Jeff Greason, XCOR Aerospace
XCOR Aerospace of Mojave, Calif., recently cleared a significant hurdle in its efforts to develop a two-person suborbital spaceplane called Lynx. It wasn’t a technical milestone, but a financial one. Closing a round of $5 million in equity funding puts the company, led by co-founder Jeff Greason, in position to finish building its first operational Lynx and begin flight tests this year.
The company also has begun booking revenue from a 2010 wet-lease agreement with the island of Curaçao to operate Lynx suborbital flights from the Dutch Caribbean territory. A wet-lease is a common aviation industry leasing arrangement whereby the aircraft owner also is responsible for operations and maintenance.
Greason, an electrical engineer by training, started his career at Intel, working with a team that helped find the balance between cutting-edge technology and commercial success. He founded XCOR in 1999 to research, develop and manufacture reusable launch vehicles, rocket engines and rocket propulsion systems.
Greason spoke with Space News correspondent Irene Klotz at this year’s Next-Generation Suborbital Researchers Conference in Palo Alto, Calif.
In some circles, the commercial spaceflight industry has this reputation that everything is just about to happen, and then years go by. What’s your take on the industry today?
One of the factors that has made capital formation a challenge in the space business has been the degree to which sometimes people over-promise. It makes it difficult for institutional investors to know what to believe. So I’ve tried to include some caveats when I talk about the future because we can talk about what might happen, we can talk about what might be possible, but predictions are for fortune-tellers.
How have you round up your financing?
One check at a time. When we started the business in 1999, I certainly expected capital formation to be difficult, but I didn’t expect it to be quite this difficult.
Is this your first round of outside financing?
No, we’ve had angel-type investment before. It’s the first time I’ve had a big check come in more or less all at once. And as we have previously announced, we also booked some substantial revenue from our Space Experience Curaçao customer in 2011. The combination of those two is what’s putting us in a very good financial picture going into 2012.
What’s going on with your upper-stage engine development work with( )?
In broad terms, it is ongoing work to extend the engine and pump and valve technologies that we have developed for our own purposes to a liquid hydrogen engine for their purposes. I believe that a more modern design that takes advantage of more modern manufacturing techniques and some of our own technologies can produce an engine that is much more affordable.
If this works out and you develop this engine would you become an engine manufacturer like Pratt & Whitney?
I’d rather not compare like this or that company, but if this program goes to fruition we will supply engines to ULA. The whole name of the game in making a cost-effective new engine is to show how to maintain the production of that engine without a large standing work force.
How do you do that?
That’s proprietary. That’s actually the secret sauce that nobody ever wants to talk about.
How does the ULA work relate to your vision for your company?
We always had a 25,000-pound-class engine on our own product roadmap because we need engines in that class for our orbital vehicle, so this is helping to buy down some of that development activity. And in order to achieve our program objectives for the ULA project, we have to develop the competency to handle liquid hydrogen in an operationally effective way. If that proves to be interesting to us, we could then employ that on our future orbital projects.
So they don’t own what you produce?
The intellectual property ownership between XCOR and ULA took time to work out and the relationship is nuanced. The portions of it that are of business interest to us we are still able to use as part of this arrangement.
For both companies, working out this relationship was a new thing. That’s part of the learning curve for many areas of this emerging industry. People always focus on the technology, but working out the business methods by which we’re going to do business is at least as challenging.
There seems to be a new emphasis on suborbital space science missions. Is that the case?
The science and payload missions have been an integral part of our business model and our vehicle design since we started. It’s really funny to me to see the tides of fashion change. When I used to pitch to investors in 1999, all they wanted to hear about were science missions and nobody wanted to hear about flying people. Then, after Dennis Tito flew to the international space station in 2001, for a while all they wanted to hear about were people flying and nobody wanted to hear about science. And now, I’m hearing many people ask, “What’s up with all this new activity in science?” And the answer is that it was all going on all along; it’s just people didn’t notice.
Are you on track to finish manufacturing the first operational Lynx this year?
Assuming that revenue continues in the projected fashion, yes — the cash in hand, plus the contracts under way, plus the contracts that we project to close get us there. But unanticipated conditions lead to unanticipated results. I don’t need any new miracles to occur, but need no especially bad news to show up.
How many clients does XCOR have?
We have two or three engineering contracts and we have two wet-lease customers for vehicles and we have more-than-I-can-count customers for flights. For people and payloads, the situation gets more complicated because we have value-added resellers that stand between us and the ultimate customer.
When do you expect test flights to begin?
It is my goal — not commitment — to see the beginnings of the flight test program by the end of this year. What I won’t speculate on is when we will enter commercial service because that will depend entirely on what we find in the flight test program.
Those will just be hops over the runway, not flying into space, right?
That’s where you start. If you’ve ever seen a flight test program for a new airplane, it takes time.
There have been some concerns about the climate for business in California. Have you thought at all about moving?
I love Mojave. If it weren’t in California, I’d never think about anyplace else, but it is in California and California is not a very friendly place to do business. Kern County and Mojave go a long way to overcome that obstacle, but it is an obstacle. Mojave has a lot of advantages that people don’t always appreciate and would be not so easy to replicate somewhere else. But it’s a rare month that goes by without some other location trying to romance us to move. And I can’t say that California is such a wonderful place to do business that I have no need to think about that. But I would much rather California fix its problems and then I can stay in Mojave.
Overall, is the XCOR business plan to have one center of operations?
No, the plan is to have one center for our R&D and flight test activity and those will always be the same place. We always planned that there would be a manufacturing site that would, by design, not be in the same place as the R&D and flight test activity.
Why would you want it somewhere else?
Because they’re really different corporate cultures. You don’t want the guys who can’t wait to see what they can change to make it better working on a production line. And you don’t want the guys who live and breathe “how do I-have procedures to make sure nothing ever changes” working on the R&D activity. Organizations are tools designed to perform a function, and you need to suit the tools to the job.
Your early career was at Intel. Why the switch to space?
If someone asks me the question “Why are you interested in space?” the only answer I can give is “Why aren’t you?” I was never interested in rockets. I was only interested in the things we could do once we got into space.
To me, rockets looked like a solved problem. When I was growing up, the space shuttle was being built. Can you remember those days? Spaceflight was going to be too cheap to meter. We’re going to have a fleet of shuttles flying every week — 100 bucks a pound. Our problems are over. And had it done those things, they would have been. But it didn’t, so they aren’t.
In an odd way, that explains a lot about why XCOR is the kind of company that it is. We’re developing rockets because we want tools to do something with. The rocket is not the point. The flight is the point.