Closing Bell - Manifest Space: CesiumAstro’s $65 Million Series B Funding 8/8/24

Episode Date: August 8, 2024

CesiumAstro has cornered the market on an uncommon, but soon-to-be crucial part of the telecommunications market: phased array communications. The startup recently closed a Series B+ funding round with investors spanning across the Development Bank of Japan, L3Harris Technologies and Airbus Ventures. Founder & CEO Shey Sabripour joins Morgan Brennan to discus.

Cesium Astro is cornering a little-known part of the telecommunications market, but one that could become crucial to a variety of industries from broadband internet to drones and warfighting to air travel and autonomous driving. Phased array communications. It allows you dynamically to put the signal where the demand is and then remove it and put it somewhere else where the demand is less. And it's really a dynamic way of managing spectrum and power and how you use it. And it's critical for the next generation of telecommunication. And that's about to come. Cesium Astro recently closed a Series B Plus round of funding, adding an additional $65

million to its cash pile. Investors in the company include Truesdale Ventures, Development Bank of Japan, L3Harris Technologies, Jaguar Land Rover, and Airbus Ventures. Founder and CEO Shea Sapropour says he's always taken a disciplined approach to growing the startup, and that's starting to pay off. We have actually earned more contracts than we have spent VC money, which is kind of unusual. So many companies have to spend hundreds of millions of dollars in venture money and capital investment before their first revenue comes through the door. We've raised 160 million. We've spent half of it in almost eight years. We have half of it in the bank. And with that $80 million, we have already generated

well over $120 million of gap-realizable bookings and revenue. On this episode, what it takes to give a niche, century-old technology a mass-market makeover, and how CZ Mastro is betting the future will rely on it. I'm Morgan Brennan and this is Manifest Space. The latest is that we finished our Series B+. I call it Series B+, because it was part of our series sequence of Series B investments that we got and our plan for Series C is hopefully by the end of the year or next July actually and so I wanted that to be a much larger amount and so this Series B plus was around our goal was 30 to 50

million and we closed it at about 65 and a half and there's still demand for it so we might actually add a few more millions to it, but it's around 66 million. It's interesting to hear that there's demand and that it sounds like you're oversubscribed. What do you attribute that to? Well, I think we've been really a very disciplined growth company, I've always believed that even during a time where there was a lot of investment being made, both through SPACs and other VC investments through space companies, I had the belief that I should have two years of runway if the worst case happens. And I think the success of the company so far has been based on that, that I've always maintained a healthy runway for the company, a disciplined growth.

We have actually earned more contracts than we have spent VC money, which is kind of unusual. So many companies have to spend hundreds of millions of dollars in venture money and capital investment before the first revenue comes through the door. We've raised 160 million. We've spent half of it in almost eight years. We have half of it in the bank. And with that 80 million, we have already generated well over $120 million of gap-realizable bookings and revenue. So that's kind of, I think, very unique in this frenzy of new space investments.

That is. There's a lot there that you said to parse through. I'll start with the contract piece of it. Where are some of those big contracts coming from? How does it speak to the role that CZ Mastro is playing in this new space economy and in the national security piece of it as well. Yeah. I mean, you know, I started the company to really bring about a new generation of wireless telecommunication technology to be part of this new transformation of telecommunication,

both for commercial, as you see with Starlink and Amazon Kuiper and others as well as government applications in c5 is our you know command and control and intelligence survey surveillance and reconnaissance and so this dual use application of our technology my strategy was first build a product that can be used by a lot of platforms and companies as sort of picks and shovels product, make money, and then you can grow into perhaps more vertical integration. When we talk about the contracts that you've won so far, how does it speak to the role that CZM Astros is playing in this new space economy and in national security as well?

Right. I mean, the contracts that we've won so far, a good portion of it has been, for example, we just announced a major contract with a space development agency in partnership with Rocket Lab. So that was a major contract that we're supplying our active phased array technology to Rocket Rocket Labs, transport layer for T2, tranche two of space development agencies, proliferated warfighter space architecture system that you're familiar with. It's a bunch of low orbit satellites

that they're launching in a distributed system. So we're part of the Rocket Lab team and won that contract. There are a couple more that we have also won this year. I can't announce it yet who the customers are. And then we have some NASA programs that we have on with some partners that we will announce very shortly.

So both in the areas of commercial NASA contracts, as well as defense makes up these contracts and as well our first generation products called Nightingale was introduced a couple years ago this was supposed to be our minimum viable product that we developed during the first five years of the company and as soon as we introduced it to market a couple years ago that by itself has generated a good amount of revenue and bookings well over 50 million. And it's being used in all sorts of applications,

in small satellites, CubeSats, in lunar missions. It's a foundation of 5G non-terrestrial network for lunar type of missions. So that's being used across the board. And then we introduced our sort of our Gen 2 or Holy Grail product right before December of last year. And this year alone, we have already booked well over $70 million in contracts for that product to Space Development Agency, to Rocket Lab, and several other companies. You're staying busy.

If I just take a step back, you and I have talked before, but if I take a step back, phased array technologies, what are we talking about here? Yeah, it's really a good question. I think phased array technologies, first of all, it's been around for well over 100 years. It was used after World War II, mostly for radar applications and jet fighters, in the nose cones of jet fighters, used in radar applications for missile tracking and other applications. For telecommunications, it has also been used because it really allows you to create multiple beams. Beams are kind of like the beams that are emanating from a cell tower.

They create a spot on the ground, what's called a cell, and you drive through it. And what that does, cellular infrastructure allows you to reuse this natural resource called the electromagnetic spectrum, radio waves. And there's only so much of it, and it's limited. It's a natural resource, as I said. And the way you use it matters. So that's why in cellular infrastructure, we have added more and more cell towers, and now we're moving into 5G and beyond. And 5G brings about electronically searable beams where you can dynamically assign different frequencies and different power levels and move the beams to where the populated areas are.

That's what phased arrays do. It allows you dynamically to put the signal where the demand is and then remove it and put it somewhere else where the demand is less. And it's really a dynamic way of managing spectrum and power and how you use it. And it's critical for the next generation of telecommunication. And that's about to come. And I'd like to explain more on why this is important. Yeah.

So what does this next generation look like, especially in a world where, look no further than the CrowdStrike outage, the world is ever increasingly connected. You're building out things like AI infrastructure that requires much more connectivity. I could go on down the list. Let's start with the AI technology. I mean, AI is going to bring about technologies that we all know about. I mean, from humanoid robots that you see companies are investing in and as well as Tesla and others to to industrial robots and I just like to use an example phrase that

You and I are having this conversation here today And we understand each other and we taught we're having a conversation and each one of us is using about about a hundred watts of power and And each one of us is using about 100 watts of power for our brain to operate and process each other's words and listen to each other and respond to each other based on the questions that you ask me or the conversation we're having. If there was a humanoid robot that was not connected to anything, it was really trying to learn and be in front of Morgan and talk and respond. The amount of power required for that robot would be several hundred times more, if not more, to process, store, and operate this neural net system. So the human machine is quite efficient.

Now, this doesn't mean that humanoid robots won't happen. It means that a lot of the processing and learning and training that humanoid robots need will be done at data centers, in the neural nets of the data centers that also require a lot of power. But that information will have to be edge processed with the robot. And that's where telecommunication is important. So that's just one example of connectivity

enabling the next generation of AI and beyond. The other aspects of it are just look around at what's available now. You know, every one of us can now take courses on MIT or Carnegie Mellon and have access to all of human knowledge. That was never quite possible before. That some of the leading institutions in the world, some of the best research in the world, some of the best minds of the world can be accessed right now. And knowledge obviously can help bring about prosperity, eradication of diseases to the world.

And I think again telecommunication plays a huge role in that. And so the demand for telecommunication beyond what we're used to right now with our cell phones in metropolitan areas are going to go up for all over the world and satellite communication is a big part of it. Not that satellite communication is the only solution. Fiber optics belongs where it belongs. The cables belong where they belong. But mobile connectivity, global mobile connectivity depends on satellite communications in all

orbits, geostationary, medium-Earth orbit, and low-Earth orbit. And that's why you're seeing, for example, a lot of telcos strike deals with satellite communications companies as a complement to their existing terrestrial networks. Is that sort of the way to think about it? As a complement, yes. In some cases, as a complement, I mean, it's really hard for satellites to replace terrestrial cellular infrastructure in urban environments where there's a lot of us that are concentrated

because no matter how big you make the phased array or the antenna on these platforms, the cell size is going to be large enough, let's say somewhere around 17 to 20 kilometers. And that cell size is very large. And given the bandwidth that's assigned for some of these mobile network operators, there's only so many phone calls that can be made before you saturate that beam. To provide the analogy that you were asking earlier, each one of us with our cell phone is kind of like a radio station.

So in this area, you have just so many radio stations on the dial. You might have a PBS radio station, a public radio station. You might have some other. And within a cell that's emanating from a cell tower, you can only have so many radio stations or cell towers. In order to pack more in, you have to make the cells smaller so that you can have one frequency band here, another one here, and then repeat this one that you used over here again.

So this reuse of frequency is really important for smaller and smaller cells. So you have these things called femtocells in urban areas. So direct-to-cell technologies that you're hearing about are good as an added layer where no matter where you are in the world, you can have some access, perhaps texting or perhaps a phone call, but it won't replace the day-to-day appetite that we have with our cell phones and downloading all sorts of data, all of us in a congested urban area.

So they're all very complimentary. Fiber optics is great. It's high bandwidth, high throughput. It can be connected to your house, but it requires infrastructure. You gotta dig the ground up. And so that has its own purpose. But you cannot connect fiber optics to every cell phone.

You cannot connect fiber optics to our moving vehicles. So for mobility, you need wireless radio waves. So that's where satellites, terrestrial 5G and 6G, all of these have to play together. And in my opinion, all of these over the next decades will use some sort of advanced phased array and software-defined processing technologies. That's where 5G and 6G is headed, actually. Yeah, and of course, that's how you're positioning Cesium Astro to capture that market. So what does that mean?

To go back to something you said at the beginning of this conversation, you talked about steady growth. What does growth look like right now? What does the trajectory look like in terms of your ability to manufacture these products and get them to orbit? Yeah, growth for us looks like, you know, being able to, when I first started the company, I had a single slide that said basically basically, if I build this technology. And what's unique about our technology, first of all, is that, as I said, phase layers have been around for a long time. But sometimes you have to bring about several technologies together and make it available in a way that really enables the customer. So when iPhone, for example, I'm going to refer to iPhone or smartphones a lot in this

conversation, hopefully. But when iPhone first came out, it was really the culmination of a lot of technologies into one package. Smartphones had been around. I'm sure you had a BlackBerry, so did I. Smartphones had been around. But what Apple brought to the table was culmination of a lot of technologies. Actually, a lot of it actually came from our Department of Defense,

where it was brought together in one package where a lot of people could write applications for, you had all the tools and all the things you need besides the phone on it, and it just, it was a game changer. We wanted to do something very similar where a sophisticated product like phased arrays, where a lot of people don't know anything about, but it's required on all sorts of platforms, commercial and government, it's required on aircraft. You want to have better internet on your aircraft. That's where aircraft companies like Airbus and Boeing and other airlines are headed, to put phased arrays to replace the traditional steerable dishes that are under those bubbles that you see on top of

airlines with phased arrays that have multiple electronically steerable beams that can track multiple satellites, both in low-earth orbit and geo. So your Wi-Fi is going to get better on the plate. Your Wi-Fi is finally going to get better, a lot better, a lot better. And that's one of our products actually that we've invested in. On the satellite, you need the same thing. You need to have these technologies where it allows you to dynamically assign beams where the customers want it. There was a time where you could, the kind of satellites that I used to work on when I was at Lockheed Martin, broadcast satellites. You illuminate the entire continental US, everybody, CNBC and others,

upload their data and you broadcast it to the entire country and everyone was happy. Add a dish on your roof and you worked it. But imagine if you wanted to have, and that happened, right? We wanted to have our own local news channels. Well, it would be impractical to have all the local news channels broadcast to the entire country. Or if I'm going to download a page, my download that I want to have should be broadcast to the entire country for me to receive it. So we had to move from these big broadcast systems to point-to-point systems. Again, that's where phased arrays and multi-beam technologies come in, allow you to really better utilize the way we live and the way we want to access information.

Okay. So just our technology allows us to bring a bunch of things together, software definition, hardware, and all the technologies required so that we can give it to our customers so they can use it very much quicker in the platform that they have, whether it's a satellite, a drone, or a car, or any other device. Yeah, which also I think probably speaks to the fact that Airbus' venture arm is a backer. L3Harris, I believe, has participated in this most recent round and quite a number of other investors as well.

So what is the longer-term game plan then for Cesium Astro? I think first and foremost we're adding more and more features and technologies into our product that makes it really easy for our customers to be able to not think about. Our customers should be focused if they're building a supersonic aircraft, they should really focus on it. They want to focus on that. Our government, one of the most recent phrases that I heard that was really interesting for me, it was on one of these Zoom calls on an industry day. And the phrase said that the government doesn't buy technology, the government buys capability.

That's a very important point for me, that we want to provide end capability to our customers so that we want to take the sort of rocket science out of the hands of our end customers. They just want the capability. So we want to create a product that just comes out of the box and works. And again, back to Apple and the initial success they had with iPod and then iPhone was the fact that when iPod came out, there were many, many MP3 players on the market. But iPod dominated the market because it came out of the box with everything you needed to get up and go and have your songs. With iPhone, when it came out, it had everything you needed to really operate it.

So our phased arrays, our technology that we sell, comes with everything that our customers need. They don't need their own PhD in antenna engineering, RF engineering, digital signal processing, or AI to work it. We give them a box, and it comes out of the box, and it just works beautifully. And we're investing more and more r d into this and we have more and more technology coming out over the next couple years already what we are producing today that i talked about that we have introduced for space development agency is is a generation ahead

of anything else that can be purchased on the market it's a decade i've personally heard from some more customers that you guys are a decade ahead of us and um and and we will continue to invest so what the next few years look like is i'd like to have our products he's a master product in every platform there is on satellites on drones of course some satellite constellations have their own technology, like Starlink, but there are many others, both government and commercial applications, where they want and need our technology, and I want to be in every one of those platforms. We're now having a contract with Air Force to put our phased array on an MQ-9A drone, drone and we have customers in missile applications, satellite applications, aircraft applications, even some car companies. You may have heard that JLR,

Jaguar Land Rover was one of our recent investors. They're thinking about their future connectivity of their cars and collecting data to teach their autonomous systems. So that's where, again, our phased array technology comes into play. So both cars, satellites, anything that's mobile, it's gonna use this kind of technology and we wanna be a market leader

and be in every one of those platforms. Ever increasing connectivity and autonomy. And autonomy, yes. Cesium Astro's CEO, Shay Stabrapor. Thank you so much for joining me. Thank you so much. It's a pleasure. 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.