Investment Notes #7 – Dawn Aerospace

At Movac one of our values is “Open and Curious”. We needed this in our first meetings with James and Stefan Powell from Dawn Aerospace. David Beard and I met them during NZTE office hours and we listened while they told us about their eco-friendly satellite propulsion system and how they wanted to leverage that into a line of reusable rocket planes that would eventually be able to launch small satellites into space. What they are doing is hard and it’s easy to discount it as only being doable by the really big players overseas. But their progress to date tells a different story. They had only existed for 18 months and had already got commitments for 45 contracts for their satellite propulsion units, and with limited capital raised. We pulled in Mark Stuart. When most kids were stealing the car keys to boot around the farm in the ute, Mark was doing that with aeroplanes so we knew he would not pass up the chance to lead this deal.

Thunderbirds Are Go?

How could Dawn have achieved so much in such a short space of time with so little capital? It broke all the rules and assumptions that everyone has about aerospace. The reason for this relates to the innovation cycle in most aerospace businesses. Launching rocket ships is an expensive and risky business. Most aerospace companies manage this risk by leveraging the technical innovations proven out during the space races in the 1960s. Using mainly government funding, scientists and engineers figured out how to strap massive explosives onto huge rockets so they could leave our atmosphere and fly to outer space. It needs a lot of fuel due to the size of the rocket and the need to fully break out of the earth’s gravity field. The stage 1 is basically trash metal after the launch. Rockets can only launch from special sites under a set of specific regulations. They also have a habit of occasionally exploding and that fact means that much of the established space industry focuses on the repeatability of well-known formulas for space flight. Innovation is happening, but the relative cost of innovation in space is extremely expensive (i.e., a single SpaceX launch can cost as much as $300m USD). As a consequence, launches for any one aerospace company are months apart as each needs careful planning and rigorous testing and re-testing of every component and system.

Speed of Innovation Wins Every Time

Instead imagine a suborbital reusable space plane that could take off from a regular airport, launch small satellites into low earth orbit and then return to the airport and be ready to take off again in the afternoon? Each launch would cost a couple of million dollars thus lowering the cost of failure. What that would effectively do is massively increase the innovation cycle of a class of aerospace applications. One thing that being at Amazon taught me is that being able to experiment and learn more quickly than your competitors is a massive competitive advantage. To consider a software analogy – remember when new operating systems were shipped in boxes every 3 years. Software companies spent about 12 months planning, 12 months building, and 12 months testing and preparing for launch. Only when the product hit the market did the company get a signal about whether their plans had been on target (does anyone remember Windows Vista Account Security controls?). Innovation was glacial and products often missed the market. The movement to the cloud was revolutionary as it massively lowered the cost of building software and allowed software companies to plan and ship on one or two week cycles. This ultimately gave rise to a proliferation of new software services which could be easily adopted and quickly improved. And that is what James and Stefan at Dawn are doing for low earth orbit: providing a step-change in innovation by lowering the costs and increasing the frequency of launches. As well as offering the lowest cost price per KG launched in the industry, they also offer one of the most environmentally friendly. In short, there is a lot to love about Dawn Aerospace.

The NZ VC village

In closing, we want to thank some people for making this investment happen. Because the thing about our country is that it’s a village, and many hands sometimes touch the ball in small and large ways before it crosses the line. Thanks firstly to James and Stefan Powell and Jeroen Wink the co-founders, for believing that not only can kiwis found aerospace companies but they can also invest in them. Thanks to Mark Stuart for leading the investment. Thanks to our co-investors Ice Angels, Global From Day One (GD1), and Erik Swan. Thanks to Emeline and Eric Paat-Dahlstrom, Edmund Hillary Fellows, for helping us with early due diligence and also for all they do for the NZ aerospace industry. Finally, thanks to the New Zealand government for their regulatory support of this high-tech industry. Love our village!

Kind regards

Lovina McMurchy and the Movac team