Shoving the rocket into space with your bare hands

Chris Gates:
Okay, ready? Three, two, one.

Danny Crichton:
Hello and welcome to Securities by Lux Capital, a podcast and newsletter focused on science, technology, finance and the human condition. I'm your host, Danny Creighton, and today we have a special episode about all that space above Earth, AKA space. Today we have two special guests, Laura Crabtree, the co-founder and CEO of Epsilon3, and Will Bruey, the CEO and founder of Varda Space. Welcome to the program.

Laura Crabtree:
Yeah, totally.

Will Bruey:
Thanks for having us.

Danny Crichton:
So I want to start with a specific part of an intersection in your backgrounds, which is you both worked for a long period of time at SpaceX, which is, I think for most people, the most prominent space company out there, certainly in the startup world, but also I think outside in the corporate world as well. And I'm curious, maybe we'll just start with Laura and we can go back and forth. I'm curious, what did you learn from SpaceX when it comes to company building?

Laura Crabtree:
Maybe we go back just a little bit because Bruey and I shared a cube at SpaceX for a number of years and then he left and co-founded Varda after a little hiatus from space, and then I left and co-founded a different company. And I think we probably took away different things, but I think one of the major themes that I see is people that leave SpaceX are not scared of hard challenges.

Danny Crichton:
And what drove that? Was it just the Muskian image that we see in the press or was that inculcated in the talent? Where did you learn to say, "Hey, we can actually go do this?"

Will Bruey:
The Muskian image is a little bit different portrayed from within the walls of SpaceX, at least they were when we were there. I didn't pay that much a attention to the public persona as much. It was actually interesting leaving and then having that be the primary interface. I asked myself like, "Oh, has Elon changed?" No, it's just like a lens that you now view through. But I think the culture fundamentals that he portrays are true, thinking from first principles, total ownership of the product that you are delivering. Those definitely get ingrained in your head, especially we were relatively early in our careers when we started there.

Laura Crabtree:
For me it was a little on the recruiting side, you tended to not have a lot of people within SpaceX who weren't ready for a challenge. They weren't ready to dive in and I'll say, "Drink the Kool-Aid." If you're not drinking the Kool-Aid, you probably don't want to be here anymore. And that kind of mentality where everyone is aligned on the mission and aligned on what needs to get done and everybody there can see what's not being done and pretty much everybody would pick up random tasks if they weren't getting done. So it was all about the mission and everything else was just noise.

Danny Crichton:
When you think about the engineering culture, when I look at software, you have this kind of continuous improvement effect. You can publish a patch to your code or think of software as a service. You can see the feedback and the analytics. You can feed that back into your engineering team through product management, et cetera, and constantly make iterative improvements. With SpaceX, you have this continuous improvement over these very punctuated launches where everything either succeeds or fails and we've seen both over the last two decades. How does the engineering culture adapt to that sort of delivery model?

Laura Crabtree:
You could see the iterative engineering happening. I would give feedback to the flight software team, "I'm sending too many commands to do X, Y and Z," and they would automate it for the next mission.

Will Bruey:
The other way that it's layered on differently than SaaS per se is that there is, like you said, it's very acute. You get one bit essentially of feedback for the entire company during a launch, and I personally love that aspect. One of my close friends who still is at SpaceX, one time he mentioned at the bar after at a launch party. He said he felt like he helped shove the rocket into space with his bare hands, and I think that feeling permeates throughout all the engineers.

Danny Crichton:
Obviously there's a stereotype in Silicon Valley that engineers pop up, they come for a year or two, they go and move on to the next startup. Both of you stayed a very long time, at least from my world of being a millennial at SpaceX. So in Will, in your case, you stayed about six years. Laura, you were there I think about 11 years total and across the industry, you've had these long tenures at a couple companies. And I'm curious, is that just particular to you, particular to SpaceX particular to space, because I feel like you see the complete opposite pattern in most software companies.

Will Bruey:
I went to SpaceX because I thought it was the coolest engineering I could do and the most meaningful in the way that I had a skillset. So there was an aspect of self-identification with working there. We weren't, I don't want to say isolated, but we didn't really think much of competition or the market around in which we were working. We were all just doing the one thing. Startup culture outside of SpaceX, you're more aware of competitors. You're more aware of industry movements. Those two things made tenure at SpaceX longer.

Laura Crabtree:
Again, back to the mission, I joined SpaceX because I was passionate about the mission. I wanted to get people to the space station, and while we hadn't gotten that contract yet, it didn't even exist, I saw the commercial cargo contract as being the stepping stone to the potential to fly humans. And once that program started, I knew that I was going to see it to the end. I think for people that stay a long time, it's because of the mission and the people. I will say I have some of the best friends from SpaceX that I value everything they say and do. When you go through something like a pressure cooker like SpaceX, you develop a deeper bond with people that can't be matched when you're at a larger company that people don't feel as passionate about.

Will Bruey:
When I left and experienced other companies, the discussion at the water cooler was different. If I saw Laura at the water cooler, I was not asking about how her weekend was and she wasn't asking how mine was. Why would we be talking about that? There's more of a focus that permeated throughout the hallways all the way to the water cooler.

Laura Crabtree:
In order to have longevity at SpaceX, you do have to find a balance because in the early days, I am not going to lie about this, I would work 18-hour days and I would come home and pass out and I would rinse and repeat and do it again. This was before C2 mission and also before D5, which was the mission where we changed everything. Those two missions were huge surges in my workload, and in order to last 11 years, I did have to find a balance. I got married and had kids while I was at SpaceX and lasted 11 years, and so I think nobody ever talks about that because you just want to know how hard everybody's working, but you do have to be able to turn it off at some point. So that's something that I learned a little bit at SpaceX.

Danny Crichton:
Well, and you were there obviously a very long time, but at some point you did spin out. You spun out to separate companies. You did turn it off, so to speak, all the way to zero. And Will, in your case, founding Varda Space and joining as CEO and Varda is the world's first commercial zero gravity industrial park at scale. I'm just gobbing that from your website. And then Laura, Epsilon3, software for complex engineering, testing and operational procedures, and so I have two questions. One is, "When did you know you wanted to go and start to figure out the way and path out?" And second, "Why did you go separate directions?" Obviously, you saw everything I would imagine the space world. But in Laura, your case, you went to software. Will, you went to hardware, and yet you worked in the same cube. So I'm curious why there's different directions.

Will Bruey:
Right after we had landed a rocket, we had done some Dragon missions to the ISS, and in my mind the next real big milestone was Mars. So I had to make the personal choice of, "Do I stick here for 15 years or so to see that through and essentially that's my career?", it was my first job coming out of college, "Or do I want to poke my head out of the hole and see what else this particular planet has?" I want to see how you answer that question, Laura.

Laura Crabtree:
I think for me, I didn't know that I wanted to spin out Epsilon3 right away, and I had been toying with the idea of leaving SpaceX when I looked out into the future of what Bruey did, the future of what my next five years would be. It was train the astronauts, get the astronauts to the space station, do the same thing for Starship, rinse and repeat until Mars. And that was agreed as the next big thing. And my goal was to get people to the space station. I think once that was realized, it was, "Okay, what do I do now?" And my thought after leaving is, "How can I make a change or make an impact in the space industry?" And based on the experience that I had had in operations in INT and software tests, I thought this was the next thing that I could do to benefit the ecosystem of space startups being born right after I left. As Bruey knows, don't like was wasting time doing things that could be done automated and don't like doing copy paste, and there are a lot of processes that take time that are silly and I don't want to waste time doing silly things.

Danny Crichton:
And you both spun out and you left in the last couple of years, let's just say, different times, but roughly in the last couple of years. When you look at the space industry other than SpaceX, there were not a lot of fundings from the venture capital world into the category for the last decade. It's a tough space for a whole host of reasons, but clearly a lot of funds including Lux, a couple of our peers, have really dived into the space. Why the opportunity today? And do you think that lines both up equally on the software or hardware or are there certain sectors that have been more popular than others?

Laura Crabtree:
Oh wow. That's a pretty loaded question. Do you want to start with-

Danny Crichton:
It's a terrible idea to go into space. You've made a terrible mistake idea. Ask for a refund.

Laura Crabtree:
No. Go to space. There are a lot of ways in which we could take this. We could talk about the human space flight aspect. We could talk about earth observation, communications. I don't know. Where do you want to start, Bruey?

Will Bruey:
In the abstract. I guess I'll start in the abstract. The reusable rockets was the thing that changed the paradigm. It showed that you could have a world where trips to space were like airplanes and that demand is still growing. I would consider our company is essentially a response to that shift to the economy in the sense we're essentially the elasticity in the economy responding to the reusable rocket technology. There's always opportunity when there's a huge dynamic shift and there is just a dynamic shift.

Laura Crabtree:
I also think that we haven't seen the end of growth in space. There's still a lot left to be achieved. Like Bruey said, the reusable rockets are going to enable that space economy that we all see coming.

Danny Crichton:
Well, to me, there's a metaphor to internet fiber for the internet, which is there's this core API that you needed, this core infrastructure even to be able to build companies and in space, getting your object, whatever the case may be, it could be a satellite, could be a manufacturing hub, is extremely complicated to do yourself. You had to work with NASA up basically until SpaceX came along and now there are alternatives with Rocket Lab and others who have now made reusable launch vehicles both with larger payloads, also smaller costs. So suddenly a bunch of applications that never made any sense, I'm thinking Starlink, I'm thinking Planet Labs and some of the others who are doing satellite photography, that would not have worked unless you were an intelligence agency, the National Geospatial Intelligence Agency.

But now that you have those sorts of capabilities, it's totally open-ended. So we're in 2022. We're in the middle of a little bit of a market maelstrom. We've seen a huge pullback across the board, mostly in SaaS and software. But the NASDAQ has obviously taken quite the hit 30, 40% over the last six months. But space to me seems like a totally orthogonal, weird... I was going to say space, but let's call it market because I can't keep overloading the word space.

Laura Crabtree:
So space is a weird space.

Danny Crichton:
Space is a weird space. I almost said it. I caught myself. But when you look at this category, I'm curious, does it align and correlate with what's going on in the market or are you seeing investors continue to invest, continue to double down? Do you see people flowing in from software companies going, "God, I don't want to build the next accounting software. God I want to get into space flight instead"?

Will Bruey:
The fiber analogy is pretty valid, and then I think that leads into an answer to your question. So Shopify is so many layers of abstraction away from fiber. Hypothetically wanted to, I don't know, sell bath mats or something, I could create a bath mat store on Shopify, which is running on TCP/IP from an internet service provider which uses fiber. That is very similar to in the space industry because space is so generic. People think of it as a specific industry, but as Laura said, it is going to be an economy in the same way that the internet is an economy built on fiber. Our company, Varda, would not exist if launch costs were higher and in the same way that Shopify wouldn't exist without fiber. We might be perceived as orthogonal, but I do think that it's each company within the space economy. Some will be affected, some won't be affected, but it depends on the value that they're creating as a function of the very generic landscape that space has to offer.

Laura Crabtree:
Yeah, I would agree with you. It depends on the product. It isn't just, "Are we going to still see satellites launching?" And the answer is a resounding, "Yes." Satellites are still going to launch to space. We're still going to launch humans to the Space Station. Those things are going to continue, but if the product that you're selling isn't needed anymore with a down economy, then you might see some people not investing in very small portions. But the space economy, I believe, will still be growing.

Danny Crichton:
And one of the questions I have, when you think about maintaining a competitive position, and this is related to Will's comment a little bit earlier, which is once you have this reusable rocket, it gets cheaper and cheaper and cheaper. At some point margins get compressed. You're getting to a point where it's about as cheap as it can possibly be, and that's actually, continuing the metaphor, what happened to fiber. There was this massive expansion in fiber back in the late 1990s, early 2000s, and then all the X networks, companies that were dominating the NASDAQ and the dot-com blew up because there was this huge overcapacity, oversupply. How do you sort of position yourselves so you're not caught in any of that over-capacity building.

Will Bruey:
I'm stoked for the commoditization. I don't know if this is true in every industry, but there's markers for when non-linear compressions occur. So the first one I think is the technology itself is shown off in a commercial way. So a reasonable rocket would be that first event. The second is when you realize it's boring. That was a goal we always had was make reusable rockets so boring that it would be like watching planes take off at LAX. I think the next one will be when there's a separation between the manufacturer and the operator. So similar to planes where Boeing used to make and fly planes. Now they only make the planes and they have operators like Delta Airlines, for example. So when we see that occur, that's another interesting aspect where you're now almost providing infrastructure. Hopefully, one day that'll even happen for Varda. We will be a manufacturing platform for microgravity manufacturing and we'll be talking in this podcast in five years from now and I will be like, "Oh, man. We've got to figure out how to get a new vertical because our margins are being compressed in the space manufacturing." I would love to have that problem.

Laura Crabtree:
We have seen some of that in satellite operations. There are satellite manufacturers and then there are satellite operators. The person buying the satellite is buying it from the manufacturer, and then they have their product, which is maybe Earth observation. So let's say it's photographs of points on the Earth and the product is not the satellite. The product is actually the data that's coming down, and then they have operations teams that are not within their company. So we are seeing that movement a little bit.

Danny Crichton:
Well, I want to pivot the conversation to one last topic, which is company building. So obviously 16 years collective experience across SpaceX, you got to see it grow from medium size to huge size, and you're both based in South California. So built in that old defense track, the Cold War kind of defense contracting, Space Coast, whatever you want to call it, what do you think about company building and attracting talent? LA's a great place. Not a huge number of engineering schools drawing into this. We always think of Silicon Valley to the north as opposed to LA with a lot of space going on on TV and movies. Less so, I think, from the engineering side and culture. But I'm curious, how do you think about attracting talent and bringing folks to both of your companies?

Laura Crabtree:
I can go first. We are a fully remote company, which is awesome because we can attract talent from anywhere. We source talent from lots of different places, but what I will say about Southern California is people do want to move here. The only problem is the cost of living, but it is a relatively easy place to recruit people to move to. I have had a lot of people that I've talked to that said, "Well, if you have an office, I will move to LA. That's my goal." Or, "I will move to LA in the prospect of when you have an office," and so I haven't found that that's been really hard. The only hard thing is obviously how much money people need to be living here, experience-

Will Bruey:
We're a little different because it's a hardware company, so we can't do the remote benefit. The reason Varda is where it is because it's the center of mass of the engineers that we want to hire. I believe the reason that there's so much aerospace in Southern California is originally the military bases over in Edwards and then Hughes Aircraft, and then it hit critical mass. So for a hardware perspective, it makes a lot of sense. So I actually drew a heat map of the United States right when we were starting Varda and wrote a little script to scrape LinkedIn and other hiring sites and created a heat map of where the engineers that had the discipline and experience that we wanted to hire. And essentially, LA is the number one spot for aerospace engineering, but there are some other hotspots. San Jose was pretty close as well. Then Seattle, then Colorado, specifically Denver and Boulder. In my mind, the source of all value at a tech company is the brain power of the people, and in this case, since we're an engineering company, just go where they are. And then from a recruiting perspective, luckily, geography and weather makes it a relatively easy sell.

Danny Crichton:
Well, I also just think it's interesting how much space is spread out. When you even think about from the NASA's perspective, you have the Kennedy Space Center down in Houston. You have Cape Canaveral down in Florida. You have a lot of the manufacturing out in South California, and obviously some of that is probably government doling out some spread across the country to make sure every... Florida, California and Texas, I think, are prominent states with some influence on Capitol Hill. But nonetheless, I do think it's interesting that you can be remote, you can do really interesting work in space basically anywhere except if you're doing hardware. It's really hard. We still need the robotics API to manufacture and have the robots replace everyone, but I feel like that's another decade out. But Will and Laura, thank you so much for joining us. This has been a great conversation.

Laura Crabtree:
Yeah, thank you.

Will Bruey:
Thanks, Danny.