The aerospace market is evolving quickly and merging with other segments of tech, making it an exciting space for both startups and investors — but the complications of the global pandemic are being felt by both.
Bessemer Venture Partners investor Tess Hatch has been helping guide companies in their portfolio through these strange times, and has been rolling with the punches herself.
Hatch recently spoke to us about the advice she’s been offering startups, which companies are being hit hardest and where opportunity still lies in the frontier tech world. (This interview has been edited for length and clarity.)
Austerity measures and hard-hit hardware
TechCrunch: I’m interested in how the virus is affecting things in the investment world. Have you made any official accommodations, like a change of strategy, or putting off key investments, things like that?
Tess Hatch: Of course, we’re advising startups on things to do, like their employee safety, and implementing working from home, and tools and tips and tricks that can help that. Especially when it comes to hardware companies — it’s kind of hard to work from home when you’re manufacturing.
We’re advising them to really watch their burn, because their top line is not going to hit where they expected it to hit, like a double or triple revenue, it’ll maybe stay the same. If it increases even a little bit, they’re winning. We’re having these individual company-to-company conversations, just advising them on getting through, hopefully just these next couple of quarters, but it could be next year plus.
“We’re advising them to really watch their burn, because their top line is not going to hit where they expected it to. If it increases even a little bit, they’re winning.”
So would you say that it has affected the frequency or the cadence of your investments, on a larger scale?
There’s really been like three partnership meetings since craziness happened. And the number of deals that we’ve talked about in the presentations we’ve had, those have remained the same, but ask that question in three more weeks, and I’m sure it I’ll have a better answer.
One of the funny things we’re talking about is that investors, one of their favorite things is to be able to predict how the future, at least the next year or two, is going to go. But this is one of the greatest times of uncertainty we’ve all lived through. So how are you approaching that when there’s so much that’s uncertain, but there’s so much that you need to know in order to effectively manage your portfolio, give advice and make sound investments?
Right now, it is shaking everything that we’ve believed in so strongly. However, we still are looking out, let’s say two to five-plus years. The real question is if this is going to be, with quarantining and lowering the curve, a little bit more under control by let’s say the summertime, or if this is going to be more than a couple of quarters, say a couple of years.
“It’s like you said, the uncertainty of just not knowing how long or how drastically this is affecting everything.”
I think that the hardware companies that you mentioned, those may have it the hardest because they involve so much travel, so much mailing back and forth of prototypes for testing. Is there any specific advice that you have for hardware companies that are trying to build a product right now?
Unfortunately, most of them have stopped all travel. We’re trying to do as much as we can virtually. The majority of them are smaller teams that are actually making, let’s say, a drone, or an autonomous robot, and they’re just staying six feet apart and taking all of the necessary precautions, doing every-other shifts. So if, say it’s a six-person team, three of them are working in the morning and three of them are working in the afternoon to increase the distance between all of them. The offices — especially where we’re building drones — are huge, so there’s tons of space for everyone.
The real issue though, is our customers aren’t showing up to work, you know? One of our companies, Impossible Aerospace, sells drones to police and fire departments. This is one of the best times to use drones to deliver emergency medical supplies, or even toilet paper and hand sanitizer to people in need. The ones that do have the drones are happy and they’re using them, but the ones that don’t, they’re so overwhelmed with everything else that’s going on.
There are always leads to follow up on, contracts to hammer out and negotiate, improvements you can make to your sales process. Is this something that there actually is a lot of, that even hardware companies can focus on in these downtimes?
At a high level, I’m sure there are people in the organization that can turn and do that. But think about a sales person or business development, there are certain ones that, their entire job is shaking hands or going to these events. I mean, think of marketing spend with no conferences this year, and all that upsets.
Aerospace between air and space
You wrote an article last week for us about a sort of neglected area of the new space industry, the stratosphere. I feel like people have been chasing this for a long time, but that the drawbacks of being in atmosphere are too much, especially when LEO [low Earth orbit] is getting so cheap. Do you really think that things like balloons and blimps are in the cards?
I agree with you that LEO is definitely becoming more accessible and cheaper and this market is shifting from price per kilogram to time to orbit, with launch vehicles like Rocket Lab’s coming to fruition.
However, there are still so many things one needs to do to modify their sensor for LEO. And with LEO, you’re only over the same area of interest for let’s say 15 minutes of a 90-minute orbit. And even then, the revisit rate over the same spot of Earth, it depends on the orbit, but it’s daily, weekly, sometimes more than weekly. The only way to stay over a single point in space is GEO [geosynchronous orbit], and that’s 36,000 kilometers versus 500 to 1,200 [for LEO].