* via email
The company received considerable publicity for a demonstration project on the ISS in which a satellite would be built to carry an Apple Macintosh computer. Ground users would access the orbiting Internet server on the satellite using a wireless protocol based on Apple's AirPort technology. The company signed a contract with NASA in October of 2000 ( SkyCorp Signs Agreement With NASA to Fly the First Webserver in Space - and it will be a Mac G4 - SpaceRef - Oct.2000 ) but sufficient private funding could not be found and the project was canceled.
In the past year, Mr. Wingo has joined with Walt Anderson to create the company Orbital Recovery. The firm seeks to develop a new type of spacecraft that will rendezvous with aging communication satellites in geostationary orbit that are running out of station-keeping fuel. The Spacecraft Life Extension System, or SLES(tm), would attach itself to the comsat and use its own propulsion system to extend the useful life of the satellite for several more years.
Mr. Wingo previously worked at the University of Alabama in Huntsville where he was a manager of the small-satellite program and participated in the Lunar Prospector and SEDSAT 1 projects. He also worked with several microgravity experiments placed on shuttle flights. (For more about his background, see his biography at Orbital Recovery).
Mr. Wingo kindly agreed to discuss with me the challenges that the space entrepreneur faces, especially with regard to raising the funds necessary to make the projects happen. The following interaction was assembled from several emails that we exchanged.
you still involved with any other in-orbit assembly projects like the
Supersat spacecraft that you were working on with LunarCorp?
Now Surrey Satellite
has had success in bootstrapping their university effort into a viable
company. They did that without investors and without having to contend
with producing large returns on investment that commercial investors
require. Today the investment community is so far into the fear mode
that it is very hard to get them to invest in even sure things.
Such amateur satellite groups are close to the heart of HobbySpace but I agree they are better at proof of principle demonstrations than at spinning off businesses. Piggyback launches, Doppler location for search and rescue, and several other techniques were pioneered by AMSAT. It seems feasible to me that an amateur/student group could send up to the ISS a small-sat in several pieces to be plugged together and launched. In the future, SkyCorp or some other company could then point this out to potential investors as proof that space assembly isn't something exotic or extremely difficult.
HS: Can you state some general lessons you learned from the SkyCorp experience about starting commercial space venture?
HS: Many space activists and participants in "private space" development are very critical, if not scathing, towards NASA's commercialization efforts. However, I read that you felt generally happy with the support you got from NASA for SkyCorp. Could you elaborate a bit on your experience with NASA? What more could NASA do to help private space ventures?
Wingo: You know, Clark, it is my experience that most of the space activists that talk that way have never actually worked with NASA. Look, NASA is a pain to work with a lot of times and in the past they have been a lot of pain. However, if you have a good idea that fits in with the agency's mission they are very willing to work with you.
[Recently], for example, I read an article in the Washington Post about how bagged, ready-to-eat mixed salads have become a $2 billion industry. One company uses satellite tracking & monitoring of its [delivery] trucks from California to insure that the storage temperatures remain in the proper range to avoid spoilage or discoloration.
Say that I come to you with a proposal to use a LEO constellation to do similar tracking/monitoring but for farm products shipped around the world - lamb chops from New Zealand, oranges heading to Europe from Florida, etc. But to beat the competition I need a really low cost constellation, which I think could be accomplished with satellites assembled in orbit. So let's assume I convince you that this is a real market and a viable business. Please discuss in some detail the series of hurdles we would need to leap to get from just an idea to actual satellites in orbit?
Wingo: The first problem to overcome is that of the written off assets of Iridium, Globalstar and OrbComm. How can a constellation be built for less than the $25M in cost of the bankrupt Iridium? Lets say we get past this with some innovations associated with total number of users (packages) on a global basis.
The second problem and the biggest is financing. Investors are not going to put money into a constellation without a very clear path to profitability in a relatively short period of time. This is where on orbit assembly comes in. We could deploy a constellation much more rapidly than the 7 years for Iridium, 5 years for Globalstar and 8 years or OrbComm. There would also have to be a technical improvement that allows the constellation to generate revenue before it is completely built.
Lets say we have someone who wants to finance the system and accepts our arguments about rapidity and sooner return on risk. The next problem is a global spectrum allocation. Teledesic spent a huge sum of money getting theirs and it is an inherently political process that means slow. That means wasting money while this gets accomplished.
Lets say we solve the spectrum licensing issue we still need to get licensed in all of the countries that we operate in. That should be easier now than in the early 90s due to the WTO agreements in these areas. However, there are large swaths of the world that only give lip service to these agreements. If we can get enough agreements that allows us to get the system built then we only have the same problems that other business have.
HS: It appears that any ambitious commercial space project needs not only patient capital, but also substantial reserve or emergency capital. For example, you mentioned Orbcomm. I followed that project fairly closely and it seemed to me that, unlike Iridium/Globalstar, its problem was not lack of demand. It had a lot of orders from trucking companies for its tracking units. Instead, it ran into serious technical problems that slowed down the installation rate and this led to a severe cash crunch. It's two main backers - Orbital Science and Teleglobe - had unrelated financial problems of their own and could not come to its rescue and so it went into bankruptcy and a fire sale.
XM is in a similar, though less dire, situation. Its introduction was delayed and it may not have sufficient capital to make it through its startup period, even though, as you say, it is meeting its subscriber goals. It appears that GM, in this case, will step in to provide the emergency capital but at the cost of serious dilution to the holdings of the current investors.
Getting through this sort of crisis period seems key to reaching profitability. Rupert Murdoch, for example, nearly saw his entire empire pulled down in the early 1990s by the startup costs of his SkyB satellite TV system. However, he stuck with SkyB and by the mid-1990s it had become one of his prize cash cows. DirecTV had the resources of Hughes and GM to get through the tough times. Lockheed-Martin is standing behind Space Imaging until it can stand on its own.
Should one avoid investing in any commercial space project that starts development without enough backup capital to survive inevitable problems and delays? Or is that just part of the gamble of investing in such projects, which are lucky to get even enough capital to build some hardware?
Wingo: Clark OrbComm's problem was technical in nature. There were some fundamental architectural problems with that system that came about as a result of its institutionalization by Orbital Sciences. I think that you are mistaking XM and Sirius on the startup problems of the direct broadcast radios. XM came out on time and Sirius had problems with their chipset.
The model that I like in execution is XM Radio. They had their radio's ready at exactly the same time as the satellites were launched and now I recently read that their chip supplier has produced the 1 millionth chipset. The same thing happened with Direct TV and EchoStar. Sirius lagged behind and look at their trouble. Building a satellite constellation is far more of an effort than simply building some birds and launching them.
It is difficult to determine, as an investor on the sidelines who buys stock, where the problems are going to manifest themselves. You have to really pay attention to all of the aspects of the business just like any other business. Most businesses start up with a lack of capital and many of them have that problem until a certain cash flow point is passed. One of the things to look for in a space investment is the market potential. You spoke of tracking systems via satellite. When we first started SkyCorp we looked at that market and the market potential is in the hundreds of millions of units. The same is true of XM and Sirius. Direct TV, EchoStar, and the other broadcast satellite systems have the same happy potential.
Execution is absolutely essential. Even with that today the environment is very difficult for new entrants into the space field. XM Radio has hit every single milestone right on time and they are still in trouble. I have bought XM Radio stock so I am a true believer in their system but it is a gamble just like plopping down a bundle on a black jack table.
SkyCorp and Orbital Recovery have a different issue. It is one of the early adopter syndrome. Both companies have customers, that if we were already producing our system, would be lining up at the door. Everyone wants to be the first with a proven concept. What is going to help us is when a customer believes in us enough to see the competitive advantage that working with us entails or is desperate enough to see that we are their only chance for survival.
What we need today are more people who are interested in a business that has space as an aspect and who have deep enough pockets to see the process through to fruition. Elon Musk is one such an individual. I wish him luck in his efforts but we need more like him. It frustrates me to no end that the investment community is like it is but it is so I have to live with it.
I wish the government had more vision in promoting the largest economic segment of the next five hundred years. I keep thinking about Abraham Lincoln and congress passing the railroad act of 1862 that funded the first transcontinental railroad during the worst part of the war between the states. That took guts and vision. I think that we have people like that in government today but the key is will they be listened to? We need an environment like the tax free aspect of the Internet to draw the money in. This will allow the little guy to get in and make investments that will benefit them as well.
HS: Yes, it definitely seems that during this bootstrapping period of space development there could be a lot more done by the government [such as your proposals above] to provide some extra push to help get through the tough times. Currently, as you emphasize, execution has to be perfect. Any mistake is usually disastrous, especially when there is not sufficient backup funding available.
There should be a recognition that with respect to space there is a bigger issue at stack - the development of a whole new environment for human expansion. It's not just for some businesses wanting special treatment.
[I double checked and XM reached full coverage several months later than its original (as of 1998) goal of late 2000. But, as you say, XM has generally met its goals quite closely and Sirius had a far more serious delay.]
HS: I've wondered about the status of defunct satellites left in long lived orbits. I could imagine, for example, that someday residents in a growing space station might like to grab an old comsat for its parts and materials. After all, there aren't many hardware stores in orbit! Even if only to use as bulk material for radiation shielding, a dead spacecraft could be quite valuable considering the cost per kg to orbit.
Have you looked into any of the legal and practical issues involved with salvaging old spacecraft?
Wingo: Well I have been saying for a few years now that the first practical mining operations in space will probably be the defunct spacecraft in the junk orbit above GEO. That is stuff in the far term. It is nice to speculate about over a beer but it does not a business plan make. We will worry about that after our first billion in free cash flow.
HS: Thanks very much, Dennis, for sharing your insights into the real world of commercial space development and for listening to this armchair entrepreneur! I wish you the very best of luck in your current and future endeavors.
Wingo: Clark I have read back over our interaction and see that I may seem to be a little pessimistic right now. I am really quite excited by the prospects that both SkyCorp and Orbital Recovery have to help open up a new era in commercial space. There has been a tremendous amount of activity over the last decade or two in component, subsystem, and computer hardware and software technology, that if implemented in the right way will completely revolutionize our ability to operate in the space environment.
There is one other thing that I would like to comment on is that I have heard rumors that certain individuals in government would like to keep space expensive on the theory that it would deter our adversaries. Nothing could be further from the truth. You cannot ultimately control the spread of any significant technology as our problems with the nuclear programs of certain states shows us. The key is to go forward and push the technology in such a way that our adversaries are always a few steps behind us. Our government is having the worst time ever in terms of cost overruns and technological implementation difficulties in space programs. As an American who understands the great advantage that space gives our military in terms of strategic advantage, and our commercial industry in terms of economic growth, we simply must take a proactive stance to leverage our technological advantage while we still have it. I advocate to our government leaders that they spread around some of these space contracts (of course I do) to new entrants and be willing to follow through to flight. Boeing, Lockheed, and Northrup do not have a birthright to our government's defense dollars.
I look forward
to the future here Clark and think that with the proper incentives and
even a small bit of vision the next ten years is going to be a lot of
Dennis Wingo can be contacted via email@example.com.