Closing Bell - Manifest Space: Starlab and The I.S.S. Commercial Succession with Voyager Space CEO Dylan Taylor 9/28/23

Episode Date: September 28, 2023

The I.S.S. is expected to be retired in 2030, closing a multidecade chapter for humans in space funded by the government. With the next chapter of human space exploration spotlighting the private sector, a slew of companies are developing what they hope will be the I.S.S’s commercial successor. Voyager Space, a holding company concentrated on space infrastructure, is the startup behind Starlab, one of 3 projected pre-selected by NASA to potentially rise to the challenge. Morgan Brennan sits down with founder & CEO Dylan Taylor about space stations, his own spaceflight with Blue Origin and the commercial space sector.

The International Space Station is expected to be retired in 2030, closing a multi-decade chapter for humans in space that has been funded by governments regardless of the geopolitical strife on Earth. The next chapter will be commercial. NASA has taken steps to open low-Earth orbit to commerce and private sector innovation, even doling out some dollars to companies developing their own habitats. Voyager Space is one such stardom, with its Starlab one of three projects preselected by NASA to potentially become a commercial successor to the ISS.

Our vision of space stations going forward is they'll be special purpose. Ours is very much leaning into the lab and on-orbit experimentation part of the market. If you look at the ISS today it's about 400 million dollars of research done per year and I'm in the camp that says supply will create demand not address demand because part of the reason more research isn't done on the ISS is it's quite difficult and quite long lead time to get experiments set up. Astronaut time is also a bottleneck. You have to schedule astronaut time down to, you know, 15 minute increments. And we know this because we're the largest commercial user of the International Space Station via our acquisition of NanoRacks.

So we know that model extremely well. So we have the service extremely well. So we have the service provider side, we have optimized hardware side, we have an international consortium because we have a joint venture with Airbus, and we're going to be addressing what I think is the most important part of the market, which is the research part. So it's a very compelling economic model and we have investors very excited economic model. And we have investors very, very excited about that. Dylan Taylor started as an early stage investor in the space sector, but realized if commercial space was going to get off the ground, it would require the ability to

scale. He started Voyager Space, a holding company, to address that, acquiring businesses and building a portfolio focused on space infrastructure. On this episode, I speak with Taylor, Voyager's chairman and CEO, about space stations, his own spaceflight with Blue Origin, and the plans to go public the traditional way. I'm Morgan Brennan, and this is Manifest Space. So space infrastructure company, that's the headline. But it's built around this premise that new space is a real thing now. The technology is real. It's matured.

We can get to space reliably and expensively and frequently. What hasn't happened particularly well is it hasn't scaled particularly well and so the whole idea was can you create a company that has prime level prime contractor level capability but preserves new space innovation and entrepreneurialism that was the notion behind it and so we formed voyager really as a platform company an operating platform you know similar to let's say, a Danaher or a Heiko, to assemble capability, to capture parts of the value chain that really the Primes were the only companies capable of capturing, but do it in a way where you're innovating. And that model was really validated when we won the CLD contract, one of three companies

to build the replacement to the International Space Station as a prime contractor. And in our industry there's a huge difference between being the prime and being a subcontractor, not only in terms of the capability you need to perform, but the economics that you're able to capture. So we're very, very optimistic that we have a model now that scales and what we'll have to be careful of is that we don't calcify and we don't turn into the big company prime along the way

because we'll lose what really is our secret sauce, which is this entrepreneurial innovative spirit that we have. So how do you do that? How do you ensure that the calcification doesn't happen? Yeah, I think you talk a lot about it. It's who you hire. It's probably also who you fire along the way. So people who sort of have the can't do attitude wouldn't be appropriate for that kind of culture we're trying to build. You know, the other premise we had was that the best people

in the industry wanted to work for a company like Voyager. They wanted the best of both worlds. You know, I joke, imagine Elon being a badged employee at Boeing or something, right? It's ridiculous. People who really have this hard-charging, innovative spirit want to work for a company where they have some maneuverability, they have some flexibility, they can put their mark on the company. So I think we're attracting the best and brightest in the industry because we built a company that speaks to them. So you talked about being awarded a contract to develop sort of the next generation of commercial space stations to replace the ISS. You mentioned that the economics are different,

being a prime versus being a subcontractor. I guess just walk me through that, and then I want to get into the specifics of Starlab a little bit more. Yeah, sure. So the idea is that when you have the prime contract, you have the covenant directly with the customer. You can determine buy versus build. So what do you want to do internal versus what you want to outsource?

And then when you do outsource, you determine the pricing of the supply chain, right? So you have control over, let's say, the entire value bucket. Now you have to perform, you have to execute, and there's some risk. And we've seen this with some of the prime contracts where you make a commitment you can't deliver and you're sort of upside down on the contract. So there's risk in it, but there's also high reward if you can perform. When you're a subcontractor, you still have some risk because you're bidding on a particular contract, but you're sort of a price taker, not a price giver. And so if you look at any supply chain based industry, typically the higher up you go on the capability scale, the more economics you capture,

the more value you capture. And that was really the notion behind Voyager. And by the way, that's part of the reason why I think typical aggregators of market share in our industry haven't done particularly well. Private equity, which is tremendous, I respect completely. They typically think in terms of assembling market share so by company a buy its competitor company B put them together take some cost out throw the top line put some leverage on it sell it to someone else we don't see it that way we see it as assembling capability so you take capability a complimentary capability B and it unlocks capability C which is higher up

the value chain and if you look at the way the primes have assembled capability that's that's exactly what they have done so I think we're unique insofar as we're really focusing on the capability piece first as opposed to market share and I think that's part of the reason why the industry hasn't aggregated the way other industries have yeah and of course you're in a very unique position to talk about what that looks like at Voyager and as a prime contractor versus say private equity entering the space and looking to put companies together because you really you started as a space investor that's

right yeah I want to get into that a little bit more too and your history and this career path. But first, just in terms of Starlab, how much, given the fact that Voyager is a holding company, how much is being done within the supply chain? How much is the supply chain vertically integrated versus how much you're outsourcing? Right, we're attempting to vertically integrate quite a bit of our supply chain. So for example, Zinn Technologies, which is a Cleveland-based human-rated infrastructure supplier,

was in our supply chain for Starlab. We acquired them, I think it was in February of this year. And so that was really a win-win. They were looking for what was next for them. They had a founder who was looking to retire. He had anointed a successor, but they weren't really sure, you know, go it alone is difficult in this market if you're not at scale. And they didn't want to sell to a strategic. Most people don't because then you're sort of gobbled up by the larger calcified company, if I can refer to it as such. So for a lot of employees who had been in an entrepreneurial environment, that wasn't attractive.

So we provided them a very attractive opportunity. It was good for us because we could capture those economics, we could integrate that supply chain piece into our program, have more control over the outcome. So classic win-win, super creative for us, super beneficial to them. So I would anticipate more transactions like that. We're on a public company glide path. We have ambitions to at least target that as an option for us.

And so, as you may know, when you do material acquisitions, then you have to sort of reset your audit timeline. So we need to be a bit mindful of that, but we definitely intend to do more vertical integration and more acquisitions. So let's talk a little bit about the stats for Starlab, the value proposition. We know the ISS is going away by the end of the decade. We know the commercialization of low Earth orbit is upon us. Walk me through the economics.

Well, the economics I think are compelling. So first of all, I believe the ISS number to date is about $440 billion. And part of that was there was no master plan for the ISS, right? It was sort of assembled over time, added to lots of sort of, you know, measure once, cut once, as opposed to measure twice, cut once. So I think we have an advantage because we can visualize this and design it from scratch. So I would anticipate our total cost, when we haven't revealed exactly what that's going to be, is going to be massively less than the ISS. So your sort of fixed costs, your hardware cost going in are much, much, much lower. The other benefit of having this master plan is we can optimize it for specific uses. So our vision of space stations going forward is there'll be special purpose. Ours is very much leaning into the lab and on-orbit

experimentation part of the market. If you look at the ISS today, it's about $400 million of research done per year. And I'm in the camp that says supply will create demand, not address demand, because part of the reason more research isn't done on the ISS is it's quite difficult and quite long lead time to get experiments set up. Astronaut time is also a bottleneck. You have to schedule astronaut time down to 15 minute increments. And we know this because we're the largest commercial user of the International Space Station via our acquisition of NanoRacks. So we know that model extremely well. So we have the service provider side, we have optimized hardware side, we have an international consortium because we have a joint venture with

Airbus, and we're going to be addressing what I think is the most important part of the market which is the research part. So it's a very compelling economic model and we have investors very, very excited about that. When do you target having Starlab in orbit? 2028 is sort of the headline number, and I feel reasonably good about that date. ISS will be in orbit. Currently, the federal government is saying through 2031, and then it will be deorbited. I'm very confident Starlab will fly before that date, but right now it's 2028 is the target.

You mentioned the fact that you're the largest commercial user on the ISS. How are you using it? We're running missions for other entities, so governments, companies. Typically, people come to us because it's quite difficult to get a mission done on a one-off basis. So I think we've done missions for 35 plus countries to date. It's right around 2,000 missions we've done on the ISS. So it's everything from schools and universities to nation states to companies. We have our own airlock on the International Space Station. It's the only privately owned permanent fixture

to the International Space Station. And so we're using that as well to run experiments. That's a human rated airlock. So those are some of the things that we're working on today. And you just had this recent successful installation of a self-built payload called Gambit to that airlock. Yeah, we did. And, you know, we're looking for different ways to utilize the airlock.

So, for example, one notion is TLR ratings. So how ready is your technology? And obviously if it's nine, that means it's flown in space and it's worked in space. Those final stages of readiness are difficult because you actually have to take your hardware from the bench on the earth to space. And typically you're going to have to run a mission. Those missions are extremely expensive. You need your own dedicated launch. You need to put your hardware in space. You need to capture it. You need to get the data back. Whereas if you have an airlock, think of it as being a lab bench in space and you can set up the experiment or the hardware in the airlock, literally open the door and you're in space by definition, run that experiment and it's almost like a readiness minting machine

in a sense and much easier for you to qualify technology. So that's another way, for example, that we can use the Aerolug. So I'm gonna ask the question about the competitive landscape, because we do have a number of companies developing commercial space stations. And then of course there's SpaceX with Starship,

which has been bandied about as a possible contender as well. Yeah. How do you, I guess, how are you thinking about them? Is there going to be room for everybody in this new commercial LEO environment? I don't know if there's going to be room for everybody, but there will be multiple space stations flying for sure. Starship is very compelling, I think, for short-term missions, for sure. Starship is very compelling I think for short-term missions for sure. I think

it's less compelling for like a 10 or 20 or 30 year life. So I think Starship will have a role to play for sure. We have Axiom that's going to attach to the International Space Station and full disclosure I'm an investor in Axiom. They're all friends you know We're wishing them the best. They have a couple of challenges. One is they have that four-meter design, which is the design for the ISS. Volume-wise, that's pretty small. You've seen astronauts sort of be able to touch the walls a bit.

Starlab is eight meters, so it's literally a three-story building. So I think that's one challenge. I think the other challenge is they're in the ISS orbit, and that's not an optimal orbit. We have the ability and others have the ability to choose our orbit. That being said, I think Axiom has a good model, and I don't see anything that would prohibit them from getting into space, but I don't think it's an optimal model. We have Blue Origin, we have Northrop Grumman, we have ourselves on the CLD contract. I think all three of those are chipping away at their milestones with NASA.

Blue Origin now has the HLS contract for the moon. They're trying to get new Glenn flying. They're trying to get new Glenn flying. They're trying to get new Shepard flying again. So they have a lot of priorities. Our number one priority is Starlab, so that might be one difference. And then Northrop, I think they're probably the best hardware manufacturer in the world right now, especially now that Boeing has struggled a bit. So I think they can't be

discounted. And then you have new entrants like Vast and others that have, I think, really unique notions, but they haven't put any hardware in space, right? And that's a higher standard than, you know, a PowerPoint presentation or a business model in an Excel spreadsheet. You actually have to fly hardware and it has to work. And space is hard, like everyone says. It really is hard. I've got to go back to something you just said, and that is, and I'm thinking about this $440 billion price tag on the ISS.

That's not optimal orbit? Why not? Well, my interpretation is it was management by committee. So it was really the Russians and the U.S. determining that orbit. And the Russians wanted to launch out of Kazakhstan. We wanted to launch out of Florida. Or actually, I'm sorry, the Russians probably wanted to launch out of Russia. We wanted to launch out of Florida.

Basically, it's a high energy orbit and it's also a data scarce orbit. So if you and I were building a space station putting in orbit, we would optimize for the amount of energy to get there and we would want to reduce that. And we would also pick an orbit that could collect data. So let's say sun synchronous or polar or one of these other orbits that a lot of the data collecting, telemetry collecting satellites are in. And the ISS is in a sweeping orbit and it's in a higher energy orbit, but it's sort of managed by committee. That's pretty much how we ended up there. It was a political decision, not a commercial decision.

Shocker. Are you still, I mean you mentioned that you're invested in Axiom, are you still actively making investments in space companies right now? I'm not. I'm not just because running Voyager, I'm also chairman of our board and taking institutional capital. I've sort of committed to downshift on my personal investing, not only in space, but pretty much everything else just to make sure that I minimize any conflicts, perceived conflicts. So when does Voyager go public? I mean, we're starting to see some potential green shoots in the IPO market more broadly right now. Yeah. You know, I'm optimistic that we have the type of company that would be attractive. Our investment bank is Morgan Stanley. We have, you know, PwC as our auditor. We have Latham as our law firm, Latham, New York. So we're putting the right pieces together to be in a position to go when

the window opens. It's not guaranteed that we're going to go down that path, but it's one of several options we're considering. I like what I see in the capital markets right now. I like the fact that the listing market seems to be thawing a bit. And could we get public in 2024? I think that's a possibility. And we certainly have ambitions to do that. And as you know, I grew up in the public markets. I grew up running public companies. So I'm very comfortable in the public markets.

I believe in the public markets. I think NewSpace deserves a proper S1 filed public company as opposed to left and other prominent banks on the book that's successful, I think that would do a lot for our industry. So that's part of the reason why I think it's a desirable possibility for us. Yeah, and to your point, I think it probably marks a milestone in terms of this convergence of the new space economy and the capital markets, what that means for investors. You mentioned several options though, several. Well, let's say going public and not going public, let's say. But, you know, the typical ones would be stay private,

have a capital partner that maybe takes control of the company and sort of finances it, selling to a strategic, going public. A couple of those are non-starters for me personally. But I think we need to keep all options on the table, at least at this point, until we are certain that one of those options is the best choice for us. And right now we're trying to keep all the doors open right now. As someone who grew up running public companies in other industries as well and then got involved in space investing,

I guess just lay out for me how you ended up here, amassing a new space holding company with the possibility as soon as next year of going public as a grown up new space company. Yeah. Well, so I did grow up in the public markets, finance, banking, real estate were the three industries and electronics. Participated in four IPOs along the way.

Ran companies at scale, you know, multi-billion dollar P&Ls with lots of employees. Honestly, it wasn't very gratifying because my first love had always been space. And, you know, you reach a point, I think we all do perhaps in our careers, where you're successful in quotes, but you don't feel like you're living a purposeful life. You don't really understand, you know, what's my impact, what's my legacy? And so those were the kinds of things going through my mind. Space had always been my first love. And so reflecting on that, it really was a choice about how do I get involved in the industry without maybe jumping, you know, without a parachute, so to speak, from one industry to another. And at that time, this is

going back quite a ways, the industry really was struggling with early stage capital formation. And so I thought to myself, I have I have money, you know, we, we pay our public CEOs very well in this country, as I think we all know. So I had capital. I had, I thought, some good business experience and maybe some scar tissue from what to do and what not to do. And what the industry needed at that time was early stage capital and maybe some business mentorship because you had a lot of technically led firms. So I wasn't thinking I'm some great investor or anything like that, but I thought this is a way for me to participate in the industry, get to know the players, be close to an industry that I have a lot of affection

for. And so that's how I got involved. And at that time, really no one... I remember I had friends who were snickering about my investments. You're investing in an asteroid mining company and all these kinds of things. But ultimately, those same friends ended up calling me saying, how do I get involved in space investment? Because we went full circle. So that's really how my journey started. And then as I got more and more recognized in the industry and more involved in the industry, then I thought to myself, what does the industry need now? We had sort of solved the early stage capital formation problem.

And in reflecting on that, I thought to myself, we need scale. We're not scaling particularly well. And without scale, ultimately the new space industry is not going to be successful. And so that's why I chose to focus on how to build scale. That's when we came up with the notion of Voyager and Informed Voyager. And it's honestly exceeded my expectations because we won the prime contract for the ISS about 20 months after being founded, which is pretty extraordinary when you think about it. So it tells me we have a good idea, tells me we have a good team, and I think we're

just getting started. I think Voyager has the possibility of being an extremely significant company in this industry. So scale is upon us. Scale is getting there. I think, you know, execution is difficult. Integration is difficult. We've acquired seven companies, so imagine the integration across seven companies. So I would say we're getting there. I'm not going to declare victory yet, but I do think scale is a priority because

without scale we're not going to be able to do the things that are really significant infrastructure-wise. Because the companies that have the capability, the primes, which I love them, they're lovable, but they'll admit they're not particularly innovative and they're not particularly ambitious because they don't need to be, right? They're typically printing money on the defense side of their business. So on the space side space side they're sort of like tell us what you want and we'll build it as opposed to really you know anticipating where the market is going and trying to push the industry forward they're just not in a position to do that final question for you because you you went to space you you flew to the

edge of space with Blue Origin. What was that experience like and how has that, I guess, impacted or shaped or helped nurture the way you're thinking about this as a business now? Right. It was a life changer, truly. It's something you can't unsee or unfeel. It's something that's so deeply penetrative. You know, it's one of these things that it's a thousand times better than I even anticipated, and I had pretty high expectations going in. How has it changed me? You know, everything I believe going into it, space being a tool for transformation, space being the next big thing for civilization, for humanity, space being a template big thing for civilization, for humanity, space

being a template by which we can reimagine what humanity can be. That all was the way I felt going into it. What this has done is really increased my sense of urgency around it. And I founded a nonprofit called Space for Humanity. We're really trying to get everyday citizens up to space. We sent the first Mexican-born female, first African-born female, first mother-daughter Caribbean astronauts to orbit. And so that's a huge passion of mine to sort of share this gift with other people. So I would say increase the sense of

urgency and just validate it what I believe going into it. But I highly recommend it, Morgan. If you can get the hall pass from your husband, you should definitely go to space. I'm trying. I'm working on it. He's on board, but we'll see. I know there's some wait lists attached. That's true. Dylan Taylor, thank you so much for joining me. Appreciate it.

My 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.