DALLAS, Texas As the International Space Development Conference (ISDC) wound
down Sunday, business practices were on the mind of many speakers. "There's too
much reliance on the 'coolness factor'," said Tom Olsen, a partner in Exodus
Consulting, a firm that specializes in performing due diligence investigations
for venture capitalists.
Instead, he
said entrepreneurs need to concentrate on knowing what they are trying to do
and solve specific problems, from providing lunar oxygen to future exploration
missions to building solar power satellites to approaching venture capitalists.
The
ISDC, the 26th conference of its kind, was sponsored by the National Space Society ran here from May 25 to 28.
While the Space
Venture Finance Symposium , held Thursday, May 24 in conjunction with ISDC, described
how venture capitalists could help space business founders, Olsen went a step
further, suggesting behaviors to avoid and tactics to attempt when
entrepreneurs meet with investor "angels" or venture capitalists for the first
time. One of the biggest challenges for due diligence investigators like Olsen is
the lies people tell in their business plans, from claiming that a larger
company is about to make a purchase to "Some other group is interested in us."
Space
businesses can kill deals with venture capitalists in other ways, like using
bogus or questionable market studies, claiming one's management team is
experienced despite lack of past performance, or assuming that one's company
position is unassailable because it has patented intellectual property.
"Mention patents once, and leave it alone. If there's a dispute with a larger
company, they have deeper pockets," meaning they can fight legal battles
longer.
Olsen
offered a "top ten" list of items new space businesses should have ready for
when making a presentation to investors or when the investors' due diligence
investigators come calling. This documentation includes a description of the
problem the business is trying to solve, and its solution; the business model
and market plan; and reasonable revenue projections based on specific, known
customer markets.
Instead of
trying to gain leverage through storytelling, Olsen suggests demonstrating
simple business savvy by doing one's homework, going to offices and getting
introductions, and showing success. He believes that arm-twisting or
truth-stretching are unnecessary, though he has heard or read them in most of
the space business plans he reads. "If the VC knows it's a good deal, they'll
want it all to themselves and will try to keep everyone else away."
This due
diligence approach is seeping into the space advocacy community at large. Other
presentations on the two-day business track at ISDC concentrated on
cost-effective or profit-minded ways to execute satellite launch services,
solar power satellites, and lunar propellant services. This business-minded
shift from technology to business models reflects the greater influence
entrepreneurship is having over future space ventures.
NOTE: The
views of this article are the author's and do not reflect the policies of the National
Space Society.
Visit SPACE.com/Ad Astra Online for more
news, views and scientific inquiry from the National Space Society.
Bart
Leahy is a technical writer at Schafer Corporation in Huntsville, Alabama.
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