Bringing Space Back to Earth

By Tytus Michalski,
Image credit: NASA

While it’s inspiring to think about becoming an interplanetary species, there’s plenty of opportunity in bringing space back to Earth.

Why bring space to Earth?

The dream of space has always been about leaving Earth. So it seems counterintuitive to focus on the opposite. It’s almost too practical.

And yet it’s already happening. Private sector innovation is leading to improvements in both launchers and satellites which monitor our planet from space — creating exponential growth in data back on Earth. Cost, variety, and most importantly, speed of iteration, have been transformed.

As an example, our portfolio company Spire went from no satellites in 2012 when we first invested to 40 by 2017, with applications in areas including shipping and weather.

The infrastructure is now at critical mass to start opening up to partners for building external applications. Instead of building and launching your own network of satellites, you can get access to the data directly.

There are also many under appreciated applications on Earth which will be critical to successfully becoming an interplanetary species. Take digital healthcare as an example: portable diagnostic devices, telemedicine, and augmented reality are just three of the obvious areas of overlap.

Can space eat the world?

The space ecosystem up until recently has been primarily focused on space infrastructure. The massive opportunity going forward is to connect this amazing group of innovators to other sectors of the economy and society.

20 years ago, the Internet was viewed as a separate industry by most people. Very quickly in the past few years, the consensus has come around to the idea that “software is eating the world”.

The space industry has a similar potential for impact across society. But whether that potential will be realized is still unclear. Whether that impact will be positive or negative is also unclear. It’s up to all of us to figure it out — together.

Start with talent

Our team at Fresco Capital recently held an event in Singapore about expanding the ecosystem, which included a panel about talent.

One of the panel participants was Lynette Tan, Executive Director at Singapore Space and Technology Association. After this panel she wrote an overview about some of the opportunities in the sector. Here is a key takeaway related to building the talent part of the ecosystem:

“The integration of space technology into our daily lives also means new modern disciplines are now required. With the avalanche of data from and flowing through space systems, programmers, computer scientists and big data experts are all likely to find increasing demand for jobs seeking to monetise these assets.”

The talent needs described above are clearly cross-disciplinary.

But that’s not all. If we’re going to build successful applications, there will be a need for design, user experience, and sales, to name a few obvious categories that are not traditionally associated with the space industry.

That’s great news in the current environment of concerns about technology replacing humans in jobs. Space applications are a potential growth driver of new jobs across the entire economy.

Of course, there’s the challenge of aligning our education system with these job opportunities, but that’s worthy of an entirely separate discussion on its own.

Practical public / private

At the International Astronautical Congress (IAC) just held in Adelaide, there were representatives of both the public and private sector from all over the world.

On one of the industry panels, a private sector member was the living embodiment of the entitled capitalist, saying something to the effect of “the only role of government is to get out of the way.” This view has the benefit of clarity, but it has the much larger drawback of being completely impractical.

At this same conference, I had a chance to share a panel with members of both the European Space Agency (ESA) and NASA, as well as give a presentation to an audience of country representatives from all over the world. Overall, I found these public sector members to be very self-aware of their organizational constraints and refreshingly open minded about finding creative solutions.

Our panel at IAC 2017 — public & private sector together

Here’s the reality: government to government space agreements and negotiations move at a snail’s pace. The private sector can move faster in theory.

Unfortunately, there are several roadblocks. Export restrictions. Import restrictions. Talent restrictions. Mostly because space is considered to be a strategic industry, which is understandable.

This creates an opportunity for private sector companies operating in applications because the regulatory environment is completely different from the traditional space industry. Obviously, there are still regulations and restrictions when it comes to data and applications. But the level of freedom for the private sector is significantly greater when operating in this application layer as compared to space infrastructure.

It’s important to recognize that governments will continue to play a key role in developing the space industry. At the same, the private sector has a unique opportunity to innovate around applications.

Connecting space to applications

It’s no accident that some of the most exciting private sector entrepreneurs in the space sector have an Internet background. But this cross-over shouldn’t be limited to billionaires who have the capital to start investing in space infrastructure.

One of the lessons from the development of the Internet is that eventually infrastructure and applications do get connected.

Sometimes this is through open standards and co-operation. HTTP is everywhere and yet invisible to almost every user.

Conversely, even a single company can dominate a key connection layer with regulators struggling to catch up.

We could all sit back passively and hope that things “just work” in the evolution of connecting space to applications. That when a billionaire decides to set up either a for profit or even a non-profit, they will be mindful of other stakeholders.

Alternatively, we could be proactive and intentional in building these connections with a mix of co-operation and competition. And in the process, just like the Internet, we may discover that the number of applications related to space are infinitely larger than we ever imagined, right here on Earth.

Bringing Space Back to Earth was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Why Are Fat Startup Rounds Back?

By Tytus Michalski,

Headline numbers look good for global VC investment during the 2nd quarter of 2017 but the more interesting story is what’s going on underneath the surface.

Digging into the details, below is the trend for first time investment activity (thanks KPMG + Pitchbook for crunching the numbers).

Even taking into account stealth rounds which have not been announced, the number of new companies has not been keeping up with the $ invested. And if you take the data at face value, the number of rounds is back to levels not seen in several years.

Instead, VC investors have been adding more to existing companies.

The increase in round size can be seen in most rounds, with the obvious outlier being the late stage Series D+. The above numbers are median, so the $40M figure likely understates the outliers.

The median pre-money valuations above tell a similar story:

fat rounds are back.


First, VC funds are cashed up.

VC funds are continuing to raise $ at an impressive rate. If you’re familiar with the timeline of how VC funds deploy capital, one guarantee is that managers will invest this money. They’re not going to give it back next year saying “I can’t find anything to do with it.” The capital will be around for, oh, about the next 10 years. VC funds will invest in something.

Second, corporate VC funds are having a big impact.

The rate of participation has been increasing steadily and in this last quarter they have been even more aggressive. Many of these funds are structured with external investors, including the headline grabbing Vision Fund. So like traditional VC funds, the capital should be around for several years (as contrasted with pure balance sheet investment from corporates which can be harder to predict over time).

Third, exit trends have been lukewarm for VC backed startups.

This has meant that late stage companies are staying private for longer. Those fat rounds are in some sense becoming short-term substitutes for M&A and IPO exits.

So there’s an interesting paradox.

On the one hand, corporate VCs are more active than ever before and investing aggressively in late stage fat rounds.

On the other hand, corporate M&A activity is not keeping pace.

Based on the lifecycle of capital raised, expect VC funds to continue investing in existing companies.

However, if market sentiment deteriorates, fat startups will become the victims of cap table recaps. There will be money, yes, but the terms will be harsh.

For startups, VC investors, and LP investors in VC funds, now would be a good time to remember the benefits of capital efficiency. For startups especially, make sure you understand the terms of rounds, not just the headline valuation.

Fat startup rounds are back. Let’s make sure we’re building healthy businesses because it sucks to be a fat, dead startup.

Why Are Fat Startup Rounds Back? was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Transforming Venture Capital, One Person at a Time

By Tytus Michalski,
Image credit: Aaron Burden via Unsplash

Some people think venture capital is just fine and doesn’t need to change. Others want to turn it into a hyper liquid automated platform.

It’s time to call bullshit on both views.

Traditional venture capital needs to be transformed and the process will happen one person at a time.

I gave a presentation to a group of family office investors and corporate investors about the “Do’s and Don’ts of Venture Investing” earlier this year using martial arts training as a metaphor. It covers a lot of basics, with details here and here.

The discussion below starts with some of the traditional issues around risk and return, then moves on to ideas about how to transform venture capital.

At the black belt level, the emphasis shifts to higher level training, including awareness of self and the environment.

A typical mistake for a beginner in karate is to punch before stepping. This results in no power — as we learned in brown belt, strength starts from the bottom and flows upwards. It seems easy which why it’s actually difficult and in fact many people simply don’t even notice the mistake. Even with the incorrect technique, it still feels correct.

Getting the timing right in venture investing is similarly a challenge. The biggest mistake is to sell too early. The only thing worse than missing out on a billion dollar investment is being an early investor and then selling out to a new investor for a small profit and missing out on the much bigger gain. I know of one investor who came in very early into Alibaba only to sell soon just to get the money back because of concerns about risk. Whoops.

Of course, there are certain situations where it’s better to sell. This can happen especially when a wave of lemming behaviour overcomes investors to jump into a theme.

There’s no formula for getting the right timing to sell, but compared to all other investments venture capital is about long-term returns, so you should be thinking in terms of years and decades, not day trading.

The foundation of looking at the risk vs. return over time is to always evaluate decisions as if you were investing for the first time. In reality, that’s difficult in venture capital because of the knowledge built up over time after an initial investment and the overall lack of liquidity. Still, it helps to set the right framework. A more detached assessment of risk vs. return tends to lead away from binary all or nothing decisions and towards a more measured approach.

Of course, the process is not all about numbers. In fact, understanding the motivation of founders, other investors and of course your own goals is critical. If the company has been grinding it out for 10+ years and everyone is ready to move on, it may not matter that the best financial decision would be to continue for another 10 years because from a motivation perspective the journey has finished. Conversely, if the company has just received a lucrative M&A offer, this might be just the catalyst for a highly motivated founder to push for a more aggressive scaling up strategy and reject the early exit. Human inputs can be the most important factors when it comes to evaluating risk vs. return.

People are surrounded by external distractions. In addition, our minds are constantly creating internal distractions. This noise stops us from concentrating.

One description of traditional martial arts is “moving meditation”. Embedded in this description is the idea of having an empty mind. The first step is to navigate external distractions. The more difficult challenge is to manage internal distractions. Rather than trying to push the distractions out of our mind with mental energy, which is impossible, the training emphasizes acknowledging distractions and then being able to let go of them. Empty mind is not a static state of being, it is a dynamic process.

At first glance, it seems ridiculous that an empty mind would be an important skill for venture investing. Traditional wisdom suggest that experience, especially domain expertise, is necessary to be a successful venture investor.

The problem with experience is that it is actually one form of noise. The deeper the experience, the louder the noise. If you have 23 years of experience building microcomputers and some kid comes along with an idea for a personal computer, all your experience screams “impossible, no way this will work”. If you’ve spent all your career selling packaged software and someone suggest selling software for a monthly subscription, your instincts react immediately that customers simply wouldn’t trust software that they don’t own. If you’ve built billion dollar satellites and a young team proposes to create a network of cubesats, the first reaction is to treat it as a toy project. That’s the voice of experience speaking.

An empty mind allows even experienced venture investors to stay open to new opportunities. You can’t ignore your experience — those thoughts will always be there. Instead, acknowledge them, let them float away, and then let your empty mind stay open.

The common assumption is that martial arts focuses on fighting. But upon closer inspection, there’s a clear emphasis on peace by many traditional martial arts teachers. Fighting is the last option of traditional martial arts.

Many startup founders and venture investors make heavy use of war and sports metaphors — destroy the competition, hunt down customers, don’t be a loser.

Words and metaphors influence behaviour and actions. So by definition people being led by these words will be approaching the world with at zero sum perspective. For them to win, others have to lose. Zero sum thinking implies a lack of new value creation. If you believe that technology is supposed to create new value, not simply take value from others, then by definition these zero sum metaphors should be rejected.

Of course many others will continue to view the world from a zero sum perspective no matter what you do. Instead of wasting your energy on constantly fighting with them, focus instead on partners who you can trust.

Trust is much easier to build with aligned incentives and shared values. Aligned incentives alone may not be enough if the partner is going to find a way to cheat at the first opportunity. Shared values create great intentions but without aligned incentives, there may be no tangible outcomes. So it’s important to have both.

The right partners will help you reach your goals faster no matter what games others are playing.

Reaching a black belt level in traditional martial arts is not an end goal. It is more like reaching the starting line of the journey. At the higher levels, this learning includes the willingness to embrace paradox in many ways.

Traditional karate training obviously places a big emphasis on learning the basics. The only way to do this is through repetition so that it becomes automatic.

But the ultimate goal is not to become a clone of others from the past. Instead, every single karate student has a unique signature style. If you try to develop your signature style at the white belt level, you’ll just be fooling yourself. The style develops naturally over time without any extra effort through the process of repetition.

Learning from other investors about venture investing is a great shortcut. After all, nobody has the time to invent it all from nothing. To this day, I’m still reading Fred Wilson and Brad Feld on a regular basis.

You should absolutely learn from what venture investors are sharing both in public content and in private meetings.

But a copy and paste approach is unlikely to be optimal. Every venture investor’s background is unique. Each era is different. And it’s all path dependent. As an example, one of the big differences about our team at Fresco Capital compared to most other venture investors is our global cross-border approach. Most early stage investors are local and that works for them. We’ve chosen to be different precisely because of our background and experiences.

Instead of a copy and past approach, better to take the time to find trusted partners and work together with them. Co-create solutions that meet your unique needs. The ideal partners adds strengths to fill your gaps. This could be knowledge, network or other resources.

A key part of our global approach is working with local partners who are on the ground everyday in the local market. So just being global is not enough — working with these local partners is a key differentiation.

Martial arts starts with physical training. At a certain point, however, the mental and spiritual aspects of martial arts become more important than the physical training.

This doesn’t mean that the physical training is not important. The physical training is a gateway to reach the mental and spiritual benefits. Rather than being independent, they are integrated.

Venture investing starts with financial returns. This has to be the foundation. And many people do view venture investing as a box that takes money in and spits money out a few years later.

But this view overlooks the potential direct and indirect benefits beyond just the box of cash perspective. There can be positive effects on revenues, efficiency, and speed for related businesses. There may be harder to measure, but perhaps even more important, soft benefits such as upgraded team skills, improved innovation and entirely new business units which grow larger than existing businesses. Most importantly of all, all of this investment in innovation can, and should, be used to actually improve people’s lives.

It’s important to emphasize that these additional benefits are unlikely to materialize if financial returns don’t set a strong foundation. So start with the financial returns. But don’t limit your imagination to a box of cash. The ultimate potential is much bigger.

Venture capital investors are always questioning and challenging assumptions in other industries. It’s important that venture capital itself faces the same kinds of questions and challenges.

While industry insiders are looking for new ways to differentiate, a little extra push from external forces can only help accelerate the process.

Ultimately, the best way to learn something is share it with others. In karate, this means training new students and then having them train students. This passes on the physical skills plus also the philosophy and values. None of this can be truly learned by reading a blog post or watching a video.

There is no substitute for person to person training.

Historically, venture capital was a very secretive industry. Knowledge was not shared and venture capital firms put a lot of efforts into controlling information flow. This started to change in the past 15 years as the industry started to open up. Blogs and in person events have allowed people to learn more about venture investing. But the reality is that most of the activity is still behind closed doors.

True innovation requires an open ecosystem, and venture capital also needs to join this trend. So our view is that successful venture investors should not be trying to hide the secrets of investing from others.

We believe there is tremendous value to be created in sharing knowledge about venture investing with others. More and more new investors are getting involved in venture capital. Without effective co-operation, that money may be completely wasted on bad investments.

Rather than hoping that other investors fail, we believe that the startup ecosystem desperately needs more high quality investors. This is not a zero sum game.

Of course, the challenge is to identify the right kinds of partners. There has to be an alignment of both values and incentives.

There’s a saying in karate: “a black belt is just a white belt who never gave up”. Learning to learn is the most important lesson of all. I’m still learning plenty about both karate and venture capital.

It’s this learning that is the secret power of how we can transform venture capital one person at a time.

Transforming Venture Capital, One Person at a Time was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

  Category: startup-ecosystem
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Fresco Capital Corporate Innovation 2017 Playbook

By Fusion by Fresco Capital,

The days of a single management guru having a neat and tidy model of corporate innovation are long gone. For 2017, any company serious about innovation must constantly be scanning the landscape from diverse sources. To help you get a head start on your 2017 corporate innovation plans, we’ve compiled the best ideas all in one playbook covering the following topics:

  1. Corporate Innovation Strategy
  2. Engaging the Ecosystem
  3. Innovation as DNA


1. Corporate Innovation Strategy


How should companies approach innovation in an unstable world?

“Every contemporary company has to be a balanced mix of established products and new products that are searching for profitable business models.” — Tendayi Viki

Tendayi introduces a useful five part framework for how established companies can manage the inherent tension of managing both established products and new innovation. Read more…

How to set up a corporate innovation outpost?

“Successful Innovation Outposts typically develop over a period of time through three stages. In the first stage the Outpost focusses on networking and partnering in the Innovation Cluster in which it is based (i.e. Silicon Valley, Boston). In the second stage, it moves into Investing, Inventing, Incubating and Acquiring technologies and companies, and in the third stage building product(s).” —Steve Blank

Steve shares the details of the three stages of setting up a corporate innovation outpost, including key questions and milestones. Read more…

Is your innovation outpost working?

“You have no dedicated system for keeping track of startup ecosystem interactions and information.” — Tytus Michalski

Tytus reviews this and four more warning signs about innovation strategy and outposts along with the solutions for how to fix these problems. Read more…


2. Engaging the Ecosystem


Why should large companies work with startups?

“The most innovative companies are also the most valuable.” — Kite

Both the data and the anecdotal stories combine for compelling evidence that the most innovative companies are engaging proactively with startups in many ways to create more value for all stakeholders. Read more…

How to build a successful innovation ecosystem?

“Just as momentum is the product of mass and velocity, the ecosystem with the most participants and fastest turnover of ideas will be the most successful.” — Martin Curley

Martin provides case studies, context and 12 principles for successful ecosystem innovation across companies, customers and other partners. Read more…

Where are the opportunities in the global ecosystem?

“We love small businesses, we love young people, and we love women.” — Jack Ma

Jack Ma shares his views on global ecosystem opportunities and more during an interview with Stanford GSB. Read more…


3. Innovation as DNA


How to innovate like Google?

“To better understand how Google innovates, I took a close look at what it’s doing in one area: Deep Learning.” — Greg Satell

Writing for the Harvard Business Review, Greg uses Deep Learning at Google as a specific case study to learn about how the company has put innovation at the core of its DNA. Read more…

How to get started with intrapreneurship?

“Never before has there been such a push for employees to take ownership of their own corner of a company.” — Alyson Krueger

Alyson provides examples of intrapreneurship, overall context about why more employees are interested in this option and the benefits for companies. Read more…

What will change most in the next 10 years?

“That’s a good question. But a better question is: What’s not going to change in the next 10–20 years?” — Jeff Bezos

Peter Diamandis highlights this important point by Jeff Bezos about focusing resources on high conviction trends, and expands with his own ideas about what won’t change even in an unstable world. Read more…

What other content do you highly recommend about corporate innovation?

  Category: Ecosystem, Thematic
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