Peter Thiel is one of the most legendary investors in Silicon Valley.
“I build companies and I support people who are building new things. From social
networks to rocket ships” He’s helped build PayPal, Facebook, and Palantir into massive
multi-billion dollar companies. And now he has his sights set on space manufacturing. And I’m
not talking about making rockets here on earth, when I say “Space Manufacturing” I actually mean
producing physical goods in low earth orbit, and then bringing them back down to earth.
If that all sounds a little crazy, don’t worry, it was completely new to me when
I started working on this video. But I’m going to take you through the fascinating history of
space manufacturing and then work through exactly how Thiel is planning to make this a reality.
When you’re a multi-billionaire like Thiel, you don’t need to get your hands dirty with founding
a company to attack an interesting problem any more. Thiel has created a platform for
building and scaling the most promising business ideas with Founders Fund, his
$6 billion dollar investment firm. And Founders Fund isn’t like most venture capital shops.
The majority of VCs focus on meeting entrepreneurs that are running existing businesses
and then giving them money to help grow what’s already working. They usually take a board seat
and help set the high level strategy, but it doesn’t go much deeper than that.
And Founders Fund does do a lot of deals that look exactly like that. But recently
they’ve been going a level deeper and actually co-founding companies alongside entrepreneurs.
They did this with the defense technology company Anduril, where Trae Stephens,
who’s a partner at Founders Fund, stepped up to co-found the company alongside Palmer Luckey.
This model is typically called “an incubation” or “a venture studio company” and there have
been some massive successes. The cloud data storage company Snowflake was started
this way by Sutter Hill Ventures and is now worth $80 billion dollars. And this
is the model that Thiel and Founders Fund are using to make space manufacturing a reality.
At the center of this project is Delian Asparouhov, he’s a VC at Founders Fund and
a cofounder of Varda Space Industries. He’d been tracking the trends in the aerospace industry for
years and assembled a team to help build this new company. The name Varda is a Tolkein reference,
like the other Founders Fund incubations, Palantir and Anduril.
Delian has basically been speedrunning Silicon Valley for the past 8 years.
His resume has it all. TED Talk. Check. MIT Dropout. Check. Startup Founder. Check. Y
Combinator. Check. Startup Investor. Check. And now he’s basically speedrunning the company
building process. Varda raised a $9 million dollar seed round back in December of 2020,
and they just closed a $42 million dollar Series A in July of 2021. That’s a pretty insane amount
of money to raise so quickly, but Delian has a unique strategy for capturing this new market
that completely justifies a more aggressive fundraising timeline.
The typical path in Silicon Valley used to be: work at a big company for 10 years,
then work on a startup for the next ten, and then become a VC in your forties. But Delian
is moving ridiculously quickly, which will be a big theme throughout this story. In fact,
he is so obsessed with speed that he counts the exact number of days since Varda was founded.
“This is the best way to institute an ethos, because, at the end of the day, the thing that
is always difficult about startups is early on it's easy to move super fast when you're like
six people in a room. You all can communicate really easily et cetera. Once you become 600,
all of a sudden decisions start to slow down and things start to slow down.”
It’s easy to look at Delian’s insane level of energy and think he might be
getting ahead of himself on this whole “manufacturing stuff in space” thing,
but he’s been watching the industry closely for years, and space manufacturing actually dates
back to the sixties, so let’s go through the history to see how we got here.
“Our great system will be judged by how we do in the field of space.”
Even though America won the Space race and landed a man on the moon on July 20th,
1969. It was the Russians who were technically the first to manufacture something in space.
During the Soyuz 6 mission, Russian cosmonauts welded aluminum, titanium, and stainless steel
together using a hardware unit called Vulkan. Four years later, the United States launched
Skylab, a fully functional space station equipped with a materials processing facility
that could grow crystals, process alloys, and weld metals using an electron beam.
NASA astronauts spent 32 man-hours on materials science and space manufacturing during the
mission and made some significant contributions that would be rolled into future missions.
Ten years after the Skylab launch, NASA began using the Spacelab facility. Spacelab was a
module that was carried aboard the Space Shuttle 26 different times and served as a short-duration
research platform. It wouldn’t stay in space, but while it was up there it accomplished some pretty
incredible things. Spacelab was an extremely large program and could be reconfigured for
each mission, which led to an extremely high throughput of experimentation. For example,
in just one mission, NASA performed 73 separate experiments in materials science,
astrophysics, and atmospheric research. Here’s a picture of a mercuric iodide crystal that
was grown on Spacelab 3. Pretty incredible. Fast forward to today and essentially all space
manufacturing takes place on the International Space Station. Most of the products that are
made in space are designed to stay in space, and this makes sense. Giving astronauts the ability to
fabricate parts quickly while aboard the space station speeds up research and development,
and there’s even a plan to 3D print food on the station eventually, but Delian has
a completely different vision for Varda. “The more commercial reason to start the company
is actually that there is a whole wide array of products that could significantly improve
quality of life for people here on Earth that can only be manufactured in microgravity.”
Delian wants to bring everything that Varda makes in space back down to earth. If that sounds
insanely expensive, that’s because it is. At least for now. Delian’s entire plan with Varda is
to position the company to take advantage of the exponentially decreasing cost of space travel.
See, when it comes to making computer chips, we’ve been blessed by exponentially increasing
capabilities for decades now. The number of transistors in a dense integrated circuit
essentially doubles every two years. This is called Moore’s Law and it explains why
computers have been getting smaller, faster, and cheaper so consistently.
Something similar is happening with space travel right now. When the space shuttle
was in operation, launching a single kilogram into space cost $54 thousand dollars on average. SpaceX
has been able to reduce that cost to just under $3 thousand dollars using their Falcon 9 rocket,
and it’s only getting cheaper. Every year, SpaceX is launching more and more
rockets and dropping the cost of getting to space. This is critical to Delian’s plan for Varda and
the main reason why he couldn’t pursue this idea sooner. Elon plans to bring the cost per kilo down
to just $10 dollars with Starship and while that’s certainly an ambitious target, if he can even get
close, the economics of space manufacturing will start to make a lot of sense.
But you’re probably asking yourself, what would you even make in space?
We seem to be doing fine here on Earth, so what could possibly be worth all this effort. Well,
there are a few good examples: The first is human organs. Growing a replacement
heart or kidney in space might sound a little weird to some people, but if you’re one of the
one hundred thousand people waiting for an organ transplant, I’m pretty sure you won't care where
it came from, as long as it works. And there’s a lot of evidence suggesting that growing organs in
microgravity yields remarkable results, since the cells won’t collapse under their own weight.
Semiconductor film could also benefit from low-earth-orbit production, with some studies
estimating that quality could increase by 10 thousand percent. That’s a huge step
up from what’s possible on earth, but that’s because semiconductor film not only benefits
from the microgravity environment, but also from the complete lack of dust in space. Tiny dust
particles routinely reduce the effectiveness of semiconductors made here on earth,
but that’s not a problem one thousand miles up. The third opportunity is fiber-optic cables: which
we use to move data around the globe every single day. There is a special kind of fiber-optic cable
made from fluoride glass called ZBLAN that could have as little as one-tenth
the signal loss of traditional optical fiber. The problem is that these ZBLAN fibers
are extremely difficult to make here on earth. And, again, it all comes down to gravity.
As the molten glass is stretched into ultrathin fibers, tiny crystals tend to form, which can
weaken signals. When you’re up in space, the microgravity environment suppresses the formation
of these crystals, so the resulting cables can carry more data over longer distances.
Human tissue growth has been tested on the ISS, but it’s impossible to even try
fiber-optic production in space currently. “For example, in a lot of fiber optics,
there’s a toxic chemical that you want to coat the fiber optic cable with that protects it at
the end of the process. No f***ing way is NASA going to let you put that toxic
chemical on the ISS. If that thing gets out, you’re potentially killing astronauts”
But Varda’s space factories will be completely autonomous. Everything Varda launches into
space will be completely self contained, meaning they can work on any manufacturing
problem without risking human lives. Okay, so we’ve established that the whole Varda
project is only possible because scientists have been testing space manufacturing for decades
and SpaceX has dropped the cost of rocket launches so dramatically, but here’s where
the technology gets really interesting. Varda won’t be building rockets, only payloads
that sit on top of SpaceX rockets, but they still have to solve a few key problems once everything
is actually up there. So Delian and his team are focusing on building three different systems.
The first is the actual factory. This needs to be small enough and light enough to fit on a rocket
while still holding all the raw materials for whatever they are making on that trip,
but you can’t just shoot a box into space and hope that it stays up there and then lands where
you can find it. So they are also building a satellite to accompany the factory in space
and serve as a command and control module. Lastly, once the product is actually finished,
you have to get it back down to earth, and that’s no easy task. Atmospheric re-entry is an extremely
risky maneuver and by far the hardest part of getting anything from space home safely.
“We’re regulated by the FAA because we’re re-entering over airspace. If we miss the
atmosphere even by three or four seconds, you're talking about rather than landing in the United
States, you’re accidentally landing in Europe.” This really illustrates how aggressive Delian’s
plan is for Varda. There are a few other companies that are working on space manufacturing currently,
but they mostly focus on developing the factory exclusively and then partner with NASA to get
everything to the space station and back. The scale of the reentry problem really can’t be
understated. In order to stay in orbit, anything in space needs to be traveling incredibly fast.
A commercial airliner typically flies at around 500 miles per hour. But the international space
station is traveling at 17 thousand miles per hour. The deceleration that occurs
during reentry is extremely powerful, and anything Varda makes in space will
have to be able to make it through reentry without getting damaged in the process.
This part of the equation is so critical to Varda’s success that Delian even recruited a CEO
with experience specifically in reentry. “But I realized that for the CEO position
I wanted somebody that had been at SpaceX and specifically on Dragon in particular because we
have a reentry problem that we're trying to solve and the Dragon is basically the only commercial
reentry vehicle that's ever been built.” Varda is clearly a moonshot type of company,
but Delian is placing his bets very carefully. SpaceX is top notch in terms of rockets, so no
need to reengineer things there. But no one has figured out how to solve reentry at the industrial
scale Varda is aiming for, not even NASA. NASA is an amazing organization, but their
budget is just $24 billion dollars per year. For comparison, Walmart spends that much money every
3 weeks. While partnering with government research teams can work in some cases, it’s not ideal for
scaling an entirely new industry. For Varda to be truly successful, they need to be launching
dozens of factories to space every month. “Yeah, I mean with Varda the initial market
that we’re going after, if we were to eventually satisfy the entire market that we’re going after,
we would have multiple of our reentry capsules coming down per day and we would
be buying a SpaceX rocket every other day.” Okay, so clearly Varda has ambitious goals, but
exactly how big of a market is space manufacturing anyway? Well, it’s currently a rounding error,
but the global space industry is valued around $420 billion dollars and that’s growing really
rapidly. Just last year investors poured nearly $10 billion dollars into space companies.
Each with slightly different approaches. Companies like Hadrian and Relativity are
developing products on Earth that are meant for space. And a company called “Made in Space” is,
you guessed it, making things in space. But everything Made in Space produces
is meant to stay in space, not come down to Earth. That’s where Varda is unique.
When it comes to the growth of the space industry, we’re seeing steady progress start to compound
in all sorts of important metrics. The cost of launching a satellite is falling dramatically.
The time between launches is getting shorter and shorter.
And even the number of humans who have been to space is increasing faster than ever before.
When Jeff Bezos returned to Earth after his trip on Blue Origin’s New Shepard rocket,
he had some really poignant words about the importance of space manufacturing:
"We need to take all heavy industry, all polluting industry,
and move it into space. And keep Earth as this beautiful gem of a planet that it is. That's
going to take decades to achieve, but you have to start. And big things start with small steps."
So, can space manufacturing become a $7 trillion dollar industry? That number is certainly a bit
ridiculous. But the global manufacturing industry does generate well over $7 trillion dollars per
year. And sure, we’re not going to move all of that to space anytime soon, but what about in
a hundred years? How about a thousand? Humanity is going to become multiplanetary,
probably within our lifetime, and when we begin seriously expanding our solar footprint,
we’re going to have options as to where we choose to build things.
We’ll be able to put certain things on Earth, other things on Mars, and we’ll have plenty of
space in between, pun very much intended. Some people find it difficult to get excited
about things that will take years, if not decades to bear fruit, but I, for one,
am not one of those people. Big things have small beginnings and Varda is clearly the first
small step in an incredible direction. If you want to chat about space manufacturing,
just leave me a comment below or DM me on Twitter, and please check out this recommended video,
the YouTube algorithm thinks you’ll really like it.