I’m a long-time investor and analyst in the information technology (IT) industry, but lately I have been turning my attention from IT to aviation and aerospace technology. What’s up? I don’t think I’m unique; in fact, I think I’m part of a trend.
There are a lot of entrepreneurs who enjoy developing new things — Macintoshes, whizzy cell phones, instant messaging, social networks. But a lot of that is getting old and commonplace. It reminds me of the old math textbook statement: “The remainder of the proof is an exercise left to the reader.” In other words, the clever, challenging part is over; now you do the grunt work. By contrast, in the new air and space industry, we’re still trying to prove things.
And so, I’m tracking an illustrious crew of IT pioneers:
Elon Musk, founder and chief executive of Space Exploration Technologies Corp. and founder of PayPal ;
Vern Raburn, chief executive of Eclipse Aviation, which produces very light jets, and formerly at Microsoft, Symantec and Lotus;
Jeff Bezos, founder of Blue Origin, and still at Amazon, which he also founded ;
Jeff Greason, founder of XCOR, and formerly with Intel; and
Ed Iacobucci, president and chief executive of air taxi operator Dayjet Corp. and founder of Citrix .
But they need to prove more than just the technology; they also need to prove the market demand. Here is where I see changes happening too.
Not only do today’s high end customers want new things, t hey also value their time more than their money. We’re willing to spend to save time (private air travel) or to savor time (space tourism). Whether it’s a business person making extra sales calls or that same business person taking a high-priced, quickly paced mini-vacation on a Zero Gravity Corporation jet or Virgin Galactic spacecraft, that person is ready to spend for an experience.
Charles Simonyi’s recent trip to the international space station, which I was privileged to witness from the ground in Baikonur, on the one hand, and the worsening experience of everyday commercial airline travelers on the other, are drawing the attention and funding of people who want a new and different kind of experience .
A s I saw on the Simonyi tour, there’s a lot more to the space tourism market than just rockets and launchers. In the same way that regular tourism is more than just monuments and safari animal sightings, there’s a whole infrastructure of hotels, entertainment or tour guide commentary and other value added services. In the same way the computer industry is more than hardware; it comprises software, training, services, applications and online communities.
While investors are starting to take note, they remain nervous. The challenge for these start-ups right now is that investors want to invest in the third round. They want someone else to take the risks so they can come in when the price has been beaten down and the risks have been overcome.
That is indeed what happened with Federal Express (FedEx). As venture capitalist Rick Stowe recalls: “The third-round FedEx investors were most — but not all — of the first- and second-round investors. The only new ones were [lawyer] Bill Hewitt and management other than [founder] Fred [Smith]. The third round ($3.9 million for two-thirds of the company) was one of history’s best deals, but we couldn’t sell it to anyone who wasn’t already mired in the company. The upside was a little murky at the time!”
So, the trick is to start early and stick with it. Even FedEx’s original investors made money in the end. Without them it wouldn’t have happened.
So what am I doing in this new market? Exactly what I did in the old one: I’m helping to define it , and to learn from other industries — IT on the one hand, and hospitality on the other. By running a workshop for the pioneers — along with investors, regulators and experts on tourism — called Flight School, I’m trying to focus the conversation on where the market should be heading.
Right now, the pioneers in space and air still are focused on the hardware, but they have started to consider the entire ecosystem they are growing. Industry groups such as the Personal Spaceflight Federation are working collectively to help the laws and regulations evolve. As spaceflight becomes more commonplace and the air opens up to a broader variety of business models, old notions of what constitutes public carriage will need to change and become more nuanced. Over time, insurers and investors will have history and experience to help them in pricing risks — and opportunities.
As for me, maybe someone will give me a free ride. But if even one of my investments pans out in a big way, I’ll be able to afford it for myself.
Esther Dyson is an investor in Constellation Services, Icon Aircraft, Space Adventures, XCOR and Zero-Gravity Corp. (Zero-G), and a two-time flier on Zero-G.
From June 20 to 22, she will be putting on Flight School, a workshop for entrepreneurs in new air and space, capped by a Zero-G flight after school.