A new chapter for a space entrepreneur
by Jeff Foust
|“Losing COTS didn’t actually harm the company because we didn’t count on any revenues from COTS at all,” he said. “The question was if we lose, what then? And the answer was to do the same thing: start the separate company.”|
Part of the challenge was finding the money needed to develop the orbital version of Dream Chaser that was at the core of SpaceDev’s COTS proposal. Even when assuming that the company would get half of the $500 million NASA was offering to companies in the program, Benson said he estimated that SpaceDev would need to raise an additional $50 million or so to cover the full costs of the program. One way to do that would be to sell additional shares in the company, but that option came with a price. “That would be a very large dilution for existing shareholders, and would have the possibility of depressing the stock price for a long time,” he said. (As of Friday’s market close SpaceDev’s shares were trading at $1.05, for a market cap of just over $30 million.) “It’s not necessarily a bad thing, it’s just not the best thing, and I asked myself what was a better way to bring money into the company.”
A better way, he decided, was for that money to come into SpaceDev as revenue. But who would provide SpaceDev with that revenue? “What about starting a company and raising funds privately, and then using those funds in that new company to contract with SpaceDev to acquire the suborbital version of the Dream Chaser?” he said. “Basically, we would pay for the suborbital version from the private sector, which would be the $50–60 million that was needed, and it would dovetail perfectly with the COTS program and actually streamline and speed up the milestones that were in our COTS proposal.”
That approach was his “Plan A” if SpaceDev won a COTS award, something that the company did not count on in its business plan, and did not come to pass. (Despite losing, Benson said he remained “very excited” about COTS and called it “one of the best competitions I have been involved in, and I’ve been involved in government procurements since 1974.”) “Losing COTS didn’t actually harm the company because we didn’t count on any revenues from COTS at all,” he said. “The question was if we lose, what then? And the answer was to do the same thing: start the separate company, raise the money privately, and contract with SpaceDev to do the suborbital version.”
The key difference of this Plan B was that SpaceDev now relies on the success of Benson Space Company in the commercial suborbital personal spaceflight market to generate the money needed for developing the orbital version of Dream Chaser. That money would likely come from an initial public offering (IPO) of Benson Space stock should the company be successful. “If we are able to do an IPO, we might be able to bring in an amount of money equal to or maybe even double to that which would been brought in by COTS,” he said. That would allow Benson Space to enter into a new contract with SpaceDev to develop the orbital Dream Chaser.
While this is a straightforward approach, it’s hardly an easy one: even Benson acknowledged that “there are a few ifs in there.” One of the first ones is Benson’s ability to raise that initial $50 million needed to develop the suborbital Dream Chaser. In a Wall Street Journal article published the same day as Benson’s announcement, Benson said he had been able to raise an initial seed round of $1 million with less than a dozen phone calls. Does that mean that the mainstream financial community has warmed to NewSpace companies?
“I don’t think so,” Benson said with a laugh. “I honestly don’t have a clue about traditional venture capital companies. I haven’t talked to any.” All the money he has raised to date for Benson Space—both the seed round and an additional several million dollars he said he’s already raised for a second round—has come from “wealthy individuals who are very excited about space and believe in me and the vision that I have and the vehicle.” (Benson rejected calling most of these people “angel” investors, saying that they’re investing larger sums of money than are typically associated with such investors.) His intent is to rely on such investors for the full $50 million needed. “Early results are very optimistic.”
|Benson Space is supported by investments not from the mainstream financial community but “wealthy individuals who are very excited about space and believe in me and the vision that I have and the vehicle.”|
A later challenge for Benson Space is to successfully compete against the other companies planning to enter the suborbital space tourism market. By the end of the decade companies like Virgin Galactic, Rocketplane Kistler, Blue Origin, and potentially others plan to compete with Benson Space—more companies, arguably, than the market can support. How will Benson Space set itself apart from the competition? “I truly believe that Benson Space will be the first to market because we have absolutely the most elegant solution,” he said. “Everyone else has major design hurdles and issues.” He added that the Dream Chaser’s ability to gradually evolve from a suborbital to an orbital vehicle also makes it easier for Benson Space to enter the orbital commercial spaceflight market.
Another pending issue is the relationship between Benson Space and SpaceDev. Right now SpaceDev is in the process of responding to an RFP provided by Benson Space for the development of the suborbital Dream Chaser. That would lead to a series of contracts for the design, prototype development, and construction of operational vehicles, he said. The details of those contracts, including the ability of SpaceDev to sell Dream Chaser vehicles to other customers, remain to be worked out. “If Benson Space Company is paying for the development of the vehicles themselves, then we would expect some benefits coming from that in terms in intellectual property and some form of advantage over competitors,” he said, “but that all remains to be negotiated.”
Leaving the management of SpaceDev wasn’t as hard for Benson as you might think for someone who has spent nearly a decade building up the company. “My forte is in creating commercial concepts and starting companies,” he said. “I can generally manage things up to about 30–35 people.” SpaceDev got to that point several years ago, by which time Benson had brought in additional leadership, first with CFO (now president) Richard Slansky, and later Mark Sirangelo as CEO after SpaceDev acquired Starsys Research Corporation last year. By this year, he said, “I was starting to feel like my talents really weren’t matching the company any more.”
|“My forte is in creating commercial concepts and starting companies,” he said. “I can generally manage things up to about 30–35 people.” By this year, “I was starting to feel like my talents really weren’t matching the company any more.”|
The COTS bid provided a new opportunity for Benson to engage his talents to the fullest while continuing to support the development of SpaceDev. “It became pretty clear that my best way to help SpaceDev is on the outside as a customer, creating yet another company,” he said. “So it was not hard to leave SpaceDev at all, since it was such a perfect transition.” He described an all-hands meeting at SpaceDev to describe why he was setting up the new company, at which time he formally handed the Dream Chaser RFP to Sirangelo and Slansky. “Everybody was pretty excited that Dream Chaser would live.”
Since he and his family are the biggest shareholders in SpaceDev, “my primary focus is on adding value to SpaceDev. That’s my life’s goal from a business point of view. Benson Space Company can be instrumental in further rapid growth and profitability in SpaceDev. My personal goals are simply opening space to humanity, and that’s been the case since 1996, and that hasn’t changed.”