Beyond SpaceX: War, AI, Orbital Infrastructure and green utopia | Mark Boggett | Seraphim Space

Speaker A: The recent IPO of SpaceX was so monumental that nobody in the investment industry can now get away with not having some kind of stance on space tech. But since most serious investors tend to be quite grounded people, and space is a concept that seems to invite hyperbole, many advisors are having to tread rather carefully in client conversations. So we're here to help. In this episode, we're going to work out what we mean when we talk about space. Is it a sector? Or is it, uh, a race for resources and strategic positioning? A kind of landless land grab? Or is it infrastructure that happens to float? And are we talking about rockets and satellites, astronauts and space colonies? Or is it much more prosaic than that? War, surveillance, cheap energy, and perhaps most importantly for fund shackers. What should investors actually make of all this enthusiasm? What are the economics behind it? Is it scalable tech or is it more like terrestrial transport technology? Railroads and airlines, both of which created great wealth, but not necessarily for their builders and operators. Is space different? And then there's SpaceX itself. Does the rise of one extraordinary company validate an entire ecosystem? Or does it simply highlight the power law nature of venture capital and innovation? To help us separate economics from enthusiasm, I'm delighted to welcome Marc, uh, Boguett, CEO of Seraphim Space. Seraphim is the most prolific and active investor in the world in space tech. It's been investing in space tech long before it became fashionable. And so Mark's been at the forefront of this trend and it's a pleasure to have him with me today. Mark, welcome. Welcome to fundshack.

Speaker B: It's a privilege to be on the show.

Speaker A: Let me start by asking you this, this is space a sector?

Speaker B: No, it isn't. So let me ask you a question. Is AI a sector? No, it's a horizontal facilitating capability that, um, impacts every single, um, theme, every single industry. Space is exactly the same.

Speaker A: So how as investors, can we box this up? Because it's like, it's literally boundless, right? So if it's not a sector, is it, it's AI. Like clearly it's an enabling piece of infrastructure.

Speaker B: Uh, it's a facilitating capability. And um, you know, so, so, so one of the ways that, um, investors, uh, have been getting an exposure to the sector so far is through SpaceX. And it's been a brilliant way to get exposure to the sector. Um, you know, it's built a monopoly position in launch, it's built a monopoly position in telecommunications. Uh, and now there's a huge amount of promise about building a monopoly position in AI as well. So that's really been the predominant way that folks have got access to this sector and they've been right in doing that. But that's not the only way to get an exposure to the sector in the same way that um, you wouldn't just have a holding of Nvidia and say there's my AI exposure done. You need to find other ways to get exposure to this sector. The other thing is um, that SpaceX um uh, is um, focused on launch and on communications, but there's the rest of the sector as well. So um, in my calculation, um, SpaceX really only accounts for about 20% of the overall space sector opportunity. So there's the rest of the 80% that other people uh, have really not been looking at for the last decade. And as you said in your introduction, this is something that we've quietly been looking at and positioning ourselves for the last decade. And now the companies and positions that we've got as leaders within the other parts of the space market are now all growing in tandem.

Speaker A: Um, so there's a space ecosystem.

Speaker B: There is.

Speaker A: SpaceX is, you say, roughly 20% of that broadcast, broader ecosystem and opportunity. Yes. Where does SpaceX fit and what are the big gaps that presumably you and your portfolio companies are looking to fill?

Speaker B: Yeah, so uh, if you think about the sort of the broader space tech ecosystem, what have you got? You've got launch, um, you've then got constellations of satellites that provide um, earth observation or they provide uh, communication capability or they provide navigation. You've then got um, in space activity. So that's the sort of monitoring of the space for debris. Um, and then there's the in space activity around ah, developing infrastructure in the space environment. So this is things like cell towers through to manufacturing, through to data centers, um, and through to energy generation. And then you've got all of the activities that sort of relate to the moon, um, space travel and effectively resource extraction. So that's the sort of full breadth of um, uh, uh, the market. And then you've got the uh, so that's the sort of um, upstream element of the market. You've then got the downstream element of the market, which is all of the sort of ground station capabilities all around, um, cybersecurity, around the transport of data. And then you've got all of the data itself. So massive um, amount of data being generated using a whole range of different sensors that are capturing um, an uh, understanding of our planet in a way that we've never seen before. All of that data, particularly applied with AI to uh, find new insights fused with terrestrial data is going to hugely impact um, every sector. Think about how GPS is now a utility that's used by every person in every industry in a myriad of ways. We're into the next generation now where uh, new sensors are going to provide new capabilities that will ultimately become utilities uh as well. So SpaceX doesn't pay in any of that. Um, and um, we um, have been positioning ourselves in uh, looking to invest in the companies that the emerging category leaders uh, within every one of those sectors. And it still goes further. I mean I could talk about this for the rest of the day but the other things that we've been really sort of focusing on is where space intersects with um, other frontier technologies. So where does space intersect with um, ah, quantum. Where does space intersect with robotics, uh blockchain, um, biosecurity, uh, Biopharma, um, the list goes on. We've been sort of proactively looking to identify those companies that are best in class where space crosses these other frontier technologies.

Speaker A: Maybe one way of trying to understand this is what are the short, medium and long term routes to actual profit? Where's the demand coming from at the moment for this stuff and then further down the line.

Speaker B: So uh, the answer is defense. Defense and defense. Um, and really uh, just to put this into perspective, the top 10 companies in our growth portfolio, the listed fund, they grew revenues in the last 12 months by on average 80%. All of that was from defence and none uh, of those contracts took any longer than six months from start to finish. Which really demonstrates that all of the old procurement processes have been washed away. There's a desperate need to um, contract with best in class technology providers. But the interesting point is that out of all of the investments that we've made in space, only one of them is a defence company. The rest of them are ah, defence companies by accident because they are dual use companies. Dual use means that you can have a military uh, application but with exactly the same software, hardware and setup. You can also uh, provide to a commercial market. So the majority of the companies, well all the companies in our portfolio apart from one have established themselves to focus on the commercial markets. They've just been drawn into defence because of the demands of the industry.

Speaker A: Is this basically the American military budget that they're drawing on?

Speaker B: No, um, just as much the European one. So uh, you know what's happened in recent um, memory? Um, well the Americans have made it very clear that they don't want to carry on paying the bill for NATO, no one asked them to do that. But for the last 50 years uh, they've picked up two thirds of the entire bill for naso. And uh, Donald Trump's called time on that. And to underline uh, how serious he is about that, uh, he told us that he was gonna stop providing defence support for the Ukraine. So for a 10 day period he switched off all defence capability to the Ukraine. Um, and uh, that's when the Europeans realised that um, they have um, very little, particularly in the uh, toolbox of space. So uh, they were blinded, they were not able to communicate properly with troops on the ground and they uh, quickly became uh, apparent that they can no longer rely on their American ally.

Speaker A: How far behind are we? Honestly? Are we starting from scratch?

Speaker B: We are starting from scratch.

Speaker A: Wow.

Speaker B: Yeah. So this is the reason why there has been a, first of all a mad scramble to uh, European leaders to pull together a ah, trillion euro budget for defence. Uh, UK being the laggard in this one, I'm sure everyone's uh, bored about uh, all of the newspaper headlines about what's going on in the uk but um, you know our European peers are taking a very different position. If you look at the Germans for example, they alone have put ah, 500 billion um, budget ah, for um, defence, um, and they've allocated 35 billion of that to space in the next three years. So they uh, other countries are really sort of putting the money where their mouth is. So uh, uh European uh mods are um, one of the biggest customers across our portfolio at the moment.

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Speaker B: It's all changing really. Um um you know Europe actually uh, UK actually really sort of punches above its weight. Um and um, you know everyone's quick to knock the uk but the reality is um, for the last you know, X number of years uh the UK has uh been third only to um the us um and China in terms of the number uh of space companies that have been founded and the number of space companies that have been funded in any year and the amount of funding that's actually gone into those companies. So it's only in, so that's certainly for five or six years that I'm confident in those numbers. Um in 2026, 2025 Germany uh moved into fourth place.

Speaker A: What underpins the UK's strength there is our university, Deep Tech University.

Speaker B: Uh you know we've got you know we are a society of uh entrepreneurial uh people um and also um the venture capital industry for Europe um has always been focused in the UK and particularly in London. So uh, you know that's now changing AH UK's position um in Europe um, um is declining in terms of the total venture capital for Europe. But um, you know we Seraphim being the most active investor in the space market globally, being based out of the UK has also certainly helped. Just one more point before I finish. Um uh we talked about how good the UK is doing on that front. Let's just talk about one of the negatives which is that whilst for all those years we've been third both in volume and value of uh private money going into these space companies, we're actually number 13 when it comes to the average size investment um into those companies. So what we have been doing is um, underfunding um all of those companies.

Speaker A: But you just said that the venture capital hub in Europe is the uk.

Speaker B: Um and this is not just true to space, it's true across all the technology sectors there's a dearth of growth stage capital um in the UK and in Europe.

Speaker A: So the problem's not seed or series A, it's the follow on stage, it's

Speaker B: the later stage follow on. And um, you know the, the UK and European investors have also got less of an appetite to invest into um, sort of long term infrastructure hardware, ah type um investments. This is the reason why we've got you know no, no major launch companies. Why um we've got um you know very limited numbers of um telecommunications companies, uh the companies that are getting uh founded and funded in Europe are doing very well at raising their seed in series A. Um, but when it comes to sort of B and beyond, um, they're challenged. So they end up raising either a smaller round and then making themselves less competitive on the global stage, or they're going to the us, the Middle east or um, to Asia to access that money. And um, you know, that money normally comes with strings and uh, that string normally pulls them to that particular territory.

Speaker A: You're a global investor.

Speaker B: Global investor, yeah.

Speaker A: Uh, you're agnostic. You're not necessarily tied to the uk. What does your portfolio therefore look like geographically?

Speaker B: So we're about um, 50% us, um, we're about 20, 20% UK, uh and um, we're about um, 10% rest, um, of the world and the rest is Europe.

Speaker A: Do you anticipate that changing significantly as a result of what we've just spoken about?

Speaker B: No, no I don't. No. We still see the US being the sort of powerhouse of the world, particularly in defence and in space. So um, we still expect um, to have a significant number of our investments there. Maybe Europe, um, uh, will sort of maybe get to 40%, um, uh, with the UK included within that sort of broader Europe definition, you know, there's certainly a huge amount of opportunity because of this trillion euros of um, defence budget and the desperate need to uh, you know, uh, to rearm. And then when it comes down to space, you know, there just hasn't been the investment in space at all. There's been almost 100% reliance um, on our US allies. And um, you know, no one asked the US to do it, they did it anyway. Uh, Europe became accustomed to relying on that and um, we put our money into welfare.

Speaker A: Yeah. So it's not unusual I think for brand new, well I'm going to call it sector for now sectors or parts of the economy to be driven by defense spending, unfortunately. So it sounds like space is a defense play at the moment, but what tends to happen is, is that there's a commercial consumer use downstream. And so I assume that's what you're expecting to happen over what kind of timeframe we start. So short term, immediate term, um, this is a defence business. It is how far down the line until it's properly dual use.

Speaker B: So defense is um, probably 80% of the revenues across the sector at the moment. And um, I believe that within three to five years that will invert. But during that period defence is going to grow very strongly. So overall, I'm saying the sector is going to grow strongly um, so what is happening at the moment to give me confidence that that's going to happen is two things. First of all the data set that is being created in the space environment, a digital infrastructure in space is being created that uh, captures ah, data around the planet in close to real time using a whole range of different sensors. And there's this new communication capability that uh, now exists that connects everything um, all the time, so people but also IoT and objects as well. So uh, in the past it's been really quite difficult um, for companies uh, um, to use this kind of data set. Um, it's really been very specialist sectors like uh, oil and gas or mining that have employed the experts and um, have the right IT uh infrastructure to be able to absorb this kind of data and then they analyze uh, IT and make sense of it. So this has really sort of kept the sort of commercial use of this data sort of rather limited. So what's happened now is AI. So AI is uh, now at the center of the IT systems in every industry. Um, and what does that do? Um, well it means that you are able to start um, ingesting data from wherever you want, um, almost overnight into your decision making processes that the whole company uses. So these data sets that might um, have taken a 1 million um, dollars contract with an IT professional and a 12 month um, run up at the project to start to ingest uh one form of data. All that's been washed away now you can do that sort of overnight. So that's point number one. Point number two is that um, this has not been lost on all of the world's largest management consultancies, the KPMGs, Accentures, Deloitte's, um, et cetera. Um, and what they have all done during the course of the last couple of years um, is that they've set up large space teams, global. And what those teams are doing is they're going and visiting um, all of their customers at the CEO and CXO level and they're going and saying to them, what are you doing in space? There's these three data sets, there's these two types of communication that are available to you today. Here's how you could use them. What are you doing with them at the moment? And sort of a shrug of the shoulders and not a lot is the answer. So they then explain how uh, this data or communication capability can help them uh, reduce costs, uh, increase profits, provide a better service to their customers. Um, uh, and then they also say to them these are the two or three things that are on the horizon that you might want to start aligning with now so that you can start to take advantage of these things. And that might be for example lower cost energy um, that's coming from the space environment. Uh so this is going on in an industrial scale globally all at once. And for the first time ever with their newly minted um, AI enabled infrastructure, IT infrastructure these companies are in a position to respond. So all of that is happening at the same time whilst you've got the defence budget that's now not just a budget, it's flowing through to these actual underlying companies. And what's that money doing? Well um, it's accelerating the pace of the um, of how quickly they're going through their technology roadmap. And then in the case of space it is um, enabling these companies to put up their satellite constellations faster and bigger than they naturally would have done. Yeah, so defense um uh is sort of uh, stumping up the money that's ultimately going to be uh, more used by uh, commercial. And as these constellations get larger and larger the data that they're collecting about Earth gets closer and closer to real time. And as it moves closer to real time it becomes relevant to a much broader group um of uh, users and it becomes more valuable. So this is uh, what's happening and this is why um it's really exciting to see what's going on in Germany where uh, the country uh has got its own sort of economic problems. Um uh they've then added an extra 500 billion of debt uh on top of that and uh, the whole country's um, ah got behind it. Um they've got an industrial heartland uh that's largely um, the supply chain to the automotive industry. That's not going so great at the moment. They're all looking for something else to sort of latch onto. And now they've got the government as a big customer that they can all aim at um, and provide industrial capability. But what they're actually doing is they're driving to a very significant non defence outcome because they're driving all of this commercial activity that comes on the back of it. So that's a brilliant example of um, seizing the opportunity to invest into defence because of all of the uh, commercial opportunity that comes on the back of it.

Speaker A: Yeah, so it sounds like there's a lot of cultural awareness of the space sector in Germany.

Speaker B: There really is, there really is walking around Germany at the moment. I was over in Berlin last week, it was the super returns event, the big LP event and um, yeah, you know, it's like Silicon Valley over there. Everyone is you know, really on the same page. There's uh, there's a lot of money chasing the uh, deals over there. The deals are happening but the ambition levels are sort of um, getting to levels of that we see in America.

Speaker A: Yeah.

Speaker B: And uh, they're looking to sort of show leadership in Europe but they're going on their own. So uh, they've decided that they're no longer going to do European tendering because it takes too long. Uh, and they're just going to award uh, these contracts to whoever they want, whether it's German or American or whatever the capability is that they want. So it's just another current example um, uh, of how the demand and the requirements for this defense capability are changing behaviors that have been sort of set in stone for decades.

Speaker A: So there's a demand thesis around space which it sounds something like knowledge is power, data is power. But the problem is, so when people talk about space, in my mind I can see satellites. But it sounds like that wasn't the bottleneck. The bottleneck wasn't how much data you can get, it was how you parse that data, how you make sense of it. And that's where AI is coming in. Which leads me to ask you about the merger of Xai and SpaceX. That starts to make a little bit more sense in my mind now.

Speaker B: It's absolutely genius. You know, um, uh, uh, Elon, everything he's done, he's managed to sort of get himself a sort of multi year uh, head start ahead of everyone. Um he did that with Tesla, he's done it with um, SpaceX, he did it with Starlink, and he's going to do it again with data centers in space. So um, ah, success in um, AI is going to boil down to uh, the cost of energy and how much energy you can procure. So the leaders are going to have um, um, uh, to be led by their access to um, energy. So um, he's got all of these um, uh, chips on the table already or pieces um, of the jigsaw that sort of, he's putting together. He's got the launch. So um, he and um, we'll come back to talk about that. Uh, I think that there's something else to sort of dig down on that. Um, he has uh, got the world's largest factory to produce satellites. He's produced about 12,000 um, Starlink satellites. And uh, what you're gonna see is the sort of first generation of data centers. People when they Think about data centers in space. They're thinking about this giant building floating around in space. That's not what it is. Certainly not in phase one. Ah, these are just satellites, large satellites, but satellites. So they're producing satellites in their satellite manufacturer at scale and then they've got the launch to be able to uh, launch that and, and then they can then start to build out this interconnected data center capability that's closely connected and linked up to their telecommunications network, uh, that can then uh, move the data around in an efficient way. So that is a massive advantage to have over the other players. The reason why.

Speaker A: Can I just ask, certainly. Are there any data centers floating around here or is this so?

Speaker B: Yeah, so um, this is the reason why um, we're so confident about sort of the data center play being real. We um, um, have got various different plays on data centers. One of our companies, um, which is called Deorbit, which is an in space taxi, they're like a rocket that goes inside a rocket. And um, ultimately what they do is when a SpaceX drops off um, all its customers at the bus stop, they are like a taxi that then takes the satellites and takes them to their orbital locations that they need to go to. But when they've delivered all of their passengers, um, they then uh, become effectively like an AA van or a 4 hire white man van. Um, but what they've been doing for the last five years or so is that they've been packing data center equipment um, uh, into those vehicles and they've been working with um, companies like Amazon, uh, to uh, work out how they can um, operationalise uh, that of the 46 investments that we've made over the last 10 years through our three funds, we've only had three failures. And one of those failures, which is about five years ago now, was effectively a data center company and that failed five years ago. So it shows how long we've been working on um, this activity. The only reason that they don't exist today is because it's too expensive to get all of the materials into the space environment. And that's what's just changed.

Speaker A: Why has that changed?

Speaker B: So uh, Elon's back at the front of the queue again here and this is why the ipo um, that's uh, just occurred and the money that he's raised is really going to um, call time on the next phase of growth for the space industry. So uh, the Falcon 9 has really been the workhorse of the last decade. Um, incredible vehicle, um, has really changed space forever. And they did that by reusability, bringing down the cost of sending a kilo into space. So um, what's happening next is that um, uh, Starship, um, the next vehicle from SpaceX, uh, they've just concluded their 12th test flight that went pretty well. Uh, SpaceX, uh, are indicating that they're going to do about 200 of these a year. To put it into sort of size context it's about 10 times bigger than the uh, Falcon 9. And to put it into cost, uh, uh, uh, uh, the sort of price per kilo has not yet been sort of made public and there's a big range of uh, expectations of what it's going to be. Many folks sort of landing on about $500 per kilo and the price in the market right now is 6,000 a kilo. Um, wow. Uh, so more than a 10x reduction, so you've got a 10x increase in volume, 10x reduction, um, in price, um, available a uh, couple of hundred times a year that then sort of um, uh removes the impediment of cost for launch. So that really is the time that it starts to make um, the business cases close for mega infrastructure plays like data centers, like manufacturing, like energy. It's energy that I'm uh, most excited about, which is really just a sort of next step from data centers.

Speaker A: So I've seen these online. These uh, starships, they're like kind of fairly large buildings being launched into space. Yeah, they're enormous.

Speaker B: They are. I think it's 37 storeys.

Speaker A: And so this is the enabler because suddenly the unit economics of space is changed just by one innovation and one company.

Speaker B: That's right, that's absolutely right. And uh, you know, from our own perspective and sort of from our own thesis, um, we are only just changing this now after 10 years of uh, having a thesis around space. Um, and previously we had around 10% of our allocation into sort of mega infrastructure in space. And the investments that we've made have actually gone very, very well. In fact one of our most successful companies, AST Space Mobile, that does um, cell towers in space today valued at $50 billion, UM is a great example of that. Their satellites are ah, the largest satellites, um, in space, um, uh, including their solar arrays that are size of two football pitches, uh, that's big, that's bigger than the International Space Station.

Speaker A: That sounds like a very capital intensive type of business for venture capitalists.

Speaker B: It is, it is. Well this is the reason why in businesses like that you have to get in early. I think that we were invested in that business in um, 2018. IT IPO'd in 2021, um uh, and now it's the third most valuable company in space market. But that was one of our sort of early plays um on ah infrastructure. We, we've also invested into a company called uh Voyager, which is a space station company. They see themselves as um, science parks in space. And um, uh we did our due diligence on that business. We became a believer and uh, the company's done very well. It IPO'd last year, um, it's valued about $3 billion now and um, they are effectively establishing themselves as a sort of factory in space to the extent that uh, we've then subsequently been investing into the tenants that sit into that science park. But the point is that we've limited ourselves uh, investing into this area in the past because um, you really had to sort of believe that there was a future where launch became incredibly low cost because if you didn't have that belief the business case just didn't tie together and you were going to lose all your money. So uh, uh, this is the reason why we uh, don't like losing money and why we limited the number of investments that we made where we had to sort um, of take a leap in faith about how the uh, economics of launch were going to change. Now it's changed. So uh, uh where we previously had sort of 10% focus on this area, um, we're now sort of maybe up to a third uh, of the fund that we'll focus on there. The only thing that sort of you that you know really have to sort of take into account here is that to um, to build one of our sort of um, uh satellite constellations, um, to build it to profitability typically costs between 4 and $500 million uh to get a um, space ah, so mega infrastructure play um to profitability, you can add a zero or two to that. So it's really sort of changing the nature um, of the game. And this is the reason why you're seeing vast money now coming into this market. Um, and all of this has been awakened and enabled by SpaceX. A lot of people doing all of the diligence that they need to do to get themselves comfortable with that valuation. And what do they do while they're doing that? Well they start to look at all of the other things that they're comparing the valuation against and realizing actually there's an awful lot of really other interesting businesses here that we can invest into. And this is um, if you look at um, uh all of the space stocks globally during the course of the last year you can see how uh, investors have been sort of coming through, doing the diligence and then making those

Speaker A: views to point out something fairly obvious. Venture capital the last 20 or 30 years it's been a software play. But it sounds like your portfolio is going in the other direction then.

Speaker B: Well yeah, you know one of the ways to make money is to be contrary, isn't it? Um, you know we set up the world's first um space fund um 10 years ago and no one was thinking about it. So you know we always approach things trying to think differently um about it. And um, you know at some point in time you know that occasionally pays off and right now it's um, it's paying off very nicely.

Speaker A: What's the. What is there a business model for space companies?

Speaker B: Yeah, but it depends on what they're doing. Um, um, uh the traditional space companies um worked on a sort of cost plus basis. A government said that we need this capability and they would say we've got no idea how much it's going to cost but whatever it costs you uh, we'll add X percent on. Um and um, that was the traditional sort of space model. Um it then moved to um telecommunications in space where effectively you were buying the actual equipment because you had to have specialist equipment and then you were locked into those systems and they could charge you know very high fees for doing that. Um, and um, you know SpaceX has really sort of hurt that market because of Starlink, um ast, um uh you know addressing that market because of uh, their ability to connect to mobile phones. Then you've got all of the um, sort of data plays which tend to be on a sort of SaaS basis um in the way that they work. There's then uh, the sort of um, the latest sort of play in sort of constellation market which is really around sovereign mods who are actually wanting to buy their own capability. They don't want to be reliant on a commercial company so they'll actually buy all of the capability rather than just buy the uh, service, the service or the insights. So that's a model that uh, is really sort of driving a lot of activity at the moment. So the main area that we've been focused on historically and we still continue to be focused on this area is around um the constellations that are providing different capabilities to different end markets. They're providing capability to big themes like um, defense and climate and autonomous vehicles, smart cities, food security, ah Iot the list of the sort of thematic areas goes on but then you've got all of the um, underlying verticals that sort of sit below that as well. Everything from logistics through to um, real estate and everything in between.

Speaker A: So it sounds like a relatively complex and interconnected ecosystem is emerging. But my read of let's say SpaceX is that it's kind of doing the opposite. It's vertically integrated and it's not having to rely on others.

Speaker B: Correct. And um, our uh, nine unicorns that we have are all vertically integrated. So um, we have found that um, companies that take that approach have an innate advantage. They design their own satellites, uh, they build their own satellites, um, they uh, develop their own software and um, AI capability. They operate their own satellites in the space environment and then they have a relationship with the end customer who provides feedback. And then that goes back into the um, design and the flywheel of um, providing that customer with what they're looking for. So the companies that are vertically integrated can move that flywheel very quickly. And the other great thing about space is that um, these companies are doing new things. So because they're doing new things they're able to patent them and they're uh, pretty much able to patent anything that they want to. And uh, the companies that we back, and we certainly encourage them to use an awful lot of our money to do exactly this, but they are patenting every single aspect of what they're doing. The design, uh, the secrets around build, how they um, create the algorithms and how they operate, how operations happen in space and things go wrong in space. Space is hard, really hard. But when something goes wrong they work out how to fix it and what's the optimum way to do that. But then they say you know, what are the other four or five ways to fix that? And they patent all of those as well. Then they patent how uh, their data is used by an end customer and a particular vertical. And uh, what's happening as a consequence is massive um, patent portfolios that are effectively giant moats to provide the leaders with a position uh, that they can sustain. And these leaders that are vertically integrated are also then developing faster than the others. So they are um, into the next gen, um, quicker because they can be, because they're not reliant on other parties holding them back. One of the things that I think is a feature of our active investment is that um, we have strongly um, encouraged uh, with arms up the back of the companies that we've invested into to become vertically integrated. And you know, it's not, not an easy thing to do. Um, it's expensive, presumably. It's expensive, it's risky. And uh, companies are doing things that they are, um, you know, not, not necessarily got skills to do.

Speaker A: But the upside, what's it gone?

Speaker B: The upside, do you know, is, is the speed with which they can become the dominant player.

Speaker A: Right. So this is a race, It's a,

Speaker B: it's, it's a race to um, it's a race to capture ip, it's a race to um, capture initial customers. It's a race to capture the capital that, that tends to coalesce around the leading player.

Speaker A: Yeah.

Speaker B: Because if you've got one player that is the sort of, ah, dominant player within a particular market that sort of, um, you know, captures the first one to 300 million, there are other companies that come behind it, but, um, you know, it's a lot harder to raise the money. And the investors who are going into those, you know, I sort of have to justify to themselves as to uh, you know, how they're going to sort of succeed with this emerging gorilla ahead of them. Um, and uh, you know, and then it gets harder as, as you, as you, as you go down the line.

Speaker A: Surely we're about to see. Maybe, maybe they're already there. But the big Silicon Valley VCs pile into space.

Speaker B: They've been piling into space for years. So, um, yeah, um, but most of them are doing it from generalist funds, which is great news for us because, um, space is um, hard. Um, and um, there's a sort of specialist knowledge that you need. So we get a giant global deal flow. Giant. We're seeing somewhere between 150 and 200 um, deals per month globally from space. Every sector, every stage you can think of, it's more than 75% of all of the deals at any one point in time. Most of that deal flow comes from other funds, other private equity funds, other tier one funds, family offices, sovereign wealth funds, um, you name it.

Speaker A: How big's your team?

Speaker B: About 20 people in total. But what they're all saying is we've just come across this space company. We think it's great, we've done all this diligence. We going to invest? What do you think about it? Who are the competitors? Uh, what diligence should we do? What price should we pay? Would you like to co invest alongside us? So we've um, over the last 10 years built up a great rapport with those biggest investors and um, because they're generalist by nature when they're investing into these frontier areas. They're quite happy to bring um, thematic specialists in with, I'm sure.

Speaker A: Yeah, I was quite surprised when you mentioned your failure rate which seems very low for any kind of venture capitalist, let alone one that's blasting things into space.

Speaker B: Yeah, um, we're not trying hard enough. Um, no, I think the reality um, comes um, back to sort of uh, part of the history of um, Seraphim. So uh, when we were setting up um, and we uh, decided to invest uh, uh, to focus the fund on space, it wasn't until then we found out that nobody else had ever done that before. And we didn't think that that was necessarily a good thing. And then we sort of looked at ourselves and we said well none of us have actually got a background in space. How can we really go about doing this and are we doing the right thing? So ultimately um, we went to the space industry itself to um, really validate to ourselves that we weren't crazy. We got introduced to um, 11 of the world's largest space companies, traditional space companies. And we went and met um, mostly at the CEO level. Um, and uh, had meeting and explained that we were setting up a fund that was going to invest into the very companies that were going to disrupt their business for the next decade. And what did they think about that first and foremost? And secondly, would they like to invest into the fund? So six of the 11 agreed with us and invested into the fund. So they wanted to see these new technologies, these new business models. They wanted to see how the horizon was changing. Um, but ultimately what it also enabled for us, which is why it's a long answer to your question, um, is that um, we were able to use their business units to help us um, evaluate the technology solutions that we were looking at. Um, and that's really become a feature of our organization Seraphim. Every time we do a funding round, we bring on board um, a whole range of the world's biggest space companies. So in our most recent venture fund, uh, we brought on board um, a whole range of um, traditional space companies, including Europe's largest um, uh, space operator, satellite operator, the Middle East's largest satellite operator, Asia's largest satellite operator. And they were amongst a group of others that came in on our last um, funding round. So we test uh, with the business units of those companies as we're seeing businesses and say what do you think about this?

Speaker A: You're almost like a multi corporate venture capital.

Speaker B: Yeah, uh, that's exactly what it is. And um, you know, it's a Win, win, win really because um, you know, we win because um, you know, we've got sort of access to this incredible expertise. Um, uh, they win because we're introducing the latest technologies and asking them what they think about it. And often the companies that we're introducing then immediately get a customer, a partner, a co investor. Um, and that really has just worked and continues to work.

Speaker A: Have you met Elon Musk?

Speaker B: I have. Um, so yeah, I met him um, at an event, um, with Richie uh, Sunak, um, where uh, he was over talking about AI Actually rather than specific.

Speaker A: I like to try and build mental models about complex things in order to just get a little bit of clarity. And so I thought one way to think about space is abundance versus constraint. Space is obviously, well, it's literally boundless, right? And so it feels like there's a huge amount of abundance. And you'd been talking about, you said you were really excited about cheap energy, for example. Well the sun's effectively limitless, so to what degree is there real abundance? Do you have this mental model in your mind of you know, the world in 30 years where all of the difficult stuff is done in orbit and we live in this green paradise? Or you know, am I going to,

Speaker B: I mean, I think ultimately um, you know, that, that we're, that we're moving in that direction. I mean we are ruining our own planet, aren't we? Yeah, you know, we're uh, we're digging things out of the ground. We're relying on fossil fuels factories that are um, you know, pumping out fumes, plastic factories that are putting um, pollutions into, into the water, into, into the, into the sea. Um, and you uh, know we're, we're, we're, we're slowly destroying our planet and we just haven't had any other alternative, uh, until now. It all comes back to the cost of getting off Earth.

Speaker A: Yeah.

Speaker B: Because um, you know, until um, a business case starts to close for you know, any activity, you know, you've got, you've got to really get off the planet. And this is the reason why SpaceX has just um, um, done an IPO. Um, you know, a couple of trillion dollars. It sounds preposterous. Um, and um, you know, all Elon's talk about um, about Mars and everything that's happening there, you know, you've put your finger on, you know, what, what we're now embarking on. I can't even remember the figure that um, uh, they used as the Tam, um for SpaceX. Do you remember what the figure is? It was something like 266 trillion, I think it was, was the size of the addressable market, um, for space. And like, you know, what do you say to that figure? But I think the reality is if you can get yourself in the mindset that we're now um, on a, um, process that certain industries, one at a time, are going to just be lifted into the space environment and we're naturally gonna start off with all of the dirtiest industries that are polluting our planet. And you know, if you think about from a sort of regulatory perspective, as soon as these things start to become uh, a reality, the regulator will sort of say, hang on a second, you know, why are we allowing any of these companies to stay on Earth? Because it's choking our children, you know, uh, so we're now on this next phase and it's going to go on for a hundred years, but I think it's going to accelerate really excitedly across the next 10 years.

Speaker A: Okay, so that's the abundance and that sounds great. Now the constraint.

Speaker B: Sure.

Speaker A: So first of all there's the obvious constraint, which is financing and capital, and you're part of that solution. Um, what about technology? So we mentioned, for example, data centers is all the technology there to do all this stuff and beam it all back, or cheap energy is all the technology available. It's just a financing constraint.

Speaker B: So by and large it's just a financing constraint. Okay, so um, new space is the area that we invest into. New space is underpinned by companies that are taking components from adjacent industries and using them within the space environment. So that's what underpins new space. And um, for 10 years that's been growing this market. It's the behind the success of SpaceX, um, 3D printed components, all of these things that sort of the industrial 4.0 capabilities that are driving this activity.

Speaker A: Sorry, do you mean just taking terrestrial technologies and then applying them to space

Speaker B: in a creative way? Yeah, absolutely. So this is what the entire, this is what's driving the market at the moment. So, and again, this is what brought me into the industry, first of all. So, uh, there was a company called Skybox that built these um, satellites that were the size of um, a, uh, shoebox. Um, and uh, within a handful of years sold themselves to Google for $500 million. Uh, and when you look at what was in that shoebox, not a lot, uh, a few components that you would find in most mobile phones. Um, um, and then the data that they were generating was using AI to uh, provide sort of interesting insights. So Because I'd been, and myself and the team had been um, frontier investors for the previous 10 plus years. We'd been investing in all of these areas. The AI, the 3D printing, the telecommunications and mobile technology. So everything that was sort of inside that shoebox, we were like, we could do that. That's not a problem. And that's really how the market's changed. And this is the reason why the traditional space companies um, have found it hard to adapt. Um, because um, it's very difficult to uh, move from creating bespoke satellites that cost 500 million to a billion dollars each to producing a shoebox that costs $100,000. Um, but when you put up 100, when you put up 200 of those shoeboxes, the capability is better than that $500 million satellite. So it's, the transition from one model to another is very, very difficult. And this is um, the reason why, um, it's been venture backed private companies that have been you know, driving this industry. And um, you know, many of those companies now are becoming, you know, serious businesses. Our biggest um, company that we, that we hold, um, in uh, our largest holding rather than the most valuable company, um, uh Isi, um, you know, just raised money at $10 billion valuation. You know they're uh, very highly profitable. They'll do a billion in revenues um, next year. Um, and um, you know it's a very rapidly growing company as are all of our top 10amazing um, so you know the industry's growing up but it's all on the basis of um, using these components. So to go back to the point that you were making is that you know, there's nothing that can't be taken into space because we've already proven that it all can be radiation hardened and, and take it into space and it still operates. So uh, you know, all of the components um, that are required for um, data centers or you know any industry, uh, ultimately uh, will find its way into the space environment. And um, you know, this will be done on a case by case basis. And um, you know, you have to build the business case, you have to then trial and test the technologies. Um, but it's sort of uh, you know, all largely proven. There's not a lot of um, inventing that needs to go on. This is really just about a bit of trial and error, um, and um, being willing to put together a business case that makes sense.

Speaker A: You make it sound easy.

Speaker B: It is.

Speaker A: Just to close off the constraint idea, I kind of almost don't want to mention this, um, so we're getting all of the dirty stuff initially off the planet, but what about cluttering up the Earth's atmosphere with debris?

Speaker B: Yeah, so that's clearly a problem. Yeah. So we've all seen the film Gravity, uh, a great film where um, you know, flecks, uh, of paint, uh, you know, cause um, a devastation, um, as they're hurtling around the Earth at um, 17,500 miles per hour. You know, they're like bullets out of a gun. So this is a big problem. And then, um, you know, like uh, the history of mankind, um, when we start to do things, we're pretty wasteful in the same way that we've just poured all sorts of stuff into our oceans. Um, we've done the same with space. So when we've gone into space we've just discarded anything that we've used without really much thought. Um, and that builds up over time. Um, and then on top of that you've now got this um, new space race, um, um, which is. I'm going to come back and talk about one of the constraints that you talked about, which is that in low Earth orbit there's actually. Whilst it's a lot of space in space there's still sort of limited, um. Um. Uh, areas that can, that can get congested. So are they around the poles or so? No, no, no. They're ultimately at sort of uh, different heights, uh, away from Earth. Uh, you know, uh, that's really how sort of space works and the sort of, the different uh, heights in orbit, um, and those different um, ones get sort of congested. So you've got individual uh, companies now like SpaceX that have got um, 11, 12,000 satellites uh, in space. And you've got many others that are looking to do the same. You won't read an analyst report that doesn't say that there's going to be 10,000, 100,000 satellites um, in space, you know, by the end of uh. Within a decade.

Speaker A: Yeah.

Speaker B: So, um, debris, um, uh, is a growing problem because as you put these satellites um, up, um, unless you remove them, those broken satellites become debris. And uh, in the new space environment, the area that we're focused on, these satellites aren't designed to last. They're using components, um, uh, from other industries. And um, the general thought is that um, you don't need them to last 10 years because the pace of technology development is so fast that after five years they're almost technically redundant anyway. So it's just better to put up another one. It's cheap to launch cheap to make. So why make it last for 10 years? Ah, so what needs to happen is that um, there needs to be regulation that works. And um, this regulation is um, is coming into play um, under what jurisdiction? So I mean it's hard to do um, um space uh regulation because every country has to agree to it. Uh ultimately whichever country you launch from that is the country whose law you have to abide by. So it only takes one country not to agree. And um, you can launch from those countries and sort of sidesteps um, everything. But really the sort of um, you know the large space agencies, uh, the commercial operators recognize that it's in their interest to behave responsibly. So the type of activities that sort of are underway. Or um, if you're, if you're getting a launch license that you also have to evidence that you've made provision to remove your satellites when they reach the end of their economic life. So you either uh, um, have propulsion that's independent, that can push the satellite back to Earth where it burns up in the atmosphere and doesn't become debris in space. Or you can have a contract with a company um, uh to remove that satellite or you can have an insurance and that insurance would then have a contract with a company, uh, that would remove that. So the great thing about all of this is this is a great way to make money. And uh, we have been making great money in this area. We've got three companies in particular that um, are worthy to mention. So uh, one of them is called um, LeoLabs and they have um, ground based um, radars that look up into space and can see um, um something um, the size of a 2 pence piece from a thousand kilometers. That 2 pence piece is traveling around our planet at 17,500 miles per hour. And what it's able to do is to see all of those two pence pieces so that it's got a good understanding of where satellites are and where debris is. Um and what they then do is they then uh, provide a service to ah, satellite operators to warn them of any um, oncoming dangers that they may uh, face. So uh, they've already got more than a 70% market share in low earth orbit. And uh, effectively easiest to think about it as the sort of Google Maps for space. Yeah, so it tells you where everything is. So you need to know where everything is so that you can operate safely. Uh all of the operators need that, um, all of the regulators need that, all of the insurers need that. And really it's that capability that will allow everyone to operate in harmony because um, you know, if you are aware of um, uh these threats, you can take action to resolve that. So there's number one, number two, ah, company called Deorbit that I referenced earlier, the space taxi. Well that stops being a space taxi when it's delivered all of its customers and then it becomes um, a sort of a, a van. So uh, you've got a satellite that's broken but elsewhere in space you've got uh, um, some spares. You call up the aa, they go and pick up the spare, they drag it over to where the broken satellite is, they swap it over, they take that broken satellite, push it back towards the Earth's atmosphere, it burns up no debris, they pay for that service. Um, um, and that's another example and then final one that we've got uh, is a company called Astroscale, um, which um, is really about um, servicing and supporting satellites. So um, satellites that have moved around too frequently and they've used up all of their fuel in manoeuvring, they will go ah, and attach themselves to that satellite to provide additional energy so that satellite can last for another two or five or ten years, um, so that it doesn't become ah, junk over time. And then once it does finally um, end its useful life, they then just use their propulsion then to sort of take it back down to the edge of the atmosphere where um, they push it, then it burns up. So these are um, multi billion dollar industries that didn't exist five years ago.

Speaker A: So your metaphors are quite amusing but it strikes me that they're not actually metaphors, it's more like space is a macrocosm of what's going on down here. And actually maybe one way to think about investment opportunity is to think well what's required on our highways.

Speaker B: You're absolutely right. And this is the reason why um, all of those investors that parted with money to put that into SpaceX, um, for the IPO, they've had to buy into a vision that's that big to really sort of justify that. And um, you know I think they're right. Um, um, but there are lots of other companies out there that aren't SpaceX that are taking their own approach to doing this and the valuations aren't $2 trillion.

Speaker A: Yep. Tell me a bit more about Seraphim Space, your venture capital business. You have traditional venture capital LP funds. You've also got uh, a listed trust and you invest across the um, funding rounds.

Speaker B: That's right. So we have three elements. Uh, currently we have a accelerator, space accelerator, we have a space venture fund, we have a space growth fund, um, and all of those uh, effectively create a global ecosystem. So we receive our deal flow, um, and then we triage between those three different parts of the business. So the spin outs from universities, um, teams out of SpaceX, man on the street with a brilliant space idea, goes into the accelerator where we can Ah, take 10 of the best companies on a three month program, evaluate them, work with them, help them get ready to fundraise, introduce them to the international community, to fundraise. So we've had 15 of those um, uh, cohorts. Those companies um, have raised uh, $1.3 billion. And uh, then our uh, venture fund then cherry picks uh, the best companies that um, come out of that uh, but only about a third of the companies that go into the venture fund come through the accelerator. The other 2/3 just through our general deal flow.

Speaker A: Have you ever had companies in the accelerator you passed up on with your venture fund and they went on to do well?

Speaker B: Yeah, yeah, many times. Well there's too many of them, you see. Ah, so uh, this is the reason we set it up in the first place. We actually want to help the ecosystem grow. Um, we didn't have enough money to do everything but when we saw a good one we, we wanted to help and support it. So yeah, there's loads of companies that um, have gone through the accelerator that we've um, you know, that we've, that we've missed out on. Um, now we do get stakes in those business because they have to give us a percentage of their business to go on the accelerator in the first place. So we are monetizing this. But um, so then what happens is the venture fund, um, then works with those companies at seed and series A. Um, and then our uh, growth fund then cherry picks the best companies out of the venture fund. So about half of the companies in our growth fund are uh, from our uh, venture fund. So um, you know, uh, and what that gives us is a high degree of conviction when we're making those investments. You know, we've seen that company, you know, since the guys like straight out university, we've seen what they've done with um, the first three funding rounds. We've seen how good they are at hiring and retaining people. We've seen how good they are at um, hitting their own technical milestones. We've seen how good they are at setting commercial targets and then achieving them. So by the time they come to us and say, you know, we're doing 100 million round. You know, can you come in and invest? Uh, and we say, yeah, and we'll lead it. Um, and um, you know, that that's really what's happening. And those that we get most excited about, we don't only put in one unit of investment, we put in two units of investment. So we double down on the companies, um, that we're most excited about. Um, ah, and this has led to a hugely disproportionate, um, positioning within our, uh, growth fund because we've got certain companies that have got giant weights, uh, because, um, our double positions, um, have paid off. Um, so we just had an exit a few weeks ago where our second largest company was acquired and we'd take a double stake in that one. And then, um, isi, our largest company, just doubled its valuation in the last week. Now valued at $10 billion, we still own 5% of that business. And, um, we've been on the board since 2017 and we're convinced about that business today, as we were last year and the year before. So, uh, we're prepared to continue to hold or even put more money into these businesses because, um, you know, we have such a deep understanding of their position in the market and where the market's going.

Speaker A: So what do you mean by double stake?

Speaker B: We mean double down. So if your normal unit of investment is $25 million, we put in 50.

Speaker A: Sure. Okay, fine. And you. So you also have the listed trust, which presumably.

Speaker B: That's the growth fund, as I was referring to.

Speaker A: Sorry, that's the Growth Fund.

Speaker B: Yes, that's right.

Speaker A: Presumably the beauty of that is that you can keep hold of these things. You don't have to force an exit. And presumably. Oh, so that is why. Sorry, I'm catching up. That's why it's such a large proportion of that fund.

Speaker B: That's right. It's the reason why we chose an investment trust, um, as the structure for that fund. Because, um, in our view, and we really believe this, that these companies that are putting up, um, these satellites are creating a digital infrastructure in space. We consider that to be akin to a new Internet. The companies that we're investing into, we consider to be the leaders of that generation. So they are the Facebooks, they're the Googles, they're the Amazons of this generation. And we've made these investments and um, we wanted to find a, uh, platform that will enable us to be able to hold those, um, companies for 10, 20, 30 years. When was the Right time to sell your holding in Google. When was the right time to sell your holding in Amazon? The answer so far?

Speaker A: Never.

Speaker B: Never. So yeah, we've uh, got this um, uh, structure. I mean it doesn't stop at everyone saying to us, you've got one portfolio company that is now valued at sort of two thirds of the value of the entire fund. You're not going to um, sell half of it. We say to them, are we going to sell half of our best performing company that we believe is going to outperform for the next 20 years? No we're not.

Speaker A: Yeah. So your growth fund I understand, has just hit the FTSE 250.

Speaker B: That's right. So next week I think it's the um. Oh no, it's late, it's later this week. Yeah, yeah, that's right. Yeah, yeah.

Speaker A: Well congratulations.

Speaker B: Thank you. Yeah, very proud of that.

Speaker A: And so what will your growth fund be in 10 years time?

Speaker B: I think that um, I uh, think that we're on a pathway to be measured in uh, valued in billions. We need to be that size to play the role that we want to play with the most active investor in the space market globally. Space is just moving uh, to the next Gear where I talked about earlier, where it costs about $500 million to get a Constellation company to profitability. Add a zero or two on that. When it's um, a big mega infrastructure, we can't really play that game. If we're writing checks of 100 million, we need to be able to write checks of 250 or even 500 million. But if we've got the sort of level of conviction that we do have on these companies, we can do that every day of the week. And um, if you look at uh, the list of who's who of um, those that sort of um, made out with SpaceX, there are investors that were writing checks of 2, 3, 4, 5, 6, 700 million into SpaceX years ago. And we are that company and we're going to scale to that scale so that we can write those um, checks into those companies that will be worth those levels of returns.

Speaker A: So your investment trust, very unusually for a private markets investment trust, tends to trade at a premium.

Speaker B: It does.

Speaker A: Which means that you can raise capital that way.

Speaker B: It does. And we did exactly that. Um, a few weeks ago. Uh, we raised um, £140 million. Um, we were really proud that um, a significant proportion of that came from retail. I think we were the um, best performing um, um, from a retail perspective in the last five years and um, yeah. So when uh this has been the sort of challenge for the last couple of years because we've been like the rest of the market being at uh a discount. We've been ah at a premium um, uh recently until we had some good news, um, about ah a week ago when our biggest company had a um closed ah a funding round that doubled the size of it. Um, we added 75 pence um onto our navigation and our share price went down.

Speaker A: Right.

Speaker B: So we ah currently sit at a very significant discount to our um nav, which I think is um, a point in time. There's a technical reason for it. We had one um, of our uh largest shareholders that um, sold down in the market significantly, um, sold down their stake, effectively just taking you know, all of the um, uh all of the buyers out of the market. Um so we think that that sort of technical um selling will correct itself

Speaker A: because you'd see your nav goes up, share price goes down for technical reasons. So this is the frustration. I'm a big fan of investment trusts but it's an inefficient market. It is and it's. Private markets tend to be poorly understood by the public markets as well, which is why I think they all trade at a discount. But you managed to escape that for now. Maybe because of the feeling around space generally.

Speaker B: Well I think that the reality is um, that our portfolio is growing so quickly. You know I referenced earlier that the top 10 companies are growing revenues on average at 80% in the last 12 months. I mean that is like exceptional growth. So the numbers are there for investors to see. So um, you know we are reporting um, um quarterly numbers, you know, almost a quarter after they've happened and there's a recognition that they're out of date as soon as we've reported them. So we should perpetually be in a premium ah position if the market was um, operating logically, which you know, over the medium term it does.

Speaker A: Yes.

Speaker B: So this is why I sort of don't get bent out of shape by you know, the type of activity that's going on at the moment. We don't need to raise any money at the moment. So uh, our share price um, you know, relative to the nav doesn't really make any difference to me. But um, you know, if I, if I did want to raise some money at the moment, you know, it would be, it would be a big challenge because um, you know the market's not behaving rationally. But I believe over the, over the medium term that it does. So yeah, you know, I'm quite confident that really our sort of um, medium term position is just um, at a premium. Yeah. Because I'm confident that these numbers will carry on coming through um, and that investors will just recognize that um, um, and therefore um, we should be at a premium. So we've got this money to invest at the moment that we've just raised. Ah, we're going to put this into exciting companies in our portfolio and just um, adjacent in fact, um, we won't only invest into the SSIT portfolio, the growth fund portfolio. We'll invest into the, the mature companies, um, out of our venture fund. We'll invest into the mature companies that we missed that came through our accelerator program as well. Because these are the companies that we've got the highest level of conviction on and we've known for the longest. And um, yeah, we're confident that we can deploy that money quickly and then come back and um, get more. So a combination of uh, just continually raising more money and a combination of sort of success and nav growth. You know, I think that we're going to be into billions quite quickly.

Speaker A: Fantastic. Mark, thank you so much for sparing your time. It's been fascinating.

Speaker B: Thank you for having me on the show.