Fund I 2019 Semi-Annual Report
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From the General Partner Dear Starbridge Fund I Limited Partner: 2019 has been a very exciting year so far! The past six months have seen a flurry of activity in the space sector, which I'll highlight more below, but also most notably for all of us - the official investment launch of Starbridge Venture Capital! I want to sincerely thank you for your participation in Starbridge Fund I, and for the faith you've put in our management team to find, invest, and collaborate with the best companies in and around the space sector. Starbridge has been many years - and a lot of effort - in the making, and while helping to advance the space sector is a personal passion for everyone on the Starbridge team, we take the responsibility we have to our Limited Partners as our primary concern. Finding the best investment opportunities in space-related technology companies for our investors is first and foremost what we do. We believe our performance numbers - even at this early stage of the fund - reflect that. Rather than talk in generalities, let me give you an example: Our largest Portfolio company gainer thus far (by dollar amount) has been Umbra Lab. This company is a great example of how investing in the right team at the right time can lead to very rapid value gains for VC fund investors. Starbridge participated in Umbra Lab's first external fund raise last year through early capital provided by our General Partners. Only a year later, Umbra has demonstrated enough progress and investor enthusiasm that they closed a $9 million funding round in April at a valuation five times that of our initial investment. Because it is still early for Umbra Lab and we strongly believe in the high valuations they will be able to ultimately achieve, we did a follow on investment in them during Q2 of this year. Within the next two years, there is a strong possibility that our investment position in Umbra Lab alone will be valued higher than the total initial capital raised for Starbridge Fund I. These are the type of investment opportunities that we strive for at Starbridge. We know that not every investment we make will be a home run, or even that all investments which look strong at the start will continue to win through the finish line, but because we're working day in and day out to put together an entire portfolio of companies with prospects similar to Umbra Lab, we're stacking the odds heavily in our LPs’ favor. You can find further updates along with commentary on all seven of our current Portfolio company investments in the attached Semi-Annual Report. Future investments
We currently have several companies in various stages of investment review, and/or investment contracts pending. These include innovative new communications platforms, sensor technologies, and even materials science and industrial solutions for the 21st century. We look forward to introducing you to these additional new investments as these deals are finalized.
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Starbridge is acting as Deal Lead on the currently active Post-Seed round for Axiom Space (see our full update on Axiom in our Semi-Annual Report). We believe this deal offers tremendous upside for both current and new investors based on anticipated valuation increases in just the next 9 to 12 months. As Lead Investor, we have a limited amount of time-sensitive Co-investor opportunities still available. If interested, please contact us directly ASAP to discuss.
Conferences/Events Starbridge is actively engaged within the space industry. It’s how we find our best investment opportunities before anyone else, and how we keep up to date by leveraging our knowledge network. We’re frequently invited to speak at industry conferences and events as subject matter expert in the business of space and finance, including such recent events as: SpaceCom Expo (Houston, TX), Orange Silicon Valley Executive Summit (San Francisco, CA), NASA iTech (Washington D.C.; San Diego, Mountain View, CA), Satellite 2019 (Washington D.C.), TiEcon (Santa Clara, CA), GSVlabs Women's Day Event (San Mateo, CA), Global Enterprise Summit (The Hague, Netherlands), Creative Destruction Lab (Toronto, Canada), EAA AirVenture 2019 (Oshkosh, WI) ...along with many other space and non-space related events where we were in attendance.
Other noteworthy Space news... A primary trend in the space industry is the build-out of entire constellations of relatively inexpensive satellites in Low Earth Orbit (LEO). Earth observation and communications companies, including several in Starbridge’s portfolio, are using the benefits of LEO constellations to provide new and improved services at lower prices than ever before. The most ambitious of these LEO constellations is SpaceX’s Starlink project which is attempting to provide low-latency internet broadband services worldwide. To accomplish this, Starlink will need to Starlink satellites just have around 12,000 satellites in Earth’s orbit within the next six years. That is several times as many satellites that are in service today! Normally, the
days after launch
space industry discounts such grand plans but SpaceX constantly defies conventional wisdom as their business model. On May 24th, they launched 60 of the Starlink constellation satellites on their Falcon rocket. These satellite constellations, beyond just Starlink, will not only have a dramatic effect on the business of space in the next few years (and a big impact on the global communications industry too), but also in the way the public views space as the night sky begins to look dramatically more crowded; as this video of SpaceX’s starlink satellites shows.
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I couldn’t sign off on this July investor letter without acknowledging and honoring the Apollo 11 Moon landing 50 years ago this month on July 20th, 2019. This has been the defining event in human space exploration thus far, and many would even argue - the biggest technical achievement in modern history. It set off a science education and tech industry boom in the U.S. that we still feel the benefits of today, and greatly affected the further development of the space industry (both good and bad) ever since. We salute all of those involved in the Apollo program and the impact they have made on the world. In tribute, Starbridge has sponsored a project to show the history of what actually led up to that first Moon landing, and how it really was an international race between the U.S. and Russia to see who could get there first. We invite you to look at this project (Michael and I both make cameos in the explanation video!), and check out the artist-created wall poster “Race to the Moon”. As you reflect on everything that has transpired since the Apollo 11 landing 50 years ago and how it appears that the U.S. will finally be returning astronauts to the moon in the next five or six years, I’d suggest thinking about all of the space-related efforts in-between in the following contexts: The original moon landings stretched our technical and financial capabilities to their limits at that time; In the following decades, the pace of space development seemed painfully slow in comparison (and it was), but it was also a period of systematic improvement to virtually all of the technologies needed for the next stage of space development; The early 2000’s saw the birth of business innovation as well as technology innovation leading to independent commercial space companies such as SpaceX, Blue Origin, Planet, etc., that Starbridge is now investing in; Last but not least, with the advent of technical and business model advances, we are currently five years in to what is likely to be a multidecade cycle of growth and expansion for the space industry. I am honored to have you as Partners with Starbridge Venture Capital to begin our own part of this journey together and I look forward to many more updates to come! Sincerely, Steven Jorgenson General Partner
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Portfolio Updates The performance of Fund I since its first investments in early 2018 is typical for a well performing technology venture fund. As expected, a few key companies have raised follow-on rounds at higher valuations which drives the value of our previous investments up. The values in the “H1 2019” column below represent the value of our original investment at either the most recent share price or the cap on the most recent convertible note/SAFE round. Total Fund Performance as of 6/30/19 H1 2019
H2 2019
(Book)
Pro Forma
+103.6%
+152.9%
2.04x
2.53x
Umbra Lab Made In Space Axiom Space AlumaPower Space Tech Holdings UbiquitiLink Airmap Total Portfolio Performance ytd Multiple
The values in the “H2 2019” column represent what the investment would be worth if currently planned or open rounds are executed at the current terms. They are speculative estimates only, based on company funding plans that are in motion and subject to change, and aren’t used to calculate the Fund’s current fair market value. We are simply providing these projections to give our LP’s some insight into what our management team sees for Fund I near-term performance potential. The value of each Limited Partner’s (LP) investment is calculated based on that Limited Partner’s pro rata share of the current Fair Market Value. Pro rata is that LPs ownership percentage of the Fund. For example, if the Fund had three LPs and they invested $50,000, $30,000, and $20,000 respectively then the first investor would own 50% of the fund, the second would own 30%, and the last would own 20%. If the Fund’s current Fair Market Value was $1M then the value of each LP’s investment would be $500,000, $300,000, and $200,000 respectively. To be clear, until gains are realized through the sale of the investment, that Fair Market Value can easily go down. Indeed, it is a rule of thumb that only one or two investments in any given Fund’s portfolio will ‘make’ the Fund.
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AlumaPower is developing a new aluminum-air battery providing high powered, carbon free energy. Business Update
Round One (Complete 2018) US$1.5m Convertible Note, enabled AlumaPower (APC) to complete its benchtop proof of concept engineering and research, identify the optimal application of material type, engineering specifications, control of the energy output and on-off switching operations in order to realize maximum efficiency of the battery. This round allowed us to file domestic and patents globally. Initial funding covered legal, accounting, formal setup of the company, and allowed us to prepare for a secondary fund-raising round with more specific details once the patent was filed and all claims were searched and allowed globally. Round Two (Mid 2019) US$2m+ This round will allow Alumapower to engage with its primary partners to bring the technology to real applications, possibly including a hybrid or electric vehicle. By mid to late 2019, Alumapower will have made thorough progress running the battery through several design iterations and will have a clear idea of how to modularize the production prototype. This second round of funding will be raised via convertible note and will convert for equity stock in the company at the time of a priced larger financing in the near future.
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AirMap connects airspace authorities with the drone ecosystem to unlock safe, efficient, and scalable drone operations.
Business Update ●
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Most recent round $200M pre-money valuation August 2018. Series C later this year at a substantial premium to the prior round. Additional enterprise service development, urban air mobility, R&D efforts including AI integration, acquisitions. Raytheon discussions ongoing related to a very significant-sized contract. Working directly on the majority of current DOT integration projects Integration Pilot Program. Leading technical partner with NASA. Went live with a system in Switzerland in July and already have a Japanese system up and running.
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About Axiom Space Axiom Space's vision is to make living and working in space commonplace as a means to sustained deep space exploration and to improve the quality of life here on Earth. The Axiom Space Station will be home base for professional astronauts and private explorers. It will be the microgravity laboratory where educators, scientists and researchers conduct life-improving research. Today, Axiom provides countries, companies and individual citizens access to the ISS with simplified processes, near-term booking, scheduling reliability, and novel in-space capabilities. ● ● ●
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Axiom is the only private entity authorized to, and capable of, sending crew to the ISS. Axiom is building, and will be operating a new commercial space station at 2% of the cost of the ISS (50x cost reduction) LOIs and term sheets have been received from 6 countries and 1 private citizen; driving several hundred million dollars in revenue over the next three years, with some of that revenue already recognized. Axiom was founded by Mike Suffredini, who managed the NASA ISS program from 2005 to 2015, and by Dr. Kam Ghaffarian who owned the 2,400-person company that trained NASA and other countries’ astronauts for 20 years.
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Business Update Starbridge invested in Axiom’s first externally available round in July of 2018. Since then, the company has been retiring technical and market risk. One of the most important developments was when NASA finally issued its plan for commercialization of Low Earth Orbit (LEO) on June 7, 2019. 1 This plan included three major components for Axiom: ●
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creating the opportunity for private astronaut missions to the space station, enabling commercial destinations in LEO, quantifying NASA’s long-term demand for activities in LEO.
Since closing their seed round in June of 2018, Axiom has had a number of achievements: ● ● ● ● ● ● ●
Axiom Ports Attached to the International Space Station
NASA approval for its first mission to the International Space Station (ISS), Commenced work on the NASA Life Sciences Research Mission Selected by NASA as one of the 12 companies to provide a study on the commercialization of LEO Signed a branding partnership with apparel company Moncler for flight suit design, Hired a Chief Engineer, Chief Medical Officer, and experts in engineering, proposals, marketing, and other areas, Progressed with NASA and SpaceX to solidify mission logistics and management, Held its first two international private astronaut marketing events.
While Axiom is already executing on parts of this plan in cooperation with NASA, the key development is the release of Appendix I to the NextSTEP 2 Broad Agency Announcement which outlines the process of making one space station port and services available for industry to attach a commercial module to the US segment of the ISS.2
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https://www.nasa.gov/press-release/nasa-opens-international-space-station-to-new-commercialopportunities-private 2
https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=6c7008e1bf035d884057891a261e3b56
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Made In Space is a space-based manufacturing company developing in-space 3D printing solutions and extremely high performance optical fibers.
Business Update One of Made In Space’s major accomplishments of 2019 was the recently announced $71M NASA contract for demonstrated in space manufacturing and assembly of spacecraft parts. 3 From NASA’s press release: “In-space robotic manufacturing and assembly are unquestionable game-changers and fundamental capabilities for future space exploration,” said Jim Reuter, associate administrator of NASA’s Space Technology Mission Directorate. “By taking the lead in the development of this transformative technology, the United States will maintain its leadership in space exploration as we push forward with astronauts to the Moon and then on to Mars.”
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https://www.nasa.gov/press-release/nasa-funds-demo-of-3d-printed-spacecraft-parts-made-assembled-inorbit
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The potential of these technologies is profound and includes such benefits as: ● ● ● ●
Enabling remote, in-space construction of communications antennae, large-scale space telescopes, and other complex structures; Enabling small satellites to deploy large surface area power systems and reflectors that currently are reserved for larger satellites; Eliminating spacecraft volume limits imposed by rockets; Avoiding the inherent risk of spacewalks by performing some tasks currently completed by astronauts.
Starbridge’s view is that the technology being demonstrated by Made In Space in this contract is a significant enabler of future in-space manufacturing and assembly based lines of business. The following update was provided by Made In Space for their shareholders: 2019 is a big year for Made In Space, where we continue to grow revenue and expand the business. The first six months of the year have resulted in a net profit. The chart below shows the revenue growth and projections for this year, with our current projections being near $30 million, a doubling from last year. A large revenue boost is anticipated to come in Q3 and Q4 from our initial Archinaut One payments. To enable company growth and especially the Archinaut One flight mission, the team will be growing rapidly. In 2019, we see the team doubling in size. Archinaut: ●
The first half of 2019 resulted in the successful execution and completion of the Archinaut bridge contract.
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The Archinaut spacecraft will be the first to demonstrate on-orbit manufacturing of an extended structural satellite element.
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Archinaut One flight mission contract expected to begin by August 2019.
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New product released, Optimast-SCI, leverages technology validated in the Archinaut Development Program, to enable the deployment of a 10-50 meter optical boom interferometer from a smallsat bus.
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International Space Station: ●
New Made In Space ISS flight payloads are currently under development and going through CDR right now including: High-Grade Metals, Ceramics, and Industrial Crystals.
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Our 2nd-Generation Fiber Optics system is currently scheduled to fly in Q1 next year.
In Space Group: ●
The In Space Group (ISG), a parent company of Made In Space, has been created to expand on the work Made In Space, Inc. has built over the last 9 years. The first step is the formation of Made In Space Europe, which is the first new subsidiary of ISG alongside Made In Space, Inc.
Made In Space Europe: ●
An office in Luxembourg is being established as the HQ for Made In Space Europe, SARL.
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A team of three is currently working on finalizing the first contract with Luxembourg to develop new in-space robotics technologies.
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Looking to grow the team this year with new business development roles, engineers, and roboticists.
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Space Technology Holdings is a strategic development group focused on commercializing and bringing to market intellectual property (IP) designed or derived from both Government and private space research. We partner with candidate IP in exchange for joint ventures or a mix of equity and billed consultancy services. Business Update
STH has already developed joint ventures and other working relationships with several promising technology companies that are on their way to becoming breakthrough winners and that meet the criterion of space/aerospace designed or derived IP that could be disruptive to several global markets. AlumaPower (joint venture) – is a New type of Aluminum-Air battery, considered to be the most powerful non-nuclear battery known to science at this time that could potentially replace the internal combustion engine. This is a strategic, potentially game changing technology, ideal for powering future electric airplanes, cars, ships, drones and a wider “off-grid” and leisure market (See AlumaPower discussion above). STH formed AlumaPower in Canada in 2017 as a 50/50 joint venture with SheerTech, as IP partners. During 2018, several patents were applied for, funding of over $1.5 million was obtained, a strategic multi-billion-dollar Auto Industry OEM partner joined as an investor and several working prototypes have been built.
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STH is currently looking to add additional funding to AlumaPower with at least one existing investor to speed up development. STH currently owns 42.5% of AlumaPower and is leading the day to day operations and management of the team. We are intent on raising some new funding via sale of member units in order to exercise our pro rata rights in the new AlumaPower fund raise. New Candidate Opportunities AgX - STH has been approached by a US agricultural biotech company to develop a new class of bio-stimulant which could produce remarkable increases in crop yields and plant health on a global level. This line of products once fully tested in the field could help to feed the world’s increasing population. The STH team has years of experience related to such a project and is keen to see it to fruition. Discussions are ongoing concerning a controlling equity stake and additional funding. OrbitalARC Space Debris Mitigation – STH is considering entering into a JV with the owners of IP pertaining to a very clever orbital debris (space junk) remediation system. Patent is filed, company is formed and first monies promised are in bound. The technology specifically applies to the small orbiting junk that no one else appears to be able to deal with. This is potentially a project that will be developed with a major US defense contractor. It could potentially be an early exit company based on its unique IP. … plus additional technologies under development, but also still in stealth mode... Financing In late 2016, STH opened a Friends & Family Term Sheet which allowed it to establish itself as a new space commercialization entity. Initial funding covered legal, accounting, and formal setup of the technical and science advisory teams. It also allowed STH to conclude equity and partnership negotiations with the candidates listed above, as well as seek out follow on opportunities. Round Two: (Q3 2019): Up to $1million will allow STH to build out the leadership, resource allocation, legal and branding for the current portfolio, as well as react swiftly to the new opportunities being developed. STH is becoming a cash flow positive full service administrative and technical support company for its subsidiary’s needs. All expenditures on behalf of subsidiaries are billed back to those units as and when they raise their own capital. Much of the current valuation of STH rests in its stake in AlumaPower, which is currently at a premoney valuation of approximately $20 million. This valuation is expected to rise substantially after the next fund raise by AlumaPower in 2020 by which time a working prototype of the battery device is expected to be demonstrable and portable. This is not taking into account the other valuable entities that STH is considering. This current STH fund raise will be in exchange for member equity units in STH LLC. This second round will be a fully negotiated price, qualified investor term sheet. All lead investors will also receive preferred status for first investment opportunity rights, in all subsidiaries as they are created.
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Ubiquitilink is building a world-wide, last-mile connectivity solution for narrowband communications using nanosatellites in an innovative way.
Business Update The following update was provided by Ubiquitilink’s CEO, Charles Miller, for their shareholders: We are proud to announce that last week, the UbiquitiLink technical team transferred our second generation cell tower in space to NASA. The cell tower was delivered to the International Space Station (ISS) via a SpaceX rocket on July 8th. Following assembly by astronauts, the cell tower will leave the ISS on July 20th, the 50th anniversary of the Apollo Moon landing. In the previous test, we produced something unprecedented in the space industry — designing, developing and delivering the hardware and software for Ubiquitilink’s First Test Mission the world’s 1st cell tower in space in just 5 months. Now we Aboard A Cygnus Cargo Ship have delivered our 2nd space payload, again taking just 5 months from the start of the project to build and deliver hardware for launch. We are setting a new standard in the space industry for rapid-do-learn loops.
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With this second-generation cell tower, our team will be able to test both LTE (“4G”) and GSM (“2G”) networks from space, an engineering feat that has never taken place before … by any other company in the world. The testing is expected to last for up to six months. Our 2nd cell tower in space will also allow our technical team to test across a wider frequency range and will be entirely reprogrammable and reconfigurable while in orbit. It has redundant telemetry, tracking, and control, next-generation hardware acceleration of signal processing, improved power management and thermal control, improved data logging (tracking both base station performance and on-orbit interference data), faster interaction with ground devices, and many software updates (for stability, and eliminating bugs and errors.) Our initial success could not have been possible without the support of all of you. We hope you are as excited as we are by our journey to bridge the digital divide for the last 2.5 billion unconnected people. Together, we can connect everyone, everywhere here on planet Earth. Thank you for being part of our mission.
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American space-based radar for defense, intelligence, and analytics solutions. Umbra Lab is developing synthetic aperture radar (SAR) microsatellites to deliver quarter-meter imagery as a service. Umbra’s space-based radar can capture images day and night, regardless of weather conditions, for delivery via an integrated web platform.
Business Update Umbra’s ITAR registration was completed, submitted, and accepted by the Office of Defense Trade Controls. ITAR registration is required for U.S. entities engaging in the business of either manufacturing or exporting defense articles or services. ITAR registration serves as a precondition to submitting applications for export licenses or other approval, including contracts with the US Government. SAR Instrument Development
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The design and electromagnetic modeling of Umbra’s large, patent-pending, deployable antenna progressed well and is nearing completion The digital design team finalized verification of airborne test SAR assemblies in order to validate circuits prior to flight motherboard implementation
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Spacecraft Development
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The custom bus structure for the spacecraft was designed and layout of flight components was optimized. Subsystems procurement activities progressed well and are nearing completion. The propulsion, communications, and navigation systems are on order for EDU and first flight systems.
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Preliminary ground system system architecture design was completed Engaged with various vendors to access commercially available mission control and scheduling offerings that can be leveraged by the Umbra ground system
Staffing: Umbra staff grew as planned and the company hopes to double the engineering team between now and the end of the year. Recruitment and talent acquisition: The company initiated a recruitment effort planned at targeting specialists and subject matter experts for positions requiring highly specific experience, skill sets, and technology skills.
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