of effort for the primes were like, ‘No, no, no, no, no, we’re going to stay in the big satellite business. We don’t want to get out of the big satellite business.’ So, it’s kind of interesting how this is evolving.

19:46 – 20:11

Each of you brought up the SDA – or Space Development Agency – as a driving force embodying this shift to favoring proliferated constellations instead of these large, single satellites. 

Can you elaborate on how this shift in mindset cultivates opportunities for these smaller space companies? And how can agencies like the SDA facilitate funding for technologies that meet both the needs of the commercial marketplace, as well as national security space?

20:12 – 22:28

EP: This was primarily driven, Scott, by – before the Space Force even stood up when General Hyten was out at Space Command, when it was part of the Air Force.

And he hired Mike Dickey, who happens to be one of my fellow founding partners at Elara Nova to architect the future of space from a national security perspective. The idea behind that was proliferating the orbits and so that demand signal was almost a part of the berthing of the Space Force, which is, ‘We’re going to move to a model where we’re going to get a lot of things on-orbit, and we’re going to do it in multiple regimes. We’re going to not only be in LEO, we’re going to be in Geo and beyond and we’re going to have a lot of capacity up there.’

It’s interesting because I was listening to Doctor Tournear and there is this thinking about, ‘Let’s keep capacity in the barn,’ so to speak. We basically have a satellite in storage near a launch facility as needed. Say we lost some capability, maybe even in a shooting war. You pull it out of the barn, you slap it on a rocket, you process it, we tested it. There was a proof of concept. You can get this thing up in 96 hours, right? That’s super, super fast when we’re talking about space. 

Derek said, ‘Well, if you want to create capacity, in case, why don’t we just keep pushing things up? Why don’t we just keep sending things into space? And as I need that capacity, it’s on-orbit already.’

I don’t pull it out of the barn. I don’t slap it on a rocket because what if you lose your launch facility? That’s why General Saltzman, the CSO of the Space Force, has said, ‘I need more launch capacity, i.e., I need more places to launch from – globally.’ 

We don’t launch from that many places in the United States. We primarily launch from the Cape. We do some national security stuff from the West Coast out of Vandenberg and other states are wanting to get into the space economy and provide that, but it’s not that many. And so Derek’s point is kind of interesting. Another signal to capital markets is, ‘Let’s just keep pushing stuff.’ So SDA as a byproduct of the signaling that was put out there right at the inception of the Space Force, it’s basically driving that narrative right now. Let’s get as much stuff as we can up there. The more we have up there, the more capacity we have, the more resiliency we have. I’d be interested to hear your take on this, Kirk.

22:29 – 23:48

KK: It reminds me of and I’ve heard this analogy before, you probably have to. It’s similar to, like, an iPhone. You keep upgrading the existing iPhone software. But then you also get a new iPhone every year, every two years. That’s how Doctor Tournear’s thinking about it is – you’re launching assets continuously. New technology, new hardware technology replacing the old hardware.

You’re also upgrading existing things on-orbit continuously via software upgrades and you create this flywheel of not just new technology going into orbit, but also a sustained supply chain within the U.S. that’s able to deliver satellites at scale and you have a healthy ecosystem, continuous demand, sustainment of that supply chain, which I think we’ve lacked.

You look at the space industry over the last few decades, it’s very episodic, right? You’ve got a big program, then it goes away and you get another big program then it goes away. But if you have a healthy supply chain of continuous demand, there’s going to be winners and losers, but it’s going to create a very healthy marketplace to deliver the best capabilities to the warfighter and to the U.S. government. And that’s, again, going to create increased technology development for the SDA, for the Space Force. So I think he’s onto something significant for the space industry and for national security.

23:49 – 25:09

Then that drives these ancillary markets, right? A lot of talk in the last year has been about now that you proliferated the heck out of all these different orbit regimes. 

Suddenly companies are thinking about debris in very creative ways, you know, that maybe there’s going to be a bond market emerge where you got to take out a bond before you are licensed to fly, because you’re going to have to make a commitment de-orbit or to push that satellite into a junkyard beyond the orbit regimes.

And I like that idea, actually, because you know, money will drive people to actually act more responsibly. But as I look at what’s going on with regard to proliferation, ultimately these new industry lines of effort are going to emerge. I’d like to get your take as an investor. General John Hyten and Major General Roger Teague wrote an op-ed in the Hill. They talked of Russia and China – pacing threats. 

But one of the things they brought to the attention of the reader to, was the unsexy part of space, because the satellite is the sexy part, right? And launch is sexy, but we those things are just useless unless they can talk back terrestrially to the ground. So the ground-based network, which is in dire need of investment and upgrading. Do you guys see ground-based systems as an investment opportunity, especially as it relates to national security space? But all space affects commercial, as well?

25:10 – 25:24

KK: We agree. We’ve been looking at the ground segment extensively.

To your point, it’s great to have all this great new technology and these new communication channels, but if you can’t get it back down into the hands of the user at a reasonable time frame. Then it’s not worth it.

25:25 – 25:47

We’ve been talking about all these different opportunities for small, up-and-coming space companies in the space economy, whether it be in proliferation, ground, infrastructure, what have you.

But what should these start-up space companies be doing to be attractive to capital markets, whether they’re looking for that SPAC-funding accelerant that Eddie was talking about, or positioning themselves as a quote unquote ‘win,’ like you were referencing there, Kirk.

25:48 – 26:27

KK: Entrepreneurs looking to start a space space company and looking for seed capital. I would encourage them to look at where the market will be in ten years, versus where it is today. Like, if I see another, launch company to fund. I’m going to be pretty, pretty upset because we see them every, every day. It’s kind of insane to me. Like, you know, you’ve sort of missed that opportunity. 

I would be focused on what some of Eddie said, like on-orbit servicing, lunar economy, decommissioning of satellites, the trends are there, right? You’re going to see proliferation everywhere. How do you play in that market? I think is how I would encourage people to think about as they’re starting a new idea, new company.

26:28 – 26:55

EP: I would challenge that person. Go look at our resiliency on the ground so that we can talk to these satellites. 

You know, nobody’s really thinking about that to any great degree. I think the whole idea of that op-ed piece was to try to get everyone’s attention, that this is something we cannot just sit out of sight, out of mind until the moment that you really need it and it’s not there and then you’re like reacting. We need to proactively address this issue. I would challenge people that want to get into this space economy to be thinking about that as well.

26:56 – 27:02

So it seems like what you’re both saying is that the future space economy is in these niche services type of opportunities?

27:03 – 27:48

KK: To use Eddie’s analogy, right? Lewis and Clark. You gotta assume the railroads will be built and you’re not going to be the next railroad provider. There’s only a few. So how do you make money with the new railroads, right? You provide goods and services that benefit from that new access. 

And, again, there’s parts of the supply chain. We can definitely improve technology and invest in those areas and I want to go out for that trillion dollar space economy, if it comes true. It’s really around – where is the space economy going in the next decade?

And you’re only doing it if you believe that the railroad tracks are there. And Eddie I know your Rob Meyerson – what he’s doing. Like that’s a great example. Where you’re taking a bet on new resources being unlocked by this access.

27:49 – 29:30

EP: Scott, you’re thinking about on-orbit manufacturing, on-orbit servicing. The railroad analogy is kind of interesting because these little towns popped up along the route, right to get out West. And then obviously an accelerant to drive traffic faster was the gold rush.

You know, suddenly they found gold, and now everybody wanted to get there quickly. Well, to Kirk’s point, Rob Meyerson knows there’s gold on the moon and not gold. I’m using that as just that there’s precious commodities on the moon that are worth a lot of money back here and Rob is way out in front of a lot of people in thinking about this problem.

And how do I get there? How do I mine it? How do I bring it home? I couldn’t agree more with Kirk about this. The track is going to get laid. Where are we going to be in that economy? Are you going to be doing 3D printing up there? Are you going to be servicing? We’ve talked about fuel resupply, debris removal. I mean, and I would imagine the part that everybody gets excited about – tourism.

Someone will throw a hotel up there at some point and people will stay up there and pay a lot of money to do that. But to me, that’s just a little ancillary element of this. It’s going to be so much more about bringing things back. But, people are thinking about Mars and beyond and it’s just going to continue to grow and space is going to become more and more and more relevant. 

The domain is massive, because remember when you start talking about money and you start talking about economics, then you got to start worrying about how do we protect it? You know, how do we protect this as a country, as a nation? Against bad actors trying to take it from us and so there’s all kinds of stuff here. It’s fascinating. I mean, it’ll be fun over the next 20 years to watch this as it unfolds, as that railroad gets laid down.

29:31 – 30:04

KK: Definitely. That’s my advice on if you’re starting a new company and things like we didn’t mention like things that you can build in microgravity like drug development, pharmaceuticals. But again it’s really about what can space do for us terresterially and I think, Eddie, you threw out some great examples. You know, not dissimilar to any other sector.

Space you can make money at. We invest in companies that make money. We’re not big investors and companies that are burning cash. We invest in companies that make money today, have technologies that work today and space has the opportunity for a lot of those companies in the next few years.

30:05 – 30:18

Now, Eddie, Elara Nova has just reached its one-year anniversary as a consulting firm dedicated to national security space.

Can you talk about what Elara Nova has learned in its first year and how it’s evolving to meet national security space needs?

30:19 – 31:30

EP: Thanks, Scott. It’s kind of interesting. When I was thinking through this with my fellow founding partners, we saw an opportunity obviously, in helping primarily I think initially the government. We thought about the government, national security space a lot. There’s this thing called the ‘frozen middle.’ We spoke to it in general terms in this conversation. But it’s difficult for the government to move quickly. And it’s very hindered by regulatory oversight. And we call that sometimes ‘the frozen middle.’ 

And the idea behind Elara Nova was, ‘Hey, let’s create an entity on the other side of that frozen middle and help pull things through.’ So, you got people like Mike Guetlein when he was out running Space Systems Command. He’s trying to push things through the frozen middle and the whole idea of General John Hyten and others who set up Elara Nova said, ‘Let’s help pull things through.’ 

And so it’s amazing to me where we are now because here I am having a podcast with Kirk from AE talking about the investment community. I did not foresee that being such an important part of what we were going to do. But we are now an interlocutor between so many different parts of – we’ll call the traditional economy and how it sees space.

31:31 – 32:07

This has been an episode of The Elara Edge: Expert Insights on Space Security. As a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain, Elara Nova is your source for expertise and guidance in space security.

If you liked what you heard today, please subscribe to our channel and leave us a rating. Music for this podcast was created by Patrick Watkins of PW Audio. This episode was edited and produced by Regia Multimedia Services. I’m your host, Scott King, and join us next time at the Elara Edge.