Motley Fool Hidden Gems Investing - Best-of Interview: Tom Vice, CEO of Sierra Space

Episode Date: December 22, 2024

Tom Vice is the CEO of Sierra Space, a company building an end-to-end business and technology platform in space to benefit life on earth. Think, space planes and inflatable space habitats. Ricky Mulvey caught up with Vice at the Sierra Space headquarters for a show that originally aired on March 30, 2024. They discuss: - The magic of microgravity, and its impact on everything from biotech and batteries to chemistry and computing. - How rent works in outer space. - Defense systems and the hope of a space-based “McDonald’s Effect.” Companies mentioned: MRK, PFE, MRNA, NVDA Host: Ricky Mulvey Guest: Tom Vice Producer: Mary Long Engineers: Desireé Jones, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Everything we do here is how do we affect the lives of a billion people, whether it's cancer research, oncology, broadly leukemia, longevity, trying to figure out the next generation breakthroughs and semiconductors. I think we're going to find new chemistry for batteries to even greatly accelerate the transition to electrical electrification. So I think of those things. And And again, before we go off and buy another insurance policy to protect the human race by putting five people on the planet and try to regrow, I'm convinced that we need to do more here not to screw this place up. As we wrap up the year, we're playing back some of our favorite conversations from 2024.

And this one is my interview with Tom Weiss, CEO of Sierra Space and co-author of the book We Have Liftoff. The mission of his company is to build a platform in space that benefits life on Earth. I met Vice back in March at Sierra Space's headquarters in Louisville, Colorado. We talked about the research possibilities in a more commercialized space, what's to come in the orbital age, and we're playing it on today's show because it ultimately made me, and I hope you, a little more optimistic about the future. Maybe we'll get to the business-y stuff.

I'm more curious about the life stuff, the possibilities. So, I mean, what is life in low Earth orbit going to look like? Yeah, you know, I think it's good maybe to take a step back and think about, you know, we're transitioning from 60 years of space exploration to a point where we're now moving into the full commercialization of low Earth orbit. We're transitioning from a time when just a handful of astronauts on government-owned space stations have been doing some research on low Earth orbit to the point where we will now being doing building factories, building cities, finding the next generation of disruptive

products in oncology, longevity, microprocessors, clean energy. And the way we see this playing out, and I wrote about this in some of the book, was really this is going to be a time in which we start to think differently, that there's the Earth's surface and then there's space, like they're two different things. Terrestrial markets and markets that get developed in low Earth orbit are going to be seen one as one integrated ecosystem so people are going to be living and working in space people are going to be doing research and manufacturing in space of course you're going to see a vibrant economy in terms of the way think people think about vacationing differently in space

i wrote about in the book i've always had this sort of dream of this really iconic restaurant called the blue dot of course it's the blue dot because you look outside and boom right and so The whole thing is to imagine that we really are on the cusp. Sometimes it's hard to see an industrial revolution when you're at the beginning. But I believe we're on the most profound industrial revolution in human history. And it's really the result of this convergence of technologies.

We've been able to build rockets that have massively decreased the cost per pound to get to orbit. Now we're building, for us, Sierra Space is reinventing the space station to bring down significantly the cost of doing work in space to be able to transition from not just what you put in space, but now what you can build in space that you can't do on Earth. And this time is going to, you know, obviously we are integrating at a massive pace

both the foundational tech of microgravity, the foundational tech of AI, the foundational tech associated with spacecraft that are turning into space liners, all that's coming together. And I think this is a time where you're going to see us move from, what, there's a little over 600 people that have ever gone to orbit to a time in which, you know, 10,000 people at any one time are going to be living in orbit. And that's going to happen in your lifetime, your generation. That's why I think about, you know, our focus of our company is to really build this business platform in space to focus on this very unique place we call Earth, right? I'm inspired by visions like Occupy Mars, but, you know, I think before we can figure out how to, you know, have people, human beings live, you know, 100 million miles away from Earth, we've got to get really good at protecting this planet. This is a very special place.

And so that's our focus. We're just going 240 miles above our head. It's sort of like the distance between, if you're, you know, a baseball fan, I was putting things in terms of the Red Sox and the Yankees. so it's it's it's about that distance above our head the food part is interesting especially it's going to be difficult because all the food has to come in essentially blobs you can't it's gonna be hard to spread things a lot a lot of globs and blobs because you got to keep it together for people to to eat in little sort of mochi balls sure it'll be fun yeah uh you know i did a bunch of og flights if you haven't had a chance to do those i encourage you to do those i have not had

a chance you gotta go do it right okay there's nothing like chasing an m&m around you know but yeah so you have to think about again the the purpose of the book was really to put you know every chapter was sort of different if you had a chance to read it um and it was trying to describe what life will be like most books although i'm a huge gene ronberry fan most books are kind of scary about space something always terrible happens i see space is exciting i see that we're going to invent new things but you have to think about what will life be like uh when people working on orbit? Will food, what will social life look like? What will eating look like? And so we try to describe that so that as more and more people start to think about traveling to space, whether

they're biologists, chemists, physicists, or, you know, a couple people that are thinking about the next big breakthrough in cancer research. It's not going to be just government astronauts. It's gonna be you you know your generation and my two granddaughters so I try to write a book for them to try to describe what living 250 miles above our head for you know months on on and are and part of that is food and what we'll be like and it's going to be a difficult life you have to work out for three hours a day you're taking sponge baths water is going to be a concern it's certainly not an easy life to live in low earth orbit it's not it's not going to be easy I mean, there's all kinds of stresses and strains on the blood system, your body.

You have to make sure you are exercising. Your muscles will atrophy. Your bone density will atrophy. But I have to tell you, it's going to be a lot easier than living on Mars 100 million miles away from Earth. So let's get this right. Let's understand it. And then we can move on, right? So even think about lunar surface.

Everything kind of gets a bit harder, right? So traveling 240 miles, I think getting that understood and having civilizations grow up and be able to understand that, oh, by the way, while you're there, really do great things on behalf of 8 billion people still living here. Next jump is 240,000 miles. That's, you know, the moon. If something goes wrong, it's much harder to get back.

240,000 miles is a lot longer than you think, right? And then you think about Mars, right? I mean, the two planets come the closest together at 35 million miles, right? The average is 140. That's a, boy, you're out there. And, you know, how many people are going to be able to live on the surface of Mars? A very harsh place to live.

In the next 100 years, what, maybe you affect a handful of people, if we're lucky? So I hear that, two things. One is that I think the vision for Mars, though, is that this is an insurance population. So if we all blow ourselves up due to nuclear war, the spark of humanity lives on a little bit on Mars. And while the moon is closer, and keep in mind,

I'm an amateur talking to a space CEO. The moon doesn't have an atmosphere. The light's very difficult. Gravity's a lot more difficult than on Mars. Everything's difficult. Well, I don't know. But you have a sort of lifeboat, right? I can get back here in days and not a year.

But I would say, again, build a platform in space to benefit life on Earth. What do we mean by that? We're going to try really hard so we don't blow ourselves up. We're going to try really hard so that we don't pollute the planet where our grandkids can't even breathe anymore. You know, I worked for a decade on James Webb Space Telescope. We still haven't found life anywhere.

Like, you know, we've only found a handful of planets that are even in the Goldilocks zone. I know, by the way, the closest one is 100 light-years away. The planet is a unique place. Like, it's kind of the planet and humans all formed together here. This is quite a nice place.

You go outside, you can breathe, you get sunshine, go down to the ocean, go up in the mountains and ski. I don't know about you, but I don't want to leave. I'm pretty happy here. I'm pretty happy here. You're also training to be an astronaut, though, so you are leaving in a sense. But it is a trip, right?

It's like, you know, I'm just going on vacation for a year, right? But I know that my family's here. I know I'm coming back. But what really drives us is the fact that we're not a company that's trying to affect the lives of a handful of people. We're not trying to give joy rides to a couple billionaires who want to spend, you know, a quick trip in space. Everything we do here is how do we affect the lives of a billion people, whether it's cancer research, oncology, broadly, leukemia, longevity, trying to figure out the next generation breakthroughs and semiconductors.

I think we're going to find new chemistry for batteries to even greatly accelerate the transition to electrical electrification. So I think of those things. And again, before we go off and buy another insurance policy to protect the human race by putting five people on the planet and try to regrow, I'm convinced that we need to do more here not to screw this place up. And so far, we're doing a pretty good job screwing it up.

It's difficult to imagine people living in space when we're not going to the moon anymore. And it seems that NASA has shut down the shuttle program and shut down a lot of the, even the space station coming up. I've heard you compare it to the birth of the railroads in low-Earth orbit. Why should people be excited about the future of space in even the next 3, 5, 10 years?

You know, it's a very insightful question because I grew up in the 60s, and, you know, I was the classical young kid, you know, glued to a black-and-white television set in my grandfather's living room watching the Apollo program, and it inspired me to be an engineer, but inspired me to do really hard things that were meaningful.

And it has been a long period of us getting back to the surface of the moon. But you see that we're going back. You see NASA's Artemis program. You see commercial companies going back. It was great to see intuitive machines landing again. I-space almost, I mean, they were within a couple of meters. The amount of energy being put into going back to the moon

moon by private companies, non-governmental, is so exciting. And I think there's a general consensus now that we're not just going back to land human beings on the moon. We're going back to stay. And I think that's exciting for a whole new generation. You know, as I look at the shuttle program, you know, in many ways, I would say Dream Chaser is, you know, a testament the wings are back. But I think even in a better way, we built Dream Chaser to be able to land at any commercial runway a 737 max or an a321 can land and so that creates wow what's happened there we just invented the first space plane commercial space plane but what's more exciting is we just invented the first space liner you think about we're taking advantage of the worldwide global infrastructure

so instead of everybody coming back or everything coming back from space today it gets plunged into the ocean in a capsule or you know into the dirt in a capsule i think it's going to get a whole new generation excited just like the five-year-old six-year-old tom vice was in the 60s there's going to be a fifth you know a five-year-old a six-year-old girl that's watching dream change for land at the paris air show and go wow the first space liner i gotta tell you this is a really interesting story i was a keynote speaker at oshkosh one year this is maybe i don't know five six years ago i think it was and um a a ninth grade girl stood up out of this if you've ever been to oshkosh it's sort of a cool place she stood up and she asked me did i believe that

someday we would build a space plane that would be just like an airplane and you can imagine my answer i'm giving it to you right now which is that day has now come and i think that will be very exciting i think the iss uh it's done a remarkable job we've had space stations now in orbit since 1971. the iss has served humanity very well and this time is coming due at the end of 2030 it uh the plan is to de-orbit it but before we do orbit it the most exciting is that there's going to be commercial space stations in orbit right ours will clearly be there and it's not just a replacement the iss it opens up a whole new world of commercialization it is meant specifically to be a research and manufacturing center largely for us it's biotech and industrial tech and just

like you know merck's drug ketruda if you know the drug i don't it's a monoclonal antibody meant for cancer which has done a remarkable job in 2023 that drug was 23 billion dollars in sales you You know where that drug came from? The research that was done on the ISS. Right, that's just one drug. Imagine if we do that 100 times a year. You know, I have two young daughters, now two young granddaughters,

and to think about, you know, we have, for the first time, the opportunity to cure leukemia. If you think about just the impact you could have on just that one thing, what was the benefit? And that's why we say we're building this platform to benefit life on Earth, isn't that more meaningful than trying to put five people on the planet of Mars? You can affect 8 billion people.

And oh, by the way, just maybe we can prevent nuclear war. Yes. Along the way. Defense is going to be, I hope it's the McDonald's effect up there, where the countries that have McDonald's don't go to war with each other. You don't go to war. I hadn't thought of that before, but that's a good analogy. If you're doing research with each other up there,

maybe you don't go to war either. We talked about some of the research possibilities. of building this commercial space station, these inflatable space habitats. We talked about battery technology. We talked about some medicine. But for those who may not be familiar, why is gravity such a problem

for developing these drugs and technologies? Obviously, we've built a lot of great stuff in the gravity fields of Earth. But when you take, if you think about gravity as a very strong force, I mean, we don't feel it because we're kind of used to it, but it's actually a very strong force. without gravity you can do things that are very different in terms of crystallization

and and and very pure very structured very uniform crystals because i don't have gravity interrupting in the crystallization that crystallization could be protein that goes into biotech and protein crystallization for biotech immediately goes into cell structures protein structurization body absorption all kinds of things right it's also an inorganic i can i can do very pure glass, right? So today we're all used to fiber optics. In space, you can build glass that's far more pure, right? I can build chips. I used to run several foundries. You can build chips that are very, very different. Now, when you think about all of that happening, now when you add AI into that, I can accelerate all of that research. And so the crystallization of micro

gravity fields is very unique again i always say wow if if i could figure out how to build you know anti-gravity factories on earth i'd have already done it that's how powerful it is and there's been thousands of research done hundreds of companies on the iss this this science is known i'm just just google patents on microgravity right and it's amazing the amount of work but the iss was never established uh to be able to go from research to research to research into production very fast. And the ISS is expensive. And so our focus has been to get the economics so that the board meetings of Pfizer's, Moderna's, and Merck's of the world start to realize now there's a return on investment. And now's the time to find a cure to cancer or a cure

to cardiovascular disease or be able to print tissues for livers and hearts that you can't do on the earth so that's been our focus i'm gonna ask one dumb business question then i want to get back to the cool stuff uh earlier today i had a conversation with my landlord got me thinking about rent how does how does rent work we have many different models part of it is that there's a real estate you know we're sort of in you know we're the largest real estate developers in north orbit that's one way to think of this we're also partners on some cases where we are partnering with a drug company and and the cost of that research is is borne by both partners and there's a revenue stream based upon the drug that gets developed uh and some companies that we talk to

they just want to buy part of the real estate instead of lease it some companies want to lease it some want to lease you know 100 cubic meters and some want to lease enough to do five experiments a year so there's we're we're very open and flexible and agile in terms of what the leasing arrangements are. So you may want to, again, in your case, you know, you're leasing or renting an apartment. Some people like to own the condo. Some people like to own the building, right? And so think of this as a real estate agent, but we provide the real estate, the utilities, and in some cases, we provide additional venture capital, and then we get a percentage of the drug or percentage of the chemistry, you know, or whatever it might be that we're producing.

There's probably a pretty strong HOA up there as well. Yeah, we'll be the HOA and manage the HOA. Yeah. I heard you mention, basically, you have a lot of tough decisions in terms of what companies get up there first for these space stations. I've heard that it's three biotech firms and one tempered glass. Now, you're probably asking, why did we pick those? Yeah. Yeah, just because what we looked at was a combination of factors. One is, how large were those terrestrial markets, and have those markets proven to show benefits of microgravity in space?

And the third is, is the companies that did that work in space, right, how forward-leaning are they to want to do work? When you combine all that together, what we saw was monoclimate antibodies, stem cell research, and regenerative medicine, advanced class were the four that were the closest, you know, in terms of ready to move to space. Now, if I think of the markets there, just those four markets in 2022 was $900 billion a year in terrestrial sales. 8.3% CAGR going to a $3.7 trillion business by 2038. The market is huge, right? And so for us, our focus is to go capture 1% to 5% of that. To have a huge business in space, I don't have to capture 50% or 100%. You just have to capture 1% to 5%, and the numbers are massive.

Now, I think we'll capture much more than that. To build a business case, though, you're in the single digits of capturing that market. That's why those three or four were very powerful for me. The tempered glass one was surprising to me. Instead of when I read your book, I'm so excited about the possibilities of quantum computers and putting putting these computers out in space where they don't have to pump all of the energy to get to basically near zero temperatures, which that one surprised me a little bit. So I hope you guys are able to do that. We are going to do that. I just don't know if that is first.

I think that this computer, the size has come down. And I don't know if you saw NVIDIA's announcements. I was really kind of excited about their new chip. But as the new chip get more and more powerful, they get cheaper. they consume less energy, then you'll see data centers not in the cloud, but in space. And oh, by the way, it's really great to manage the temperature. And if you think about moving stuff to space,

I'll give you a really interesting one that's happening right now because we're very excited about this. The entire directed device, you're watching this, right? This is where lots of conversations now are, I just want to connect my iPhone to satellites without cell towers so my iPhone works anywhere, right? So a lot of effort, a lot of incredible technology is going in to directly connect your phone

to satellite systems so you don't need cellular. You're not talking to a cell tower, you're talking to a satellite. And so there's an ecosystem between cell tower, cellular, terrestrial cellular, and in-space mobile services from satellites, all that ecosystem's coming together. But you think about if we had thought about

just taking the entire structure to space, you wouldn't need any of these ugly cell towers everywhere right i mean just think about what we just moved off the planet right if you do that with chemistry wait i just moved chemistry factories which are hazardous to space so now you think about data centers right you think about how much energy data centers you know take we talk about how much co2 airliners put in in the atmosphere or business jets data centers are far worse i didn't know that yeah um so you move all the data centers off the planet, it makes the planet, you know, greener, right? It provides more space for people to live and vacation. So taking stuff off the planet and to lower

the orbit, that's this whole idea of building a platform in space to benefit life. So part of it is data centers are really exciting for us. I think, you know, they're not going to be the first thing we take up because they're just massive today. I mean, you ever been those data centers. They're massive, right? Although they're much smaller than they were, you know, again, in the 1980s or 1990s. I mean, a terabyte now fits, my iPhone has two terabytes in it, right? But they're getting smaller and smaller, consuming less power. We put them in the space. You put them in LEO, so latency is low. And if we build them right, they'll be really cheap. That's going to happen. I will say, though, I still remain really, really excited first on

biotech you know um person dies every nine minutes in the u.s with leukemia just again i always i always tell our team if we did nothing nothing but solve one issue like leukemia huge now if i can solve cancer cancer is a trillion dollar problem right what i'm really excited about because i'm i'm a little older than you is i'm really excited about longevity there's a massive of research going into longevity right now right and you're and you're going to be able to print organs where they're not collapsing in on themselves yeah i mean right now we're already proving we can you know retinas are already something that's been proved uh i think livers are next organs are to follow you know hearts a little harder uh but ultimately i mean being able

to print organs without somebody having to die to harvest it first i think that's a pretty cool thing that'd be pretty cool one thing we've i think touched on didn't get into too much though is defense how much of the work are you doing is because i i want the commercial space station to be an american company and and i think that that's going to be important as you try to keep life on earth safer how's how's how's your work going to do that i think that's another great question we we believe if if we're going to be able to accelerate a vibrant leo-based economy and keep space free and available to everyone we also have to be the company that defends space and so we have a big part of our business that's a defense tech company that's leveraging our technology and

ingenuity and we're building high-end systems critical missions for missile defense missile tracking missile classification fire control we focus a lot on space superiority space situational awareness exquisite earth observation and pull all that together so that we make sure that if you want to do things of harm in space, we can stop you. We do that on behalf of the United States government, of course. You know, we were sort of in stealth mode on the defense tech side of our business

for the last couple of years. But over the last 10 months, you've seen announcements where we've now been awarded $1.3 billion in contracts to do those kinds of missions. We think it's really incredible. I encourage all high-tech companies and space tech companies specifically that if you're building things,

and, you know, you're a patriot of this country, you owe to make sure that we keep space free. I want to ask a couple business-y questions. One is, you have a partnership with Blue Origin. How are they helping you build these space habitats? So we build all the habitats. We build all the technology associated with the space infrastructure. We provide that to ourselves because we're building a Pathfinder station

that we intend to have up in just a few years. But we also provide that as part of our partnership with Blue Origin for Orbital Reef. Orbiter Reef really scheduled sort of in the 2030 works we're moving even faster than that because my concern is that if if the ISS de-orbits early right I want to make sure the United States does not have a gap in low earth orbit so we focus a lot on taking our same tech and applying it to our Pathfinder station and we also apply that to our partnership with Blue Origin for Orbiter Reef. Sounds like you have a pretty busy schedule you want to go public as a company why do that what's

that going to allow your company to do? Well, see, we focus a lot, not just on technology for technology's sake. You know, we are a company that is really doing fundamental great work that leads into a high revenue growth rate, high net income growth rate. We kick off a lot of free cash flow. And so going in from a private into the public markets gets us access to public market capitalization. But we do it in a way where we'll enter the public markets as a company that has free cash flow positive, EBITDA positive. We don't just say we're going to have this hockey stick growth. We've proved it year after year that we've doubled in size. And so I think the capital markets will reward us for that, and therefore we'll have capitalization that comes

with it. And so, you know, we'll time it right. As you can imagine, when we first kicked this off in 2021, you know, I'd seem like every bank in the world was calling about doing a SPAC. You know, I had no interest in that. I wanted to de-risk the business, de-risk the portfolio, build a leadership team, you know, build the capital structure of the business. You saw what, you know, we've got, you know, significant capitalization with our Series A and the first phase of B. And so now we're in a path through 2024. We've done all the work to make sure that we're public company ready. So when we're in 2025, you know, we'll be the company that has a lot of trust, both in the institutional and the retail investors. And I think we'll be rewarded for that.

I hope so, too. Two final questions. One is, you worked on the James Webb telescope. Yeah. That's been out for about two years now. What have you been excited to see come from that work? Well, you know, we built that telescope to be able to do several things, right? We wanted to go back and look at the very first light from the very first star. That's 13 and a half billion years ago. We wanted to see, you know, fundamental science.

You know, I met with Stephen Hawking once. It was just a brilliant afternoon, you know, just thinking about the origins of the universe. I mean, it was all theoretical physics. and the James Webb's is proving some theories right, proving some theories wrong. I think it's been remarkable in terms of being able to find planets within that sort of Goldilocks zone. I think someday it will probably help us find life on distant planets.

It's just remarkable. I mean, if you think about, we're this tiny little blue dot, everything we know, everything, right? The great Carl Sagan quotes. and it's what's really interesting is this is that this universe is is not only expanding it's accelerating its expansion and then it will collapse and do it all over again and i think for the first time we're really starting to understand you know some really fundamental things about the universe through james webb before then it was just a theory now it's backed

up by data and some of those theories are oops yeah kind of cool really i i can see back in time 13 and a half billion years really because i always thought it was cool i mean everybody that was working in in you know exoplanet research or you know any of the cosmology any of that stuff but the day i knew that it was really meaningful is when i was walking in new york city and times square on the big monitor was an image from james webb and people just stopped yeah they all stopped and they looked up and they didn't necessarily know what they were looking at. I don't know that they were all, you know, if they were a physicist, but they all knew it was important and they all knew it was, it was new science. And I think they had a fundamental,

you know, understanding that, wow, I can actually change things. As always, people on the program may have interest in the stocks they talk about And The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.