Closing Bell - Manifest Space: Space Media With Payload Co-Founder Mo Islam 6/13/24

Episode Date: June 13, 2024

As the space economy has skyrocketed, so too has coverage. Payload secured funding in 2021 and has grown into a space media hub, newsletters, podcasts, research and events. As it expands into other areas of coverage such as nuclear energy, co-founder Mo Islam joins Morgan Brennan to discuss the big trends tracking for space, how payload is opening up opportunities beyond the final frontier.

Payload started as a passion project. Mo Islam and Ari Lewis were frustrated with what they saw as a dearth of quality media coverage focused on space. When Ari, my co-founder, and I first started the business, we really weren't sure what we were building. All we knew was that the industry itself was one of the most innovative industries in the world. And we looked at the surrounding media and we said, okay, the content's really great, but the delivery mechanism and the products that are built around that content

are not what they should be in our opinion, right? We didn't think that where the innovation was occurring in the industry, which is mainly startups, we felt like that wasn't being covered well enough. And we saw a lot of other industries where this idea of B2B media, which is like building content for an industry audience, we felt like, hey, it's being done really well in these parts of other industries, but not in space. The decision proved to be fortuitous, as interest not only from Main

Street, but from Wall Street in space was starting to take off. Since securing seed funding in 2021, Payload has grown into a space media hub with newsletters, podcasts, research and events. The team is also expanding into other areas of coverage, most recently launching Ignition, which focuses on nuclear energy. On this episode, Islam, a former investment banker turned media entrepreneur, discusses the big trends he's tracking for space and how payload is opening up opportunities beyond the final frontier. I'm Morgan Brennan, and this is Manifest Space. It's all very exciting to see how much growth and interest there is in space in general. But just to take a quick step back,

so we're a B2B media company. We focus on what I would call like technical, critically important industries that have significant ties to national security. So our first brand is Payload, which has become the leading media brand in the space industry. So not relevant to today's show,

but earlier this year, we also launched a sister brand of Payload called Ignition that's focused on nuclear energy. But effectively, we build editorial research and intelligence products around national security focused industries. And beneath those products, we build an events business, which includes trade trades on the like. But that's the plan for now. That's amazing. And congratulations on launching nuclear. And I will probably ask you a question about that before we're done. But first, let's just talk a little bit about what you're seeing in space right now. It looks like according to Elon Musk, we're going to get another Starship test flight here in the coming weeks. I feel like so many of my conversations have pivoted

toward pre Starship world post Starship world, and what that's going to mean for the startup landscape and for what's possible in space and kind of this next chapter of the space economy. Yeah, well, it's interesting you bring up pre- and post-starship because, you know, we get the question a lot. We talk to a lot of investors. So we get the question a lot of like, what should we be focusing on? What are sort of the key themes that are going to drive the industry over the next call it five to ten years and it's this idea of pre pre and post starship so uh just to give you a sense right so like right now i think there's this like tug of war in space between sort of miniaturization and now enlargement for lack of better words so within a low earth orbit um because of moore's law you know performance to cost ratios

of satellites have increased significantly um Said differently, satellites have gotten cheaper and smaller and they've maintained performance. So you've had this growth of like small satellites and all these constellations. However, the other side of that equation is now Starship. So SpaceX is heavy lift launch vehicle that can carry about 150 to 250 tons to orbit. And what that means is that the mass and design of spacecraft are no longer constraints. If you think about it historically, when you've built a spacecraft, you've had to design the spacecraft to fit into a pretty small fairing of a launch vehicle, and you've had to worry about cost. Now you don't have to do that anymore.

So you can launch very, very big things to space at low cost, which means that you don't have to miniaturize everything. And the idea of space stations, larger satellites can now be done a lot more cost effectively than in the past. And I think a lot of players out there, government and commercial, are actually not spending enough time or effectively ignoring the architectural economies of scale that I think will be unlocked through Starship. And the best example of that actually is JWST, James Webb Space Telescope. In the original NASA science directive from like 10 to 15 years ago, it was estimated that JWST was going to cost, you know, 500 million bucks and ended up costing $10 billion, right?

So a 20-fold increase, mainly because, you know, as they built the telescope, they realized they had to make it smaller, they had to fold in mirrors. And in, you know, engineering, generally speaking, when you try to make something smaller, but keep the performance the same, it increases cost. And, you know, effectively, that's what caused the telescope to be so expensive. You don't have to worry about that anymore because Starship is so, so large that you could effectively build almost inefficiently and keep your costs low. So that type of paradigm shift and engineering, that's what we're kind of witnessing right now. We've never seen that type of engineering sort of process in aerospace before. I haven't heard anybody lay out the James Webb Space Telescope thesis quite

that way. And it's a good one. It's such a good point, especially at a time where I think it's becoming more of a household name, given some of the incredible images and research that's coming back from that telescope now. I mean, from an investing standpoint, you can't talk about investing in space and not talk about SpaceX, right? It's sort of the elephant in the room. And what's amazing to me is that I've had so many conversations about that, and it doesn't even seem like Starship's necessarily factoring into valuations yet. It's really all about Starlink. But I wonder, we talk about how SpaceX has opened the door to sort of this new commercial space economy,

but it's opened the door for investors too. Yes. to sort of this new commercial space economy, but it's opened the door for investors too. Yes. So a lot of investors view SpaceX as sort of their indexed space exposure, which makes a ton of sense. And, you know, I certainly understand that perspective. But I think what's really exciting from our end is, you know, so like over the last year, we've spoken to almost every major growth equity crossover and sovereign investor, and we're helping them think through, build and establish space theses, understand what to avoid and where there's opportunity. But effectively, our conclusion is that there's billions of dollars of capital waiting on the sideline. SpaceX, in and of itself, I think that one of the big catalysts for the industry

is going to be some type of liquidity through an IPO. And I think that's going to tremendously help the industry. It's going to also open up the sell side to start actually to know how to think about this business. There's a lot of lack of there's a little bit of lack of transparency still with SpaceX, even for investors. And I think that will certainly open up the market. The big question, of course, is SpaceX going to go public? I think there's a lot of debate there.

I think that realistically, if you think about it, the easy question to ask is, if SpaceX will go public, why would they? They're the second most valuable private company in the world. They're very close to the number one spot, which is now held by TikTok's parent company, ByteDance. They're the only company in the world, other than maybe OpenAI, that can raise a billion dollars overnight. And until that changes, there's really no reason to go public. And it's a massive advantage for the company because they're the only space company that doesn't actually need to worry about fundraising and therefore has the luxury of taking over whichever market it wants. If you actually think about it from the employee perspective, it means that

employees never have to worry about fundraising. All they have to think about is building and meeting whatever insane timelines Elon has. And that's a huge, huge advantage. If you take SpaceX out of the equation, most of the other space companies, there's amazing businesses out there, but you know, they every six months have to go back into market and raise capital and it's a slog and it does tie into and it does bog down employee sentiment sometimes. So SpaceX just has that benefit that it doesn't have to worry about that. So that, and that helps their pace of development. The several billion dollars that's potentially sitting on the sidelines, what do you think? If you don't get if you don't get a SpaceX IPO or Starlink IPO here in the next couple of call it next couple of years, what does unlock that capital or or enable its deployment more broadly into the

sector? Yeah, I think the easy answer there is that, you know, there's a lot of things that the space industry still needs to do well, which is like a bit of it is sort of getting the simple things right. Like, sorry, I shouldn't say simple things right. But there are things that we're used to seeing. Let's take launch, for example. Right. We've been launching things since the 50s. Very regularly. We've been launching humans, like, since the 60s.

And you have a whole plethora of launch companies. Actually, one of the things I hear a lot is like, hey, launch is commoditized. But I don't think that's the case, right? Everyone says, hey, there's all these launch companies.

Like, why would I, even from an investor's perspective, why would I invest in launch? But if you actually take SpaceX out of the equation, no one is consistently delivering on the technical side of launch. You could argue Rocket Lab, but that launch vehicle electron is tiny.

So, you know, 300 kilograms to low Earth orbit versus like a Falcon 9, which is 22,000. It's on it's on it's on a whole different plane. So the industry does have to get the technical pieces correct far more often, especially the things that people are used to, which is like launch. Now, then you can think about like industries like, or sub industries, like the moon, right? Lunar lander, lunar landers, which we've seen a number of attempts already, but they've all none of them have like really worked perfectly. They're all you know, some have landed on the side, on their side. Others have not actually even made it to the moon. So I do think that, you know, institutional investors

want to see more technical progress and more milestones that are actually, you know, achieved. And I think that's part of the problem. It also seems like national security is really sort of the area that's getting the most attention right now because it's a very clear cut. You know, we've got a geopolitically tense environment right now. We know money is going into space, even if you have budgets like ones here, defense budgets here that are flatlining. And it does seem like so many of the conversations I'm having now on the investor side, on the VC side, it's really we're interested in national security. We're interested in so-called defense tech. Yeah. Well, if you actually think about it, right, like this whole what's happening in geopolitics, what we're witnessing is very different from what we saw over the last 30 to 40 years.

Right. We, you know? Over the last four decades, we were a unipolar world order, right? US was the undisputed global hegemon with no great power rivals. We're now very much in the early stages of a pretty significant geopolitical turning point. And for the first time, effectively, in two to three generations, market participants and investors are going to have to factor geopolitics into their investment process. And we are in another space race. Like if you think back to the 60s, during Apollo, we were politically coordinated on an adversary, right, the Soviets. We're witnessing that same level of, we're starting to see that same level of political coordination, space is bipartisan. We have another common adversary, like the U.S. does, which is China. And we launched our first astronaut in 1961. That was Alan Shepard.

China didn't launch their first astronaut until 2003. And the progress that they've made to catch up to where we are today has been extremely significant. And the government is very, very aware of that. And it's part of the reason why this is the first year where defense spending specific to space is greater than our NASA civilian budget. So the Space Force budget for the first time is larger than the NASA civilian budget. And that is a huge signal, at least to investors, on which direction the government is taking spending in space. Now, I read the content you put out on a daily basis. You really have your hands on the pulse,

or finger on the pulse, I guess I should say, of the startup community and landscape. What are you most excited about? And as we're having this bigger, broader conversation about, and what this is going to mean for investors and unlocking at some point institutional investor activity, what's growing fastest? What seems most promising? What is maybe not getting enough attention? Yeah, I'll hit on a few different... I think that's a big question. I'm sorry? That's a big question. It's a broad question.

Well, look, we can get into very niche-y, nitty-gritty, very specific things. But if I were to keep it high level, what I would say is, I think launch... Let me put my investor hat on and say, if I were to think about where I would want to spend time or diligence or where I would want to potentially deploy capital in terms of growth areas. I do think launch still, you know, launch is not commoditized, like I mentioned before. I do think you're going to, there's really effectively, there's two types of launch. There's economic launch and there's responsive launch. Economic is who can launch something at the lowest cost. That's SpaceX. SpaceX has won that battle. No one is ever going to come close,

likely, at least in the near term, right? No one's going to come close on a cost perspective to SpaceX. The other side of launch is responsive launch, which is the idea of launching a few payloads to space within, call it 24 hours, right? The government cares about this significantly. There's going to be some commercial use cases for that as well. So responsive launch is something that I think still could use one, two, maybe even three winners. I think the other thing to keep in mind is that governments and sovereigns want their own launch capability. So there's inherently going to be investor opportunities within launch that are specific to specific sovereigns.

I think outside of launch, I think space stations are really interesting. Space stations are always going to have military relevance. If you think about the Western world, we have the ISS. Around the end of the decade, the International Space Station is going to be decommissioned. China, meanwhile, has an orbiting operational space station. We won't if left up to the government, but the commercial industry is now stepping up. Space stations were never a business model because when you have a piece of real estate in space that cost $100 billion to build, and you're only generating about $2 billion a year, that's the amount of productive spend that occurs on the

ISS every year. When you have $2 billion a year in call it income and $100 billion asset, that's not a great cap rate, right? But if you can actually get the cost of that station down to like $3 to $5 billion to build, operate, and launch, and you're talking about a $2 billion a year revenue opportunity, that's a real business, right? So I think that's something that now a number of players, a number of companies are going after. I think maybe the last thing I'll touch on is Earth observation, right? So the imagery of Earth and how AI is going to play into how that imagery is analyzed. So, you know, one of the biggest challenges within Earth observation has been convincing commercial industry to use imagery. So, so far, imagery, Earth imagery has been sort of the realm of government and a lot of it has been military use cases. So, so far, imagery, earth imagery has been sort of the realm of government,

and a lot of a lot of it has been military use cases. But I'm over simplifying. I mean, if you look at some of the earnings reports from the publicly traded EO companies, commercial demand is not what they expected it to be. And I think part of that reason is because commercial entities don't know how to use this imagery yet. They don't know how to analyze it. They don't know how to build teams to kind of figure all that out. But I was recently speaking to the former CTO of Maxar, which got acquired by a couple of private equity firms. And he was telling me about how you can actually now, he was testing this the other day and I tried it and it was pretty amazing. You can toss an image, a satellite image into GPT-4.0 and ask it what it sees. And I'd encourage anyone to drive,

you can do this, like Google like a satellite image of something, throw it into GPT-4O and ask it questions. And he threw this image in of a military base and asked GPT-4O like, what are you looking at? And GPT comes back with, hey, looks like this is a military base, looks Russian. There's a number of aircraft in the image. It looks like it's this type of aircraft and the surrounding land looks pretty arid. But importantly, this type of tech is not optimized yet for imagery, but I think that's going to be really exciting, which is how companies are going to use satellite imagery to make business decisions. Not a lot of people know this, but the largest retailer in the world

has a multimillion dollar, I can't say exactly how much, but a multimillion dollar a year budget to spend on satellite imagery. And the reason why they are a little bit more innovative about this is because, you know, when you take a look at their customer base, you know, they know once you're in the store exactly what

you're going to buy, right? They can identify you. They know what aisles you're going to go into. They know what products you buy on a weekly basis. But the second you step out of the store, they don't know what your buying pattern is. They don't know where you're going. They don't know where you're going next. They don't know where you're coming from. And as scary as it sounds, like, you know, there's a very, very important retailer out there that's trying to figure this out. They want to know, okay, before you came into our store, where were you before that? And where are you going after that?

And can we continue to offer whatever service you're looking for before and after here at our store and keep you here? So that's just a very obvious use of imagery that a large very resourced retailer can can pursue but once you have tools to analyze imagery um easier better faster than ever before i think that market's going to open up pretty significantly that's a that's a hot tip right there that's a good story uh and certainly we're seeing it on the insurance side too which seems like obvious perhaps low-hanging fruit on the commercial side you know private sector side as well just in terms of being able to um you know assess landscapes and have have an understanding about for example as you said like you know an arid

climate etc natural disasters um okay i want to go back to the media landscape um and specifically what what you're seeing atload and what we're seeing, I guess, across the space media space, which in part because of Payload has become, you know, something in its own right. So we've realized, I mean, Payload was originally a passion project, right? It was never meant to, you know, when we first started, when Ari, my co-founder, and I first started the business, we really weren't sure what we were building. All we knew was that the industry itself was great, but the delivery mechanism and the products that are built around that content are not what they should be in our opinion, right?

We didn't think that where the innovation was occurring in the industry, which is mainly startups, we felt like that wasn't being covered well enough. And we saw a lot of other industries where this idea of B2B media, which is like building content for an industry audience, we felt like, hey, it's being done really well in these parts of other industries, but not in space. So that's really the primary reason why we launched Payload. And I think we got a little lucky because, you know, the industry was at an inflection point.

So we really were able to kind of ride that wave. But at the same time, I think the way we deliver news and we deliver information has been, you know, people really like it. And in my mind, and I'd love to get your opinion on this, Morgan, as someone who's been in the industry for some time, you know, in my mind, and I'm new to media, right? I'm a kind of banker investor by background, but media to me is like, great media is news, synthesis, and insights. Like news, like telling current events, right?

What's actually happening in the world. Synthesis, which is like taking what everyone else is saying and summarizing it and presenting that view to the audience. And then of course, insights, which is presenting unique views about whatever topic you're covering, truly unique views, and adding that value. And that combination of that three, in our opinion, did not exist in the space industry. And quite frankly, doesn't exist in a lot of what I would call deeply technical industries.

We do think that there's many, many deeply technical industries that have significant ties to national security that are not being covered well because, you know, either the media is by special interest groups, trade associations that actually have their own kind of conflicting, you know, reason for doing it. It's think tanks. So these walled off gardens where the intellectual sort of output is not available to the public. And these are critical industries. So we feel like we can build these great media sort of B2B media brands, build like great editorial products, build an event business behind it around all of these different critical technology industries. And that's why we chose kind of nuclear next, because nuclear in our mind, nuclear energy is where space was three years ago.

No, I think that makes a lot of sense. And to your point, I mean, I think the acronyms alone, when you start talking about anything tied to the government is enough to like make your head explode. For years now, I've been threatening to craft a CliffsNotes just for the acronyms for government related programs. So what's next? Where do you see, you know, it started as a passion project, it's become so much more. Five years from now, ten years from now, where does Payload go? Well, I haven't actually said this out loud publicly, but I guess I can, I'll give you a little preview, Morgan, but later this summer we are going to announce a holding company in which we are going to pursue what we're calling the future of defense media.

So space and nuclear were our first kind of two two brands. But we've identified about four to five other industries that we want to go after. So we're just very excited about what's happening within, you know, defense and defense tech and, you know, the government, the US government budget, you know, the DOD budget is something like $800 billion a year. Such a small fraction of that goes to startups right now. Well, I should say like the sort of new crop of defense tech startups, in terms of like contract and procurement. And of course, Andral is leading the way in some of those changes in Silicon Valley. But I do think the future of defense and how we're building

companies is quite bright. And I do think we have a tremendous opportunity to build great media brands around that. Specific to space, I mean, it's really hard to know what's going to happen. Like, you know, I do think in this decade, we're going to land, we're going to be back on the moon. We're going to land the first person of color and the first woman on the moon. It's going to be extremely exciting. It's going to inspire a whole new generation of kids to be, you know, scientists, you know, teachers, engineers, mathematicians, we desperately need more of that. We'll probably be on Mars in the early 2030s. And what does that mean for us as a media company? I have no idea. Are we going to have reporters on off planet? Maybe. But I think that it's going to be, it's really exciting. I've never been part of

an industry where I've seen more growth. So I think there's just so much to think about, so much to write about and analyze in the space industry. So we're here and we're going to continue doing that. New space, new media. It's great to speak with you. Thanks for joining me. Thanks for having me. 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.