Investors and investees

[joertexas]

I have a question about this excerpt from the purpose statment:

"As one owner of an investment firm was quoted in the press, they would never invest in a business whose principals said they'd quit their fulltime jobs if we put in money -- they're not real entrepreneurs. You don't get paid to lead, you get paid to follow (except by shareholders/investors). Leaders take broader risks."

Were you trying to say that the investors wouldn't fund a business whose principals *would* quit their regular jobs?

JR

[Mark Prado]

Yes, this was an interesting article I read. (It was many years ago, can't remember where.) However, I can understand this viewpoint. A key to business success is perseverance, and a track record counts.

Another article I read, which is related as regards the main issues, is about the failure rate of small businesses. It has long been said that the vast majority of new, small businesses fail. Well, somebody in some business school (forgot where) did a thesis on WHY these small businesses failed, by systematically going to a local department of business registration and contacting all the registrants from 5 years before. The results were interesting.

A minority actually failed, but a great majority did cease operations. The majority either profited or broke even. The main reason for closing shop? People underestimated the time and effort it would consume. Many just returned to their fulltime jobs.

It is not difficult to come up with a business plan, making oneself a principal, and seek investment. The main motivation of many people is to make more money, quicker and easier. Look at the internet boom and bust of the 1990s, mainly because of paper tigers.

Good ideas are "a dime a dozen" (maybe a dollar a dozen now). What counts is not the idea as much as the perseverance, true commitment, experience and broad competence to make it succeed. Talking the talk is easy, but most investors will look for a track record of walking the walk before handing over their money and losing control.

An "investor" is different from a "principal" or CEO or entrepreneur. The investor hands over their money but does not manage the business or do the real work. They basically let go of their money in hope that the business will prove sustainable and be sufficiently profitable. However, the most successful and largest individual investors have been entrepreneurs before and thus have EXPERIENCE managing a business, doing the real work, and taking responsibility -- walking the walk.

I understand their viewpoint very well. Most of us would be happy to hire people on this forum as our employees. However, for hiring a manager, much less handing over money to a wannabe CEO with no experience as an entrepreneur, just a paper business plan, would be risky, to say the least.

As a self-employed businessman since 1987 (when I resigned my fulltime space job in advanced planning for the US government), I have employed a considerable number of employees and managers under my control, and that has considerable risks. Paid for out of my hard earned savings. Similar to investment.

I've also known countless people who want to switch from fulltime jobs to self-employment like me, and a large number who have actually tried for awhile, some successfully.

I am very happy to hire people as employees, and there's nothing wrong with taking on people from other fulltime jobs for particular areas of responsibility, based on their experience and serious interest, or even just their enthusiasm and ability to learn (given a commitment to stick with my business if I'm going to be investing in education and training).

However, for a position like CEO or something of that caliber of responsibility and leadership, a real 5-star General Generalist, they must have a track record showing they have both the real experience and perseverance before I would invest my money into a major project they would control (rather than myself control). Therefore, I fully understand the statement you quoted!

(Notably, I have also helped many expats overseas to set up their own business, with myself providing paid consulting services to advise them, set up their legal paperwork, and my staff help them set up their office, hire, market, etc., so I'm keen about these issues, having lived vicariously through these people, too, also learning from their experiences in diverse realms. I've seen successes and failures. I've seen companies send employees overseas to start a branch office, as opposed to the founders coming over themselves to do the same, and the differences between them...)

My friend Sam Fraser, the PERMANENT artist (fantastic job, in my opinion), who started as a very casual volunteer in 1998 with a project to teach himself how to create computer art, showed exceptional perseverance. That's why the PERMANENT website improved gradually from 1998 to 2001, as you can see in the Way Back Machine archive. A few years later, in 2001, I was more than sufficiently impressed by his perseverance. Despite Sam's lack of a significant history of skills and experience, I was willing to hand many of the keys over based on his track record of perseverance, self-development, and seeming trustworthiness. One day, I thought hey, want to work with me here in Thailand? Sam had never been anything except a low level employee elsewhere, nor even outside of New Zealand before, but he got a passport and flew over. Sam has developed and run a division of my company successfully, at the time a mere startup division based on a $1 idea of mine. It's practically his own business now, as all the revenue goes to him (except when he voluntarily chips in for some of the PERMANENT expenses). Sam is one of those exceptions who not only talks the talk but walks the walk. He's still here with me 8 years later forging ahead together! Sam's not making a fortune on that division, but it's more than sustainable. The most valuable thing, however, is the experience.

However, for every story like that, I can tell you a dozen others where the person had a good idea, and maybe even a decent business plan, but didn't have the perseverance, broad competency (something gained mainly by broad experience), or ability to work with others and put themselves in others' shoes. There are also issues of taking responsibility for the position one assumes, and also the greed factor.

Given a good business plan on paper and a good interview whereby an investor (if I am the investor) is convinced of the prospective investees personal competence in enough facets of the challenge, the last big issue is the flake out factor. Every business has its difficulties, and does not go as smoothly as hoped. From my observations, when the going gets tough, the majority of people will give up quickly and return to their fulltime job, just drop the ball. People can always make excuses and rationalize anything. If it's not their money invested, then it's easier. It was their fantasy and playground at someone else's expense, and by quitting they lose nothing except their fantasy. The loser is the investor.

I have seen this happen MANY times, with first time entrepreneurs.

Actually, I would disagree with only one thing about my paraphrasing of the article, in that I would "never say never". Nonetheless, I think it's fairly clear that a wise investor would have a similar outlook, whereby if someone with no entrepreneurial experience came to an investor and wanted the investor's money, they would need to be very exceptionally convincing to get any money. To better understand this, entrepreneurial experience helps, especially as an employer where the buck both starts and stops with you, not somebody else. The bucks for you and your colleagues have come out of your personal pocket, not just other peoples' monetary resources, at some point in your history of experience. That would weigh in heavily in an overall assessment.

[joertexas]

(snip)

Good ideas are "a dime a dozen" (maybe a dollar a dozen now). What counts is not the idea as much as the perseverance, true commitment, experience and broad competence to make it succeed. Talking the talk is easy, but most investors will look for a track record of walking the walk before handing over their money and losing control.

(snip)

Actually, I would disagree with only one thing about my paraphrasing of the article, in that I would "never say never". Nonetheless, I think it's fairly clear that a wise investor would have a similar outlook, and if someone with no entrepreneurial experience came to an investor and wanted the investor's money, they would need to be very exceptionally convincing to get any money. To better understand this, entrepreneurial experience helps, especially as an employer where the buck stops with you. And the bucks for colleagues have come out of your personal pocket, not just other peoples' monetary resources.

Given the above, who really is qualified to start a business in space? After all, no one has done anything like this, excepting a few government agencies.

JR

[Boxy]

Um, I believe Prado's point is that only those with business management experience would be given funding. As a good example, check out Virgin Galactic, which is a space tourism outfit put together by uber-CEO Sir Richard Branson using the SpaceShipOne flight model.

I think two of the major problems to overcome with space development is (A) the high costs of getting anything into orbit, and (B) public perception that space is accessible only to governmental space agencies.

[joertexas]

Um, I believe Prado's point is that only those with business management experience would be given funding. As a good example, check out Virgin Galactic, which is a space tourism outfit put together by uber-CEO Sir Richard Branson using the SpaceShipOne flight model.

I think two of the major problems to overcome with space development is (A) the high costs of getting anything into orbit, and (B) public perception that space is accessible only to governmental space agencies.

One can find experienced business managers from daylight til dark. As Henry Ford once said, he had to but press a button on his desk to summon men who possessed all the expertise he needed to run his business. Elon Musk, SpaceX's owner, has assembled a team of aerospace experts to run his business.

As I see it, while business experience is vitally important - and I'm agreeing with you both on that point - a clear vision of what must be done is even more important. Again using Ford's example, he had the vision of selling a car that practically everyone could buy. No one had done that before, and Ford changed the world. He certainly didn't have a track record when he started, but he saw his vision through to fruitition.

JR

[Mark Prado]

Right, Henry Ford and Elon Musk both had track records as entrepreneurs, and an investor would seriously consider investing in their projects.

Actually, Elon Musk used his own money from the start and bootstrapped to a certain point of establishment before going out to look for investors. I don't know the details, but I do know that Musk started and ran his own business for quite awhile without any investors. Neither Elon nor Ford were fulltime employees somewhere just waiting for a secure income from an investor, based on a paper plan, before they would quit their fulltime job.

The managers and technical people Ford and Musk hired are not the "principals" (what you quote me on, in the first message) going to an investor.

Elon's and Ford's MANAGERS were not the people the investors were interested in. Investors look at the prime movers -- the CEO / principal / Board -- Elon and Ford themselves. The investors know they must rely on Musk and Ford for success.

It's the same way in the aerospace business. It's a huge mistake to assume that most space professionals are in it because they love space. Many like space and prefer a space job, but most of those I knew simply took the job that paid the best and/or looked the most secure when opportunities arose. And hop between jobs likewise. A very tiny percentage are any sort of volunteer or entrepreneur themselves. That's why we need outsiders like Elon Musk, Jim Benson (SpaceDev), and other entrepreneurs with a track record.

There are huge numbers of people who will talk the talk, but when it comes to walking the walk of entrepreneurism, the vast majority will flake out, most of those very quickly.

Ford struggled for many years in the car business, losing money and unable to get good enough quality people to produce good enough products. Quality and efficiency were nagging problems. I think he had a couple of companies fold.

Ford could have returned to fulltime employment at high wages, but he didn't. He persevered with his car idea for many years.

Ford got breaks when he created race cars and announced land speed records, and very importantly, had his car tour around the country to make people aware of it (sort've like a website for publicity). The race car added credibility with key investors as a much needed publicity stunt, and the tour car helped create the market demand.

His profitability started then (not before creating the race cars, after the race cars), but his business took off best when he offered double the wages of other places, and instantly attracted the best metal workers and other fulltime employee sorts, who had previously not risked their time and effort on an entrepreneurial venture. Then he could produce high quality, and produce quickly.

Musk is more contemporary. He made his initial fortune on the web, without any investors to employ him, all out of his own pocket. He started with some sort of content management system for news sites. It was eventually bought up by Compaq and Musk lost control and left with a huge bank account when he sold his stock. Then he started another company on his own money to deal with financial payments, which eventually merged with others to become PayPal and again Musk left with stock sales and no control. All that happened over just a few years altogether.

He founded SpaceX and has maintained control of that for many years now.

Anytime you look at examples of people funded by investors, it's important to not take the exceptions but to look at the statistics.

It's even more important to understand the perspective of experienced investors.

Anything's possible, but investors look at track records, and are rightfully leery of dreamers who haven't walked the walk yet. Lots of plans look good on paper, but who is the "principal" or prime mover who will push a project thru both good times AND BAD TIMES and persevere into success? Rather than bail out and return to an easy fulltime job and lifestyle when the going gets tough, abandoning the investment?

-=-=-=-=-=-

In response to another post here, about the cost of space being high due to the launch cost from Earth, well, that's WHY we have PERMANENT. Likewise, 500 years ago, it would have been very expensive for Europeans to ship to America their houses, food, and industry. To develop space most economically and on a large scale, we need to use resources already in space -- material from asteroids near Earth and the Moon. It's a paradigm shift. We can deliver construction materials, radiation shielding, and other basic supplies to Earth orbit for a much lower cost than blasting them up from Earth in such mass and volume. Claims of cheaper launch rates right around the corner have been around for 40 years now. The problem is basic: the Earth is a BIG planet, 81 TIMES as massive as the Moon, and incomparable to asteroid mountains floating around, so it is naturally very expensive to launch stuff up, and you have no choice but big risky rockets. It's an entirely different matter with space resources. It's WHY we are here at PERMANENT -- the high cost of launching from Earth. Space resources, once started, will ALWAYS be a better deal that mass blasted up from Earth. It's a sure bet in the longterm, just like the automobile was compared to the horse & buggy, and American indigenous resources instead of shipping over European resources to support settlers in America.

There's a first time for everything. The car. The first ship to America. And so on. Same for space resources.

It won't be done by the bureaucracy. It will be done by people like Elon Musk and Jim Benson and of course Robert Bigelow, who have a history of entrepreneurism ... and none of these three had any history in space before then! But they all DID have a history as entrepreneurs who persevered.

By the way, I don't agree with the Ford paraphrase that you can just push a button and get good enough quality people, nor does paying more necessarily get higher quality in cutting edge fields. In mass production fields, like Ford pioneered, yes, but not in something like space resources pioneering. I saw major differences between ideas, designs, and quality of work which had little to do with salary, more to do with the special individual. In my space work, in my computer consulting (many of the best were actually self-made, not with a university degree), and in engineering project management, same thing -- the best are relatively few and far between. They also usually are not passing around their CVs because they are in demand in their community and by referrals. You have to go out and find them. They can make key differences, and the difference between success and failure. They usually are not "principal" types, but they are exceptionally good at what they do, with exceptionally proactive, creative solutions and diligence.

This is why I had the PERMANENT documents database (about 500 technical papers and authors), which was sort of a people database albeit now more than 10 years out of date, plus a stack of paper documents unprocessed on my shelf here, cellulose sent around the planet out of difficulty and expense of finding it on-line. But this shows the best candidates, the pro-active ones, with their analyses laid out for peer review.

If you want to learn a lot about the space industry from this viewpoint, read Alan Binder's book "Lunar Prospector: Against All Odds". It is his diary on the Lunar Prospector, from idea, years of marketing, eventual funding by NASA, but then more obstacles, then detailed design and revisions, revisions, revisions..., construction and launching. Alan Binder was the "principal". He started by looking for private funding but came out getting NASA funding. It's a little over 1000 pages but you can just skip around the book and get the gist of the space industry where the rubber meets the road, living about 10 years of the main experiences in the real life of a successful space pioneer. Actually, it's the trials and tribulations of most any cutting edge engineering project. Highly recommended book, get it from Amazon or somewhere. It may not have the best reviews, but I enjoyed it because I related to it as an entrepreneur and manager who has been frustrated by others' carelessness, lack of proactive action and creative solutions, and quality assurance issues. (There are some other things I disagree with Alan about, though usually different from others' disagreements.) I'm sure many government contractors hate that book because it points out clearly many of the things wrong with government contracting, and which also applies to many very large companies. I wouldn't write something like that, naming names and all, but I must admit that I was appreciative to see somebody else tell it like it really is, because it's very useful experience to relate to the next generation. Alan's getting up in the years now, and we should hope his health holds on.

Many important space people are old or starting to get old ... experience eventually lost if we don't engage it soon.

[Phenix]

From the public perception, how would space devolpment and industry be more accessible or less elitiste ?

Would communication campaigns help to gain confidence for individual investors showing that for once a private organization such as PERMANENT is paving the road along with SpaceX for instance on strong and serious plans on space development ?

Would also major aged space pioneers join and boost PERMANENT with their invaluable knowledge in different fields ?

[Sirachman]

Since the technology to mine asteroids is basically awaiting development funding isn't the main challenge facing permanent simply attracting the funding? If so I would suggest that since a list of technologies to be developed is there we need to attract the funding for that development and since these technologies cannot be proven in order to attract funding to develop them we instead need to more sufficiently show the need to do said development.
This may already be obvious, but other than refining an outline of the overall methodology of asteroid mining/etc (which has already been done to some extent), our first true goal should be getting solid figures as to what is in different asteroids and in what quantities and distributions. In order to do that we need probes, what types and how they can be funded is a good goal to work towards finding out. But once these yield more information and likely only once these yield more information permanent or others can more effectively attract investment.
Your thoughts?

[Sirachman]

From the public perception, how would space devolpment and industry be more accessible or less elitiste ?

There are many things which could be pointed to in order to better the public’s perception. The cool factor is always something which can be used especially when a future depiction of space is mixed with realism. Another commonly used item to tout is jobs. Depending on the scale of the venture or the time being looked at, a organization based in space could very well operate outside the confines of any one government much like a sort of 'international waters' only dealing with governments once coming back to 'port' (Earth).

This depiction might not be the best thing to focus on, but recognizing its significance could help one envision the type of future that is possible in order to 'sell' the pathway to it along which participants would gradually become more self sufficient (sufficiently able to survive with little to no Earthly help.) This to my mind is not elitist from a government perspective and due to the overall effect of the costs of space decreasing it would only make space more accessible to those other than the 'elite'.

Hopefully that in some way goes along with what you were asking about.

[joertexas]

Since the technology to mine asteroids is basically awaiting development funding isn't the main challenge facing permanent simply attracting the funding? If so I would suggest that since a list of technologies to be developed is there we need to attract the funding for that development and since these technologies cannot be proven in order to attract funding to develop them we instead need to more sufficiently show the need to do said development.
This may already be obvious, but other than refining an outline of the overall methodology of asteroid mining/etc (which has already been done to some extent), our first true goal should be getting solid figures as to what is in different asteroids and in what quantities and distributions. In order to do that we need probes, what types and how they can be funded is a good goal to work towards finding out. But once these yield more information and likely only once these yield more information permanent or others can more effectively attract investment.
Your thoughts?

That's precisely what I'm working towards with my Dirty Dozen list of close and potentially viable mining target asteroids.

JR

[Sirachman]

That's precisely what I'm working towards with my Dirty Dozen list of close and potentially viable mining target asteroids.

JR
Good to hear! I'll check it out in more detail as soon as I find your post.

[Rhyshaelkan]

A hard, backed by science, well thought out business plan. One that takes into account the good and bad of what we will find. A plan with a specific goal or two. 3-D simulations of said process. These are the things we need when we go to conventions to get the little guys. Or when we head to the big fund drives to catch the big fish.

Yes this is the stage in which we should be doing. "Well wouldn't this be cool or that be cool. What can we do here what can we do there?"

Then we need to write to others, or bring them onboard, with the know how. So that we can start getting estimates and budget ideas. Then we will know how much to ask for from our fanatics and from our investors.

[Sam Fraser]

Another commonly used item to tout is jobs.

Hello, Sirachman, and welcome. Yes, this is a quite important point. Even considering the general waste in government space programs, money isn't just printed, loaded into a rocket, and fired into the sun. It keeps people on Earth in all kinds of specialist, skilled jobs in engineering, high technology etc., albeit very expensively. PERMANENT is about private and profitable development or near Earth space to produce useful products and services that will benefit Earth consumers. It transcends politics, religion and borders. People with all kinds of skillsets and from all walks of life will be needed to work as miners, construction workers etc. It's not something vague like "space exploration" reserved for the astronaut elite, but open to anyone.

BUT, while we can push the jobs angle (some stats on the current size of the space sector and workforce size would be useful), we should also keep in mind some critics with this "Earth first" objection won't ever be convinced. We shouldn't waste our time on them.

[Sirachman]

I agree to an extent. However when an in-depth dialogue can be had it can often be pointed out that there are many "Earth first" reasons for space involvement. The main being threats to Earth and methods to safeguard life to be breif. Even those wishing to "solve the problems on Earth first" can then realize that it is a good idea to protect the habitat (Earth) of which they seek to 'solve problems' on, or else those solutions become irrelavent. This could be expanded, but I need to get some rest :)

[moonus111]

My friend Sam Fraser, the PERMANENT artist (fantastic job, in my opinion), who started as a very casual volunteer in 1998 with a project to teach himself how to create computer art, showed exceptional perseverance. That's why the PERMANENT website improved gradually from 1998 to 2001, as you can see in the Way Back Machine archive. A few years later, in 2001, I was more than sufficiently impressed by his perseverance. Despite Sam's lack of a significant history of skills and experience, I was willing to hand many of the keys over based on his track record of perseverance, self-development, and seeming trustworthiness. One day, I thought hey, want to work with me here in Thailand? Sam had never been anything except a low level employee elsewhere, nor even outside of New Zealand before, but he got a passport and flew over. Sam has developed and run a division of my company successfully, at the time a mere startup division based on a $1 idea of mine. It's practically his own business now, as all the revenue goes to him (except when he voluntarily chips in for some of the PERMANENT expenses). Sam is one of those exceptions who not only talks the talk but walks the walk. He's still here with me 8 years later forging ahead together! Sam's not making a fortune on that division, but it's more than sustainable. The most valuable thing, however, is the experience.


Wow I have to give props to Sam, in the 1990s was when I learned about SPS, and the moon from websites like PERMANENT, and a few others. I was only a kid, but I understood the vast implications. It's the reason I went into aerospace engineering. Sadly the story for me takes a different tone. Years would go by where I would mention the subject and get nothing but rejection from people. I stuck to my guns, got my degree, made mistakes, but last year the rejection stopped. Weather it was I learned how to say it right, or the idea got better, i don't know. If he's been onboard for that long, then I have to say Thanks Sam!