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Virgin Galactic

Virgin Galactic

Mon, 23 Nov 2020 06:26

Live from the 2020 ASCEND Space Conference, Acquired covers the full story behind the most "out there" technology story of the past few years: Virgin Galactic. How did this space tourism company grow out of the winning X Prize team, and catch the eyes and fancy of billionaires like Paul Allen, Sir Richard Branson, and, most recently, company chairman Chamath Palihapitiya who took it public via the first "modern" technology SPAC transaction in history? Tune in to find out!!

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Playbook Themes from this Episode:

(also available on our website at )

1. Prizes can be a great way to generate leverage on innovation. If done right, the X Prize and other industry prizes like it (e.g., Netflix Prize, DARPA Challenge, etc) can bring an order of magnitude more talent to bear on a challenge than what the same dollars alone could hire.

  • The challenge is to create a prize that inspires and draws in a large enough pool of contributors. The aerospace industry’s “cool” factor may be what allowed the X Prize to succeed and explain why prizes aren't employed as often in other sectors.

2. When trying new things, most people want to go second — but those willing to go first get the best returns.Being first into new markets carries high risk (including/especially reputational), but often also offers asymmetric upside. Investing in a new frontier when others think it’s crazy is a recipe for success — if you’re both contrarian and right.

  • Chamath took a huge turn from the traditional VC playbook when he created his first SPAC in 2017, years before they went mainstream. He and his investors have generated over $1B in profits from that vehicle (which is now merged with Virgin Galactic), and have since used those proceeds to launch five more.

3. The best time to invest was yesterday, the next best time is today. Great investors don’t miss the chance to invest in big markets because they’ve passed on it before. Sir Richard Branson passed on investing in the X Prize twice before partnering with Burt Rutan's winning team to build Virgin Galactic.

4. Whenever a market's prices aren't being set by supply and demand, there's probably an opportunity to disrupt that market. The traditional IPO pricing process is managed by third parties (investment banks) that represent both sides of the transaction, and also have their own economic interests at play. It's the equivalent of a real estate agent representing both the buyer and seller. As a result, many technology IPOs have left hundreds of millions or billions of dollars on the table. SPACs and direct listings are now solving that problem. Any other market with this dynamic should represent fertile ground for entrepreneurs.



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Should we put in a little bit of fake reverb in post so that it sounds like we were actually live like that? At an auditorium. That'd be awesome. Live from the cavernous ascend auditorium. Live from spaceport america. Welcome to season 7, episode 6 of acquired. The podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle. And I'm David Rosenthal. I'm an angel investor and independent advisor to startups based in San Francisco. And we are your hosts. Today we are coming to you live from ascend, the event defining the future of space. Over the next hour we will tell the fascinating story of virgin galactic and the swirling cocktail of the billionaires, Richard Branson, Paul Allen, and Shamath Polly Haapatia, and the aerospace pioneers including Bert Ratan and Peter Diamondis behind it. We also thought it would be very timely because in the next week virgin galactic expected to make their first flight from spaceport america in new mexico, followed by next year in early 2021. So Richard Branson himself flying on their first commercial trip. However, the news did break this morning that and this probably won't surprise long time followers of the company. They announced that this flight is delayed indefinitely and we'll put a link in the show notes to read that press release. But for you regular acquired listeners, this is our very first episode covering a company that went public via a SPAC and we will unpack the business behind and hopefully ahead of the company and a few fast facts virgin galactic if they are successful in opening up space tourism. It will have a massive impact on the percentage of our species to go to space. As pointed out in their S4, the SPAC version of an IPO prospectus, only 573 humans had ever been to space by August of 2019 and virgin galactic already has over 600 customers or as they call them potential future astronauts who have prepaid deposits on their trip to space. And the sticker price for one person to take that trip, $250,000. It's a cool quarter mill. Pretty steep. There were just yesterday. Was it two more new first time folks in space with the SPACs launch? Oh, interesting. I know one of them is the first trip. I think maybe two of the four astronauts might have been the first trip. Super cool. Well, I do know now SpaceX has sent more humans to space than the entire Mercury program. That was a stat that I saw thrown out yesterday. So amazing how the pace is picking up. Well, for those of you watching this live at a send, a few words about acquired this podcast and sort of what the show is. So first of all, David and I are not from the aerospace industry. We are venture capitalists and entrepreneurs that invest in consumer and B2B startup technology companies. But we're big fans and observers of space. So today, this episode will reflect an outsider's perspective, albeit we hope a fairly well researched one. And our goal, besides our own self indulgence in getting to geek out on the topic that we love, is to try and make space more accessible to those in adjacent fields. And I know I'm not alone when I say this, but I think that the space ecosystem is poised to explode over the next decade or so. And this is one of the most exciting places in technology to be right now, though I'm sure all of you who are watching this live probably feel like it's been this way for a while and who is this guy who the things he just discovered something waltz in in here. So really excited to tell the story with you today. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founder. So we knew there's a natural fit. We know the host of founders. Well, David Senra. Hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how the group is together. And then they say it's like the best curriculum for founders and executives. It really is. We use your show for research a lot. I listened to your episode of the story of Akio Maria before we did our Sony episodes. This incredible primer. You know, he's actually a good example of why people listen to founders into acquired because all of his greatest entrepreneurs and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence Steve Jobs talked about him over and over again. If you do the research, jam, but I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders listeners. The other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest such printer to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's My Hero. So the reason I did that is because I want to find out like I have My Heroes who were their heroes and the beauty of this is the people may die, but the idea is never to. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what requires doing what a founder trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders go check it out. As always, if you love acquired and want to hone your craft of company building, you should join the community of acquired limited partners. Among other things, you will get access to the LP show where we dive deeper into the fundamentals of company building and investing. The last LP episode that we had was with Rahul Vorra and it was insanely valuable and a very enlightening conversation where he pulled back the curtain on the unorthodox tactics that he used in raising venture capital investment for superhuman, which is now valued at over a quarter billion dollars. If you are not already an LP, you can click the link in the show notes or go to slash LP and all new listeners get a seven day free trial. Thank you to some awesome sources in our research. Julian Guthrie wrote an awesome book how to make a spaceship that covers the entire history, the X prize. There's a great documentary called Black Sky that covers the entire development of the spaceship one program and we will put all the links that were a part of our research. The talks we watched by Virgin Galactic executives like George White sides, lots of other great bits that powered the research here into the show notes when this does come out as a podcast that you can find anywhere where fine podcasts are distributed. Well, David with that, should we dive into the history in facts? Oh, indeed. And for folks who listen to acquired, you'll know that we can't start our episodes without going back at least like 50 years. In this case, we're going to go back over 100 years. It's just like, it makes us so pleased here better me. We're going to go back to 1919 and the announcement of the Orteg prize, which was a $25,000 prize announced by I think the Orteg family, I believe, was behind it for anyone who could fly a plane, an air vehicle, nonstop from New York City to Paris or vice versa. And of course, famously a few years later, actually more years than I would have thought eight years later in 1927, Charles Lindbergh won that prize in the famous spirit of St. Louis, which I think is now in the air and space museum in Washington hanging there. Has to be. Has to be. That was the first, I believe the first major aviation prize to spur innovation. And of course, there would be later prizes after that as well. And that would lead directly into what we're, what we're about to talk about here with the X prize. But this whole idea of like using a prize to spur innovation is pretty cool. Totally. I think there's this brilliant, I'm not sure this was the intention behind it, but all these prizes since them have sort of realized you get an amazing amount of leverage on your dollar, this $25,000 prize, I think had $400,000 poured into the research and development by all the different teams who were competing for it. So not a bad return there. If you had to go and raise that $400,000, a hundred years ago by yourself, you know, I think that would have been a much taller order to get a similar sort of outcome. Yeah, totally. So inspired by this history, we now fast forward about 70 years past the Lindbergh flight to 1995. When a gentleman named Peter Diamandas puts forward an idea at a space conference, not the ascend space conference, which we'll see it takes him a while to get traction here. If this were ascend, it would have been immediate. He puts forward an idea for a similar aeronautical innovation prize this time for space. And he posits if we put forward a $10 million prize for somebody, not a government to build and launch a reusable crude spacecraft into space. Because at this point in the mid-90s, people are already thinking like what Elon and SpaceX have popularized this idea that like, hey, it kind of doesn't make sense how we do space right now, where it'd be like every time you flew a 747 to a destination, you would scrap the 747 at the end of it and not use it to fly back or fly anywhere else. Reusability can vastly change the economics of going to space. Even the shuttle program, which was amazing in many ways and had its big problems in many ways, even that had an element of reusability or refurbishability to it, certainly with the reusable shuttle and then the sort of refurbishable boosters. So Peter puts forth the idea for this prize that anybody who can launch a spacecraft up to what's known as the Carmen line, which is 100 kilometers above the Earth is one definition of space. Kind of in other words, you get to the canonical black sky where the sky is no longer blue. It's black at that point. Actually, I believe happens a little bit below the Carmen line, but it's lower than orbits. You don't have to make it up to like satellite orbit. But any team that can do that with a vehicle twice in two weeks with the same vehicle will win a $10 million prize. So he has this idea for the prize. This is 1985. It ends up taking quite a while to actually secure the funding. He doesn't have the funding when he puts forward this idea. He can just tweet funding secure it on likes. Yeah. That only works with electric cars, not with space vehicles. Oh boy. So notably, he approached Sir Richard Branson twice, I believe, right, Ben? And was turned down. Yeah. I mean, it wasn't just Branson. This was a massive list. Everybody who you would think would fund this thing basically looked at it and didn't. I mean, Paul Allen looked at this thing and turned it down. Although that was for more strategic reasons that we'll sort of get into later. He even approached Elon Musk in 2001. And let's just say 1995 to 2001. So like the funding was not secured for quite a long time after sort of having the idea for this and ultimately launching it. And Elon also said, Hey, this is really interesting. But I have a certain amount of money. It's finite. I kind of do my own thing. I want to be specifically focused on Mars. There's actually this little digression, but a great Elon quote that said, Yeah, we want to do something that's significant, but something on a reasonable budget. Not 10 million, just sort of a couple million. We have 10 to 15 million to spend. But we want to start with like a one or two million dollar project, which, you know, if you're if you're a Peter and you hear that from Elon, this guy that's starting to get some traction as an entrepreneur in this ecosystem. And then you go and watch how they do end up spending money. It must just be like, Are you kidding me? Well, as we covered on this basic episode, the idea originally was they were going to spend not that much money, but of course, that changed. So some of the notable early donors that they do get to the prize are Tom Clancy, the author, and also the Limburg Family Foundation comes in and and donate some money to the to the cause. But eventually, there's actually quite a cool story that I think you have been here about how they fund about half of it. But the biggest donor ends up being the Ansari family, which is a super cool story on its own. It's a family. It's a family of Iranian immigrants who founded a telecom empire in the early 90s. I believe late 80s, early 90s and made a lot of money through that. So they end up becoming the sort of title sponsors and it becomes the Ansari ex-price at that point. But that was only for about half of the 10 million dollars, right? Yeah, it was it was less. So the way it basically worked is they raised like two or three. And then before the Ansaris came in, which I think their initial pledge was 1.75 million. The way that they got from that two or three up to like eightish was that they approached first USA who eventually became bank one and then finally, JPMorgan Chase, where everyone ultimately lands either there or Bank of America. But basically after raising this few million dollars, that a huge chunk, five million was actually filled by a whole and one insurance policy. And so in a sense, the 10 million was never actually raised. But rather, they found a price at which first USA was willing to bet against anyone ever actually successfully win it. And that price was $50,000 a month insurance premium that Peter and the ex-price team had to be sort of paying in overhead in order to keep the prize alive to hopefully get that whole and one cash out, which is totally wild. And you think about the motivation there of first USA, their biggest motivation was that the ex-price, while it was underfunded, it was a really sort of like cool, sexy brand. And they saw a market to be the credit card issuer to people who were space enthusiasts. And so they wanted to sort of do this multi-faceted deal that included being the provider or underwriter of the policy that would reward the prize winner, but also to be able to issue ex-price branded credit cards. And so it also came with some other strings attached. So in addition to the 50K monthly payments for the $5 million insurance policy, first of all, if no one won by a certain date or if the full $10 million wasn't raised, the $5 million from first USA would never have to be paid out at all. And second, that certain date was not very far in the future. It was actually just December 17, 2003, which I think this point was like 99, 2000 right around there. So it really set up the ex-price for quite the photo finish because anybody who sort of wasn't already working on it had to throw their hat in the ring very quickly. Yeah, that's why this is a foreshadowing we're going to get to Virgins and Branson's involvement in a minute here, but the power of space as a marketing vehicle already. Okay, so one of the teams, I really think just about the only credible team that ends up entering the ex-price competition. There were a few credible. When you go, I spent a bunch of time and actually went and read the whole how to make a spaceship book. And there were several credible teams, but the only one that got really, really close and the only one sort of left standing by the end of the competition was Ritann. So we should give credit where credit is due to some of the other international teams that did pretty amazing things. Okay, great. Well, this team led by Aviation Pioneer, which is probably everyone listening here live at a send. Well, no, no, well, Bert Ritann and his company, Scaled Composites, enters the competition. Bert is a total legend in the aerospace industry. He had founded Scaled in 1982. And Bert had been a former Air Force test pilot, but was this just legendary independent airplane designer. So he designed the record-breaking Voyager aircraft, which for folks who've been to the Ernst-Based Museum in Washington, it's hanging there. I think right in the HM when you walk in, in 1986, it was the first plane to fly around the world without stopping or refueling, which is just incredible. So Scaled, interestingly, the company he had founded in 1982, it's had a long history of its own. It was bought in 85 by a company called Beach Aircraft, which they were collaborating with to design a plane at the time. Then Beach was owned by Raytheon. So Scaled was owned by Raytheon. After a while, I think this was post- Voyager, Bert bought it back from Raytheon, then sold it again to a company called Wyman Gordon. They got acquired. Bert bought it back again, this time with some financing from Northrop Grumman, who was already investor. And then later, as we'll see in the story, Northrop ends up acquiring Scaled fully itself. And so that's where the company lives today. But like this company has been part of it. It's been independent. It's been part of Raytheon. It's been independent again. It's now part of Northrop. Kind of amazing. And just speaks to like the talent of both Bert and the team. Totally. And it's not called Scaled Composites by Accident. Their thing that they're really good at is coming up with these really innovative designs and then using incredibly lightweight materials, you know, composites to basically create aircrafts that people didn't think were possible before that use less fuel that do more things. And frankly, you just push the edge of applying cool principles of aerospace and physics to figure out what sort of new goals you can accomplish. And so many of the Scaled planes are ones where you kind of look at funny at first and then they go on to achieve something that humans didn't really think was possible until they were able to do it. Yeah. So Ben, you know, it tells about the design that Bert ends up coming up with and entering here, the feather design. It's pretty awesome. Yeah. It's unbelievable. So anyone who's never looked at spaceship one or now spaceship two, you can kind of hear about it and sort of in your head, you're like, okay, I kind of get what that might look like. It is a goofy looking plane. Like it is a crazy looking like two planes actually. Yes. Animal of a system. So let's talk first about spaceship one. And then we can talk about the the mothership in a moment. The whole idea that Bert sort of initially figured out is, okay, well, if we're going to send this really lightweight thing all the way up 100 kilometers above the earth to win this prize, it's going to have to come back down. And normally when winged things come back down, think the X 15 or the space shuttle, it needs an incredible amount of heat shielding because these things go crazy fast through the atmosphere. I mean, famously they were putting like new tiles back on the space shuttle every single time it landed because these things would heat up and fall off. I mean, they're they're amazing at doing their job, but it's it's hard to maintain it's heavy. And of course, in scale, they're building a lightweight aircraft. So what do they do? Well, they come with this design called the feather, which does two really, really interesting things. The first is that it applies an incredible amount of drag while keeping the aircraft very stable. And so what's going to happen is it's going to come back down to earth slow enough that heat is actually not a huge issue. And when I say slow enough, it's still supersonic or at least starts supersonic and then goes through the slow is relative here. Exactly. But it has maximum drag. So he doesn't affect our end. It comes down very, very stable and steady. It sort of automatically flips into the correct position that they wanted in. And the final thing that sort of makes this all work is that it can be unfethered while it's launching. And we'll talk in a moment about what the launch system looks like. And of course, well, it's going like Mach 3 straight up and basically being a rocket that's going up into space. It can be sort of unfethered. The feather then flips into position, which is this 55 degree angle to come back through the atmosphere with maximum drag. And then unfathers it again and boom, it's a glider. It comes down. It lands real nice on a runway the way that you would expect sort of a lightweight glider airplane with no fuel in it to land. So remarkable genius system. I mean, basically, this thing is like a transformer. Totally, totally. So, okay, that's the spaceship one. Then of course, they're like, well, wait a minute. We're not going to throw a spaceship one vertical on a launch pad, the way that SpaceX or the Apollo missions are doing it. The way that they're going to do it is they're going to create a mothership, the white knight, that I think it's a dual fuselage or at least spaceship 2's a dual fuselage plane. The way they went was also dual fuselage. Okay. That they put the cargo on the spaceship one on, they fly it up to about 50,000 feet. And then the way that they launch spaceship one is they're flying this thing. They drop spaceship one takes, I don't know, 5, 10 seconds and then boom, ignites. And the rocket goes off and then it flies straight up. Like this is the craziest system to imagine. Like if they had not had precedent for this before with some of the very early prototype, I think the X 15 took off this way. At least some of the early vehicles in that era did. Then it would be hard to imagine how they thought this was like the right idea. But I mean, this is like a video game thing. Like a trick shot or something. It's amazing. Yeah, it's wild. So they enter the competition and pretty quickly they achieve supersonic flight actually in December of 2003. So there must have been an extension on the ex-price insurance policy then. There was. There was. So December 2003, they achieved the first. So from zero when they entered in like 2001, 2002 to first supersonic flight with the spaceship one, dropped off the white night in December 2003. And this actually means this was the first private manned airplane. So not a government project. And I guess they I don't know how the Concord fits into this that went supersonic, which is a great maybe because the Concord was perhaps developed with the government. I'm not sure. That's a good point. Yeah, I suppose that would be why I do know in the Black Sky documentary, they point out specifically this is the the first non-government supersonic non-government funded supersonic plane. Maybe. And of course it also is a it goes to space but also goes to space, right? So then in April of 2004. So a few months later, the US Department of Transportation issues burden scaled the world's first license like private license to go to space, which is incredible. And then in June of 2004, they make the first flight. I believe I don't know if they hit the carbon line in that first flight in 2004. They may have, but it was just one flight. So they didn't win the prize. They get spaceship one back down. They did because they would have had to go above the hundred K line to qualify to make that the first flight. Ah, interesting. Okay, so they hit the carbon line. And then over two weeks at the end of September beginning of October, 2004, they do it. They make consecutive flights within those two weeks. And they win the prize. It's incredible. Perhaps even more incredible is what happens right before and after. So from a like physics and human accomplishment perspective, yes, what we've already talked about at the amazing part now from like business, right? By the way, too, from like nothing to going to space twice in two weeks. 100%. It's wild. So it's worth noting before we talk about what happened the night before the first flight, who was bankrolling and who was sort of funding all the operations to create spaceship one in the white night. So it was not mostly scaled itself because my best scaled is kind of an independent company at this point. They did have a semi secret backer of the project who was Paul Allen, the Microsoft co-founder and of course late Microsoft co-founder and great space enthusiast during his time. But this was unbeknownst to the ex-price foundation and to Peter and to de-Amandis. So it was relatively secret that this was happening. Yeah, and it's no surprise among Seattleites. I mean, me and my my my colleagues at a Pioneer Square Labs know Vulcan and Paul Well in the Seattle ecosystem. And he is always funding very eccentric, crazy projects that no one else is funding, particularly in space, particularly in oceans, particularly in these interesting exploration fields. But for whatever reason, it was not disclosed until the successful flights that Paul had poured. I can't remember exactly what the number is, but on the order of 20-ish million into the project to fund the thing and into scaled and the partnership with Bert, which is sort of an amazing partnership that the two of them formed and built trust with each other. And it was so secret that actually Peter, De-Amandis and the ex-price folks didn't even know who was behind or at least where the money was coming from to fund scale to go and make this amazing run at the prize. So Paul Allen's involved here. Now the night before. So it's pretty obviously they have to, you know, they have to make this second flight to win the prize. But it's a pretty safe bet that they're going to do it. They've made multiple flights at this point. Everything's ready to go. So the night before, who reenters the picture, but the one and only Sir Richard Branson. Yes. He, Ben, you may have the whole story. Does he, did he contacts Paul Allen first? Is that right? Yeah. So there's two deals that happen. The first one is a press conference that they have that basically announces that Sir Richard has sort of seen the innovation that's happening here. And even though he didn't decide to fund the ex-price originally, and even though he doesn't have a competing team here, he sees the future and he wants to buy the assets and all the intellectual property and partner with scale to take everything they've built and build a venture out of it after they you know, complete this flight and win the ex-price. And the second thing that happens is overnight, he pays Paul Allen $2 million or he cuts a deal to pay $2 million to put a gigantic virgin decal on spaceship one. So everyone who's coming in for the flight the next morning, including P.R.D. Amandas, the whole ex-price team, they come in and the plane now has a virgin logo on it. And it has, you know, prominent placement on the runway and Richard Branson also has another project that's going on that's got a virgin logo on it on another plane that's also out on the runway, front and center in front of all the press. So suddenly they're like, all this media attention is descending upon the ex-price, hopefully about to be one. And boom, there's virgin branding every year. I think the amount is the ex-price, they're pretty great just about this. They're like, oh, well, cool. I mean, great. Good for space. The goal is evangelize space and that is happening. So after, I think this is after the flight, Branson holds a press conference with Ritean and says that virgin is going to be buying this technology and people like, wow, okay. Well, why? What is virgin doing? Now, I mean, virgin could be an episode all on its own. I think Branson actually got to start the magazine industry and then moved into the music industry with virgin records and then retail with virgin megastore. But at this point, I'm probably the biggest and best known part of the virgin empire are the airlines, the virgin Atlantic in the UK and then virgin America, which is now big part of Alaska here in the US. So what is he going to do with this space technology? He's going to form the world's first space line. What a brilliant marketing move. Airlines been working well for us. Like, let's do it on a grander scale. What's bigger than, you know, the air space. And I've seen Sir Richard talk a few times once in Seattle and once in Indianapolis at a marketing conference that I went to there once. And I do remember, I think he's even said this in both talks that I watched. He has this line, screw it. Let's do it. And you could just imagine him sort of seeing the world change in front of him and saying, screw it. Let's do it. We have to be a part of it space is the future. And I know the business model to do it. Well, so they announced that they are forming, quote unquote, virgin galactic, a new space line. And the business model is that they're going to take private tourists into space for a very high ticket price. And the idea is that this is going to be an airline. So Sir Richard puts one of his top lieutenant's at Virgin Will Whitehorn in charge of this new company. They form a JV with Bert and scaled called the spaceship company. So Virgin Galactic is the airline. The spaceship company, this new JV is going to be like essentially the, you know, the Boeing or the Airbus. They're going to build and also operate these planes, at least in the beginning. Virgin puts up the money, reportedly over a hundred million dollars to fund all this. Scaled brings the technical know how the spaceship company is initially 70% owned by Virgin, 30% owned by Bert and scale. And Virgin Galactic, the space line, immediately contracts five spaceship twos. So the spaceship one, which we'll get into in a minute, this is really, this is not safe for a passenger passenger use. And certainly not enjoyable or smooth. Yeah. So they're going to build five spaceship twos and two white night twos to launch them. All contracted. They're going to finance this. The revenue model is they're selling these tickets at initially $200,000 a piece. And the crazy thing is people buy them. So like pretty quickly, they sell a good number of tickets. So Angelina Jolie and Brad Pitt buy tickets. I think they were together at the time. I wonder if they're taking their flights together or or separately now. Lady Gaga buys a ticket. Steven Hawking. I think Branson actually gave Steven Hawking a ticket. Eventually some of the last folks to buy tickets were the Winkobost twins later are on the list on the flight manifest. And you can understand the demand for this because this is a completely underserved market at this point or unserved. You think about the people that the civilians that have been to space have either found their way to pay to be on a Russian rocket. And I think they have to become honorary or temporary members of the Russian space agency to be able to do this. Or you know, you look at the folks. I think Charles Simone has gone up twice. And I think has paid north of 50 million, maybe 75 to a hundred million dollars to be able to go up. Of course, that's orbital flight that they're going up to. So this is a different thing. But like, you know, civilians are not finding their way to black sky space and experiencing minutes of weightlessness. There's no real product for that. In fact, the only product to experience weightlessness doesn't really go all the way to space. But as Peter D. Amandus is previous company. And so there's this funny, you know, such a small world in this sort of space community. But you can totally imagine why there's an entire tier of wealthy, but not crazy wealthy people where you're like, oh, yeah, this is cheap. And what a unique and different experience. Yeah. I mean, you could spend a lot more than $200,000 on a vacation house somewhere. Or you could go to space. Pretty cool. So the product that they're selling is, this evolves a little bit over time. But current product is a four day experience where you get training at Space Board America, which is now in New Mexico, which we'll get to. You get 90 minutes in the air and about a little over five minutes of weightlessness with five to six people in your ship. And then probably, most importantly, you get astronaut wings when you land, because you will have been to space. Pretty cool. Pretty cool. Okay. So this is all happening in 2004. Now, remember, it was like three years to get Space Shift 1 up reused flow. And like, things are moving here. It's like the classic software engineering aphorism that, you know, the first 90 percent, you know, all you have left then is the second 90 percent. Exactly. Or maybe in this case, the second 99 percent. Yeah. So, you know, we mentioned that Space Shift 1 was really a prototype vehicle built like all births designs like the Voyager and all the other great planes. Like, this is not, this is not ready for a Virgin America let alone Virgin Galactic safety measures are comfort here. So three years later in 2007, we still don't have spaceship to ready or really even close to ready. Very tragically in July of 2007, there was an accident at scale when they were testing. So, the engine components and three scaled employees were killed in an explosion when they were testing these engine components, which was terrible. And unfortunately, not the only tragedy that will happen in Virgin's history here shortly after that is actually the very next month when Northrop acquires all of scale. So, I don't know if that was part of what was behind the acquisition, but certainly and then it was a few years later after that the Burt retired. So, you've got some transition happening here where the major technology provider to the spaceship company is now part of Northrop. And importantly about that accident, that wasn't something like, you know, they thought a design would work and it wouldn't or that it didn't and it crashed or anything like that. This was literally, hey, we're doing an on the ground test with fuel that we perceived to be safe and it just wasn't safe. And that's most observed by the fact that the folks who are watching were behind a chain link fence. So, it wasn't even like we have to go to a facility because something could go just people didn't think anything could go wrong there. Yeah, and it did unfortunately. So, nonetheless, the next year in the next summer July 2008 is when we get the first predictions from Sir Richard about when commercial flights have happened. The first of many. So, July 2008, Branson predicts the first passenger flight will happen within 18 months than not quite almost 18 months go by in October of 2009. Virgin puts out a press release saying that actually it'll be within two years from then. So, within two years of 2009, okay, okay, we're moving. And in March of 2010, actually the first, the first spaceship to the first spaceship to is built. The first white night to is built at this point. And the first kind of captive flights of the two of them up in the air together do start happening in early 2010. But spaceship to is not yet flying on its own. And despite Virgin and Sir Branson having put in $100 million, the project is starting to run out of money. So, in 2009, they go to the sovereign wealth fund of Abu Dhabi and they invest $280 million in Virgin Galactic at an $875 million dollar evaluation. And part of that deal is that they announced plans that a Middle East region spaceport is going to be built in Abu Dhabi. So, that'll be great. And Virgin announces at that time that they have over 300 reservations at $200,000 each. So, great. Things are moving along. Definitely signs a demand. Yeah. One other classic acquired theme that I'll pull out here is this $875 million dollar evaluation. I don't know what discounted cash flow you do to arrive at this company being worth that. This is your classic example of company needs X amount of dollars and how much of the company does the funder need to own in order to be willing to do that deal. It is a backed into valuation if I've ever seen one. You might say venture capital style valuation a theme that'll come back up in a minute here. So, at the end of 2009, they do a big event at the Mojave spaceport in California where scale is based. They unveil officially the spaceship to France and says at the event that flights are going to begin now in 2011. Okay. 2011 rolls around. France and says, I hope that 18 months from now we'll be sitting on a spaceship and going to space. So, the trend continues. And then as we mentioned in April of 2011, the boat does retire from scale. Okay. So, clearly things are not totally on track here. And remember, like so, boats now retiring from scale. Virgin is the space line, but who's the technical space leadership now? So, they bring in the end of re-organ the entire organization. And Branson brings in a new CEO to Virgin Galactic actually at the end of 2010. George Whiteside's, now who was George Whiteside's missing part of who his background is that he was actually one of the very first people to purchase a ticket on a Virgin Galactic as soon as they went on sale because he had recently gotten married. And he and his wife wanted to spend their honeymoon in space. So, they actually got a lot of publicity around this. So cool. And you know, George is a long time space entrepreneur. I think this is like a, we're not talking about Brad Pitt wealth here. This is like George is like, hey, this is like a material amount for me and, you know, hope and hope and be able to do this soon. So my, my honeymoon is in decades in the future. Yeah, he really does have passion for and commitment to this company and project, but he also has some serious crit. So, he was the chief of staff at NASA immediately before becoming CEO of Virgin. I'm prior to that. He was the executive director of the National Space Society. So, the idea here is bringing him in. It doesn't happen immediately, but I have to imagine that this was the plan was with Bert stepping back. Hey, Virgin realized like this, we can't just be a space line for this. We need to like actually control production and the science and the technology in space and be vertically integrated here. So shortly after he joins in 2012, Virgin buys out scale stake in the spaceship company and takes full control, integrates the companies, and George and Virgin are now running everything. George has a great quote about this. He says, we've changed dramatically as a company. When I joined in 2010, we were mostly a marketing organization. Right now, we can design, build, test and fly a rocket motor, all by ourselves and all in Mojave, which I don't think is done anywhere else on the planet, which is pretty incredible. Right. It just makes sense for them to be vertically integrated here. I mean, it reminds me a lot of taking the Apple approach of needing to control the core technologies upon which your experiences are based and your products are based. It always struck me as a little bit strange that there was Virgin Galactic and there was TSC and they're the spaceship company and it was a contractual relationship of which they had different shareholders. It just kind of makes sense. Yeah. I mean, it works for like Boeing and the airline industry, but we're not anywhere near that level of maturity yet. So there's actually a pretty cool little venue found this little history and connection between Peter and George, right? Yeah. So George White's eyes was actually briefly Peter Diamandis's roommate back in the ex-price days when Peter was also running the space tech startup blast off from around the year 2000 in the sort of go-go days of the internet, which is its own whole separate story that we don't need to get into today. But an interesting thing here is like the world of space is so small. Like, we always joke about this with Silicon Valley where we're like, my gosh, that's the same person that showed up in that other episode. Like everyone in this story is really only connected by, you know, one, maybe two degrees of separation and while we're on tangent territory here, I got to do this. One more insane connection is when Peter was in college at MIT. So this is long before the ex-price. He started a college organization called Students for the Exploration and Development of Space, or SEDS, which has since become, you know, this international organization. There's chapters all across these college campuses all over the world inspiring thousands of future space enthusiasts and entrepreneurs. I suspect there's many people in this audience who are in SEDS in college, the president of the SEDS chapter at Princeton around 1985. This is so great. Jeff Bezos, which is crazy. For all the stuff that people want to say about Elon and Bezos and all these just negative headlines that we saw, I don't think you see him anymore, but for the longest time, you know, billionaire pet project going to space, Jeff in college was the president of his, you know, it's just cool to see the seeds of these passions starting so, so early. Yeah, totally. Anyway, back to Virgin Gold. Back to Virgin in George. Total or totally worthwhile digression there. So the other thing that George does is lands a deal. Now remember, George comes from the government. He lands a deal with the New Mexico state government to construct and finance a spaceport, a $200 million launch facility in the desert there, appropriately titled spaceport America, Kristen spaceport America. And he gets a fantastic deal for Virgin. So the New Mexico state government, construction finances, the whole spaceport, Virgin is the anchor tenant. And I believe they pay $5 million a year in rent, which is a total wonderful deal for them. The other thing he does is this is the beginning of sort of the excitement around the small satellite industry. So he starts a new operation within Virgin to see if they can use this same tech to launch small satellites into space, not just people. And in July of 2011, Abu Dhabi invests another $110 million into the company behind this business plan. We'll see what eventually becomes of this. But it starts working in August of 2013. They announced that Virgin announces that they now have twice as many customers as before who would reserve flights up to 640 reservations, about $80 million of prepaid flight reservations. So things are on track. And they actually close down new tickets at this point, right? Like they haven't sold another ticket since. Well, they, I believe it was actually after what happens next that they have some new ticket sales. So unfortunately, and you know, George's also has said this often, I think, space is hard. And this is new stuff. So in September of 2014, so now we're now in 2014, Branson goes on David Letterman and he says, we're so close. I think we're going to have the first passenger flight in the beginning of next year in February of March of 2015. And who knows if that may or may not have happened, but very tragically, the second major tragedy in Virgin's history happens on October 31st, Halloween 2014. They're doing a test flight of spaceship two. They had just switched out the fuel system to a new type of fuel. And this spaceship two, the same one, the original one they had, the VSS Enterprise, breaks apart in mid-air during the test flight after it's released from the mother ship. And the co-pilot Michael Asbury is killed and the pilot Peter Seabold survives, but it's seriously injured. And this is obviously not the headlines you want when you're trying to, well, it's tragic period, but not the headlines you want when you're trying to attract customers to come and reserve tickets on your new space line to have the craft blow up in mid-air. Now, just enormously sad. I mean, the both tragedies so sad in their own right, but the fact that they're both so different too, and so many years apart, it just shows what early days it still is for humans trying to go to space. Yeah, yeah, this is really real pioneer stuff. So it turns out the government, the Transportation Safety Board does conduct a full investigation of the crash and turns out it actually was not a real technology problem or a problem with the fuel. Unfortunately, the feather system that we described early deployed way too early on the way up, not on the way down, and the GeForces from that tour the ship apart. The investigation revealed it was it was likely, I don't know that they know for sure, likely the result of pilot error, which of course raises questions about like, hey, shouldn't there be safeguards about all this? So it was back to the GeForce for a lot of things. And of course, they also said, I think, you know, well, it was likely pilot error here. It is incumbent upon the designers to consider human factors in designing the technology in the first place, like a person undergoing that much sort of stress and pressure. What should you expect of them and what should the systems sort of do on their behalf, which is a fascinating sort of philosophical concept that we don't have time to all the way dive into on this show. And a bit of a mehicle you can say. You'll get deployed the feather on the way up, which is of course how Virgin Galactic changed the design for the next ship that they created. Yeah. So after that, George and the company sort of refocus on getting all this rate. They spin off the small set launch operations into a separate company to remove that distraction. It's called Virgin Orbit, which is actually it's still an independent company part of the Virgin Group today. It's not part of Virgin Galactic holdings. It is crazy cool. Like they're basically strapping a rocket to a modified 4.7 and launching it the same way that the white knight to launch a spaceship to. So really excited to watch that, but totally different market different different different. And different back down to it's not using the white knight. It's using a 747 as the launcher. So they need a new spaceship now. So they start work on the next spaceship to this one. Chris and the VSS unity actually named by Stephen Hawking, which is super cool. They do a big event in Hawking when they introduced Hawking announces the name. So they unveiled that in December 2016. And then in April 2018, it performs its first powered flight, the first flight for the company since the 2014 crash. So it ends up being four years after the crash, almost four years, three and a half years until the first flight of the unity. And then in December 2018. So just about two years ago, we have the big moment when unity finally reaches an attest flight 82.7 kilometers above the Earth 51.4 miles, which is below the carbon line. But this is what we were referring to earlier. NASA's definition of space is actually the 50 mile mark. So they passed the 50 mile mark. Such a hilarious like standard versus metric system. I know. The international metrics would be like 100 kilometers in America would be like 50 miles. Yeah. Totally. For something that's a space is set to the exact. Exactly. The atmosphere is thin at like gravity pulls the atmosphere toward the Earth and it thins in a way that can be described by an algorithm. And here we are defining arbitrarily what height space starts. Totally. So this is huge for the company. I mean, it's taken now 14 years. But they finally have a viable, you know, not yet ready for passengers, but like design that will be ready for passengers that reaches space by some definition. NASA awards the pilots, Mark Steckey and Frederick Stucco astronaut wings. It's all happening. This is good. And it's and this is actually, you know, this was pre the SpaceX launched this year. So it's the first human space flight launched from American soil since the retirement of the shuttle was actually Virgin Galactic. It was the SpaceX launch earlier this year and then their second launch yesterday. That's fascinating. Where the first American launches into orbit and up to the space station. But it was actually Virgin that did the first human space flight from American soil after the shuttle retirement program. That's a good tidbit. Of course, on the business side of this too, after the 2014 tragedy, as we mentioned, they stopped selling tickets. So I think there's 603 people who have paid that 200 to 50 K some was some discounting. But they basically haven't sold tickets since then. What they have done because they need to know as a business, is they're demand for this thing and is they're continuing demand is our marketing efforts working. They do have the ability for you to indicate interest by paying $1,000 in a Tesla model. This actually only launches this year. This is post-spac. This is a Tesla Model 3 style refundable deposit. I reserved a ticket. I'm actually curious if that's what we're talking about here or sort of the full, hey, I paid 250 K. But what you can basically do is we'll put the link in the show notes. You can go to their website. You can fill out a form. I think you can put your credit card information in and put down $1,000 and say, put me in line. It's the one-stall one I can take. One small step program that then once they are selling tickets for real, you will make the one giant leap from the $1,000 to the $250,000. That's pretty giant leap. I didn't realize that was recent. I thought that was sort of before they spacked and went public. No, it was only in February of this year that they launched that. So of course we're referring to the spac. Okay, so by the end of 2018, this is big. This is huge for Virgin. And finally, they're on track. They have demonstrated, put a vehicle into space. This can work. The only problem is they're running out of money again. The money from Abu Dhabi is, you know, it digs a lot of capital to do this stuff. So that's okay though, because Branson and Virgin have a plan. They have secured, they literally have secured funding, a billion dollars from another sovereign wealth fund in the Middle East this time, Saudi Arabia. And this is now in 2017. They announced that they have secured funding from the Saudi Arabian sovereign wealth fund, a billion dollars to fund continued operations and hopefully soon. And notably that sovereign wealth fund. I mean, there are the largest LP in soft bank vision fund fund one. Like they're doing big deals all around the world at this time. Many billions of dollars each. And Saudi Arabia under Crown Prince and B.S. is, you know, had to make a big deal over the past few years of they want to diversify their economy from oil. They're getting into tech. Their LPs in lots of venture funds, not just the vision fund, lots of money in the public markets and tech. So this all seems like a great path. So the deals agreed to in 2017, but it's under regulatory review in the US and the UK and takes a while to close. During that time in 2018, folks will remember the journalist Jamal Kashoggi, who was, I believe he was Saudi and was living in the US and was vehemently opposed to the Saudi government. He enters the Saudi consulate in Turkey and never comes out. And it is assumed and very likely that he was murdered by the Saudi government inside the consulate, which of course is just horrible, but also be for the tech industry specifically causes all sorts of problems because there's so much Saudi money all over the tech industry at this point. And this is a major like international event. Yeah, I mean, this is the, this is the start of startups being very aggressive and asking venture firms before they invest. Hey, tell me who your LPs are. This used to be faceless money to me. Now I don't want this particular money or money that seems like this type of money to be profiting from my startup or having control over my startup. So very much shook the entire venture landscape of what it means to take capital and how much you should care about the who's invested in your investors and who's invested in those investors, et cetera. Yeah, this was a huge wake up call. We all remember vividly. So fortunately, you know, for Virgin and Branson, the deal wasn't done yet. And you know, Sir Richard does what he thinks is right and he pulls out of the deal even though a Virgin is like bleeding cash needs money, they're not going to do this deal with the Saudis anymore. And that is when he meets yet another colorful character this time in the Silicon Valley tech world, Jamath Paliapatiya, which for anybody who's a long time listener of acquired and certainly anybody in the tech industry at this point well beyond. It's probably familiar with Jamath. So Jamath was an early Facebook executive. I think he was like employee. He was within the first 30 employees and he was pretty senior there and he was the guy by all accounts his own and others who really figured out Facebook's viral viral growth strategy started the growth team at Facebook and then particularly also figured out international growth for Facebook. So a super super key executive. He was also the guy at Facebook behind. Remember the Facebook home, I think it was called the operating system for phones. Oh yeah. And I think the Facebook won. Like they partnered with HTC to make a Facebook specific phone. That's right. That's right. That's right. When I was built off of Android, it was kind of like the fire phone. Man, other companies building off of Android turns out that wasn't a good idea. So anyway, right after that he left Facebook, but Facebook had already gone public at this point and he had a very large equity stake made hundreds of millions, if not billions of dollars from Facebook. And then he did a pretty audacious thing was he said, I'm going to take most of my money and I'm going to roll it into a venture capital firm. So he started a venture capital firm called Social Capital with few partners from USVP, Mammune and Ted from USVP come over. They start Social Capital. And I remember when they were breaking in. So this was like what 2012, 2013 time frame, I think. Sounds right. They made a big splash. I think their first fund, gosh, I want to say it was like 600 million or so. They got into some great. Big fund for back then. Yeah. Now it's a quaint early stage fund. But that was big. They got in early into some really great companies. They did the series being slack. A bunch of other great companies. They I think led to A for front and really established themselves as at that point in time, no new venture firms had really broken onto the scene in a big way in this same way that Social Capital did. So Chimath, engineers, solve this. And then in 2017, a few years later, this has been chronicle much elsewhere. We'll have to tell the full story ourselves on acquired someday. Social as a venture firm basically breaks up at Chimath's direction. Remember, he's I think by far the largest LP in the fund. He converted into sort of a Berkshire Hathaway style holding company slash family office. And I believe some of the LPs did roll into this, but he turns it much more. He's mostly investing his own money at this point, mostly investing his own money. And he had made some great calls on the public markets too along the way. He went all in on Amazon. He had a hedge fund within Social as well. That was also managing a bunch of his money. He went big into Amazon at like a $300 stock price or maybe it was even lower. Also, the time. Yeah. Made some great bets on Bitcoin early. So he has a lot of capital to play with. So he's in the process of converting Social into this holding company. And he sees this that gets this idea and sees this thing that's happening in the venture industry, which is now news to nobody. But the time was really ahead of the curve, which is companies are staying private longer. They're not going public. Time to liquidity is awful. And when companies do go public, because we had started to see some IPOs at this point in time, it's kind of a raw deal for the companies. Like you're seeing these big IPO pops, but that leaves so much money on the table, literally billions of dollars in market cap that is just a wealth transfer from these companies to the investment bank clients that are buying into IPOs. Yeah. And for folks who are new to acquired and haven't heard us talk about this on our on our limited partner show, which is our sort of second show that we go deep with our biggest fans who are actively building companies to talk about these concepts. We did one on on SPACs and talked about this. And in talking about comparing against the IPO pop, you know, my favorite example of this is when people are saying, what do you mean the IPO pop isn't that good? Well, you think about it this way. It's like I own something that's worth call it, you know, 20 bucks. And I sell it to someone for 20 bucks. And then at the end of the day, they run over and they sell it to their friends for 30 bucks. And every 40 bucks or 50 bucks. And you're like, wait, wait, but you just bought it for me for 10 and it's literally, it's nothing has happened in the time since then. How come all of you told me like the whole market, like you all only told me that it was worth 20. And now suddenly you're all saying it's worth 30 and you're willing to and it's just this ludicrous thing where you're like, I spent a freaking decade holding this thing from one dollar to $20. And here you are now doubling the price, you know, or putting some big multiple on the price within a day. This is stupid. So yes, that is the approachable corollary. So and this is the real leap that Jamath makes, which is, you know, Bill Gurley was already starting to rant against this and you know, you had the Spotify direct listing, I think happened right around this time. So people are looking for alternative ways. Jamath thinks he finds a really good vehicle to solve this in a more elegant way, which is he does off this old concept called a special purpose acquisition company or a SPAC as abbreviated that Ben referred to. And he says, hey, we can use this thing which used to be like a financial engineering play to take old school private equity type companies, public and profit off of some cash flow from them. And we can actually use this this vehicle to take tech companies public in a alternate route to an IPO that's going to be way easier way faster and most importantly is going to avoid this mispricing aspect where this wealth transfer is happening just to basically investment banking clients. So now this is crazy at the time. Like Jamath has a great quote on this. He says, you know, this is something where like everybody wants to be second. Nobody wants to be first. And it's kind of an apt analogy to being a passenger on Virgin Galactic here. So 2017, Jamath teams up with an investor out of the UK named Ian Osborne, who runs a fund called head of Sophia, which is funny. You've been in I were texting when we were preparing for this. I thought social capital, head of Sophia, which is the name of the SPAC was like a name that Jamath came up with to name his SPAC. No, it's actually his investment partner, the head of Sophia firm in the UK. And Ian, he and Jamath probably knew each other from the Facebook days because Ian was a partner at DST. DST was your email nurse Russian firm, your email nurse Russian tech investment vehicle. They were, I think they led the first real like big, big valuation growth round in Facebook at a $10 billion valuation, I think. Maritek led the, Maritang Ray liked it to be at a $500 million valuation, which is crazy at the time. But then like this, you know, multi-billion dollar valuation, DST were the ones that got this. So Ian and Jamath launched a $700 million SPAC in late 2017 under the ticker IPO A. And they go out looking for a tech company to merge with and take public. Yeah. And I remember like, of course, I didn't really remember before the Virgin Galactic announcement when it was just a SPAC and they didn't know what they were going to buy because that wasn't well marketed. Like there wasn't, you know, the press wasn't writing about what Jamath's doing this SPAC and we don't know what he's going to buy, what they were writing about came months later when he did know what he was going to buy. And within Silicon Valley, I mean, I remember this, people were talking about it like Jamath's doing this crazy thing. Social capital is turning from venture firm into a holding company like, what is going on here? What is a SPAC? I don't understand this. And SPACs, I mean, they're like at this point, they are four bad companies. This is like a way to get crappy companies public. And it's, it's like, well, whatever he buys with this thing can't be good. Yep. Well, the counter argument to that is, well, whatever he's buying here is non-traditional is something that, you know, most traditional retail investors with some specific time horizon and herd mentality wouldn't be, you know, taking public like the normal way or investing in the normal way. So at the very least, whatever he's going to buy here, this is likely their only or one of a limited set of options that they have. Indeed. Well, and all that would be true when Branson and Jamath meet, I don't know the actual story of how they got introduced. I wonder if Hedisophia and Ian had something to do with it given that they're based in the UK as his Branson, of course. Anyway, after the Saudi deal falls apart for a virgin galactic, they get introduced and it's a perfect match. So by mid 2019, they agree to a deal and on October 28th, 2019, it's finalized. IPOA had a social capital, Hedisophia one, D-spacks, quote unquote, which means merges with virgin galactic, bringing virgin galactic to the public market says now a publicly traded company under the symbol, the ticker symbol for the company changes from IPOA to the very appropriate SPCE or space. Love it. Love it. So here's the deal. Here's what happened. So remember, the SPAC was a $700 million SPAC vehicle. It was $700 million in a trust. And that just means like it's basically worth $700 million and the reason it's worth $700 million is because it's literally a cash account of $700 million. Yep, to be used to consummate a transaction merger with virgin galactic, which they do. So in the deal, $674 million from the SPAC, from IPOA, goes into virgin galactic. Presumably, the delta there was operating expenses for the SPAC in the search period over the year and a half ish where they were, or it's close to two years really where they were looking for the right target before they finalize the merger. Plus, Tamath invests another $100 million himself in new capital. So we have $774 million going into the deal. $274 million of that goes to buying out insiders in virgin galactic. So I'm not sure exactly who I presume this is probably longtime employees options and probably also at least some portion of Abu Dhabi's stake. At that point, I believe they owned about a 37% stake in galactic. And then there's close to $50 million in transaction fees associated with the deal. So virgin at the end of the day becomes a publicly traded company with $400 million. $50 million in transaction fees. I know. So that is going to come down over time. I have to imagine the part of the reason that was so high was this was the first like technology SPAC that was happening. So they were pioneering a lot of stuff here, which of course means lots of legal fees. So virgin gets $450 million in new cash to the balance after transaction fees and the $274 million buying out insiders. The deal includes virgin galactic and the spaceship company, which remember now is wholly owned subsidiary of virgin galactic is vertically integrated does not include virgin orbit. So that's separate company. But when the dust settles virgin galactic SPCE is now publicly traded at the end of the first day of trading worth about $2.3 billion on the public markets. The SPAC shareholders own 33% of the company almost exactly a third virgin in the previous shareholders own 52.5% and the social capital had a Sophia team own 13.2% and Shemath is chairman of the board of the company. Wow, an untraditional match if there ever was one. But it works incredibly. As we sit here today, well, there's more news this morning. But as of last week, the company was trading it over a $5 billion market cap. It works as a funny thing to say there, David. It's like the speculation party has continued. I would say like the merry go round or the musical chairs or whatever you want to call it. Yes, that's continued. Of course, we haven't really seen results yet. The cash did go to the balance sheet so the company gets to keep building toward its goal of launching paying all of his expenses. It seems to be close to going to plan. But like if you just want to look at it from an equity investment perspective, sure. Yeah, the things doubled in market cap since the since the IPO, which seems good for anyone who invested at that point. Yeah. Well, it's probably probably just like tracking to market at this point, at least for tech markets. That's a great point. Yeah, I'd compare it against the NASDAQ. Against the NASDAQ. But it's pretty funny when they do. So as part of the de-spac merger process, there's not a typical S1 prospectus. There is an S4 merger document, though, which includes much of the same information actually more because they can talk about forward-looking projections. It's pretty funny. So for the prior 12 months ended June 30th, 2019, the last quarter in the books at the time of the de-spacking. Fertian Galactic had revenue of $4 million in an operating loss of $173 million. So very much a non-traditional IPO. A number that has gone up since then is their operating loss because I think they're brought at about $250 million a year now on a run rate basis. So the question is, like, why would public market investors receive this stock with such enthusiasm, or at least equal enthusiasm to the NASDAQ over the past couple of years? Really, I think it just comes down to what this could be. This is an option on this future market. Now, Virgin said at the time of the de-spacking merger that it believed it could complete 16 flights in 2020, serving 66 passengers, which would equate to 16 million in revenue, and hopefully growing quickly from there. Now, of course, here we are in November 2020, and zero of those flights have happened. Virgin would argue on this valid to a certain point that coronavirus had a lot to do with that. But there's also the IP and all the physical actual physical property associated with the company, which is worth a lot. There's the Spaceport America, at least there's the Virgin brand that they have a license to. There's all the IP of the actual planes. Technology, the Space Ship Company, yep. I think at the end of the day, the biggest thing, though, and why this has traded so well is there's just no other way or very, very few other ways for people who don't have access to venture capital as an asset class to make these kind of bets. It's a public moonshot bet, and it is literally a public moonshot bet. Yeah. Yeah, you're at such a good point, David. What else could you invest in where there's legitimately a chance of a hundred X or a thousand X return in the public markets? Now, I mean, I could, there probably are some good examples of those, but nothing that is so clear-cut, pure play, hey, I can put a little bit of money into this, and I might get a thousand times my money back, or it might go to zero, but it is an asymmetric upside. Yeah, it's funny. David and I were texting last night, and I was like, so market cap of 5.2 billion. I mean, I guess, because it's either worth a lot more or a lot less. Yep. Okay, so what's happened since the merger? In February of 2020, like we talked about, they reopened the ticket sales with the one small step program, the Elon inspired $1,000 to reserve your place. They've had 900 people sign up so far, so close to a million dollars in revenue there. Great. And then in July of 2020, the big news, they bring in a new CEO. So George Whiteside's transitions becomes chief space officer within the company. He's very much still part of the company, but the new CEO, Michael Koglaser, is drumroll acquired theme. Literally, he spent his whole career, except for his internship during business school, 30, close to 30 years at the Walt Disney company. In parks, right? In parks. Mostly in parks. I believe he started in, this would have been the late 80s, early 90s, I think. I believe he started under Eisner in the Strat planning group. And then, legend, spent a couple of years doing that and then went to business school. He interned at Bane, I think, during business school, then came back to Disney after that. And that's been most of his career in parks under Higer. And, and of course, now under new Disney CEO, the other Bob, JPEC, running the parks business, which, you know, you could imagine that being a really great fit for now running this new experience. Look, I am going to spend $250,000 to go and do four days. It better feel like Disneyland the entire time. Like Disneyland in space, that is like the perfect. That is what you should be promising me for this price tag. I mean, gas when you put it that way. I wasn't planning on doing this, but Disneyland in space, that's pretty compelling. I might have to book a ticket. It's such a good, yeah. It is interesting. I mean, it's, it in a lot of ways, it shows the maturation of the company where it originally, you know, with, with Burton, the scaled team, it's like some, it's originally Cowboys, right? And then it goes from Cowboys to like space industry veterans who are well connected and have sort of like the ability to work with government agencies and much bigger contractors if they need to farm out parts to either, you know, the Boeing or Lockheeds or the subcontractors of the Boeing and Lockheeds of the worlds. And then on top of that, like now it's like George can be the chief space officer and sort of have all the space relationships and understand that ecosystem. But now we need sort of like the person who can craft the consumer brand to, to be the CEO of the company going forward. And so I don't know exactly what the narrative they sold to Wall Street or sort of talked about internally was, but those sort of three areas of the company make a lot of sense to me. Totally, totally. So that was in July of this year of 2020. Two weeks ago on November 5th, they announced earnings earnings, i.e. losses. That's like that was to be expected. Yeah, the loss calls. But they announced that the first test flight at Spaceport America will be happening later this month in November 2020. And they are on schedule for the first passenger flight to take place in Q1 of 2021 with Richard Branson on board as the first passenger after which they will open up real ticket sales again. So all that is good, the stock reacts well. But then here we are. It's Monday morning November 16th, 2020 is we're recording this and they announce this morning that that flight from Spaceport America is now delayed indefinitely, supposedly due to new guidelines from the new Mexico Department of Health to disrupt the spread of COVID-19, which makes sense that very well could happen. I don't know what the new Mexico new governments are in the middle of a series. Well, the middle of the worst moment of the pandemic in the United States. So yeah, totally makes sense. On the other hand, you do have to ask the question, it's not like COVID is a new development. Well, this is also the 15th year that there's been a delay. Like at some point, you have to say like, can you give us a date and hit it? Exactly. So when we started recording the stock was down about 10%. But yeah, I mean, that really is the question now going forward and we'll wrap up history and facts here and transition into analysis. Like the promise here is immense. And we'll get into the tam and what this could be if they do execute on Disneyland in space. But unlike another company that we've covered on the show and in the startup in the space at the street SpaceX that despite some early missteps has now just had a decade long track record of launching hitting their targets, did of now putting people sort of hitting their targets. I would say like they're very good at revisionist history. Both SpaceX and Tesla are good at like setting an incredibly aggressive target, missing it by like 12 to 18 months, but then being like, yeah, it's kind of the plan the whole time. But they make enough progress. But then they actually do enough and they ship stuff where you're like, okay, like it still feels really fast to me. Yeah, you get that 18 month leeway. You know, Virgin is used this 18th monthly way. I was encountering but five six times and still hasn't launched. So spaces are now funny. Coda, which is totally appropriate to put a bow on history in fact last month in October of 2020. Do you know who the latest entry to the SPAC game was? Oh, is this Branson's SPAC Branson himself? We're coming full circle going from being the first SPAC target to now our participant on the SPAC side. What will he buy? It's interesting. I don't know. I think they're targeting a consumer or a technology company, $480 million VG acquisition corp of any SPAC investors out there. I want to go speculate on what what's her Richard might might buy. It is available for you to do so in the public pockets now. Yep. Okay, analysis. Let's do it. All right, so narratives. Yeah, I think narratives are the right one for this because boy are there ever. We've pretty much danced around narratives, but I think it's worth specifically articulating what the bull and bear cases are around the company. So the bull case is that SPACs actually are an incredible vehicle to finance these long term capital intensive projects. And what they were used for before sure was bringing crappy companies to market and you know, they deserve the reputation that they had. But the vehicle itself, like not having to do a road show and actually consummating a transaction with one buyer who has done a ton of research on your company brings a ton of capital all at once to bear. It's actually an awesome way to raise a good amount of money to provide the right amount of liquidity to shareholders and to only need that sort of like one party that believes in your long term vision and is willing to get you public to allow any future investor to make a moonshot bet. Whereas the traditional IPO process, like it would be really hard to run the traditional bookmaking process on Virgin Galactic had never made a dollar or a material dollar before, well, still basically never. It was really hard to estimate when that would start happening when it would turn a corner, really hard to estimate how much future capital would be required and sure you can make a projection. But like how much is any retail investor going to believe that? So you sort of risk going public and then the whole business dying based on trading down immediately or based on being able to sort of not subscribe the offering. Whereas in a SPAC, like you really just need that one true believer. Well, that one true believer and it's at a negotiated price. I mean, I think that's an important piece of great point here, which is the SPAC vehicle, both the insider as of the SPAC and the SPAC shareholders acquired 50% of the company here. Right. It's a pretty dilutive financing. This was a, even though it ended up first day trading at $2.3 billion market cap, I think this was basically a more or less appropriate valuation for something like this, which is, hey, this is a very high beta bet, right? But the upside is huge. So like shareholders will be very much appropriately compensated if this works out. It could go to zero, but like it's, you know, you're buying half the company here. So at that day one market cap, it was trading at about 2x, the capital that had gone into the company, which I know is not a like ideal academic way to value the company, but you can just sort of think about like, okay, a billion dollars now of R&D has been put into this. Am I willing to pay two dollars to every one dollar of R&D that's put into this for an option on the idea? Pretty cheap. This idea. It's, it's not, you could make an argument that this is not a crazy valuation. All right. So that's our, that's our bouquets on the transaction. But let's talk about the future of the company. Yeah. So let's talk about the market here because of course there have only been 600 people to date who have been willing to pay the $250,000. These are pre-orders. Like these are people who have been lining up to do this. I don't think they knew it would be a decade before, but a decade before they could actually get on this ship, how many people potentially could do that? Well, they ran some analysis. I think they worked with an investment bank to figure out that it's something like 90% of the people on that 600 person wait list, 90% of those have over a million dollars in net worth, which makes sense if you're going to go spend 25% of your net worth. 70% is less than 20 million. So there's sort of sweet spot is people between one and 20 million in all likelihood. It's a lot more than one. So the way that they got that is. But they might be able to get the price down over time. Like if you have $1 million in net worth, would you pay 25,000 for this? Like, yeah, probably. They won't get the price down that much. I can talk in a minute. Why? But the bouquets is basically like, okay, let's just say like 10 million plus is what the majority of people who are going to do this will have. Well, there are 1.8 million humans on earth that have that much money. So you actually don't need a huge percentage of that market in order to like make a really, really nice business here. I ran the numbers by my math. If 10% of those 1.8 million people buy tickets at some point in time, which, you may argue that 10% is way too high. You may argue it's way too low. But if 10% of the 1.8 million people buy tickets at the $250,000 ticket price, that's close to $50 billion in revenue to Virgin. So that's sort of like lifetime revenue for the company lifetime potential revenue. Another, another bottoms up way to build that, which is using the company's stated goal, which is to get to 1,000 people per year, which if you think about that, that's 200 flights per year. These things are fully reusable. They can get to $160 million a year in gross profit. So the way that I got to that number is they actually have 65% gross margins. Because if you look at the fuel and launch costs and insurance, it's really only, it's like four to five hundred thousand dollars, but you can generate one and a quarter million per flight. And so those are almost software gross margins. So you really, you know, that 160 million in gross profit can cover a lot of overhead, a lot of our R&D, a lot of GNA. And there's a lot of like, if you can actually get that coming in in in revenue that you don't have to pay out and fuel and all that, you can subsidize a nice nice man overhead. Yep. Yep. And if you can get, you know, this is part of why the original contract was for five spaceship twos. And then obviously the idea is that they're going to build out more space ports around the world. Like, yeah, you could get to a point. If this is a popular product, where you're doing many launches a day and thus, you know, hundreds to thousands of launches a year, you could start to make real money with this. Yeah. Okay. So what's the bear case narrative on this company? What isn't the bear case narrative here? No, that's too harsh. But I mean, I think the big one right is like, it's been 16 years. And still there has not been a passenger flight. Yeah. And and the biggest issue is like, you do have, I mean, these are companies going after completely different markets, but you do have a second launch spaceship company called SpaceX that has wildly outperformed over basically the same time period. And didn't have the head start of being able to just buy the successful spaceship one IP. When did SpaceX start? Is it 2003? 2002. Yeah. That was like early early. That was when the go by a Russian rocket days in 2002. Right. And again, lots of reasons why these things are in no way apples to apples, but SpaceX is going to orbit one to two times a month and Virgin hasn't flown a suborbital flight until last year. So that would basically be the bear case on why investors are falling all over themselves to get money via secondary transactions into the non public SpaceX versus buying retail shares of Virgin Galactic in the public markets. And that's reflected in their valuations. We've talked about this $5.2 billion number SpaceX most recently raised money in the private market. It's at $50 billion. So you can decide which risk profile you would rather take, but that's sort of why there's a 10x delta in in value. Yeah. Totally. And I think there is still, you know, SpaceX, the current business model is totally proven like they're making a lot of money launching, doing both government contracts and satellite launches into space. There's more speculative, but very promising additional business models to come with Starlink and then potentially future, you know, exploration and moon and Mars and all that. But it's a real business. I think there is also a question and unknown of just like how deep is demand here for Disneyland in space? Like how many people are really gonna just want to do this? Like and BB willing to pay a large sum of money to do it? Yeah. I think the bet is that they have to be able to graduate from this market quickly to be able to make orbital flights and do things beyond just space tourism. And I think that's in the company's plans and not only to be able to do more than just space tourism, so sort of open up additional markets, but also de vertically integrate or horizontally integrate where you're already seeing them sign NASA contracts that were announced just in the last couple of months to do things like identify the people who want to go to the ISS as tourists and help train them, but not actually fly them on Virgin hardware, you know, on on and all likelihood going up on other launch providers. But Virgin Galactic has these competencies that they seem to be willing to unbundle from their sort of full service offering and be able to generate revenue in other ways. And of course this makes sense. Like you look at companies like Blue Origin that are unbundling their engines and selling their engines to ULA and other rocket builders and not just staying fully vertically integrated. It makes sense in sort of an early wild west industry that hey, there's a material revenue opportunity to go chase this thing and it requires me doing a little bit of unbundling and changing my strategy a bit at least for the time being. Sure, that that seems reasonable to me. Totally. And then there's also another sort of big opportunity on the horizon, which is if this becomes a safe regular thing, these launches that Virgin is doing, and there are multiple space ports around the world, well, you could take off at one space port and land it the other like two hours later halfway around the globe. Now SpaceX has also talked about doing this too as part of their business. But I can totally understand the demand for that better set up for it though. Like if they set up an Abu Dhabi space port and have space port America and you can do that point to point travel sub-orbitally and in this fashion rather than you know strapping yourself to the top of a Falcon 9, like that makes a lot more sense to me. Yeah, totally. Okay, so I think that's the I think that's the very case. Do we only do what happened otherwise quickly? Yeah, and the big question here is basically like if you look at the comparable of SpaceX, why is it that SpaceX has done what they've done well, Virgin hasn't let's pull out execution for a moment. A big component of that I think is SpaceX's strategy to go get those government contracts and basically have an enormous amount of capital in the form of revenue from government customers to launch satellites. Like that has just been you know billions and I think over $10 billion now in non-delutive revenue funding that the company has gotten, which of course translates to things like 10X the head count. You know, you look at Virgin Galactic still a startup. It's like 700 people. SpaceX is 7000. So let's for a moment just say it is by no means an apples to apples comparison because of the way that they chase dollars differently. Space industry folks may correct me here because I'm waiting out into somewhat technical territory that I'm unqualified to, but I do wonder if SpaceX's technology strategy to of basically laddering up from the Falcon 1 to the Falcon 5 to the Falcon 9 to the Falcon Heavy to the Starship. Never shipped the Falcon 5. It was never built. But it was part of the roadmap right and then they never they just went straight to the 9 right. I think they basically just strapped four more Merlin's on it and went straight for the 9. Yeah. Stranger 9. Yeah. But anyway, they basically they've stair stepped up into where they are now whereas Virgin from the get go was like, hey we're going to go from this prototype way and I want to like all the way to a commercially viable like they haven't actually changed the design in 16 years. It was like a big heavy lift to start with. Not that all of these things aren't heavy lifts, but I do wonder if a more stair step strategy would have been more appropriate here. But I think probably the bigger thing is what you said been just the the capitalization and the amount of funding that SpaceX had was order of magnitude bigger. Yeah. And another, I mean, this is actually this is great segue to playbook. This our first playbook item. Another structural way to look at this is Virgin Galactic is chasing a market that doesn't yet exist of space tourism whereas SpaceX was serving a market that totally existed, which is governments that want to get things into space and are willing to pay a lot for it. So of course, there was revenue financing available whereas Virgin Galactic needed to demonstrate they could do it before people would pay. Of course, nonwithstanding the $80 million that they have raised in revenue capital. But since those are sort of pre orders, I imagine they can't quite use that for, you know, I don't know. I think you have to be very careful in how you spend that 80 million. Yeah. I do think they have restricted cash there. Yeah. Okay. Playbook. Let's do it. Big one in my mind is an industry prize. Like what a fun concept that provides a massive amount of leverage on the initial dollars raised that brings in so many more people to an ecosystem that stimulates way more innovation than you would have if you just took that same amount of capital and plowed it into a single company trying a single thing. And of course, there's way more losers because if you don't win the prize, then you spent your millions, you know, trying to achieve something not only did you fail, but then you also didn't win the prize to get reimbursed for your costs. But I just, you don't see it in that many other industries. It's very interesting how this seems to be unique to aerospace and space. The only other one that comes to mind in our world is the Netflix prize. I wonder if I think to run this playbook, you have to have something that is like so sexy that like people are going to want to do it. There's also the DARPA competition with autonomous driving. But like you're not going to be able to run this playbook if you're building a SaaS company. Right. Right. I can just imagine the launch website of someone trying and Twitter just hating it. Of course, we joke in this market like probably somebody could stand up like a prize for like some innovative SaaS company. And I bet they would actually get entrance. Someone should do a prize for making Chrome faster. That would be a yeah. That would be amazing. Or or Gmail faster. Yeah. Yeah. Okay. Cool. So that's a prize. I think that important second one here is the concept of the best time to invest was yesterday, but the second best time is today where Branson sort of famously turned down Peter twice for the X prize. Not that that would have been an investment anyway, but you know, stayed out of this game until literally the night before the first sort of all eyes on the prize successful flight. And then comes in and and funds it then, you know, to say that that was still the first inning of consumer space travel would be a vast understatement. And so the the idea of when you know you're early to a market having no shame about sort of passing and then coming back and saying, nope, still still lots of runway ahead. I think that's an important one and one not to be missed. Totally. The only one I would add unless you have other playbook themes you want to talk about. Nope. Go for it. And I'll think about if I have one more or not. Cool. The only one I would add to those he said is I think actually something from the SPAC and social capital, head of Sophia, to my side of things here, which you know, I've heard to my talk a lot about this on all the other media he's done. I think there really is something to what he said about with a new risky thing. Everybody wants to be the second person to do it. Not that many people want to be the first. If you're willing to be the first and if you size your couldn't quote bets right and your risk exposure, that's how you can get extremely outsized returns by doing stuff like that. Like doing this whole SPAC thing. Like that was crazy. A lot of people thought Chimath was nuts for doing this. Well, it turns out, you know, the story is still being written on SPACs. It turns out it was actually a pretty good idea. And it was a good financing product, certainly for version Galactic. And I think it's going to end up being a good financing product for a lot of other companies here. And Chimath has benefited, you know, usually from that. He now has six I think as of today. SPACs that he and head of Sophia have launched just on this virgin one alone. The founder shares in the SPAC and sponsor promote. You have to disentangle his secondary investment that he made as part of it. But he made a lot of money right off the bat in successfully completing this SPAC. And I think at a broader level, you know, he's talked about on other shows how he really tries to have a barbell strategy with his holdings and his portfolio now within the holding company of social capital of one large end of the barbell is like relatively low risk stuff. I don't know exactly what all he would put in there. Traditionally, you'd think like bond funds and whatnot today is probably like Amazon stock. But then another heavy barbell on the other side of like out there high risk stuff with not a lot in the middle. And this type of thing, whether it's virgin Galactic or SPACs or anything in the like this is that other side of the barbell. And yeah, most of that's not going to work. A lot of it's not going to work. But for the ones that do work, you're going to get truly outsized returns. Yeah. And not being afraid to look like a moron like there's going to be a long period between when you declare you're going to do this and when it works. If it works and being willing to take the heat, I just think both both humans aren't set up for that psychology. Like you kind of want to social check your ideas with your friends. And if they tell you it's stupid and enough people tell you that, you kind of don't do it. And that does not seem to be how Chimouth operates. No, not at all. Well, the last one that I want to bring up before we get into creating here is a frankly applauding government. And I think it's government finding the right way to be involved to enable private enterprise in a win-win. And the big one that jumps out to me here is the New Mexico State and County governments that actually funded space port America. Virgin Galactic has this $5 million a year lease on it, which, you know, that's expensive and, you know, it's a material cost for the company. It would have been completely impossible for this company to go and raise 200 million on their own to build this facility. Like in addition to all the other money they needed to raise, like who is going to fund that if that's in your pitch deck? Right. I mean, think about that at $5 million a year, that's 40 years to just pay back the construction costs. Right. Right. And the state of New Mexico being forward looking to say like, gosh, if we can actually, this could be huge for our local economy. If we become the, you know, Silicon Valley of space and we build this thing and not only the sort of goodwill that comes from that and the who knows how much money will make in the future if we're actually the center of this ecosystem. But then on top of that, like the literal dollars that will come from tenants two, three, four, five, the pay back period actually isn't bad if you can get several Virgin Galactics in there. And for anyone who's curious, you should go to Virgin Galactics website and look at the pictures of space port America. This thing is awesome. Like it looks like a spaceship while you're driving up to it. And they just did a fantastic job working with this great architecture firm and making the whole thing. Like, I mean, it does feel like the front door to Disneyland of space. So they did an amazing job at that. And I do think it reminds me a lot of our SpaceX episode where we covered NASA's forward thinking approach with the crew resupply and cargo crew initiatives to outsource those missions to the private companies. We just saw crew one and we've talked about it several times, launched last weekend actually yesterday as we record this. And I think governments take a lot of heat for for being stodgy for being backward looking. And I think these are two great examples of government enabling not only sort of private sector innovation, but in a way that will benefit the government and that government shareholders over time. 100% great fantastic investments to be applauded on both cases. All right, let's bring this home with grading. Let's do it. So we thought listeners about the standard acquired thing is grade of the transaction. Hey, was this a good use of capital to spend it on this transit? Like we could get into that on this back. We sort of have litigated it a little bit. Feels feels like the wrong way to do this. So what we want to do is paint the A plus the C and the F scenarios for Virgin Galactic as a business over the next 10 years. So I want to start and we covered some of this in the barren bull case, but I just want to put a little bit more color around what the picture of an A plus could look like. The business is awesome on a unit economic basis. Like obviously we haven't yet seen a unit happen yet because it has a clone. I love how it sounds like a seed startup pitch. Hey, we don't have any revenue yet. But our unit economics are going to be awesome. It's so true. It's so guilty of this. But like really if you think about it, if this works, like and they've sort of tested each part of the system individually, they've tested the fact that the thing can fly. It can go above 100K, it can take people. There's some number of people who are willing to pay a quarter million dollars for this. You can put five, six people in these capsules. So like if you really can generate one and a quarter million per flight and you really can make 65% gross margins, the fact that they have this fully reusable design of both aircrafts or if you want to compare it to like a rocket, effectively like a first stage and a second stage, both of Virgin Galactics are reusable, which is not a common thing in the industry right now. So they really could fly it. I don't know if it's every day, but you land it, you inspect it, inspection doesn't take terribly long, you refuel it, you clean it up and you fly it again. It's an airplane. And so I think that to me is the A-plus case, it's a strong, you know, gross margin business super reusable, could be super high volume. If you believe what we were talking earlier about the market, if you really think you get 1,000 people to do this per year or more of the 1.2 million person market of the 10 million air plus club, and of course there's going to be a handful of the people below that, but you know, the 10 million air plus is where it's a drop in the bucket. You know, it feels like you could get to a profitable business there. And I think that David, you mentioned earlier the fact that the price could come down over time, unless the fuel price dramatically goes down, it seems unlikely, they'll materially lower it. Like I think that's a very long term horizon, unless they were willing to start taking lower margins, but at least at the quantities we're talking about here, I think that it needs to be a pretty high margin business in order to be sustainable. Fair enough, fair enough, but your point could still be big. Yep. All right. What's the F? So the F, well, we have a few things in our notes here. I mean, I think the biggest risk for the F here is that for whatever reason, it just continues to be that they can't actually get this thing off the ground, which you hate to say, I hope is not the case, but it is hard to ignore that it's been 16 years and it still hasn't happened. So if history is any guide, then how much longer and not just how much longer, but how much more capital, let's assume that they can get off the ground and make this happen. Are there unforeseen things or things that aren't baked into the projections that are going to require them to raise a lot more money to make this happen? This last round of financing while obviously being a great outcome for the company was extremely delusive, 50% delusion. Now, if this takes a few more years, they're burning whatever $200 million a year run right now. So that probably means I didn't actually look at the cash balance, but let's assume they probably only have two, two and a half years of maybe even less of runway left at this point without revenue. So it doesn't take many delays and we've just seen another delay here this morning before they're back needing more capital. Yeah, that's a great point. And at what point does any existing shareholder employees start looking at their equity and going, this is never going to be worth anything because it just keeps getting crammed down. Even if we become a $20 billion company, like we've taken on so much capital that my share is divided by the total number of fully diluted is just a very, very, very small percent. Totally. And then we have another couple of other things. And here, I mean, the other big one is just like, hey, demand might not actually be there. Like these 600 people that have paid the full ticket price plus the 900 people that have taken the one small step. Maybe that's like half the market here. I think that's like 2,500 now. I think they've got a fair number of deposits on the the one small step. But you're right. Like it could just be that, you know, this is only cool for so long. Yeah. Well, just to touch quickly on the sea, I think it's the sort of horizontally disintegrating thing that we mentioned earlier where the core business never works out, but they're able to sort of scrape some revenue from providing a lot of different things to a lot of different people licensing technology out. Basically not having a focus and not executing their main strategy, well, they'll just never build power as a business and sort of have a repeatable engine for for free cash flow. So that would be my, that would be my C case. Yeah. They look more like a Sam Sung than an apple. Well put. All right. Should we, should we land the spaceship? All right. We're going to deploy the feathers. Defeather will go into glider mode. Yeah. Land the plane. 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