I sat down with Delian Asparouhov who just cofounded Varda Space technologies.
Varda builds factories in space. Dalian is also a principal at Founders Fund who invested in SpaceX. Delian is now moonlighting as both a founder and a VC, which sounds really hard, but it turns out that folks at Founders Fund have done it quite a few times.
We talk about what that's like and:
How you can iterate quickly on hardware
Why we should building factories in space
How you can build an early stellar team
How we should get more people working on ambitious startups.
Here is the video, and there is a full transcript below.
You have a new company called Varda and it's really ambitious. What are you trying to build?
I've been thinking about orbital manufacturing for quite some time. It’s related to how California became California. It wasn’t paying Lewis and Clark to explore. We became California via the gold rush.
Low earth orbit manufacturing is the equivalent for space where you can actually significantly accelerate, humanity’s path into the stars by commercializing lower earth orbit. This is as opposed to taking a big spaceship to Mars. That was the SciFi geek motivation behind starting the company.
The commercial reason to start the company is that there's actually a whole wide array of products that could significantly improve the quality of life for people here on earth that can only be manufactured in microgravity. People think making factories in space sounds crazy. But life here on earth would get better, like cheaper data transmission, a greater supply of human organs, much cheaper, cancer drugs, etc
There's a wide array of products that can only be manufactured up in space that are useful for people down here on earth. Nobody was solving that problem. I was trying to find a group to invest in and couldn't really find anybody. And so got frustrated and thought “Crap. I just got to do this myself or else it's never going to happen.”
You are an investor, and now you're starting a new company. This keeps you very busy. How did you decide to do both vs one full time?
I've mentally tortured myself for years over, even before starting this company: what do I want to do? Do I want to go back and be a founder? if you asked 19-year-old Delian, I was consistent: I wanted to be a founder. I want to be a founding CEO.
That's what I did. I dropped out of school at 19 and started my first company. Then I took a year-long break working at Teespring. The plan was to rest up and start another company.
But I couldn't find the right founding team for the company that I wanted to start. Keith Rabois offered for me to join Khosla Ventures. The role was somewhere between an EIR and Chief of Staff. I could learn from him and spend some time finding cofounders for my next startup.
Then I had an aha moment about eight months into Khosla Ventures. I realized first Venture Capital is the way to do space immediately rather than doing what Bezos and Musk did: making it big in normal tech and funding space companies. I can start funding these space companies today and work on space today. But only as a VC because I thought I wasn’t ready to found a space company myself at the time.
The second aha moment was that I kept meeting all these founders that are just like much better founders and CEOs than I ever was. I don't think I'm ever going to be a top 1% CEO.
It comes down to personality traits and working style. I am extremely intellectually curious, ADD, bouncing off the walls, don’t care much for people’s feelings. Those are all huge pros when you're an investor. And those are all big cons if you want to be a really great CEO. I can work the 15 hour days when needed, but I would burn out a lot faster than great CEOs if I needed to do that for a long time.
So at 8 months in, I thought I could credibly be in the top 1% of VCs. It might take some time, but I have a better shot than being in the top 1% of CEOs. So maybe I should stick to venture longer term.
For Varda’s incubation, Will Bruey is the right CEO for Varda. I am not. When you look at him operate and the people he’s recruiting - he’s like a recruiting machine. We’re up to 12 people full time, and we got the cash in the bank literally a week ago. These are extremely experienced engineers: spacecraft, thermal, mechanical. All the types of engineers we need to build a company like this are in his Rolodex.
I know a handful of SpaceX engineers but it would be slower. The CEO’s primary job is recruiting.
Sure, there is a bit of a hedge staying a VC. But if Varda fails, who is going to want to take money from a guy who started a company and failed. My neck is on the line either way.
How do you split your time? Do you have to be in different places?
Thankfully I don't have to reinvent a lot of this stuff from scratch.
The company equity structure to
The seed round term sheet with Founders Fund getting common and preferred
The same employee offer letters
Anduril’s COO Matt Grimm has been incredibly helpful getting everything set up.
I had a long conversation that I've had with Trae Stephens around what he's learned over the past three There are a few key lessons that he taught me.
First, you have to be regularly at the incubation. You can’t do it totally remotely. We’re both based in SF with the company in LA. You can try to do it ad hoc, but he quickly realized it doesn’t work. The team went through mental gymnastics on when to schedule in-person time. So just be there every Friday. Some Friday’s might not have a lot of Anduril business, but at least he’s there. People know when they can schedule in-person time.
Second, don't try to segment the days. Both jobs require being very responsive. There's a time where a Founders Fund portfolio CEO just needs to hop on the phone that day and discuss a new term sheet. Same for Varda. So you can’t do a magical segmentation.
I literally just have two sets of TODO lists, inboxes, and priorities. At Founders Fund I could get to inbox zero. Now that’s impossible. Now it’s: where can I allocate resources to prevent something from exploding? For the past few months, it's been things like making sure we have workman’s comp, an office, and desks, that we’re hiring the right people. Varda has taken up a lot of mental space.
But now once we get those hires onboarded, they're taking a lot off my plate. We have an IT guy, a head of business development, and a de facto COO. I think at that point, it'll start to get a little bit more evenly balanced. I'll do what a VC does best. I’m a really high-level head of people. I'm great at strategy, fundraising, recruiting. That will be most of my contribution to Varda. I'll jump into the various high-level customer conversations, but we have a guy on the ground that's a lot better at that than I am. He'll rope me in when needed.
What is the recruiting list coming up and where can I help there? Will Bruey, the CEO, is gonna be a lot better at recruiting our VP of engineering. When it comes time for us to have a CFO or a CRO, I can significantly help accelerate those types of recruiting campaigns.
They intermingle. I'll be on an FF call one time. I'll be out Varda call later. There are also the fun ones that are actually both, where I'm talking to a space company that Varda can use and FF might want to fund.
Even this interview! People are learning about investing and also about Varda.
For Varda, you haven’t shared the details and timeline for what you’re building. What relationships do you expect? Maybe you have a pharma company that wants to build something and contract with you to build it. Maybe you build the robot that can manufacture that material. Or maybe the most profitable path is to be the only supplier of long carbon nanotubes you sell to others.
What do you expect to happen from Seed to A over the next year or two?
We'd like to be more abstracted and just be the “Foxconn of space”, not developing or even designing the product. We're just a step in the supply chain with the most expertise in how to develop it.
Early on, we have to develop that market and use cases ourselves. We're much more involved in the actual, basic design of the first products. And then we’re also leading those customer conversations.
Ideally in the long term, when we're starting to work on cancer drugs, Pfizer comes to us and says, this particular drug would benefit from microgravity manufacturing. Here’s the design, manufacture this for us, and handle the supply chain. We deal with microgravity manufacturing, bringing things back down, and delivering it to the customer.
With Foxconn, their “supplier” is Apple, where they buy designs. But then they are selling the iPhones right back to Apple. That’s the ideal outcome.
For the first couple of products, it's not going to look like that. We’ll need to make the raw materials ourselves and also figure out the customer side. Josh Wolfe who joined the board as MD from Lux Capital said this first product is kind of like training wheels. The point is not to develop that product. The point is to develop that whole supply chain and then be able to apply that supply chain to a lot of different products.
It doesn’t matter if that first product is profitable or perfect. Generate some revenue so you can show it’s commercially viable.
When it comes to venture for super deep tech, often by Series A or even B, companies often don’t have any revenue. But for a B2B SaaS product, you're definitely judged by retention, revenue, and other metrics. Where do you think it will be on that spectrum? Those training wheels can take you down the driveway or down the block.
My presumption is that you're gonna have to raise a lot of money. The market is completely new, so maybe you need to prove the market exists. Or maybe you just need to prove the technology works. What do you expect?
Thankfully space factories, as crazy as they sound, are actually a lot less capital intensive than rockets. Depending on the quality of that revenue from that initial product, it’s possible we break even on the R&D with $100M-$150M raised.
We won’t need to raise $500M+ in order to get a significant amount of revenue. Broadly, we’re a lot closer to Relativity Space, raising lots of money before you have revenue. The promise is if this deep tech works, you get a binary outcome. If it works, it’s extremely valuable because nobody else can do it.
This depends on the investor community appetite for believing something like this. The reason that Relativity Spaces of the world are able to raise so much is that SpaceX is showing that the launch market is quite valuable.
We don't have that same analogy in microgravity manufacturing. We need to be able to prove that story. Three or four months ago, I thought it would be pretty tough. I’m kind of crazy. Maybe I was a little bit too pessimistic. It turns out a lot of people have been thinking about this.
Maybe it’s easier to understand once we actually give a full pitch, and walk people through explaining the plans. There was a lot more appetite for people investing in Varda than I expected. We also had a lot of interest to back with very large checks from people interested in seeing this come to fruition.
We've put together the world-class team across the various technical and non-technical aspects of the company. It's our ball to fumble. I think investors will continue to be interested irrespective of the exact revenue metrics of the company through D or E.
I think this company gets to $500M to $750M total raised until some real scrutiny starts to get put on the margins for these products that you're developing and selling back down on earth.
When it comes to manufacturing, there are really different kinds of robotics. Self-driving cars and drones are field robotics. What you see in manufacturing robotics is different. Even terms like computer vision vs machine vision - only in manufacturing do you talk machine vision. You have a controlled environment, so my presumption is it's more of the latter. But maybe it’s teleoperation.
What kind of automation do you expect?
It’ll be largely automated.
It’s funny, the first question I get is if its humans out there. Oh my god, no! That requires so much engineering. The ISS is not a simple thing to build where you have continuous oxygen and dealing with all the needs of humans.
And then people ask, will be like Boston Dynamics robots walking around a floor and picking things up? Oh my god, no!
When we talk about factories, there's four motors. That's about it. Those motors spin at various rates and various things that get moved very simply. You do have to be very precise. These are high-value materials that are somewhat sensitive. But this is not robotic arms moving around. You move a pulley, spray a coating, or heat things up. These are extremely simple electrical and mechanical processes that were automating.
This is much simpler than a Tesla manufacturing line. It's not like the entire product is manufactured in space. It's the very particular step that is sensitive to being in space. Most of the time we have an almost done product and we’re finishing in space. Or you're taking some pretty raw materials, doing one step in the process, and bringing it down to earth. The rest gets done on earth.
It'd be fun to have an orbital dropship that lands on my front yard with the iPhone inside. But probably not the way it's gonna work.
For what it's worth, not that far away though!
The thing about these markets is they're just so, so large. If we make it work, with resupplying our factory continuously just with materials, even automated, we'll consume more launches than all the satellite companies combined. We’ll double the entire launch market within a couple of years.
I don't think it's impossible that within a decade, we will be producing more semiconductors in space than we are on earth. And Varda will be the primary producers of those. An iPhone is a set of semiconductors welded together. It wouldn't be impossible to see an entire Apple manufacturing line in orbit within a decade.
In planning this company, did you take the launch costs curve and just project it down? What do you expect and what is required? And will this be more SpaceX launches where the costs come down, or is there some other dimension?
On SpaceX’s site, you can book a rideshare for a 200 kg satellite for a million dollars. That’s $5K/kg to launch. In the projections we pitched to investors, we assume by 2025 that goes down to like $3K/kg.
I talk to friends working on Starship, like my fraternity brother from MIT is head of economic performance and responsible for figuring out how much it’s going to cost to launch. He's always delivered on all his various promises. He's been in SpaceX for about nine years. Sometimes they're a year or two late, but they always deliver on their promises. He's promised me $50-$100/kg by 2025. That makes microgravity manufacturing move from difficult to make profitable to extremely easy.
Everybody's mind needs to shift. It costs you a million dollars to send your satellite to space today, and you don’t spend less than $1M designing it. If you spent $50K making it and it fails, you lost all this money in the launch.
But if it costs $50K to launch, then all of a sudden you're talking about satellites at a 50K. Our ability to send an ISS size module up to space as a non-government non-state entity in that world. I'm not banking entirely on SpaceX. Look at the number of launch companies that are both getting into orbit and are getting significant fundraising rounds. They are also thinking about the economic cost of this and our margin down towards more and more reusability. We now have three commercial companies that have made it orbit: SpaceX, Rocketlab, and now Astra as of like three weeks ago. It’ll be 6-7 in the next 18 months. All of those companies are increasing production and slashing costs and improving the economics.
Even if Elon gets hit by a bus and Starship doesn't work out, we're already on this decreasing cost curve. It is moving far faster than Moore's law. There's no fundamental physics reason that it should stop.
We project $3,000 a kilogram by 2025, but I think it will be much lower than that. I think a lot more people will be thinking, damn, why didn’t I start a microgravity manufacturing company in 2020?
One of my favorite topics is moving fast and hardware, because it's just so hard. The way you make something cheap is that you lock in a design for manufacturing. The way you make something good is iterate. I know Founders Fund has strong opinions about having a clear vision for the future. Go and build that vision, versus going “lean startup”. If you have a $50K versus $5M satellite, how much work do you put into that? Look at the way NASA does a Mars mission. You have to be very conservative. So how do you build a company that can build hardware fast?
The average tenure at SpaceX of an employee at Varda is about 6.5 years.
Thankfully SpaceX knows how to make hardware really, really fast. We already have that culture and are closer to the “lean startup” model. We create hardware iterations rather than try to design the end product.
Starship is now the perfect example of this: nonstop creating iterations. Don't increase the technical scope too much because if you fail you don’t know the root cause. We're starting off with extreme MVPs of our basically space factories. We make sure they work and then add on scope to eventually get ready for launch into orbit.
I definitely don't believe in the lean startup model when for, “What you are building in the long term? What is your business?” and AB testing towards that.
When it comes to hardware development and space companies in particular, they get screwed when they try to come up with a design on a whiteboard and then perfectly designed towards that. That’s what prevented blue origin from getting to orbit. Plenty of other space companies suffered the same downfall.
You have to focus on making a piece of hardware every quarter, testing the full system, and integrating together. Then every team does back: the re-entry team makes the next version, the microgravity manufacturing team makes their next version, the solar panels, and propulsion. They reconvene every 3 months and integrate everything together and see how it works. This or that failed, now we know what we need to fix for the next one.
If anything, I'm concerned about this team moving too fast given that speed is in the DNA.
We went from founding team, to capital in the bank, to the first 12 hires, faster than any space company ever. So let's make sure not to go to orbit too soon. Our timelines are only getting accelerated. We thought our electric engineer wasn't going to start for another 3 months. They're starting on day one in the office of everybody else, so we can start electrical design a little bit faster than we expected.
It's incredible to see the recent Starship test that exploded. But everyone cheered it on because they learned what they needed to learn. Only a company that's focusing on the iteration can take the value of that.
I’ve meaning to tweet about that particular Starship analogy how things have shifted. My buddy high up at Starship told me how it’s bending their brains at SpaceX because they've had to all unlearn “rockets exploding is bad”. For a long time at SpaceX, a rocket exploding almost killed the company many times. Elon had forced to team to launch, regardless of how ready you are. You’re launching today because we’re in a post-capital world at SpaceX. Rockets blowing up doesn't matter anymore. I can afford to build a hundred of these before we run out of capital.
We're not gonna run out of capital. It's really amazing to see that ethos come to fruition. You also see the public start to appreciate this as well. Read books like Loonshots or other books about mega projects and how they work. It's constant hardware iteration and willingness to have that hardware fail. Designing in a vacuum, on a spreadsheet, and on a whiteboard never works.
Just send things out in the environment on a regular basis. As a space enthusiast and entrepreneur, it is thrilling to see that the public markets and private markets are willing to make space companies live in a “post capital world”. Elon can raise infinite amounts of money for SpaceX.
All that SpaceX has done over the past decade has been in a pre-capital world. They had relatively limited fundraisings, and some were really tough. They have raised more in the past 12 months than they did in the entire company's history before that. If you think SpaceX is cool, imagine what they’ll do in a post capital world.
People joke about late-stage capitalism, but actually, it means getting to space, becoming a multi-planetary species, and watching cool rockets blast off.
How do you get founders to be more ambitious? Maybe it’s just by demonstration. Let's look long-term. What does the future you want to live in? But people tend to hedge. To caricature, every employee at FAANG believes they should be focusing on short-term income over building the future. How do you get all of these would-be founders and people starting today to dial it up, to build the world we want?
The way that you encourage us is actually just by practice. The reason that I was more willing to start Varda was that I was seeing other financing rounds happen. I thought, Woah, you can raise a lot more with the level of team that I could recruit than what you could 4 or 5 years ago.
Varda couldn't have raised a $9 million seed round out of the gate five years ago. I was in the fundraising ecosystem as an entrepreneur in 2015. Zero chance. The only people that got $9 million rounds out of the gate were the Jack Dorsey's of the world. I'm no Jack Dorsey, but it's pretty awesome that I can get $9 million for a pretty damn crazy idea. I do think that type of stuff really does encourage the next generation of entrepreneurs.
Second, I do actually think that this is starting to shift. I'm more optimistic about company formation than I have been in a while. If you just look at macro US stats, more new businesses were formed in 2020 in the United States than any year in the past decade.
The oversupply of capital is now starting to shift people's mindsets. If you were an early employee at Stripe or the equivalent, you maybe got financed, but it wasn't like a guarantee. Today, if you're an early employee at Stripe, Anduril, Snowflake etc, it almost doesn't matter what your idea is. You get to raise three or $4 million out of the gate. The bar has been lowered for both quality of team and quality of idea. Back in 2009, $3M or $4M would have been called the Series A.
It's increasing the success rate of these companies too. Way more capital's afforded to them that allows them to continue to progress. The quality of startup advice, mentors, and number of VCs continue to increase since I've been in Silicon Valley.
You keep inspiring people by doing and being the example. I am sure that a lot of my friends are thinking, Delian wasn't 10 years at SpaceX, and he’s starting a space company. Maybe I can also go start a space company!
It used to be space and Silicon Valley were two separate areas. The overlap between the two worlds is getting a lot tighter. Julia DeWahl used to be the chief of staff at Opendoor and now is one of the early business hires at Starlink. I categorized her into a Silicon Valley world. I never thought she would overlap in a space world. Worlds are starting to bleed together. I think that gets people a lot more comfortable working on space. They’re thinking about the kinds of companies they can now start.