As far as Tom Olson is concerned, the companies trying to raise money to build new-generation launch vehicles and other space systems need to focus on the fundamentals. “There’s too much reliance on the
,” said Olsen, a partner in Exodus Consulting, a firm that performs due diligence investigations for venture capitalists.
Speaking at the Space Venture Finance Symposium here Olson
said entrepreneurs need to concentrate instead on knowing what they are trying to do and solving specific problems, from providing lunar oxygen to future exploration missions to building solar power satellites and approaching venture capitalists.
The Space Venture Finance Symposium was part of the 26th International Space Development Conference (ISDC), which was held here May 25-28 and sponsored by the
National Space Society.
While the Space Venture Finance Symposium, held
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,” he said.
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, he said.
Olsen offered a “top ten” list of items new space businesses should have ready
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 [venture capitalist] knows it’s a good deal, they’ll want it all to themselves and will try to keep everyone else away.”
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.