How to attract investors

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[00:00:37] Welcome to the Space Marketing Podcast.

[00:00:40] We look at marketing principles, strategies and tactics through the lens of space.

[00:00:45] Hi, I am your host Izzy House and a listener had some great questions about promoting to investors.

[00:00:53] So we have a special guest that is an investor and an expert in the gaming and web 3 industry, which is super important to the marketing world.

[00:01:03] Jeffrey Agba with Galaxy Digital will be with us today.

[00:01:07] So lift off in 3, 2, 1.

[00:01:12] Welcome to the Space Marketing Podcast.

[00:01:25] Information relating to our discussion today and links to the video version can be found in the episode show notes on spacemarketingpodcast.com.

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[00:01:52] Jeffrey and I met a few weeks ago at the FAA Space Transportation Conference.

[00:01:58] He was a part of the panel that was called Venture Capital in the New Space Economy.

[00:02:04] Back a few months ago, Shannon, a podcast listener, reached out and asked for an episode that focused on investors who are looking to invest in the company.

[00:02:15] And what are some marketing tips to attract them?

[00:02:19] She requested a tech flavor to her answers.

[00:02:23] I have been on the lookout ever since and then I saw Jeffrey and he was perfect.

[00:02:30] Jeffrey is the director at Galaxy Digital, which is focused on mergers and acquisitions, capital raising and strategic advisory for gaming and Web3 companies.

[00:02:41] Prior to joining the firm, he worked on gaming and TMT transactions with PJT partners and Evercore.

[00:02:51] He has an investment in Merchant Banker covering frontier technologies, which includes space.

[00:02:57] His expertise crosses a venture capital ecosystem development, corporate finance, private capital markets and mergers and acquisitions.

[00:03:07] He is an honors graduate from Harvard with a degree in history and philosophy of science and has an MBA at Wharton.

[00:03:18] So welcome Jeffrey and I'm so glad to have you here today.

[00:03:24] Super excited to be here. Is he really pumped about this conversation? Obviously it's a topic that is increasingly near and dear to my heart and I kind of live it to a certain extent every single day.

[00:03:37] It has its ups and its downs, but it's always an excellent adventure so really happy to be here.

[00:03:43] No two days are ever the same right?

[00:03:46] Fortunately and unfortunately, I would say I think before I was before I went to business school, I was actually kind of lamenting the fact that I could predict every single day up to the next six months.

[00:03:59] I really wanted some variety and after business school, after banking and now in this current role every day is completely different.

[00:04:06] And so I always think back and harken back to those, you know, olden days of it was that really worse or is this is this really better. And so the predictability with its own turbulence if you were on the upside and sometimes on the downside, depending on the day.

[00:04:21] It keeps life interesting.

[00:04:23] It definitely does.

[00:04:25] So let's start off the discussion with getting to know you. How did you become interested in your industry?

[00:04:32] I'm not sure. And so, maybe to start all the way at the beginning. I was born in Houston, Texas, but I'm actually the child of immigrants from Nigeria and so it's a very traditional kind of immigrant story.

[00:04:47] My folks were from kind of the same village actually in Nigeria came to the US for the objective of just having a better life and a better set of opportunities for their kids and so I have two younger sisters as well.

[00:04:59] I was born in Houston was lucky enough to go to Harvard for for undergrad.

[00:05:05] And while I was growing up as a kid, I was a huge science fiction nerd, and I really loved video games as well. And I think I oriented myself or at least I was more inclined towards future oriented pieces of fiction either linear media or interactive media.

[00:05:21] So thinking about, okay, here we are today. This is what the future potentially look like in many cases the future was kind of sort of bleak and in some cases it's actually very optimistic and so thinking about what those opportunities will look like was very interesting to me coming to college going to Harvard.

[00:05:37] I had a lot of focus areas and a lot of interests, and I really focused in on the history of science, history and philosophy of science which was a unique major as I'm always told here and again.

[00:05:50] But it really focuses in on, you know what were the really the real catalysts when it comes to new scientific developments new pieces of technology, new concepts new theories and how do they actually manage to really be anchored in the the moment from a cultural perspective or sociological

[00:06:10] perspective or technological perspective and what are really the catalysts and the drivers to make sure that certain ideas are able to proliferate versus other ideas and so you know I kind of took that role thesis on just understanding of metaphors and really enjoyed that major but I realized quickly that I needed to get a job in some capacity after graduation.

[00:06:31] So I ended up at a really great firm called the corporate executive board, which is really, I would describe as kind of a quasi consulting research institution. And I was a researcher writing products for different fortune 500 companies.

[00:06:44] I think ranging from anywhere from TMT companies to consumer to financial services and I focus a lot on risk management and information security so very future oriented in a certain way, thinking about what are the risks on the horizon how do we protect ourselves against us.

[00:07:00] As I mentioned, I really was able to predict every single thing that I would need to do over this next six months. And I wanted to do more and you know talking to some mentors, they mentioned that hey, it might be a good idea for you to go into business school and actually pursue a career like investment

[00:07:19] because it would be an excellent compliment to what you're doing right now on the strategic side but also kind of financial technical acumen as well and so with that guidance, I was lucky enough to get to Wharton where I studied finance and just kind of jumped all in into investment

[00:07:37] and I was at Evercore where I was there for about four years, and it was a great experience for me learned a ton about banking about finance about strategy about myself and working long hours and things of that nature.

[00:07:51] I had a full head of hair when I started banking and so here I am now but things clearly change a lot over a period of time. But you know while I was there, I was a generalist and so I kind of spent a lot of time not only in TMT but also in industrials and so on the software side and really I'm kind of on the hardware side as well

[00:08:11] and you know I was hearkening back towards my early experience in my childhood where I was huge into video games, huge into science fiction and I thought okay how can I apply this skill set into kind of one of my hobbies as a kid

[00:08:26] and jumping into that mindset I realized hey can I work in gaming as a banker and you know I found an excellent role at a fantastic institution called PJT Partners where I was a banker for a bit working on gaming transactions for a lot of the companies that you know I played the same games for as a kid

[00:08:49] and you know from there I got to be introduced to different types of economic systems and different types of assets that were not physical but actually digital. So digital assets started to run through as kind of that specific type of unit of value that people are willing to pay for without any kind of tangible thing involved

[00:09:09] and you know one thing led to another and I was poached to come to Galaxy to work within their investment banking practice focused on digital assets and now increasingly focused on kind of frontier technologies across both adjacent and some non-adjacent sectors as well which I'm happy to go into but I'm spoken for a while so.

[00:09:31] You know that's awesome that's great which is space so tell us a little bit about Galaxy now.

[00:09:38] For sure so Galaxy is a diversified financial services institution and its primary focus is on the digital asset ecosystem so it's founded in 2017 by Mike Novogratz who used to be a partner at Goldman he was a trader at Goldman and his intention was hey there's this new asset class called crypto digital assets Bitcoin Ethereum etc.

[00:10:02] And I think that he thought that there was going to be a lot of economic value and a lot of transaction activity based on that asset class and so he built out Galaxy for the express purpose of trading digital assets trading Bitcoin and Ethereum and so on and different types of assets on behalf of institutional players and in that same mandate.

[00:10:24] You know obviously you know when you think about the whole ecosystem we cover mining we cover trading we cover banking we cover asset management and there are a lot of different sectors that digital assets actually touch that are quote unquote frontier sectors one of which is gaming which I mentioned kind of before when it comes to digital assets in gaming.

[00:10:44] Another is computing and especially high performance computing because if you think about an asset or crypto currency like Bitcoin in order to validate a set of transactions within a specific block you actually need to calculate a very complex algorithm and you can only do that efficiently using highly specialized computing devices called asyc minors and so you'll have these massive facilities that are just row after row after

[00:11:05] row of these you know computers that are extremely loud they run extremely high and you have to think about the balance between production of Bitcoin and then energy consumption so there's a there's a climate element to it.

[00:11:21] There's a computing element to it there's obviously a hardware infrastructure element to it and from there we've been branching out into other frontier.

[00:11:32] Sectors including AI and ML infrastructure including space in terms of advising space companies including you know climate tech and energy energy transmission.

[00:11:45] So there's a lot of different things that are captured within kind of the overall umbrella space and energy and all those kind of work together as well so let's let's focus that down a little bit into space because it's a space marketing so we're going to go ahead and do some of the

[00:12:02] why is the space industry in particular interesting to the investors right now.

[00:12:09] So I think the space market is incredibly interesting to investors both historically and because of the current circumstances so historically the space market has actually generated for early investors returns of anywhere from 600 to 700 x their initial investment if you think about GPS technologies and if you think about you know satellites that are sent into geosynchronous orbit and then the communication

[00:12:32] capabilities and the transmission of information capabilities as a result and so folks that have been able to build businesses on top of that you know in space in orbit infrastructure have generated trillions of dollars I think about $2 trillion of value to date since the 1980s right and

[00:12:50] so what's different.

[00:12:51] So I want to give the audience an idea of what that figure means the gross domestic product for Canada is around $2 trillion so that's a whole country.

[00:13:06] So just to kind of give some perspective.

[00:13:08] Yep and it covers a lot of categories that you know would expect and also wouldn't expect and so TV broadcasting is obviously a huge one.

[00:13:17] You know internet broadband services across the world is a huge one but things like geolocation for certain satellites that are in in orbit today for Uber eats for example or for Instacart or for Uber or for left all of those businesses would not exist.

[00:13:36] If you didn't have the in orbit space infrastructure in place and so what we're looking at today and what's really exciting for venture capitalist today is to think about.

[00:13:46] Okay, now that we have all that infrastructure in space how do we build out a more even more robust ecosystem and even more business opportunities that basically evolve business models that we perfected on earth so terrestrial business models in space and the benefit is that

[00:14:03] the cost of actually launching materials into space into lower earth orbit or geosynchronous orbit is actually becoming much cheaper and so I think you know back in the back in the late 90s I think it was about 30 to 50 K for 30 to $50,000 per kilogram to launch.

[00:14:21] You know a single you know kilogram of components into space I think today is something like six or $7,000 right so 80% compression in the amount of costs related to getting stuff.

[00:14:35] Generally into space will lead to a lot more folks being able to experiment on different business models in spaces which is where venture capitalists come in because the infrastructure is already there.

[00:14:46] And so the hard part of the curve has been completed now it's really the experimentation on the software side, building on top of the legacy architecture that that it currently exists.

[00:14:57] When I wrote my book there was several different models that the average space company did you know they were usually grant base and they usually had one or two investors.

[00:15:06] And so many of them didn't think they needed marketing for say so but that is changing with all these different companies coming online and with 80 different countries now having space programs.

[00:15:19] It is completely changed the dynamic of that particular business model.

[00:15:23] So we're going to we're going to talk a little bit about how to get the investor and so when we look at the approach to an investor.

[00:15:32] You know marketing is a very big part of that process. So how important is marketing and branding for you as you look at a company.

[00:15:43] It's incredibly important and the reason why is because it's not something that's actually focused on a lot when I look at different types of new space economy ventures.

[00:15:52] And the reason why it's important is because the investors themselves they have a pull of capital that they can deploy but they need to be able to defend their deployments.

[00:16:06] And in order for them to defend their deployments they have to be able to go to their LPs who provide that capital in the first place to be able to say listen this investment makes sense for these reasons now in many cases you know people generally want to work hard but don't want to work that hard.

[00:16:20] And so they don't want to necessarily have to go and do a lot of some results in order to explain a business model and to explain the unit economics or to explain what the plan is in the long term to their LPs.

[00:16:34] They would actually prefer for the founders and the management team to be able to do that themselves.

[00:16:38] And so if you're able to really you know very tightly encapsulate this is what my business is trying to accomplish. This is where it fits into the space value chain or the space ecosystem and this is the value that it's going to generate across the lifetime of let's just say the next five to seven years which is a lifetime of a fund.

[00:16:59] Being able to do that upfront actually makes it easier for any investor to be able to take that to their own investment committee and be able to say hey this is where this potential opportunity fits within our portfolio.

[00:17:13] And so when the LPs come knocking asking for either you know quarterly reports or annual reports then it's something that the investor themselves the GPs can say hey you know we've seen some really great opportunities.

[00:17:24] We should double down in on space and so there's a two fold aspect to it where in one case you're obviously trying to get some capital for your company but in the other case you're trying to expand the pie of investment that comes into the space ecosystem.

[00:17:41] So the more companies that focus on branding the easier it is actually globally for companies to raise capital for this specific industry vertical.

[00:17:52] Not a lot of folks focus on it because I think there's a mentality and this is a cross frontier technologies but there's a mentality that the technology will speak for itself.

[00:18:03] It will be something that is so so amazing so bespoke you know so technologically sophisticated that by itself it will be able to tell the entire story and I don't even need to focus on marketing.

[00:18:15] I don't need to focus on business development. I don't need to focus on commercialization if we build it they will come they being either customers or the venture capitalists or you know the press wherever the case might be that doesn't actually work and it was an insight that I

[00:18:31] had gained from my time in school from the history of science where sometimes you build a product that's ready for market or ready for the market but the market is not ready for the product right and so you need to educate the market through branding through marketing.

[00:18:48] And if you're not able to do that successfully you might have a piece of technology that sits on some company's shelf for five 1015 20 years and is not really activated until the ecosystem coalesces or the marketing and branding coalesces into something that folks can actually digest.

[00:19:06] Hold on to your boosters. We will be right back with guest Jeffrey Agba with Galaxy Digital after a brief moment from our sponsors. Please like and subscribe to the Space Marketing Podcast so you don't miss a thing.

[00:19:37] And I'm sure you get approached by lots of different companies with great products and so when they don't have branding and they have just text on a white presentation or you know just just a basic report.

[00:19:54] You know what does that message say to you about that particular company as far as how they were market and how they were brand their their company after they get the money.

[00:20:06] So I think I think it's it's a great question because if there's a there's a little bit of an overlapping skill set. So if you're able to go to an investor and convince that investor that hey you should you should put capital to work in my company.

[00:20:25] There's almost an overlapping ability to be able to go to a customer. An enterprise customer or government customer and say hey you should buy my product right and so if there is a founder or a founding team that comes with you know a presentation that's relatively bare.

[00:20:42] My expectation my underlying kind of expectation is that oh they don't necessarily know how to talk to investors. There's a good chance that they might also not be as experienced in speaking to their target customers right which is a huge problem and you can you can short circuit that problem by being able to simultaneously say hey we already have you know 510 15 enterprise customers some of government some of commercial or civilian.

[00:21:12] Depending on how you want to describe it but if you don't have that then a lot of investors are going to look at your presentation and they're going to say oh wow.

[00:21:19] This person has some challenges pitching me which means that they're definitely going to have some challenges pitching to their customer base which means that if they can't sell into a customer base there really isn't there really isn't a business and this is more either a scientific experiment or a scientific hobby which is not investable.

[00:21:41] At least as far as I can tell.

[00:21:43] Just the way a presentation looks I really want to stress that if you go to an investor and you do not have a brand and you do not have a look in it really erodes your trust the trust that you present and it hurts you so you need somebody that knows how to tell that story tell your story when you're up there in front of investors.

[00:22:06] Yeah and I and you would be surprised how many that the opposite is also you know true where if you have no product and if you have no like real kind of you know economics but you've done a great job with your presentation.

[00:22:23] You might actually be able to slide through and get some capital right just based on your ability to story tell to another party about what the vision of what it is that you're trying to accomplish and so there's a store there's a marketing aspect.

[00:22:36] That's related to it that's related to the branding aspect to it that's related to the storytelling aspect to it.

[00:22:40] That is a separate skill set from the space technology aspect to it.

[00:22:45] It's a completely different skill set and it's very rare to find in a person outside of maybe you longer or or.

[00:22:53] Mezos that can successfully synchronize or synthesize the understanding of the commercial opportunity with the technology with the branding and the marketing right sometimes it works well and you have some runway but that runway doesn't last forever.

[00:23:11] Virgin Galactic is a great example.

[00:23:14] Excellent marketing received a lot of capital received a lot of attention but eventually the technology is going to have to you know meet the expectations established by the branding approach.

[00:23:25] Yes it's got to be all of the above and that's what makes it investable is when it has the whole package.

[00:23:30] Yeah and I think the other piece of it is that the assembly of the team is going to be really important right you're not going to necessarily find as I mentioned you're not going to find the person that has the technology chops and the commercialization chops and the branding chops all in one person you might.

[00:23:48] But understanding where your strengths and weaknesses are and finding folks that are complementary to you in that regard can be hugely beneficial.

[00:23:56] And I think that if you're a lone wolf that shows some red flags as well so if you don't have that team in place then that means that you're not going to be able to scale.

[00:24:10] Yeah one person can only do so much.

[00:24:12] Yeah and the team is really that the team is really critical to especially when it comes to cohesiveness right. And so there's extra points let's say given the teams that have built a company together and exit a computer together or go through something that's very challenging in the past and I've been able to overcome those challenges by kind of working at what the solution is collectively as opposed to individually.

[00:24:39] You know I always get nervous if I'm talking to founders and rich some of the founding team members for whatever reason have decided to part ways and are still on the cap table.

[00:24:53] So you have this like phantom equity where they have five 10% but they're not really contributing at all to the vision and so you might as well consider it to be dead equity on your cap table that's going to be that's going to appear to be less investable for future investors because they're going to wonder

[00:25:09] okay how do we you know we don't really we're not really able to capture as much value as we would want to because a huge chunk is already you know owned by somebody that is no longer part of the business and then you ask questions about okay why did that person leave did they not believe in vision.

[00:25:24] Where the personality conflicts was there some other issue that we don't know about so it's really navigating many of the information asymmetries that the management team knows and the venture capital team doesn't know your customers don't know and making sure that you guys can meet in the middle especially on that dimension.

[00:25:42] Don't let them think that think of reasons why it happened it could be something just personal private has nothing to do with the business but everybody that's on the table is going to think otherwise so you need to make sure that they understand the real reason because you know that that is a red flag for drama.

[00:26:01] Somewhere down the line.

[00:26:03] Yeah, that's exactly right.

[00:26:05] Shannon's questions she says are there expectations that the same as traditional software tech startups that focus on hockey stick type growth to recoup their investment.

[00:26:17] So are they are there expectations in the same as for space as the traditional software start up that focuses on the hockey stick growth to recoup their investment so.

[00:26:29] Yeah, and so I think that this is this is something where you have to be more specific in choosing your investor because I'll say this there are those expectations do exist if you focus on a generalistic investor.

[00:26:46] And so my generalist I mean a generalist technology investor or maybe just a generalist investor overall.

[00:26:53] That is looking at all of these different investment opportunities with the same lens and perhaps doesn't have the same level or depth of expertise either in space or with government contracting or kind of with the public private partnership dynamic that exists today when you think about going into orbit right and so those investors definitely will be able to say hey.

[00:27:16] We really want to return in seven years or 10 years and you need to adhere to these specific terms in the term sheet for that to happen.

[00:27:26] I would argue that those are the best investors to go after especially if it's a seed or kind of a series A round.

[00:27:35] I think those investors don't have the risk appetite a or the patients B or really kind of the network of support C to be able to look at that kind of opportunity and stick with that opportunity over time.

[00:27:50] So I've talked to a lot of investors across the spectrum from you know generalists all the way to more specific aerospace and defense or infrastructure and and national security or you know space investors that on that end of the spectrum.

[00:28:07] They're not only providing capital they're providing a network they're providing experience they're providing capabilities and so they know that this is going to be a longer term game if you will.

[00:28:20] And so they're in it more for the long haul and understand that there's going to be certain setbacks that are unforeseeable right.

[00:28:26] I think space is a great example the first three launches were failures right in many cases most generalist investors would look at them just saying sorry we can't.

[00:28:36] We can't underwrite that because the risk profile is too high we need something that's a later stage so series C that's already been validated.

[00:28:44] The upside is going to be lower because you're not taking as much risk and so it might be a 3x versus 100x but that's probably where they're more comfortable and so if you're an early stage investor.

[00:28:54] Fewer generalists in your target pool and you're like core target pool is probably the right way to go.

[00:29:02] I'm not suggesting you shouldn't speak to them at all because you never know it's really a numbers game at the end of the day if you have 1000 conversations and you have a 1% conversion rate that's still you know pretty good conversion versus if you only have to take conversations with a 1% conversion rate and speaking to everyone is going to be really useful but for earlier stages that core group of investors

[00:29:23] I think they should definitely be more specific to space or to you know deep tech or to you know defense infrastructure something along those lines.

[00:29:33] As far as like the different levels of funding. Have you seen an increase or a decrease in the seed funding that very first level of Sunday funding.

[00:29:42] Yeah, so I think that seed and series a is probably more stable in terms of in terms of funding levels. I think that last year was tough for space ventures getting any type of funding but so whatever I think this year is actually much better because a lot of people have more eyeballs

[00:30:00] and more attention and obviously the successful launches on the space outside and from the larger is the helping matters there. I think it's just it's increasingly really tough for later stage series C series D series E companies, a lot of companies just by you know reading

[00:30:18] the lines probably are towards the end of their run run life from the cash perspective and they have not received or have not achieved product or the fit.

[00:30:30] Or don't have a product to sell into customers or don't have significant amounts of commercial traction and it's just very hard for those same generalists investors that we were talking about to go back and say okay we can underwrite this opportunity because the risk profile actually hasn't changed.

[00:30:44] So the upside is not only lower because it's a later stage opportunity, but it's lower because certain founders are still trying to figure out how to sell into their either commercial civilian customers or their government customers and so I think you're going to see fewer.

[00:31:02] We're likely going to see fewer raises at the series CD level and you're likely going to see more acquisitions of those companies at cost or, you know, as significant contraction from their last rounds post money valuation is my is my guess I don't think that there's going to be any.

[00:31:24] Any space companies that are going to IPL anytime soon, but I could be wrong.

[00:31:32] So alright, one of her other questions was what are the best marketing tactics to attract you know people like VCs and investors, you know, and where we meet them how would you find the right one and how do you find the people that are coming to you that.

[00:31:51] In that you that are asking for for some investment.

[00:31:55] Yeah, no it's a great question I think the right tactic is not to go for the hard push or the hard play immediately and what I mean by that is the first time that you talk to an investor as a founder.

[00:32:07] Shouldn't be, you know, right when you need to ask for a capital right and it's better to build a longer term relationship that has relatively lower stakes involved in the beginning in which instead of talking about hey I need $500,000.

[00:32:24] You have an informational discussion about hey this is what I'm trying to build will love to get your advice and your feedback and your guidance as to you know, is this the right direction what would you like to see in terms of commercialization what would you like to see in terms of

[00:32:40] in terms of progress, KPIs etc. So that when you do get ready for prime time, which is when you do get ready to actually, you know, formally raise your round. It's not a very abrupt conversation where five minutes into the introductions, you're going into okay I need, you know, 250k in order to

[00:33:00] accomplish this milestone to get through this specific milestone or process gate. And so that would be my first piece of guidance, whoever your whatever your list is, you know, be very broad about it and just start initiating conversations with folks earlier and sooner rather than later

[00:33:17] I think the quote is, you know, did your well before you need it. I think that really applies here. I think, you know, the location of where to find investors, you know, conferences are great.

[00:33:28] I totally totally recommend going to conferences and just, you know, being very open being very transparent about what you're trying to build building is hard executing is hard sharing ideas is very easy.

[00:33:40] And so I don't think that you should necessarily feel as a founder uncomfortable about sharing, you know, any specific idea, because 99% of success really lies in the execution piece.

[00:33:52] And if you're able to get the execution piece correct with the ideas wrong. All you really need to do is just pivot pivot to an idea that is much more amenable or much more agreeable to either your investors or to your customers and then execute against that idea.

[00:34:07] And if you have the right team in place and you have the right processes and systems in place, you should be in good shape.

[00:34:12] Regardless, and so going to conferences actively talking about what you're trying to build.

[00:34:16] I believe building in public can also be really beneficial. It depends on, you know, what side of the space sector that you're on and you obviously can't do that if you're more defense oriented on a kinetic or not connect basis but if you're not as defense oriented

[00:34:32] or more communications oriented or if you're doing something that's different and really kind of building out and based on infrastructure that's publicly known or information and data sets that are publicly available.

[00:34:41] Building in public I think can't hurt in those cases. Where do I go to find those same investors really I just do a lot of cold outreach outside of conferences myself, a lot of cold outreach into different companies that find interesting.

[00:34:56] Listen to a lot of blogs or listen to a lot of podcasts on space or other frontier technologies and really just reach out and say, Hey, you know my name is Jeff. I really, you know, would love to learn more about what your focus areas are when it comes to investment opportunities and you know learn a little bit more

[00:35:13] about specific companies within your portfolio and just scheduling call and you'd be surprised. Right. Everything is a game of probabilities in my opinion, and it really is the number of shots that you take that that matters at the end of the day, either for, you know, cold outreach or for, you know, getting capital.

[00:35:30] The person that reaches out to 10,000 potential investors is just statistically going to be more successful than the person that reaches out to you know 100 or 200 or 300 by you know the law of wash numbers so it's a lot of work.

[00:35:45] Right.

[00:35:46] So folks consider, you know, building the product and building the software as paramount. I think it needs to be thought of as these are symbiotic in terms of their relationship. So doing both at the same time is very, very hard.

[00:36:01] But that's where, you know, the value creation if you will is coming from.

[00:36:05] And one of the things I talk about in my book is one of the problems is that you have something that you want to keep secret.

[00:36:12] Yeah.

[00:36:13] And so you don't tell anybody about it. But here's the thing there, you know, when we first went to space with the Apollo program, there was a lot of secret. We were going against the Russians, but they were still able to take what wasn't secret and tell the story and get people involved.

[00:36:29] And that's what made it successful. If you keep your business a secret, then how will anybody know you exist and how can anybody buy from you or, you know, my whole thing is if you keep it a secret you will cease to be existing in a short order if nobody knows.

[00:36:47] You gotta have people know.

[00:36:49] I agree. I have this weird theory that certain certain technologies that are made public first tend to accelerate across the growth curve a lot faster and if we look at even something as simple as or complex as as a I in the company open a I it started as a public benefits corporation.

[00:37:12] So it was actually a public corporation. And their express purpose was to develop a generalized artificial intelligence for humanities benefit.

[00:37:22] And so after, you know, they successfully created a prototype in the chat GPT interface. That's when you started to see more of a clamping down into more of a private benefit organization or just a private organization corporation.

[00:37:39] But a lot of the learnings and the understandings of AI in general.

[00:37:46] We're able to come from that public orientation and this are pollinating other companies into building up their own iteration of AI. Right. And so my only point there is that there's a lot of benefit that can come from folks that are all aligned on.

[00:38:04] Okay, this is what we're trying to achieve and you'll attract a lot of folks who have the same vision. You see it in gaming all the time as well where there are folks that build games in public.

[00:38:14] And they're just asking for specific skill sets on Twitter or on their blog and people inbound them who have been working on this kind of discreet way to, you know, visualize this 3d 3d graphical object and they just say hey, this is what I've done.

[00:38:31] Can I help you out? And some of those companies end up being huge successes as well. It's a totally emphasize that point on trying to build more in public if you can.

[00:38:42] Absolutely, that's great Google started that way as well and look at them.

[00:38:48] And okay, so a big one here. What are some pitfalls that companies fall into that make them undesirable to an investor.

[00:38:58] Yeah, yeah, that's a good one. And I think one of the biggest ones is raising around raising too much money.

[00:39:11] And the problem is, is that if you raise too much money and you burn through you burn through all of that capital quickly.

[00:39:19] It becomes incredibly difficult for you to raise the next round, especially if you haven't achieved product market fit or commercial traction because any new investors want to come into the situation and look at how exactly did you use the proceeds that you were given.

[00:39:37] And if they're not being used in a responsible manner, then they'll just assume that you're not a good steward of that same amount of capital.

[00:39:46] And they'll very politely say sorry we can't participate in this round but you know keep us posted on your progress I think that's a that's a big one and then whenever you raise a big round you obviously have a very large valuation.

[00:39:59] Sometimes it's almost impossible to grow into that valuation because you don't have the revenue streams in place to do so. Right and so.

[00:40:09] That makes your numbers look bad.

[00:40:11] It makes your numbers look really bad, right because maybe you're generating $5 million revenue but you're one billion dollar valuation company based on your last round.

[00:40:20] It's going to be very hard for anyone to come in after that and you have to also think about okay, am I willing to go through the mental stress and strain and the emotional stress and strain of a revaluation or a down round of anywhere from 25 to up to 95%, which I've seen happen in different

[00:40:42] healthcare sectors and it's a very painful thing because a lot of the folks that joined really joined for the upside opportunity and the potential. So that's a big one.

[00:40:52] Another one is a lot of conflict at the management level, right and so that team piece again, if the team is not cohesive, right, getting to space and building a business through space assets is very challenging.

[00:41:09] The team needs to be iron clad as much as possible. If there's any of there are any fissures, it just becomes really difficult to invest because now you have a technology challenge. You have a commercialization challenge and then you have a human capital challenge.

[00:41:24] And most investors only want to deal with one or two of those challenges or frankly are only equipped to deal with one of those challenges not all three.

[00:41:34] And the first one is if you've allocated too much and this is kind of sort of related to the first one, but if you've allocated too much of your, your ownership too early. Right. And so I think the rule of thumb is, if you're putting in, if you're losing out on more than 20% of your capital cap table in around,

[00:41:54] and let's say it's 25 or 30 or 35% that is really uninvestable for subsequent investors. And it's actually kind of painful for existing investors because no new investors want to come in into that cap table because they're going to know that the founders are already

[00:42:11] heavily diluted. And those new investors are going to assume that the founders are not really that incentivized to treat this responsibility, which is building this business as more than a job. Right. This has to be kind of a passion, a mission, a vocation, not a vocation, a passion mission.

[00:42:29] And you have to really be driven to do this. And investors that look at founders that see their role as a job are not going to, they can't expect a 10x or a 100x or even 1000x outcome from somebody that's thinking about their responsibilities as a 9-5 frankly.

[00:42:49] Okay. And we had a different conversation and you talked about what percentage would be a good percentage for the founder to have of their shares.

[00:42:59] Yeah. So I think maintaining ideally 80% of their shares across the seed, let's say the seed round and then it'll decrease randomly from there but trying not to give away more than 10 to 20% per round I think is ideal.

[00:43:19] Right. Because at the end of the day, you know, you have to choose investors that are partners and that are not predatory. And what that means is that yeah, you might give away some percentage but there's also terms that imply that you're even giving away a higher percentage and you don't even know about that.

[00:43:37] So the liquidation preference is a big one, which I deal with all the time today. And it's usually it has to be a 1x liquidation preference, which means that the investors in an exit or liquidity event they get respectively 1x of what they put in so they get what they put in.

[00:43:52] I've seen as high as 2x, as high as 3x to the point where the incentives are not aligned. And it's really, it gets to be a painful kind of contentious conversation in the future. So I think making sure that you maintain ownership of your company is really critical for your own motivation and for the perception that you're going to be motivated to move this venture into a company into a corporation that eventually exits well or goes public.

[00:44:19] One of the things I wrote down a note saying you touched on market fit. And this is one of the areas I see a lot of problems is that they create this widget.

[00:44:30] It's their baby, they think it's great but they've actually never talked to the people that will be using it. We want to talk about that a little bit and how important market fit is what it is and why is it it's important.

[00:44:44] Yeah, market fit is really understanding who exactly are your customers going to be and how is your customer base going to evolve over time.

[00:44:52] Right, and I think this is a little bit of the crux of the inventor or the dilemma of the inventor where they exist within a network that understands to my new detail technology.

[00:45:04] And they know that a piece of technology that they've developed through their own ingenuity is extremely impressive to themselves and also that same kind of scientifically or technologically oriented network.

[00:45:16] Now what the what that inventor or that founder doesn't know is, okay, but is anyone going to pay for either that product or a service that's built on top of that product.

[00:45:28] And that requires a very painful transition, which is you need to take your baby out of the house and bring them bring that baby to the to the neighbor and say hey, is my baby ugly.

[00:45:43] Or hey, is my baby worthy of being on a Gerber commercial. It's like one of the two and it's really it's really an easy there's an easy way to determine one direction or the other and it's, hey, I actually I actually look at it.

[00:45:57] I would pay for that. Right, if it was first say I will pay for that today, or if there was a service that's based on that technology I would pay for that today. And you know, it's a it's a business development question, but you can take it in a lot of different directions and so it's business

[00:46:12] development through kind of the government contracting piece right and so you need to have inroads into either defense primes or, you know, the Department of Defense or different agencies to be able to say hey, what exactly are you guys looking for

[00:46:24] and can we build a product or is the product that I've built.

[00:46:27] Aligned with what you're looking for such that, you know, we can go through some type of commercial agreement here.

[00:46:33] The same thing has to be done with more traditional civilian or commercial customers. It's a different skill set right because there's process involved in one case.

[00:46:41] And there's less process involved and really kind of less understanding of who to speak to on the civilian commercial side, but I think it still needs to be done.

[00:46:51] And there's, there's different ways that you can develop a product right so different product development processes.

[00:46:58] It has to be integrated in your product product development process. So as you're getting to different design phases or different levels of prototypes going out into the market either on the government side or on the civilian side is going to be really crucial and be able to say hey, this is what we have is what we developed.

[00:47:14] Is this something that is aligned to these mission requirements or criteria? Is this something that's aligned to your corporate strategic objectives for 2024.

[00:47:22] If yes, okay, how much would you be able to pay for it or this is what we're thinking about for pricing. If no, how can we make this product or service more aligned to what you're looking for so that that I think needs to be.

[00:47:34] It sounds weird, but I think it needs to be integrated into the product development process itself and consistently otherwise you'll come out with a fully formed.

[00:47:45] You know, object product service, but you'll be looking around because there's no takers because there's no, there's no customer need from any.

[00:47:54] It's quite not on target. And this is where your marketing professionals bringing them in on this process can help because they can go out and talk to your customers and your potential customers and get feedback.

[00:48:09] So your marketing team is critical from the very beginning. It's not just something that you hire when you're ready to do a website.

[00:48:17] It is and I think there's a, there's a tension there as well because I think there's a lot of VCs that believe that the founder should be the best marketer as well.

[00:48:27] Right. And they should be in the same person and you should be able to sell everything. You should be able to build everything. You should be able to market everything.

[00:48:33] And I very frankly, space is so complex as a category.

[00:48:38] It's, you would be hard pressed to find and to be able to even develop that skill set within within a person.

[00:48:44] Right. And as my recommendation is don't feel excessive pressure to do everything yourself because if you do that, you become a jack of all trade trades master of none.

[00:48:57] Definitely allocate different folks that have that specialty or the have that capability or that capacity to focus on the marketing piece while you're focusing on the tech piece or the government liaison in peace.

[00:49:09] And then you all can kind of work together towards accountable and you make something beautiful. You make a beautiful baby. Yeah, yeah. Exactly.

[00:49:18] So, okay. So where do you see the space industry because you're all about future? This is what you do is you look at the future. So where do you see the space industry in the next 10 to 20 years going?

[00:49:30] Yeah, so I think it's going to be. I think there's going to be an explosion of new space companies and I think that it's you're going to see a lot of folks that are not endemic to space.

[00:49:39] And so folks that are not ex-NASA or ex blue origin or ex space X that are coming from all different walks of life looking at the opportunity in space thinking about their own childhood and how they thought about space then and trying to figure out how can I apply business models that I understand very well and it could be premium business models.

[00:49:57] It could be subscription services. It could be.

[00:50:00] Grocery models could be insurance models. How can I apply that skill set in space because of the different capabilities that space is now providing us as a result of the, you know, 10 X 20 X increase in the number of assets that we're now going to be able to have in space due to reduce

[00:50:20] launch costs and reusability of rockets and advances in material science and manufacturing. And so I think, you know, we're going to have a lot more smaller businesses in in or oriented around space.

[00:50:34] And we're also going to have a diversity of potential customers. Right. And so right now, I think the, the, the commercial civilian sector is lagging behind the, you know, governmental defense sector as potential customers for a lot of space ventures.

[00:50:49] And so we're going to slowly shift and change over time, such that different, you know, commercial companies via financial services, consumer goods agriculture are now going to start thinking about, okay, how can I incorporate space as the fundamental or critical part of my corporate strategy, either through, you know, making sure

[00:51:10] that our transactions are executed in a timely manner and our comprehensive either through coordinating, you know, I would say decentralized energy infrastructure across a very wide geography or, you know, even through just mapping of, you know, cities and determining

[00:51:27] how do we expand, you know, ever expanding cityscapes into larger and larger entities that are still controlled to a certain extent or agriculture and just making sure that we're monitoring the health of different agricultural fields or monitoring, monitoring biodiversity or monitoring, you

[00:51:42] know, reforestation or deforestation. So I think there's going to be a lot more commercial opportunities on space. I think that the more folks that we get into the industry into the sector, I think the faster it will grow.

[00:51:53] Yeah, and more customers in something there'll be more space to space customers in, you know, it just the ecosystem grows. So, all right, the last question of the day is what thoughts would you leave our audience with today, what do you want them to mull around in their head as they're going through their day.

[00:52:11] So I think the, I think the thought that I think about a lot is when I was a kid, I always thought about the future in terms of media. So linear media, books or movies or interactive media video games and more often than not, the future was very negative.

[00:52:30] And it was, you know, bifurcated between one of two outcomes. It was either the Blade Runner outcome where it's massive, you know, dark cities and, you know, everyone is the 99% and there's like all this, you know, this overhang of despair, or it's the Mad Max outcome where it's everyone for themselves and, you know, it's heavily, you know, heavily climate change disasters left and right and, you know, things are looking very wild and chaotic.

[00:52:59] And I think that the thought I would leave folks with is there's definitely a middle path that is much more optimistic and, you know, much more positive in nature. And I think that what we need to do is ignore, you know, the examples that we've been given and build, you know, towards the future that we want to live in.

[00:53:20] And it might look very challenging at times and there's a lot of issues in our world today. But I think that incrementally building towards that future, you know, either in space or in some other frontier technology or frankly in more traditional industries is the right way to do it.

[00:53:37] And it's just a matter of, you know, hunkering down in some cases and taking it one step at a time in whatever it is that you're trying to accomplish.

[00:53:44] Yeah, let's create the future that we want to see.

[00:53:48] Exactly.

[00:53:49] Yes.

[00:53:50] A special thanks to Jeffrey Agba with Galaxy Digital for sharing his expertise and his journey to space.

[00:53:57] Be sure to check out his links listed in today's show notes.

[00:54:01] Please like and subscribe to the Space Marketing Podcast so you can help get the word out about this incredible industry of space.

[00:54:11] I hope that you have found this podcast useful for your journey as you reach for the stars.

[00:54:34] And if you're watching this on YouTube, click the subscribe button.

[00:54:38] We're down here. Yeah, wherever it is.