Motley Fool Hidden Gems Investing - To LEO and Beyond

Episode Date: March 30, 2024

Tom Vice is the CEO of Sierra Space, a company that’s trying to build an economy in low-Earth orbit (LEO), a mere 250 miles above our heads. Ricky Mulvey caught up with Vice for a conversation about the future of space commercialization. They discuss: - The magic of microgravity, and its impact on everything from biotech and batteries to chemistry and computing. - Rent in low-Earth orbit. - Defense systems and the hope of a space-based “McDonald’s Effect.” Companies discussed: MRK, PFE, MRNA, NVDA Host: Ricky Mulvey Guests: Tom Vice Producer: Mary Long Engineer: 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 in semiconductors, even greatly accelerate the transition to electrification. So I think of those things, and again, before we go off and buy another insurance policy, I'm convinced that we need to do more here not to screw this place up. I'm Mary Long, and that's Tom Weiss, CEO of Sierra Space and co-author of the book, We Have Liftoff. The mission of Sierra Space is to build a platform in space that benefits life

on Earth. They're engineering a fleet of Dream Chaser space planes, which can land on commercial runways. They're building commercial space stations to house researchers 250 miles above our heads. And they're developing defense tech systems in addition to a whole lot more. Ricky Mulvey caught up with Vice in person at Sierra's campus in Broomfield, Colorado, to share an optimistic vision of what space commercialization might actually look like. 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 be 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 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 people think about vacationing differently in space. As 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, you know, 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. it. 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 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 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've got to keep it together for people to eat in little sort of mochi balls. Sure. It'll be fun. You know, I did a bunch of zero-g flights. If you haven't had a chance to do those, I encourage you to go do those. I have not had a chance to do those. You've got to go do it, right?

There's nothing like chasing an M&M around, you know? But yeah, so you have to think about, again, 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. And it was trying to describe what life will be like. Most books, although I'm a huge Gene Roddenberry fan, most books are kind of scary about space. Something always terrible happens.

I see space as exciting. I see that we're going to invent new things. But you have to think about what will life be like when people are working on orbit? What 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 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 going to be you, your generation, and my two granddaughters. So I tried to write a book for them to try to describe what living 250 miles above our head for months on end are. And part of that is food and what we'll be like. And it's going to be a difficult life.

If you have to work out for three hours a day, you're taking sponge baths, water's going to be a concern. It's certainly not an easy life to live in low Earth orbit. 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 and then we can move on right so even think about lunar surface uh you know everything kind of gets a bit harder right so traveling 240 miles i think getting that understood and having civilizations grow up uh and and be able to understand that oh by the way while you're there really do great things on behalf of eight 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 is 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 haven't 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 form together here this is this is a 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 you are leaving in a sense but it's a but it is it is a a trip okay right it's like uh you know i'm 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 at 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 uh 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 you know 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 yeah and 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 in low earth orbit why should people be excited about the future of space and even the next three five ten years you know it's it's a very insightful question because i i grew up in the in the 60s and you know i was the the classical young kid you know glued to a black and white television set and you know 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 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 um ice space almost to me they were within a couple of meters the amount of energy being put into going back to the moon by private companies non-governmental is so exciting and i think there's a general you know 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

or land at the Paris Air Show and go, wow, the first space liner. I got to tell you, this is a really interesting story. I was a keynote speaker at Oshkosh one year. This was maybe, I don't know, five, six years ago, I think it was. And 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, it's done a remarkable job. We've had space stations now in orbit since 1971.

The ISS has served humanity very well, and its time is coming due. At the end of 2030, the plan is to de-orbit it. But before we de-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 of 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 Merck's drug Keytruda, 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 in sales. 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 eight billion people and oh by the way just maybe we can prevent nuclear war yes i mean along the way defense is going to be i hope it's the mcdonald's effect up there where

what is the countries that have mcdonald's don't go to war with you i hadn't thought it out before but that's a good analogy if you're doing research with each other up there maybe maybe you don't go to war either uh dream chasers are supposed to launch in 2024 is that is that something right Right now it's getting shaken up at NASA. Yeah, we finished the shake. Yes. Now we're in the bake. Okay.

So it's in its thermovac chamber. It's doing really well. We'll bring it back out of the chamber in, call it three weeks, get it down to Kennedy Space Center. We've got some additional testing to do. What's really unique is because it's a plane, we've got to get it on the runway and do all the traditional runway testing. And then we integrate it and get it on top of the ULA Vulcan rocket,

load it up with cargo, and send it on the ISS later this year. Wow. 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, right? But it's actually a very strong force. Without gravity, you can do things that are very different in terms of crystallization 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 mainly 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 microgravity fields is very unique. Again, I always say, wow, if I could figure out how to build 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 science is known. I mean, just Google patents on microgravity, right? And it's an amazing amount of work. But the ISS was never established 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, for, for livers and hearts that you can't do on the earth.

So that's been our focus. I'm going to ask one dumb business question. Then I'm going to get back to the cool stuff. 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 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 And so think of us 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 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 how four to lean are they to do 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 uh ready to move to space now if if i think of the markets there those just those four markets in 2022 was 900 billion dollars 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. You know, 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, right? Now, I think we'll capture much more than that. To build a business case,

though you're in the you're in the single digits of capturing that market but that's why those three or four were very powerful for 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 yep that one surprised me a little bit so i hope you guys are able to do that uh 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 chips get more 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 the it's really great to manage the temperature and if you think about moving stuff to space i mean 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 where 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 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 we had 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 to off the planet it makes the planet you know greener right it provides more space for people to live and and vacation so taking stuff off the planet in dolores 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 um i think you know they're not gonna be the first thing we take up because they're just massive today i mean your bendo data centers are 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 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 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, a person dies every nine minutes in the U.S. with leukemia. Just, again, 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 a little older than you, is I'm really excited about longevity. There's a massive research going into longevity right now. 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 being proved. I think livers are next, organs are to follow. You know, heart's a little harder. 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? Because I want the commercial space station to be an American company, and I think that that's going to be important as you try to keep life on Earth safer.

How's your work going to do that? I think that's another great question. We believe 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 uh but over the last 10 months uh you've seen announcements where we've now been awarded 1.3 billion dollars 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'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. Orbital Reef really schedules sort of in the 2030. We're moving even faster than that because my concern is that 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.

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 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 say like every bank in the world was calling about doing a spec 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 and the first phase of b and so now we've uh we're we're in a path through 2024 uh we've done all the work to make sure that we're public company ready

So when you're 20, 25, you know, we'll, we'll be a 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, 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 store that's 13 and a half billion

years ago. We wanted to see fundamental science. I met with Stephen Hawking once. It was just a brilliant afternoon, 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 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 time square on the big monitor was 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 could 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