Delian Asparouhov on manufacturing in space

How Building In Space Will Improve Life On Earth | Delian Asparouhov on Where It Happens with Sahil Bloom & Greg Isenberg

Check out the Where It Happens Episode Page and Show Notes 

Key Takeaways 

  • Think of crafting an early-stage startup like you’d create a movie
    • Write the script ahead of time, identify and place the ideal profiles in the appropriate roles, lock everyone in a room for six to twelve months, forge product-market fit, and emerge with the product
  • All other variables held constant, an in-person startup will beat out a remote startup 
  • The best way to level the playing field is through our republic democracy via votes and policy; early-stage startups should not be forced to be the catalyst for implementing political change 
  • “The person that is likely going to contribute the most to climate change is going to look like a heavily capitalist, venture-backed, private startup, and not through some global, large, public policy.” – Delian Asparouhov
  • A material percentage of the Environment, Social, and Corporate Governance (ESG) groups in the United States are funded by Russia and China; they are not acting in the best interests of the United States 
  • The Chinese Communist Party operates on multi-decade time horizons; the recent, tragic developments in the United States are not by accident 
  • Almost all of the best innovations in history came from cross-pollination, oftentimes unexpected cross-pollination, from two completely different fields consisting of top-tier, multi-disciplinary, physically co-located people working incredibly hard and incredibly smart on separate things 
  • Organic, spontaneous connections between unrelated disciplines do not happen if you’re working entirely remote 
  • Delian’s company, Varda Space Industries, will manufacture high-quality materials in low-orbit and then bring those materials back down to earth
    • Manufacturing products such as pharmaceuticals and human organs in zero-gravity space has certain advantages over manufacturing them on Earth
  • Varda is increasing societal productivity by lengthening the production process of space manufacturing, i.e. increasing specialization and the division of labor  
  • “The fastest path to a multi-planetary future isn’t necessarily just building larger and larger infrastructure for launch, but it’s also building larger and larger economic incentives for humans to actually be in space.” – Delian Asparouhov 
  • Following the hyper-cheap capital period of 2019-2022 where everything under the sun got funded, the year 2023 will be a reversion to the mean for capital allocation 

Intro 

  • Delian Asparouhov (@zebulgar) is the co-founder and president of Varda Space Industries and a principal at Founders Fund. He attended MIT to study computer engineering but left early to begin his investing career at Khosla Ventures. He likes to ski, play soccer, and is “here for a good time, not a long time”. 
  • In this conversation, Delian shares insights on how he runs a billion-dollar fund while simultaneously launching his first company, how a small group of people can change the world, remote vs. in-person work, hiring based on merit, how China weaponizes TikTok, the future of venture capital, and more
  • Check out these Podcast Notes from Delian’s appearance on The Pomp Podcast 
  • Hosts – Sahil Bloom (@SahilBloom) and Greg Isenberg (@gregisenberg

Books and Articles Mentioned

How A Small Group Can Change The World

  • “Never doubt that a small group of thoughtful committed individuals can change the world. In fact, it’s the only thing that ever has.” – Margaret Mead 
  • Think of crafting an early-stage startup like you’d create a movie; write the script ahead of time, identify and place the ideal profiles in the appropriate roles, lock everyone in a room for six to twelve months, forge product-market fit, and emerge with the product
    • This is impossible with remote work 
  • All other variables held constant, an in-person startup will beat out a remote startup 
  • N = 1 anecdote: A Founders Fund’s portfolio company switched to in-person and 4x’d its already ambitious sales quotas it achieved when working remotely
  • Delian did not subscribe to the “mass-psychosis-isolation” model encouraged by our deteriorating institutions; he did it for six weeks and has since been on a flight every four or five days since August 1st, 2020
    • That’s about 150 flights, approximately 31 entire days of time spent in the air, and a lot of AMEX points
  • He credits his recent career-highs in productivity to his differentiated view on work 

Hiring Based On Merit Vs. Woke Mandates

  • California tried to implement a law that required early-stage startups to discriminate on the basis of race for the selection of its board members
    • This law was ultimately struck down, but it reveals the reach of woke politics 
  • The job of startups is not to even the playing field of opportunity in society
  • The world of infinite, cheap capital made startups feel like they could behave like FAANG companies, but historically, startups are barely alive and fighting every day to survive
    • Google and Netflix have the luxury to invest in Diversity, Equity, and Inclusion offices as they are effectively institutions of the state now, but early-stage startups do not share this luxury 
  • The best way to level the playing field is through our republic democracy via votes and policy; early-stage startups should not be forced to be the catalyst for implementing political change 

Hear ESG, Think CCP 

  • Companies should optimize for outcomes
    • Diversity can naturally happen when a company with several risks optimizes its personnel selection process in a manner to mitigate those risks best
  • Different risks require people with different backgrounds to best handle them, so the backgrounds of the ideal person will look different, i.e. diverse
  • “The person that is likely going to contribute the most to climate change is going to look like a heavily capitalist, venture-backed, private startup, and not through some global, large, public policy.”Delian Asparouhov on Environmental, Social, and Corporate Governance (ESG) criteria 
  • California liberals in office make themselves feel good by shutting down nuclear power plants but have no problem using slave labor in other parts of the world to manufacture solar panels 
  • ESG-type policy is a contributing factor in Germany shutting down their nuclear power plants and now becoming increasingly reliant on a territorial dictator just east of them
  • “When you think ESG, you should be thinking CCP.”Peter Thiel at the Bitcoin Conference 2022 in Miami 
    • A material percentage of the ESG groups in the United States are funded by Russia and China; they are not acting in the best interests of the U.S., according to Delian 

The CCP’s Attack on The United States

  • In 2010, if you were Xi Jinping thinking, “How do I cripple the United States and ensure its demise?”, he’d probably come up with the following ideas:
    • Decimate the middle of the United States by producing opioids and bribing people in the U.S. to prescribe them at low cost to citizens that don’t need them 
    • Send China’s top STEM students to the best schools in the United States, get them into the top U.S. technology companies, and then force them to steal the company’s trade secrets and bring them back to China by threatening harm to their family 
    • Cripple the next generation in the U.S. by giving them all types of depression and social anxiety disorders, convince them not to have kids, and that climate change is an existential threat 
  • The CCP operates on multi-decade time horizons; these tragic developments in the United States are not by accident 
  • Sahil: Everyone should read Atlas Shrugged by Ayn Rand, irrespective of whether or not they agree with the sentiments of the book 

You Can’t Change The World From Your Couch

  • Remote work is beneficial for a large subset of the world 
    • Example: A software engineer with familial ties in the midwest can earn a high-paying tech salary in Missouri while tending to her family’s familial needs in the region 
  • Almost all of the best innovations in history came from cross-pollination, often unexpected cross-pollination, from two completely different fields consisting of top-tier, multi-disciplinary, physically co-located people working incredibly hard and incredibly smart on separate things 
    • The cross-pollination would never have happened without the spontaneous in-person gathering 
    • Examples: physics breakthroughs at Princeton in the 1930s, Xerox Parc in the 1970s, and Bell Labs
  • Organic, spontaneous connections between unrelated disciplines do not happen if you’re working entirely remote 
  • In-person fosters camaraderie between internal and external groups that can help lead to game-changing innovations 
    • Example: An employee in product makes an off-hand remark to a business development employee and a breakthrough-insight sparks in the MBA’s brain that would have never synapsed if he was half-paying attention on Zoom sitting in his Herman Miller 1,000 miles 
  • Pure execution companies that do not require large amounts of creativity to thrive are more conducive to a remote working structure  
    • These companies probably aren’t changing the world though 
  • Optimizing for investments that do billions of dollars in revenue requires investing in the top 0.01% of companies; it’s unlikely that a remote company, or one that doesn’t maximize the traditional “hard work” principles, will do billions in revenue this decade 

Varda Space Industries & Its Origin Story 

  • The Google Lunar XPRIZE was Delian’s original motivation for starting Varda Space Industries back in 2011 when he was in high school 
    • He was very much obsessed with Elon Musk and SpaceX at the time
  • He wanted to create something with economic incentives to promote industrialization in space 
  • “The fastest path to a multi-planetary future isn’t necessarily just building larger and larger infrastructure for launch, but it’s also building larger and larger economic incentives for humans to actually be in space.” – Delian Asparouhov
  • Elon and SpaceX dramatically reduced the cost-per-launch, which attracted capital to the space industry 
  • Varda started as an investment thesis:
    • Which of the industrial use cases for the space economy make the most sense?
    • Which companies in this realm are worth investing in?
  • Delian identified the most viable, near-term industrial use case: the manufacturing of  high-quality materials in low-orbit and then bringing those materials back down to earth 
    • There have been 20-30 groups working on this for the past few decades, but all of them have been hyper-academic groups that tend to prioritize research papers over producing a product 
  • Delian officially started Varda Space Industries in 2020 after his six-week stint of isolation
  • All space manufacturing has occurred on the International Space Station (ISS), a great research station, but it is not the place to scale up a commercial supply chain
    • Geopolitical issues limit what can be done on the ISS 
    • The materials that can be manufactured on the ISS is limited because there are people onboard
    • Example: Carbon and organic solvents cannot be brought onboard the ISS, which significantly reduces the kind of experimentation that can take place considering all living things are made of carbon 

Varda: Making the Movie 

  • Part 1: Get the materials to space 
    • Elon Musk (@elonmusk) of SpaceX, Peter Beck (@Peter_J_Beck) of Rocket Lab USA, and Tim Ellis (@thetimellis) of Relativity Space are solving this problem for Varda 
    • Just like its more productive to pay for Amazon Web Services compared to running your own data center, it’s more productive for Varda to use the existing launch services than it is to build its own 
    • “Rocket launch is pretty easy.” – Delian Asparouhov on the relative commoditization of launch services
    • Pharmaceuticals, semiconductors, fiber optic cables, and human organs are some examples of things that have advantages to being manufactured in zero-gravity space compared to on Earth 
  • Part 2: Engineer the actual manufacturing process in the space 
    • Recruit SpaceX engineers and ISS microgravity scientists and make them part of the founding team 
  • Part 3: Bring the materials back to Earth 
    • There aren’t that many buyers in space, so the materials need to be brought back to Earth so they can be sold 
    • Bringing the materials back to Earth is just as complex as the rocket launch process
    • There aren’t commercial re-entry services like there are commercial launch services, with the exception of four SpaceX vehicles, but they are optimized for the ISS
  • Part 4: Build a re-entry vehicle

Separating Design From Manufacturing = Innovation

  • Varda reminds Sahil of TSMC, a company that separated semiconductor design from semiconductor manufacturing
    • This separation unlocked tons of innovation and increased economic productivity because it allowed entrepreneurs to  bring their semiconductor designs to life without having to build a $5 billion manufacturing plant 
    • The Austrian view of economics argues that longer production processes are more productive because they allow for a more optimal division of labor and specialization; Varda is increasing societal productivity by lengthening the production process of space manufacturing 
  • While Varda will likely be involved in the product design process early on, ideally it will look more like TSMC or AWS in the long-term where clients simply rent Varda’s capacity, thus separating design and manufacturing
  • Delian: Varda must prove that scaled manufacturing in space is viable before it convinces clients that they should use Varda’s platform to do such a thing 

Building a Start-up While Also Being a Venture Capitalist at Founders Fund

  • Following SpaceX’s achievements that dramatically decreased payload costs, Delian identified the massive potential of investing in space over the coming decades 
    • What better way to gain access to space investments than to start an aerospace company himself?
  • Starting Varda has increased his credibility with founders of companies he wants to invest in 
  • The year 2021 was his most successful year competing for investments, despite him spending far less time investing and spending most of his time building Varda
  • The Founder’s Fund cache also helps Varda when Delian is lobbying for the company in Washington, D.C.  
  • Tactically, doing both requires a lot of travel: Delian travels between Los Angeles and Miami on a weekly basis, with stops in D.C. and Utah as well 

Predictions for 2023 

  • 2023 will be a reversion to the mean of capital allocation 
  • 2023 will resemble 2013, i.e. Google will print dollars and the next wave of prestige start-ups will fight every day for their survival 
  • There won’t be infinite amounts of capital, but people will still build game-changing companies
  • We will likely look back to the period of 2019 -2022 as a hyper-cheap capital environment where everything got funded

More Background on Delian’s Journey To Starting Varda 

  • Delian’s interest in space began in 7th grade; his original plan was to study computer engineering at MIT for undergrad, go to CalTech for grad school, then work on robotic missions at NASA’s Jet Propulsion Laboratory  
  • At MIT, he realized he might be able to have an impact on space much earlier in his life
  • He joined Khosla Ventures, an early investor in Rocket Lab USA, and began attending aerospace conferences and interacting with industry CEOs
  • Many of his MIT classmates went on to work at SpaceX, so he regularly interacted with them to see how they thought about the various business models in the space economy

Additional Notes 

  • Varda has raised a total of $54 million led by Khosla Ventures and Caffeinated Capital and joined by Lux Capital, General Catalyst, and Founders Fund 
  • The Yerkes-Dodson Law: a model that suggests there is an optimal relationship between stress and task performance 

Source: Healthline

Where It Happens with Sahil Bloom and Greg Isenberg : , , , , , , , , , ,
Notes By Stan Rizzo

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