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Aerospace is no longer a vertical stovepipe exclusively populated by a small cadre of highly trained “rocket scientists.” It is going horizontal like the IT community of the 1960’s did, propelling crossover advances in a broad range of 21st Century industries such as location/time-based GPS, energy, biotechnology, nanotech, photonics, materials, robotics, natural resources exploration and development, and many more.
In this emerging world, venture-backed businesses employ aerospace-derived technologies to deliver content to global commercial markets.
Here, space as “an end” in and of itself is joined by a much larger and more influential view of space as “a means” for delivering commercial value.
This shift is bringing about some cultural challenges, of course….
The aerospace community is accustomed to working with decadal and longer-term project horizons with government funding and the discipline imposed by scientific and engineering principles. Commonly heard are statements like, “I only know government funding” and “I don’t want to share (read: give away) control of my company.”
Entrepreneurs and investors employ the power of the free markets and the creativity of entrepreneurship to recover meaningful profit (10x return is a common expectation) within five or fewer years. And, space is still a source of awe, but little understanding, to them. The “giggle factor” is frequently the result of any pitch with the word “space” in it. “Space is expensive.” “Returns are at least decades away.” “I don’t speak NASA-speak.”
In order to defeat the giggle factor, much more than a full understanding of the idea/technology in play must be mastered.
It is absolutely essential to possess a team that includes experienced entrepreneurs, investors and professional service providers, such as IP counsel, transactional lawyers, risk managers, and management consultants, among others.
Let’s take these one at a time….
Entrepreneurs and Execution Intelligence
Technologists, if you remember only one message from this entire blog post series, it is this: Successful investors will choose an A team with a B idea over a B team with an A idea.
Every time. Always.
Top-rate teams possess what Rob Adams, in A Good Hard Kick in the Ass, terms “execution intelligence.” Execution intelligence should be present in the people within the entrepreneur’s Board of Directors, advisor network, and staff. It is comprised of:
- Domain intelligence – experience in specific market space and with the prospective customers within it
- Experience surviving and thriving in fast-growth markets
- Experience surviving and thriving in highly competitive markets
- Experience anticipating markets changes and managing those changes well
- The right expertise in marketing, sales, and product development
- Leadership skills
By the way, entrepreneurship, and the agility it requires, is not the sole province of small organizations.
Money, Investors and Value Inflection Points
Investors provide capital to a venture. They look for right-sized and right-timed opportunities for returns on their investments.
Investors are entrepreneurial. They prefer to fund ventures that have created excitement in their early adopter market segments, have assembled teams that can execute on the idea, and practice continuous market validation research.
The success of a venture is totally dependent on finding investors whose requirements sync with the venture’s requirements. The more perfect the match up, the better the chances of success for both investor and entrepreneur. A match occurs when the investor’s goals and requirements are the same as the venture’s ability to deliver on them. In a quality investment relationship, that ability is calibrated in terms of the venture’s “value inflection points.”
Value inflection points are related to execution intelligence. They are execution milestones, the reaching of which represents both (a) the raising the venture’s valuation, and (b) the mitigation of the venture’s risk in the eyes of follow-on investors.
For example, for a venture in the seed funding stage, reaching the point where the market for the product has been validated and where a profitable business model is established is a value inflection point. This is so because the venture then be entitled to approach Series A investors interested in profiting from financing the work needed to get the first product to paying customers; that is, the next stage value inflection point, signaling the venture’s ripeness for Series B funding.
Other value inflection points can be, among many others:
- Prototyping the product
- The hiring of high quality senior executives and key advisors
- The hiring of quality managers and individual contributors
- Signing up brand name customers
- Establishing strategic partnerships with entities that will speed introduction in key markets
- Lining up certain types of investors, such as lead, strategic and others with important expertise and contacts
Lawyers, Accountants, and Other Professional Service Providers
Simply put, lawyers, accountants, and other professional service providers constitute an essential infrastructure of supporting resources that a venture should have “in its own back yard;” that is, they must be present within a 45- minute land route commute.
And, not just any lawyer, accountant, etc., will do. They must be savvy in the specific technology being exploited. For example, Silicon Valley or Austin may not be the optimal place for aerospace-derived ventures (unless they have a large IT component). Southern California, Colorado’s Front Range, the National Capitol Region, Boston, and Houston are arguably better because of their substantial aerospace communities. Other specialized resources to look for:
- Engineering/technology, entrepreneurial, financing, and managerial/administrative talent pipelines
- Consultative talent (e.g., academics, commercial and regulatory attorneys, survey research firms, and accountants)
- Easy access to adequate air transportation and, if shipping, rail and highway systems
- Supportive (or, at least, “do no harm”) government
- Adequate design/test/prototype/production capability
- Lifestyle conditions that match those desired by the people who work for the venture.
Rich or King?
All of the above sounds simple, right? Or, at least, “do-able.” After all, engineers are smart people. They are intellectually equipped to figure out just about anything, given they have enough time to do so. “Our engineering firm has done pretty well so far under an engineer-CEO’s leadership. No need to change that. Right?”
Hopefully, you answered “I’m not so sure.” More pragmatically, perhaps you responded by asking another question, “But, how does one intelligently accept non-engineers in a company’s critical path?”
For many engineer-owner-CEOs, this prospect introduces a huge (perceived) risk into all corners of the Project Management Triangle. With their different rules, processes, vocabularies, and who-knows-what-else, the MBAs, investors, lawyers, accountants, and communication professionals needed to take a company to the next level appear as alien invaders set on turning the predictable tried-and-true methods of the engineering profession on its ear.
What’s more, some entrepreneurs and investors may want a share of ownership and control of your venture!
Taking this step means that the days are gone when all one needed to do was satisfy the government-customer. Gone are the precise requirements-based predictability and command-and-control process supervised by another engineer. A company’s transition to fixed-price/global-markets-as-customers introduces the need to understand, incorporate and satisfy a much larger audience – end users, equity shareholders, lenders, regulators….and public opinion.
A good engineer probably does not know much about these folks and how to deliver to them.
A great engineer does.
In Part 4: (Re-)Teach the Teachers