Closing Bell - Manifest Space: $100M Series Funding with True Anomaly CEO Even Rogers 1/25/24

Episode Date: January 26, 2024

Space has transformed from a peacetime domain to a military one, spurring space startups to target warfighting demand. The niche of defense tech and national security space startups is gaining investor interest, with True Anomaly a recent benefactor. CEO Even Rogers joins Morgan Brennan to discuss the $100M Series B funding round it closed in December and his outlook for the first of its satellite launches later this year.

Evan Rogers, call sign Jolly, served in the U.S. Air Force for nearly a decade. He worked in a number of units and had a front row seat to the transformation of space from a peacetime domain to a warfighting one. There was a strong desire after the 2007 ASAT test and some weapons testing by China and Russia to start to move towards more proliferated architectures. And I got to see the acquisition processes start to change and the developmental test and operational test practices start to change to support that. But the defense industrial base just wasn't equipped. They were used to building

really, really big spacecraft that take seven to 10 plus years to go build. The software was often built sort of separately by a different contractor. There wasn't a recognition of what it would take to build the true warfighting system for a contested and integrated and operation-limited environment, which is what the space domain is now. To address the issues and risks he was familiar with firsthand, Rogers founded True Anomaly in 2022. It's growing fast.

Last month, the startup announced a $100 million Series B funding round, led by Riot Ventures. Valuation? Undisclosed. But it was upsized and oversubscribed, speaking perhaps to the growing interest of investors in defense tech and national security space-focused startups. In the coming months, True Anomaly will launch the first of its satellites designed to track threats in orbit. The Jackal autonomous orbital vehicles will hitch a ride on SpaceX's Transporter 10 mission. On this episode, defending space and moving quickly to do so. I'm Morgan Brennan, and this is Manifest Space. So I want to start just sort of at the beginning. What is True Anomaly? What are you doing? True Anomaly is a defense product company for space specifically. We were started by four prior Air Force and Space Force operators who saw some wicked hard problems that were emerging,

given the designation of the space domain as a warfighting domain, which was previously designated as a peacetime domain. We recognized the defense industrial base was not prepared to respond to those needs and the space national security space community needed a new defense industrial partner. Okay, so what does that mean in terms of what you're developing a true anomaly? Yeah, so the kind of hard problems of national security space require a full stack solution. So that means both hardware and software. And our product offering consists of really an architecture that consists of software and of a spacecraft.

And our software is called Mosaic. It's an operating system for space superiority. It's designed to integrate and fuse data and allow operators to control spacecraft, a variety of different spacecraft and ground systems to do national security space missions. Our spacecraft is called Jackal. Our first two spacecraft are launching in March on SpaceX Transporter 10. We're really excited about that. There's quite the buzz around here. And those satellites are designed to operate near other satellites to take images, to do training missions. So they have their own propulsion system, their own set of cameras and a variety of different wavelengths and phenomenologies.

And we've really cracked the code on the per unit cost of these kinds of satellites. They used to be hundreds of millions of dollars. We've been able to bring them down under 10 million, drastically under 10 million, which allows them to be proliferated. And that has some important effects on kind of key space problems. OK, what are some of the effects? Yeah, so the key issue that the Space Force is trying to solve, one of them is dynamic space operations, maneuver without regret. And to do that, you really need to optimize for cost per meter per second, which is just an efficiency cost for how much is it going to take? How much money is it going to take to be able to maneuver around the space domain to do imaging missions and training missions and defensive missions. And so we've been able to achieve that rather than building a very, very large system that's

sort of moderately expensive with a lot of gas, we've been able to build small, proliferatable, heterogeneous systems that have a solid amount of delta V, which is just a measure for fuel in the space domain. And that allows them to be proliferated because for the same budget amount, you can buy 20 instead of two. So at a time where I'm hearing a lot of debate about exquisite versus proliferated when it comes to satellites, this falls more into the proliferated category, or is this sort of the merging of both worlds in terms of technologies and capabilities and how quickly you can make them? Yeah, we're really focused on the proliferated side of the equation. And that has a downstream effect. If

you build less expensive systems, you feel more comfortable iterating over time. And one of the challenges that the Space Force faces is that they really don't have decades or centuries, in some case, the way that other military services do, of combat operations and military activity that gives us confidence to go build a certain set of technologies, to invest in things like carrier strike groups, bombers, and fighters the way that the Air Force and the Navy does. So the Space Force has to learn in peacetime. They have to iterate quickly and it's easier to do that with a low cost system. Okay.

What's so fascinating to me about this and you sort of touched on it right at the top of this conversation was the fact that the defense industrial base was not ready for this type of capability, which is why you saw a void and you felt like you could start the company and step in to fill it. How does that speak to your own background and your own firsthand knowledge and experience around that void? Yeah, so my career overlapped with, as I said, the transformation of the space domain as a

peacetime domain to a warfighting domain. And I served in a couple of different units that allowed me to see space operations with big exquisite systems, but also small proliferatable systems. So I worked in an organization called the Fourth Space Operations Squadron that flies a really important communications satellite that's designed for communications through a scintillated nuclear environment, but also really challenging electronic warfare environments. As the threat, as we saw the threat evolve, primarily posed by Russia and China, we realized that the loss of one of our systems

was gonna have a significant impact on our operational capability. And it became very, very clear that we had a substantial amount of fragility at the constellation level in a variety of different mission sets and the constellations to support those mission sets. General Hyten, who's the vice chairman of the Joint Chiefs of Staff, former Air Force space operations and acquisition officer,

called those satellites big, fat, juicy targets. And there was a strong desire after the 2007 ASAT test and some weapons testing by China and Russia to start to move towards more proliferated architectures. And I got to see the acquisition processes start to change and the developmental tests and operational test practices start to change to support that. But the defense industrial base just wasn't equipped. They were used to building really, really big spacecraft that take seven to 10 plus years to go build.

The software was often built sort of separately by a different contractor. There wasn't a recognition of what it would take to build a true warfighting system for a contested, integrated, and operation-limited environment, which is what the space domain is now. Yeah. I do want to take a little bit of a digression here, and that is the fact that you saw this transition from peacetime to warfighting. I mean, what did that transition look like? What caused it? And what does that mean now in terms of when we talk about warfighting at a time where geopolitical tensions are flaring,

we've seen some activity that has been space related. I think about Russia invading Ukraine, for example, and some of the jamming and hacking attempts that happened with the beginning of that invasion. Yeah. I mean, what sort of caused U.S. policy to start to think about this in a warfighting domain scenario? Yeah. So let's go back even farther than that, the 1960s and 1970s, right? The space was thought of as a high ground. It was a domain of a lot of competition between the United States and the USSR. And after the fall of the Berlin Wall and the collapse of the Soviet bloc, we really didn't have a threat in space, right? And at the end of the decade, the 1990s, end of the century, there was a study done by that was led by Donald Rumsfeld called the Rumsfeld Commission or the Rumsfeld Report.

And that identified that there was this fragility in the architecture. We built big systems, but we weren't investing in defensive systems, you know, vis-a-vis strategic defense initiative. But 2001 happened, right? And all of the DoD's resources and focus went to counterterrorism and the global war on terror. That was the case for about six years. In 2007, the People's Republic of China launched an SC-19 missile at a defunct weather satellite, the Feng Yimong Charlie spacecraft. And that was really a wake-up call across the intelligence community and the Department of Defense that we had a growing near-peer threat coming out of the South China Sea and the People's Republic of China

that could hold our exquisite capabilities at risk. And what we recognized was that was really just one flashpoint in a very, very steady demonstration of counter space capability, but also the People's Republic of China's exploitation of the space domain in the same way that United States of allies do. So building sensors that are designed to track US and allied forces on the ground and designed to assist with targeting and weapons employment. There was a sense of urgency, certainly in the Obama administration. And then that sort of the changeover of administrations caused a little bit of chaos. Ironically,

you would think we'll given Donald Trump's history with standing up the United States Space Force, et cetera. A lot of those ideas actually came from the obama administration interestingly enough um but the you know bureaucracies move really really slowly and there isn't confidence yet to build to make substantial investments in space capabilities space domain awareness training etc that confidence is just starting to build okay so now so you've given me the background. You see this void. There's fragility in the space architecture. You're looking to fill it with true anomaly. How quickly can you do this? Are you already working with the US government to do this? And what does that mean in terms of your ability to grow the company and grow the company quickly, which you only started in 2022. Yeah, that's right. Yeah, January 2022. And our first day of engineering activity was in May. That's right. Yeah. So the urgency for my co founders and I was really this this

looming date of 2026 and 2027. You may have heard sort of the intelligence community in the Department of Defense articulate that as a as a key inflection point for when the People's Republic of China could be equipped and capable and interested and motivated in a push over the Straits into Taiwan. So the focus for the Department of Defense is really readiness to deter that type of military activity. If you look at the history of space capability development, it takes, as I said, seven to ten years plus in many cases. There just has to be a new way of doing business. The reality is that the large system integrators are focused on other things.

They're focused on autonomy and aircraft and ground systems. The space businesses in those companies are actually relatively small. So our view is that a team that had really lived through that transformation, that had written many of the tactics, techniques, and procedures, and evaluated the systems for large system integrators, kind of know what the weaknesses are and what the strengths are, and could use that to design brand new capabilities would be best equipped to solve those problems. So our desire to go raise venture capital is really connected to this urgency around being in a position to field meaningful operational capability by 2026. So in June, when the team, the engineering team and I sat down and we said,

here's the operational problem, what are we going to go build to solve that problem? We were able to leverage private capital to move very quickly, to buy long lead items at risk, to focus on building a low cost system lead items at risk, to focus on building a low cost system and get it flying, fix it on the fly and then fly again. And that's really the urgency that has driven our launch cadence coming up this year. To your point, I mean, you have moved quickly. You're literally celebrating two years as a company here and you're already getting ready to launch your first two spacecraft to orbit in just a couple months, you also just closed a Series B round of funding at a time, I might add, where capital has been harder to come by for many companies in the startup community.

That's right. The key for us was to articulate True Anomaly as a defense thesis, not really a space thesis. And what was most interesting to investors is really the intersection of hardware and software. Our software product can be sold independently of the Jackal spacecraft, and it solves a pretty wide variety of the Space Force's most pressing challenges for command and control and data fusion and space domain awareness. So we really have a unique thesis relative to other space companies, and we were more resilient to some of the moves in the capital market that you've seen. That's interesting. So what is that? I guess, what does that mean in terms of business model for the company, the different ways you can and plan to, or maybe already are making money?

Yeah. So we're really proud of the contract traction that we've received to date. That's really the success of the first major contract we were awarded, the Ciber Phase 3, that gave us the confidence to step out and fundraise. We have some really exciting announcements that are going to come up in the next couple of months with some additional traction. The Space Force is responding really well to our thesis and our product. And really that's driven by a focus on showing and not telling. We show up with working software, we show up with working spacecraft, and we're not

putting PowerPoint in front of people to the greatest extent possible. So we're pursuing, I would say, high dollar contracts. We're focused on working side by side with the Space Force to really define and shape the method of transaction that best aligns incentives between True Anomaly and the government so that we can continue to leverage private capital and to really get the DoD to think about working with a company like True Anomaly as a way of gaining financial leverage, right? If the Space Force's budget is $30 billion and for every dollar that the Space Force buys of a True Anomaly product, I can go raise $5. That is the definition of financial leverage. So it's been an education campaign underpinned by a maniacal focus on proving that we can actually build and go do what we say we can do. quickly enough in terms of not only just that initial funding, but also what it takes to get to an actual program of record, which is where a startup can actually find that sustainable

revenue? I think that remains to be seen. There have definitely been some success stories. We're following in the footsteps of other neo-primes like Anduril and Shield and Vanabar and others. But the DoD is going to need to make big, meaningful bets if they want to continue to leverage the speed of companies like True Anomaly and the access to private capital that we have. So I think we're starting to see really great signs. DIU has been a phenomenal partner for us and for others. There's a focus on additional capital pools that can be leveraged by the Department of Defense and transaction methods. The bottom line really, though, Morgan, is that all of the transaction methods and the contract methods and authorities actually already exist in the DoD.

It really is a question of educating program managers and senior leaders and personnel at all levels of the organization to make sure that they understand how they can move fast. And that's really a focus for us. So what does all of this mean for the company in 2024 and beyond? What's the near-term vision? What's the long-term vision? Yeah. Long-term vision at True Anomaly is to be the dominant space security, sustainability, and defense contractor globally for the United States and its allies. Obviously, a clear focus on that on those organizations in those countries. In the near term, we're focused on three things. Proving the jackal works. I'm looking at a countdown clock right now. We have 56 days until

the launch window opens. The team is totally laser focused on that. We have contract deliveries that we're working against and we're focusing on managing cash flow. Okay. Anything else to keep in mind, either from an investor standpoint or from an industry standpoint, as you build out this company? No, I don't think so. This team has a really strong sense of urgency and we're going to continue to drive. And it's a really unique team and a really strong sense of urgency and we're going to continue to drive. And we're, it's a really unique team and a really unique thesis. It's, this is a company that was started by folks who were wearing the uniform who said, who really asked the question,

if not us who, and if not now when. All right. Evan Rogers, true anomaly CEO, thanks for joining me. Appreciate the time. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.