Nanoracks CEO Jeff Manber predicts that by the end of the year, private space companies will have more discretionary money to spend than the U.S. federal government. Listen in as he provides an update on his company’s acquisition by Voyager space and more.

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Transcript:

Jen DiMascio:

Hi and welcome to the Check 6 Podcast. I'm Jen DiMascio, the executive editor for Defense & Space. I'm here with Space editor, Irene Klotz, and a very special guest, Jeff Manber, the CEO, co-founder, and chairman of the innovative space company, Nanoracks. Manber has been a pioneer in helping to bring commercial ventures to outer space. He was the CEO of MirCorp, which leased the Russian Space Station Mir and so is one of the architects building a space economy in low Earth orbit, and I guess that's where we'd like to start, Jeff. Where does the effort to build a space economy in LEO stand right now, and where do you see it headed?

Jeffrey Manber:

Hey, it's good to be here with everybody. Boy, what an open question. The effort to make LEO commercialization a genuine market stands better than I would have thought of a few years ago, but frustratingly slow nonetheless. We've made remarkable progress in the last decade, as your listeners know, in making the government a customer, and that's been the radical breakthrough. For me, it's a frustrating time because so many people, especially at NASA say, "Oh, commercial, that's Adidas soccer balls going to space," or "That's a DoubleTree cookies going to space." And that is not what commercial is about.

            What commercial is about is changing the public-private partnership between the government and industry and where you have cargo being delivered to the International Space Station by the private sector, but the government's the important customer there. And as we look at International Space Station, which Nanoracks is focused on and as we look at private space stations and as we look at so much happening in the industry today beyond that, it's about making the government a commercial customer, and there we have done we remarkable things and made remarkable progress.

Irene Klotz:

Jeff, so speaking of DoubleTree cookies and Adidas soccer balls, NASA recently put out revised pricing for ISS services that landed with a bit of a thud amongst the commercial suppliers. I understand there's been a bit of a walk-back or a clarification of what that means. Where does that stand for you, and have you been affected by the price increases?

Jeffrey Manber:

Great question. We were affected with the realization that our good friends at NASA still behave at times like Soviets. Okay, so in that sense, we were affected. As you say, the policy came out with all the grace and all the subtlety of what one would expect from a different sort of government agency and something we might've expected 15 years ago.

            So first, the way it was released is what has disappointed me the most. It did not, and I'll talk about how it affects us and how it affects others in a moment. First off, they determined to raise the prices for media branding and entertainment. They did not run that by the NASA [NASA Advisory Council], on which I served for commercial. They did not reach out to stakeholders beforehand. There were all these calls going back and forth between people like myself and my colleagues saying, "Did you know about this?" And so I was, I am terribly disappointed that they felt it was not necessary to discuss this with the community.

            Okay, having said that, the question is what is the new policy, and who does it affect? So it came out of concerns on the Hill in Congress, that when they heard about Tom Cruise going into the Space Station and NASA has a very advanced, very forward-thinking and important policy of subsidizing prices for things like tech demo, education, STEM, new products, and I'll talk about DoubleTree cookies in a second because it's an important point. As you begin to look at true commercial, Hollywood movies, I support that that should not be subsidized by the taxpayer on board a government platform like the International Space Station (ISS). So the increase in prices affects only fully commercial projects, whether it's a movie involving Tom Cruise, let's say, or whether it's a makeup like L'Oreal. It does not affect others efforts.

            Let me say that at Nanoracks. We always work in educational, and let's look at the, if I may, quickly look at the DoubleTree cookies. We went to NASA and said, we have an opportunity with a sponsor, DoubleTree, when you go into their hotels, they bake cookies. They want to send those cookies to space. What did Nanoracks do on its own? Nanoracks persuaded DoubleTree, owned by Hilton, to strike an educational deal with Scholastic. Scholastic spent close to a million dollars in sending out curriculum to 50,000 kids to teach them how baking in zero gravity is different than baking on the Earth. That money going to Scholastic to do that program is more important to me than the U.S. Treasury getting more money, let's say half a million dollars, if it had gone purely commercial.

            So number one, I personally do not believe that almost anything should be purely commercial at this time. It is a government program. We're in the midst of an education multi-year effort to educate people. So we at Nanoracks will continue to support having it be educational programs as well. Even for things you may think is completely commercial, there's always an opportunity to get people in the public, the taxpayer, to understand the cool things and how space is different as we educate kids for the next generation. It's my long answer for saying, to sum it up, number one, it went out into the public horribly. Number two, it doesn't really affect Nanoracks. Three, I support the price increase. And four, we continue at Nanoracks to have the subsidized pricing because what we do is God's answer to good things.

Irene Klotz:

Thanks, Jeff. That's a great perspective on a really big issue. So maybe in that light, NASA is taking a much more cautious approach next week, when it's setting up a briefing to discuss, I guess, its plans, maybe some options for a Free Flyer LEO platform. Does Nanoracks have an interest in that, and what do you think that might look like given that so far there hasn't really been strong financial support from Congress to help NASA get a commercial LEO platform in orbit?

Jeffrey Manber:

We are passionate that we cannot have a Space Station gap. You just cannot. Your listeners are sophisticated in the industry. They know about the Shuttle gap. We still are dealing with commercial crew and foreign policy implications for having to rely on the Russians. We don't know how long the Space Station is going to last, and I told that personally to Senator Cruz before the pandemic hit. And I thanked Senator Cruz for his support of Space Station Program, and I said to him, "But we don't know how long this is going to last." It's a mechanical engineering question as well as a political funding question.

            And so today is the time that we need to start having players in the private sector, look at how you would do a free flyer that supports and builds it up and stimulates utilization in low Earth orbit, one that does not subtract from the ISS program, but makes the case for further utilization and to assure continuity in the event that something goes wrong with ISS. So we're looking forward to the dialogue with NASA.

Jen DiMascio:

Thanks, Jeff. I wanted to ask you a Nanoracks question, and Nanoracks is in the process of being acquired by Voyager Space. What's the status of that right now, and why did you choose the path that you did? What will it bring to Nanoracks?

Jeffrey Manber:

Let me answer the second first. The explosion taking place in the private sector capabilities presents one with the question of whether you wish to go it alone with the limitations or you wish to be part of a team that you believe in that allows for scalability and growth. And we went out to do a series B at the start of the summer, and we were talking to people, space is hot, and we were talking to people that were quite willing to give Nanoracks capital. But at the end of the day, at one point, as we began to talk to others, we spoke to Voyager. I spoke to Dylan Taylor who was kind enough to come to the office, and we spoke for about four hours. And I went to my colleagues and said, "As we look for going out further into the industry, I'd like us to align. I think it really makes sense to align with someone with whom you have a shared vision."

            And so I'm sort of answering both parts of the equation. So we elected, we were fortunate that we could sit down with Voyager and discuss why we should join and reached the decision to. It's going very well. We expect the tender to be finished in the next, let's say, six to eight weeks. And I see that there's been a public conjecture, and Voyager has said that they're going to go public. And we're going down the public pathway at the same time. And it's an utterly fascinating time in the industry, and Voyager and we have a choice whether to do SPAC or do a more traditional IPO. And I know Voyager's looking at that very closely, but however, we go, one of the, so I'm answering... So let me stop and say, it's going well. Voyager's going to tender, and then immediately we're on the pathway for the IPO.

            So if I may, I'd like to say something else about the implications for all these companies going public. And you can't see it on the podcast, but everybody's nodding. Yeah, so you're nodding, so I can continue. It's an utterly, as I've said, fascinating time where, I may be wrong here and push back on me, but I think that with all these entrepreneurial space companies going public and tapping the liquidity and the capital of private markets, by the end of the year, there will be more discretionary capital in the private sector than at DOD and NASA. How cool is that?

            I've said that to a number of people and they look me. I said discretionary. NASA doesn't have several hundred million. You said a moment ago, they haven't had funds for LEO commercialization. Well, with Spire going public, Momentus going public, Astro going public, Virgin going public, the Lockheeds and Boeings don't have discretionary capital, nor are they inclined their shareholders wish to spend it the way. I am struck by the fact that you're going to have a billion dollars roughly in the hands of entrepreneurial space companies. How does that change the relationship with the American space agencies and those concerned? It's an extremely interesting question that I'm giving some thought to now.

Irene Klotz:

Jeff, would you say that the availability of private capital is kind of the single biggest difference between the commercialization efforts underway now and what you worked on and experienced 20, 30 years ago back when you were trying to commercialize the Mir Space Station? Or what else has kind of changed in the years?

Jeffrey Manber:

It's the second biggest, the ability of having this capital is a new phenomenon. It's happening now as we speak in March of 2021. The first is, as I said, at the start of this conversation, is government is customer. Okay, for those who remember the Shuttle era, no offense to those associated, but it was a launch vehicle built by committee. Wait, wait, a launch vehicle built by a government committee. And it's showed, unfortunately, sadly tragically. And so it was not a vehicle that a space-faring nation wanting to show leadership should hinge its future on.

            But as we made the transition to government is customer where government became more willing to buy goods and services, what did you get? We went from a closed monopolistic situation on launch vehicles and satellites to the present era of extraordinary opportunity, services, pricing across the board in launch vehicles and satellite and Earth observation, and it only took a decade.

            After 40, 50 years of the space program being closed and monopoly driven, and within 10 years, we have the situation today where I bet U.S. government worries about a lot of things, but right now they're not so worried about access to and from space. And for those of us who remember the Shuttle era, you worried. And we had times when the United States of America was, after Challenger, was basically grounded. And we had some abilities with Delta and other things, but the big change Irene is that the government has been a customer for a decade, and it's showing wonderful [inaudible 00:14:59].

Irene Klotz:

Jeff, I don't mean to put you on the hot seat, or maybe I do, but there's that SLS hot fire coming up this afternoon. And as you're talking about NASA's shift to buying commercial services, of course, the agency still has its legacy programs, I think, for programs like JWST and the Mars Rovers, which are fabulous. And there's doesn't seem to be a lot of controversy about government committee, government scientists, government programs, but what about SLS? What about the investment that the taxpayers have made in this program for more than a decade and still not at the launchpad?

Jeffrey Manber:

First, I'll give a somewhat poetic answer because I read a somewhat poetic column. And I forget who wrote it in The New York Times the other day. It might've been... Well, it doesn't matter to the podcast, but it was the other day that there was a columnist in The New York Times who had a piece on SLS, and I thought he phrased it very nicely. He said, "No matter the situation, SLS is the last launch vehicle program NASA and the government will ever build, be a part of."

            So, first off I would like to celebrate that even the august New York Times recognizes that the future is in the private sector and development and probably more mature public-private partnerships. So in general, I'm an observer here. Both at Nanoracks and Voyager, we've been an observer. We have not been a participant in the program. And I'm sorry that, I'll put it in a more philosophical way, I'm sorry that still in 2021, we're pushing through programs where the government has had such a limited, allowed for such a limited contribution from private sector in design and stuff. But it has a momentum on its own, and it's really going to be a question for the administration, the new administration, of how forward they want to go with this. I don't have a crystal ball, but I have to believe that, as it was said in The New York Times, this is the final government launch program.

            And I look forward to the next decade where science missions will be more decentralized, smaller. They'll be more innovative, quicker. You'll be allowed to fail. Fail fast, learn, move forward. So I think the next 10 years even programs and science will be more innovative. And there'll be far more things we can do on the limited budget we're going to have once we begin to recognize that debt is debt no matter who suggests it, Democrat or Republican, so.

Jen DiMascio:

Since we are at the start of a new administration, what would you like to see policy-wise to support the momentum that's been built in terms of commercializing space?

Jeffrey Manber:

Number one, recognize that not all that [former President Donald] Trump did was bad. I'm very, very worried that this administration will dismiss some things accomplished in space because it was done during the Trump administration. I thought there was some very good, the focus on space, the high level focus on space was good. I thought the creation, not my area, I'm not an expert on this, but the creation of a dedicated sector in DOD to space was a positive thing. I did not applaud the fashion and all the publicity on it and all that. The way that the Trump administration worked I'm not a fan of.

            I thought space councils are good. I think clearly we're not going to have a space council in the Biden administration. And if the Office of Science and Technology policy is being elevated, and they can have cross-government discussions on space issues, that's critical. You cannot allow one or two agencies such as NASA and units within DOD to dictate policy for the United States. So I welcome the having the cross-agency discussion with Transportation and Commerce and other agencies.

            And so our government is customer. We need to understand. We need to extract ourselves from artificial deadlines. "Returning to the moon by," put in any date, I'm against it, any date whatsoever. I'd rather just say it is the policy of the United States of America to return to the moon, this time to stay. First boots on the ground will be by a woman. And we will be working with our friends at Congress and the private sector and internationally to set realistic goals based on technological and budgetary challenges. Boom! I mean, so I'm against any date. And I thought the 2024 was ridiculous, and it's proven. And some good people were sacrificed on the altar because of their feeling that an artificial date wasn't good.

            So the message I would like to give, and I've given to some friends coming in the administration is, as I said at the start of this conversation, commercial is not simply frivolous things. It's a procurement reform. It's a new way of doing it, doing space. It's working. Let's keep it going.

            I'd like to see more international. I'm a believer in international because it becomes more credible, and it's some of our big ticket items in space are going to be multi-year, decades in the making, and it's good to have international support. So I'm excited to see what the folks bring. At the same time, I have the realization that it's not key in importance, that it was the previous administration.

            We've unveiled a new initiative, if I may say quickly. We're working with friends in Abu Dhabi on a space farming initiative. And we have a five-year program to look at innovations in ag tech, and we're doing it not only to sustain, to have, let's say, greenhouses on the moon, we're doing it to green the Earth's deserts. And there's been some fascinating research within the harsh environment of space. Micros, bacteria, and crops survive in the harsh environment of space. They can survive in the deserts of Earth, which are being subjected horrifically to climate change. And so I think we see new ways to communicate with this administration and meet its priorities. I started this two years ago. I'm not doing it because of the new administration, but I think space is on the cusp of a one to... It's a legitimate marketplace now, and that's exciting.

Irene Klotz:

Jeff, in the little time we have left, do you want to give us an update on the newest Nanoracks hardware to get to orbit, Bishop? How have sales been going, and is there a broader market for the Airlock beyond supporting NASA?

Jeffrey Manber:

The little engine that could. Okay, in December the Bishop Airlock arrived at the station and is now permanently attached to the ISS or as one of the mission control folks said when we were attached, they said, "We're delighted at NASA to be permanently attached to the Bishop." So I thought that was really cool. So now we at Nanoracks say, "Yeah, the ISS is permanently attached to Bishop." It's the largest module or hardware commercially done. It was done without government funding. Somehow through the grace of space gods, we funded it internally, but we could only do it with the help of NASA.

            And so we have our first commercial customer announced is Japanese robotic company GITAI, and they're coming down to our shop in a couple of weeks to begin working on their first payload on the Airlock. We have a NASA as a customer for a variety of things. We have the European Space Agency as a customer. And now that it's up there, we are going out to satellite folks and others to explain how you can use the Airlock both to put things out into space and bring things in, talking to NASA about allowing us to bring things in.

            And so it's a great example of the public-private partnership and that NASA did not put out, envision an airlock, but when we went to them and said, "We'll be five times larger than the current airlock, and here's how we see using it." We're already talking to our friends in Abu Dhabi in ag tech using the airlock for research labs. It has Wi-Fi, it has power. There's all sorts of things. So I know the astronauts have delighted about the additional real estate.

            We did a very cool downlink with NASA, last week I think it was. And one of the things Shannon Walker said, by the way, which was very intriguing, she said, "We weren't expecting how much it would change the airflow within the Space Station." So that was interesting, but it brings us closer to NASA. And so far we're pleased with the sales, and we look forward and like Free Flyer saying, how do we take this public-private partnership and build it now for other things in LEO?

Jen DiMascio:

Well, thank you so much. Unfortunately, that's all we have time for today, but I hope you'll come back and join us again, maybe in the fall later this year. And I just wanted to thank our listeners for tuning into another edition of Check 6, which you can download on iTunes, Stitcher, and Google Play.