Mo Islam
Mike, really appreciate you being on the show, but I gotta hand it to you. You’ve officially won best dressed out of anyone who’s ever been on Pathfinder.
Mike Palank
Right. That’s right. I just happened to wear this shirt today. You know, it was the top of the pile. Like,
Mo Islam
For those of you who are in listen-only mode, Mike is sporting the Dashing payload t-shirt in the only color it comes in, which is jet black. But he looks great, and we appreciate you wearing the shirt to the show.
Mike Palank
I love it. I actually wore it last time I wore this shirt. I was receiving a pitch for an entrepreneur who I guess knew Ari and it was like instant credibility. He’s like, you know, I love payload. I got a shirt. It was like, you must be awesome. So I should just wear this shirt every day because it clearly pays dividends.
Mo Islam
We’re actually doing a big revamp of our merch store coming. We’re leaning into the street wear, the payload street wear. So be on the lookout.
Mike Palank
I like that. That’s very on brand. You know, you guys are the edgy space publication. Okay, I’ll be loading up.
Mo Islam
Yeah, don’t don’t be surprised if you see like a Gucci partnership one of these days. Yeah, supreme exactly. I don’t know What are the I don’t know what the kids wear these days. But there you go. But Mike really appreciate you being on the show. Why don’t we just kind of start off with a quick intro? Tell us who you are what you do. And yeah, let’s start there.
Mike Palank
Yeah, great. I’m one of the founding general partners of MaC Venture Capital. We started MaC in 2019. I’d say I have a very atypical background for a VC. I started my career at a hedge fund in Chicago, so I did start as an investor, but I did that for about a year. About 20 years ago in April 2024, I moved to Los Angeles to do a bit of a career pivot. And I started in the mail room of a Hollywood talent agency called the William Morris Agency. Went from a hedge fund to literally pushing a mail cart, wearing a suit and tie. And I had a passion. I always had two passions growing up. And one was movies and entertainment. I was that kid who was at a movie theater almost every weekend, just fascinated by movies and decided I wanted to try that out as a career and thought for me, given I’m more business minded than maybe creative minded, I’m a terrible artist, you know, trying to become a talent agent who are the, you know, the business people and the lives of artists made a lot of sense for me. And so started in the mail room and about six months in, I want to work for a talent agent, which is what you do. You assist them and that’s how you learn the business. And my first boss was Charles King, who is my co-founding partner at MaC venture capital. So that’s, that’s part of the way, how I fit into the MaC equation.
But I did Hollywood for about a decade about six years at the William Morris agency. Maybe we’ll talk about this later, but being a talent agent is actually a really good training ground to becoming a seed stage VC. The art of the job is identifying amazing talent before it’s obvious to other people, signing that talent and then doing everything you can to help that talent achieve their true potential. You read a lot of screenplays in that job. I read a lot of bad screenplays about talking dogs and random things and never felt truly like intellectually satisfied, but I did love working with artists. It was very satisfying, especially when you’d help them book their first big role or directing job or whatever it may be. So when I became a VC many years later, I was like, I’ve done this job before. Just kind of swap out screenplays for pitch decks. But a lot of similarities between entrepreneurs and artists. And I’m very thankful for that first part of my career and how it set me up for success years later as a VC. I ended up working for Will Smith, ran business development at his company Overbrook in 2011. That’s sort of what got me more involved with the LA tech ecosystem. One of my goals there was to help launch a venture fund for Will Smith and his family.
It wasn’t the right time back then, but doing that work and kind of digging into that strategy got to know a lot of the people in the LA tech ecosystem, which back 2011 was still sort of emerging but saw the promise and the potential and the uniqueness of the LA Venture ecosystem and taking advantage of LA, which is truly a multi-industry town, and decided I want to go work directly in this ecosystem. And so called up a former William Morris colleague named Paul Rico and basically said, I’ll work for free if you give me a job and introduce me to people. And he said, come on over. So that was about 2012. From there, I ended up at a tech studio called Science that was sort of spinning up tech companies. And I ended up running one of those tech companies in the e-commerce space. And so got that firsthand experience of what it meant to be an operator. We raised $8 million from Google Ventures, Polaris Ventures, and some other VC firms. Grew to about a team of almost 20. And for about two and a half years, it operated that business. Ultimately, we shut that business down, but definitely rode the roller coaster of the ups and downs that come with being a founder. I learned a lot of empathy that I can now employ as a VC.
After I left that company, I advised a bunch of companies in LA. I became the guy that people would call to build their first financial model, help with pricing strategy, business development, operations, did that for a number of companies in LA. Until about 2015, when I helped my partner Charles launch his media company, Macro. Macro is a multicultural focused diversified media company developing, financing film and TV content. Now they’re in management, digital content events. And so that was sort of my second full-time startup that I was at from inception. And two years into that in 2017, we started our first venture fund with Charles’s longtime friend, former law school classmate, former DC mayor, Adrian Fenty. Adrian started his career in local politics, city council, became mayor in 2007, I believe and then when he left office, he moved to Silicon Valley and went to work for Andreessen Horowitz where he learned the venture business and left there in 2016. And we all got together and started our first venture fund in 2017.
So I’ve been doing venture now. So I guess about seven years and I’ve done a lot of things in my life. I had a side hustle as a record label CFO. You know, I finally found in my mid thirties, the job that was perfect for me. I can talk more about why it’s the perfect job for me, but you know, some people find that job right out of college. Some people find it later in life, but I truly found the most amazing profession for me personally. And I hope it’s the job I can do for the rest of my life.
Mo Islam
Mike, I gotta say that’s, I mean, fascinating. You hear a lot of different journeys towards venture, but talent agent to VC, that’s an interesting one. And I would love to actually dig in a little bit into sort of like, there’s a lot of great, actually, I actually see this more and more now sort of as a media guy and kind of to your point, I did finance most of my career. I would never have said, never have guessed I would be in the media industry. But here we are. And you know, life wakes up, life works in strange ways. But certainly curious to hear like, you know, the sort of talent agent to VC route, like what is that? What kind of superpower does that give you in terms of identifying or networking with companies? And yeah, I was just kind of just curious because you hear, you know, another very interesting route that you hear a lot is sort of journalists to VC, right? And there’s a number of, you know, really prominent ones out there right now, that, you know, former journalists who are now, these are now investors. And, you know, that makes sense. There’s obviously there’s a level of sort of marketing storytelling that’s very much part of venture and sort of portfolio company growth, especially in the early days. But yeah, just curious, like, yeah, talent agents to venture, tell us a little bit about sort of what edge that gives you.
Mike Palank
But you know, as a young agent, even as an assistant, I was always out there scouting for talent. And for me, that meant going to comedy clubs in LA and seeing folks that weren’t the headliners, but that were the opening acts or going to a film festival and watching a bunch of movies, watching back then, you know, MTV music videos and, you know, trying to get a sense of, from a 10 minute standup set or a quick music video or a two minute performance in some Sundance film, was there enough of a spark in something that I saw or watched that I felt I could dive into or something that sort of told me that there’s real potential here. And this artist, who maybe is unknown and small right now, could take advantage of that spark and become something really big make a real, a real impact in the industry. And so, you know, there’s a lot of that, obviously in seed stage VC, where you meet a founder sometimes before a company’s even launched. And you’re trying to find those, those, you know, kind of sparks that you think can lead to someone building a big business. And so I say sort of, you know, making decisions off, not a lot of information. It’s easy. You know, if, if Denzel Washington says, Hey, I want to be signed like, yeah, okay, great. He’s got a great body of business. It’s sort of like investing in SpaceX’s series, you know, Z round yeah, this has already left the gate. Like this is obvious. But you know, the point where I would get involved with artists was very early when it was very non -obvious. And so you would have to make that decision because like in VC, you know, there’s a big upfront investment of time before the payoff comes. So you might sign an artist when they’re nothing and you may work with them for sometimes seven to 10 years before, you know, the big payday start coming. So you’re having to decide that, you know, is this a good investment of my time? Because then, you know, in Hollywood, in talent agency world and in VC, the best thing that we do, the most important thing we do is helping the artist or in my case now, helping the entrepreneur level up and build their business and I say kind of increase the odds of their success. And sometimes that could take a large amount of time. But that was the best work I did as a talent agent. It’s the best work that I do now as a VC is helping people achieve their full potential.
Mo Islam
Right. Do you think there’s a level of like spotting, you know, it, you know, quote unquote it when you speak to one, you know, whether it’s a whether you’re recruiting on the agency side or now looking at kind of the founder side, like sometimes it’s just not obvious to folks, right? You got to sit down face to face with the founder and really understand like what’s driving them. What’s really their motivation behind this company. And are they really going to are really going to take it to sort of the nth degree?
Mike Palank
Absolutely. That’s exactly it because yeah, someone, you know, an artist may have a great resume. Maybe they’ve trained at a really prestigious acting school, maybe an entrepreneur, went to the right schools or worked at Google or, you know, some well-known company prior. But what you’re really looking for to your point is someone that is going to bust through barriers, not take no for an answer, have that drive, have that, you know, determination to see through, you know, the biggest challenges. And that often is not obvious from a resume. And so, yeah, I look for artists that I knew were so dedicated to their craft. Like there was no other option than to succeed and that any setback, you know, wouldn’t deter them from, you know, going after their goals. And it’s the same thing when looking for entrepreneurs, there’s that sort of subjective quality that you’re looking for that, you know, just kind of comes from interactions with the people. It’s way more interpersonal than it is, you know, it’s not, it’s not this objective thing that you can like clearly measure. so I was, I was comfortable with doing that from my time in Hollywood.
And so when I got into VC, I was used to doing that. I’ll say also another kind of similarity is sort of the competitive nature. you know, when I would determine there was some spark of genius in an artist, often I wasn’t the only agent coming to this conclusion and. There’d be other agencies trying to sign this same person and I would then have to go into sales mode and sell myself and my firm’s ability to be the best for this particular person. And that happens quite often in VC where, yeah, you get into these competitive rounds and you’re selling yourself, you’re selling your firm on why you are the best partner for this company, for this founding team. And I was very used to doing that. And so, you know, these competitive situations are nothing new and felt like I had a good training from my time at William Morris in that area as well.
Mo Islam
Right. Fascinating. Well, tell us a little bit more about the structure of MaC. What is the current structure of the firm? What’s the investment thesis? And tell us a little bit about how you guys think about space.
Mike Palank
For sure. Yeah. So I said, we started, we started back in 2019. the prior fund that I was a part of called them ventures that I started with, with Adrian Fenty and Charles King. that was a, we did two funds. We did a fun one and fun two, small funds, about $11 million. We did our first in 2017, our second in 2018. And that allowed us to sort of get in the door to start to build a track record. But we were writing a hundred to $200 ,000 checks into early stage, mostly seed stage companies with what we had always wanted to do, but I think we had to earn the right to do it is raise a larger fund where we could be the lead or co-lead in the seed round. Meanwhile, my other partner at MaC, Marlon Nichols, had started a fund called Cross Culture Ventures in 2015. Very similar, small proof of concept. We were kind of looking at a lot of the same deals and sometimes co-investing and he also wanted to do something bigger. So we decided and. I guess late 2018 to bring our teams together to start MaC and go after a larger first fund, which ended up becoming $110 million fund.
And we did a second fund about two years later that was double the size, about $205 million. And now we’re about to have our final close on MaC fund three, which is the 2024 vintage. And that will also be around $200 million. And so I think a $200 million fund allows us to really execute our strategy. And the strategy has been the same since inception of MaC, which is to be one of the first institutional commits into a company, to lead or co-lead, sometimes take board seats, but sometimes not, but to be a driver in the business, to be involved, to be a voice in the room, so to speak. We very purposely chose to be a generalist firm for several reasons. One, I say that one of the through lines of MaC, I think one of the things that differentiates us most is diversity. And that doesn’t just mean racial diversity, which is maybe the obvious thing you’ll notice about MaC. If you go to our team page, a joke and say, I’m the token white guy at MaC. Usually it’s the other way around where maybe there’s a black guy or, you know, two at a firm. but, you know, I was the one of four founding GPS and was the only white founder. So there is an element of racial diversity, which then lends itself to more diverse deal flow. We have more diverse networks and that makes its way into our portfolio, which I think to date, 60% of our companies were founded by at least someone on the team who’s now in white. I think 40% of our companies have a black or brown founder. So we purposely chose not to raise a diversity fund where we only invested in diverse founders of color, because we knew that naturally we would be finding and investing in more underrepresented founders just given our diverse network. But beyond racial diversity, it’s about what we all did prior, which I think is pretty atypical.
I mentioned my background, Adrian’s background as former mayor. Charles was truly a Hollywood super agent who represented everyone from Prince to Tyler Perry to Oprah. And Marlon, I don’t want to say he has more of a typical VC background, but maybe it’s more typical than ours where he ran Cornell’s pre-seed fund while he was getting his MBA there. He then went to work for Intel Capital for, I believe, five years, which I think at the time was the most active corporate venture firm in the world. So he sort of built up an institutional track record there and then started his first fund a few years prior to us in 2015. But we have sort of, yeah, these very differentiated backgrounds and prior professional experiences. And then where we’re all from in the world. I grew up in St. Louis, lived in Chicago. Adrienne obviously grew up in DC, now lives in Silicon Valley. Charles is from Atlanta. Marlon was born in Jamaica, grew up in New York. So we come from different parts of the world, different socioeconomic backgrounds, have different personal interests, different styles. And then our team reflects that diversity as well in terms of race, gender, geo, prior professional experience. We are truly through and through a diverse firm which gives us different perspectives and lenses to look at opportunities through. And that’s one of the reasons why we chose to be a generalist firm. But we also just thought, you know, we looked at a lot of the best performing firms throughout history in each key area of VC and kind of concluded that the best firms were those that pursued great companies in a lot of different areas. And so we wanted to be generalists. We also wanted to be kind of geographically agnostic, but recognizing that, you know, most of our companies would likely be in our backyards. And that’s how it’s played out.
About 50% of the companies we’ve invested in are located either in Northern or Southern California. But we wanted to be open to finding great companies in other parts of the country and either other parts of the world that could benefit from being in those different locations. I can talk more about that. And then, you know, in terms of like portfolio construction, because that was very important. And I like to geek out on portfolio construction. You know, it’s sort of optimizing what performance could be by thinking through how you construct your portfolio, how many investments you make, how much ownership you get. Being a generalist, we wanted to have a larger portfolio, so targeting 30 to 40 companies per fund, with the fund size of 200 million. And also thinking about follow on, how much we wanted to follow on into companies that were performing. But the strategy that made the most sense for us is sort of slightly larger 30 to 40 company portfolios, writing an initial check of, you know, two and a half to three and a half million dollars aiming to get 10 to 15% ownership and then following on half those funds into our best performing companies. That’s the strategy we concluded works best for us. That’s the strategy we’ve been enacting and it’s worked really well so far.
So yeah, space, you know, how did that start? Like I said, my two passions in childhood were movies and entertainment. The other was space. I was that kid that was fascinated by space, built space legos as a kid. Parents bought me a telescope, which just look at the stars and the planets and just like obsessed with it. Like desperately wanted to go to space camp. Parents never sent me there. It’s okay, mom and dad. But like, it was just, I just was fascinated by space, sci-fi, that’s continued throughout my life never really pursued it professionally until about four years ago when I’ll give credit to my partner, Adrian, because he’s sort of the catalyst of getting us into space investing. And he just has a really fantastic network and started sourcing some space deals. And I’m trying to remember our first deal, but Stoke was definitely one of them and that’s a launch company. And when I got the opportunity to start meeting these space entrepreneurs and hearing their stories and what they were building. It was just like a kid in a candy store. It was just like, this is amazing. I pay to sit in on these meetings. And so I just so enjoyed meeting these entrepreneurs and diving into their businesses that I would say yes to any introduction that was offered to a space entrepreneur. And one of the first investments, aside from Stoke, that we made was into Epsilon 3, which we, I think one of their first, if not their first commit in their pre-seed round, we met Laura and Max pretty early on. They were here in LA where most of us are based.
After we invested in Epsilon 3, Laura became my single best source of deal flow in the space sector. And she would basically say, hey, just met this company that could be our customer. Why don’t you fund them so they have the money to pay us? And I said, Laura, like, anytime you want to send me someone like that, just know that I’m a yes. You don’t even have to ask me if I’m down for an intro. Just introduce me. I want to meet as many space founders as I could in part because I had complete imposter syndrome in the space industry and really felt that founders would pull up my LinkedIn before getting on the phone with me or zoom with me and be like, why am I talking to this former Hollywood guy? Like, I’m not trying to be an actor. I’m not trying to find a bit in a sci-fi movie and I just felt like, you know, I didn’t come out of this space industry. I didn’t have, you know, this kind of background that maybe they were expecting. And I thought, well, at the very least I can learn a lot from these founders and get smarter. So over time, maybe they’ll see and understand that I’ve developed an understanding, you know, for some of their businesses. And I just, I wanted to learn as fast as possible. And so meeting founders is one of the best ways to do that. So I just said yes to every meeting. And of course, along the way, we met some really fantastic companies. Some of them we invested in.
So that’s sort of how it started. And if I’m being honest, we didn’t have sort of this top-down, mapped out thesis of where we wanted to invest in the space sector. When we started looking at space companies was about the same time when we were at the height of the NFT Web3 sort of craze. Kind of like AI now, there was a lot of money flowing into a lot of deals, a lot of really big rounds that were very expensive and very large and even with a hundred million dollar fund were too big for us. And aside from not understanding some of these businesses and the long-term value, the deals were too big or too expensive where we couldn’t participate. And so I was looking for other areas where, you know, I thought there might be a lot of long-term value where we could sort of carve out a brand and opportunity for ourselves. And in meeting some of these space companies just saw that while there were some really amazing early stage space, dedicated to space, focus funds, there were fewer generalist firms writing lead size checks in these seed rounds in the space sector. And pretty quickly I saw, you know, the value in the sector and that we were at this inflection point in part unlocked by SpaceX and falling launch costs. I saw the value to people here on earth, to millions of people here on earth, to what space companies were doing, unlocking a lot of true value I felt to, you know, large amounts of people here on earth and just decided, wow, this is a place where we can really build our brand, see some of the best deals and win access into them.
And so kind of decided at that point, because our prior funds, like I was investing in publishing companies, VR companies, video game companies. I was sort of investing where I had prior experience and decided kind of at that point, I’m going all in on space. And I want to meet as many space founders and you know, really kind of build my own personal brand in that area. And a lot of that was, was about learning and, you know, publishing and writing stuff and, and all of that. And, I think we were fortunate, I’d say I’m more opportunistic opportunistically than by design to back some really fantastic companies that I’ll talk about. Of course, when you do that and those companies start to become known and people know MaC was the first check. They see you on the cap table. It leads to more deal flow. It leads to your brand being built better. It leads to more knowledge acquisition. And so it’s sort of this nice flywheel that really helped us out. And so, you know, that’s kind of where we find ourselves now. And, you know, you invest in some of these companies, you join the board, in board meetings, you start hearing about critical reoccurring bottlenecks that some of these different companies have. So you start to seek out solutions for your companies. Some of those companies actually become good investments. And so that’s sort of how we built the portfolio over time. Now that it’s been, I don’t know, close to four years since we made our first space investment. We have, I think, over 10 space or space adjacent investments.
Now I’m trying to be a bit more top down and thematic about where I’m investing. And we’ll talk about this later, I think. But like, where do I invest next in the space sector? Because I think I may be slightly beyond the point of being more opportunistic. And I want to be more thoughtful and proactive about the areas where I may invest in space next. And we can talk about that as well. I’m honestly still looking for some input there and would love to bounce some thoughts against you about where I may be investing in space next.
Mo Islam
So Mike, you alluded to this a little bit in that you’re getting up to speed. One of the questions I was gonna ask you is about how do you get up to speed on a new industry? And it sounds like a lot of it is just from talking to founders. But maybe tell me a little bit about how you feel like, what was the process of getting up to speed on an industry’s technical space? And I know you mentioned in the beginning, you said, well, we didn’t really have sort of like a sort of a these overarching thesis around space when we first started investing. But tell me about what that looks like today. Like how is that developed? How are you thinking about the industry today? What do you think the current market for startups are? Maybe, yeah, share some thoughts on that.
Mike Palank
Yeah, I’ll start with sort of our process of getting smart and how we do it. And I’ll say this about MaC. I think, I’m sure a lot of VCs do this or say this, but I think one, we’re insanely good at research. And I think that that’s driven by sort of this quality I think all of us have at MaC, which is sort of this knowledge addiction. And I joke and say, it’s kind of like if you were a smoker and you got a job at a cigarette factory and you could just grab a cigarette off the line whenever you wanted it and smoke it, what a great job to have. If you’re addicted to knowledge acquisition and you’re a VC, every day is an opportunity to just satisfy that addiction of knowledge. It’s something I think we would all pay money to do. If you ask someone, what would you do if you didn’t need to make money? I would do this. I would be a VC where I could acquire knowledge, whether it’s by talking to people or other means. And so I think, you know, I do think some people in VC maybe don’t necessarily have a knowledge addiction, but they like the prestige or the payday or whatever reason, the power. but we are, I think truly knowledge addicts at MaC, which leads us to be just insane researchers. And we love to go and really dive in and learn as much as we can in the time that we can do it.
That being said, I think like a lot of seed stage VCs. Majority of our decision calculus does center around the founder. I do think there’s more art to that than science would stoke, for example, you know, when we met them and Adrian sourced that deal for us, the team was phenomenal and it was pretty apparent even back then. I think they were just coming out of, you know, Tom’s garage and setting up their first office. They hadn’t done anything. They had done some simulations, but there was nothing really to speak of. But that being said they had this illustrious career together at Blue Origin. They had this shared vision and passion for full reusability and all the things that could unlock. They were young and hungry and just very aligned and just had a lot of those subjective factors, I think, that VCs look for. And I think that’s what got Adrian most excited about the deal. I was still a bit hesitant, if I’m being honest, because I’m like, what do we know about rocketry? Is this even possible what they’re talking about this regenerative cooled, you know, heat shield on a second stage and, you know, like is, is launch too crowded? Cause every VC, everyone was telling us launch is too crowded. Don’t invest in it. It’s too capital intensive. There’s more supply than demand.
Like I wanted to understand all of these things. I wanted to understand how rockets worked. And, you know, kind of funnily, I came across this article about the, the MaCrocket textbooks that Elon Musk had bought when he was thinking about starting SpaceX. And I literally went and bought all of those books on Amazon. They’re sitting over there. I bought $600 worth of space and rocket free textbooks, told Adrian this, and he’s like, what, what the hell are you doing? Like you don’t have time to read a single textbook, much less six. And it’s all math. Like, what are you going to understand from those? And I’m like, well, I just, maybe I’ll just read the, you know, intro section and like, I want to understand sort of at least the 101 of how rockets work so I could talk to someone about it. Of course, you don’t have the time to become a PhD in rocket science when you’re doing diligence on a company. So I do sort of go back to those books. I mean, for me, it’s an ever sort of evolving knowledge. I’m continuously acquiring information and knowledge about what a company does, how it works, even after investment. But I’d say what’s key I think a doing diligence is finding those true critical sources of information that can get you really smart and as fast of a time period as possible. In Stokes case, what I came across was a YouTube channel called Everyday Astronaut by Tim Dodd. That to me was the gold mine because there, I think I watched maybe all of his videos on rocketry and they’re between 30 and 60, 90 minutes. You can consume all of those in a matter of a few days. And it’s so brilliant because the way he does it is he really brings these complex things down to earth. So they’re understandable by everyday people, as his name suggests.
And that, that to me kind of satisfied, I watched all those videos and sort of got a fundamental and expanding of different types of rockets and, and better understood what Stoke was doing and the different nation of it from watching those videos. So we do any deal because we do a lot of deep tech. We’ll jump into sectors where we don’t have a lot of pre-existing knowledge and it’s about how do we get as smart as you can and as short of an amount of time as possible. The first thing to do is really think about the sources of information. You’ll go and target because they’re not all equal. So we spend a lot of time there and sometimes it is just truly being good at Google and reading articles from different publications, finding different white papers. I think we developed a really good ability to find the key sources of information and go deep on those quickly to get a good level of understanding. And I think that has helped us win deals. I know for a fact that I’ve won a few deals because the founders have been so impressed about the information that we’ve picked up in a short time period. Sometimes we’ll ask them questions that they hadn’t thought of, we’ll kind of identify potential competitors that weren’t on their radar. Josh Diamond at Galvanic jokes and says, I showed up with a binder full of research, which is basically true about cybersecurity and the history of it and different models of it. And he’s just like, you, how do you know all this?
Like, you don’t come from this world. I’m like, I just started going down a rabbit hole. And I just, again, being insanely curious, just couldn’t get enough. And I think that can impress founders and it can help you win a deal. You may not have to do that level of digging to get to comfort, to do a deal. Again, it’s mostly based around the founders, but I think it impresses founders when you take the time to go deep and understand what they’re doing as best as you can. They appreciate that work and I think it kind of shows the kind of partner you’ll be. So we try to do that on every deal. And again, we won’t finish the process. I think by the time we get to conviction and make a commitment, but it does continue after investment where we’re continuously learning about the spaces where our founders are building. So that’s sort of on, yeah, I don’t know if you want to ask, but that’s sort of like around our process and how we get.
Mo Islam
No, that makes no that make that make sense. So you alluded to a few of the companies you’ve already named a few of the companies, but maybe share a little bit about some of your what you consider your sort of notable investments in A&D and maybe talk for a second about like what made you make those investments. And it does sound like to me that most of those investments, at least the ones you’ve named already, Stoke, Epsilon, Galvanic, sounds like some of those were more founder driven investments like, hey, like we get what you’re doing, but really like we’re making a bet on the team. But maybe talk a little bit about what drove those investments into those companies.
Mike Palank
Yeah. So I’d say to date we’ve invested across a number of sectors, sub-sectors across A&D, launch, earth observation, ground segment, GNSS, software for manufacturing, cybersecurity, AI, data labeling, synthetic data, and then more on the defense side, drones, even missiles. So we’ve invested across, I think, a number of key sectors. And again, for most of those, it wasn’t like we took this top-down approach. Maybe on the defense side a little bit, where we kind of more proactively thought, where do we see the best opportunity in space or defense? Where are the biggest dollars flowing? Where are the biggest pain points? That sort of came later. So, you know, Stoke, it’s not like we kind of thought, God, there needs to be a good solid, reliable number two to SpaceX or I guess we did sort of figure it out or concluded that there was more demand for space access than supply, but Stoke, it was just really, we loved the team, thought there was a unique vision. I forgot to mention we did, Starfish was one of our early investments and we didn’t really have a thesis on OSAM or on orbit, you know, servicing and maintenance and satellite life extension. We really liked the team and their vision.
But in hindsight, looking back, I do think, you know, I tell new people thinking about new investors, thinking about investing in space. Like you should consider, you know, RPO, OSAM, life extension as a key area. I think being able to service our assets in space continuously is a really important area. And I think a true key unlock. I mean, the guys that start fish always joke and say like, you know, when you drive your car off the lot, you’re not thinking this is it. This car has got to last me for the rest of my life because I can never fix it. Like you have that confidence that if something goes wrong, you can take it to repair shop in space. Not necessarily true. Everything’s got to be perfect and exquisite before you take it up because it’s really hard to repair the thing after the fact. I mean, you can obviously look at what they did with Hubble, but it’s complicated and expensive. But what if it was as easy to change a tire here on earth as it was to fix a satellite in space, or vice versa, to fix something in space as easy as it is to change a tire here? That will be a big unlock companies like Starfish and what they’ll enable is a critical thing to see out our true potential in space. So yeah, in hindsight, I think that’s a good area. Earth Observation, I think we did a bit more thesis -driven work there and looked at the full landscape, the different data sets from SAR to optical to thermal to hyperspectral and what each remote sensing type unlocked, what data provided, what the use cases were here on Earth. And we kind of concluded that our thought was every company, every Fortune 500, probably at some point should in some sense be a space company. There’s information we can gather about our planet from space that could help a lot of companies. It’s just that a lot of them, they don’t think have the means or the understanding to access this data and turn it into sort of business insights that are easily actionable upon.
But our sort of thesis was that as the access to space data kind of democratizes and the ease of use of it sort of increases that more and more companies will figure out how to use this data and how to fuse it with other data sources that are sometimes collected terrestrial, terrestrially to help their businesses. And so we wanted to have exposure to earth observation and then it kind of became like, well, where? And by the time we were there, like SAR felt fairly crowded, Optical felt fairly crowded. We felt like some of the category winners were already emerging or had emerged, but in hyperspectral, we felt like it was more of a wide open space and that we could find what could become a category winner and we picked Wyvern. They have three satellites in space and delivering commercial imagery. We also felt hyperspectral was a very differentiated type of data set from the others that had unique use cases. Then we met Clint Grauman at Newview and had never met anyone building a LIDAR constellation and quickly saw the difference that LIDAR data could provide and how it could enhance other data sets. And the fact that no one was building in this space, like NewView could have sort of a monopoly on LIDAR data from space, that got us really excited. So we backed NewView. And so, yeah, that’s kind of how it’s played out. In defense, it has been more, I guess, proactive. We’ve looked at you know, the J book, the, the NDAA to kind of see where, where will defense dollars be spent in the years ahead? What are the biggest areas of critical need? where we had, you know, geopolitically, if there’s going to be a conflict, you know, in the South China sea, what kind of, you know, I guess like capabilities will we need to be successful there? And, you know, so that sort of gave us a short list of technologies that we honed in on and then tried to meet companies that were fielding new companies or new technologies in those areas.
That’s what led to our investments in Swarm Arrow. It’s making long range group five large drones. It’s what led to our investment in Aon that’s making more accurate, less expensive munitions like the Javelin, which are in very short supply. Yeah, we’ve become a bit more thesis driven as we’ve moved on and in space and we can talk about this now is thinking through with this third fund and have not yet made a space investment out of fund three. Where do we invest given we’ve invested in these critical areas thus far and because we’re a generalist firm, we’re probably not going to double up and launch. We’re probably not going to do a second or third EO company. I think we’re pretty well positioned in those areas until those companies exit. So what are the next areas that have the most potential, can feel venture scale outcomes, or we can meet great teams? And I wouldn’t even mind asking you that question. I can talk about some of the areas that I’ve been going deeper into. Can’t say I’ve sort of come out the other end thinking that, yes, this is definitely an area where I want to make an investment. But just as an example, some of the areas I’ve been thinking more about, one is propulsion. I’ve met a lot of propulsion companies and frankly, I’ve been a bit hesitant, it seems like companies like Ursa Major have been doing well and finding a great market. We’ve met a lot of satellite component companies.
That’s been challenging. But again, going back to like we thought Stoke had something truly uniquely novel. Is there something truly uniquely novel in propulsion? We’ve met a V-Leo company that’s developing a novel air breathing technology to kind of unlock V-Leo orbits very close to Earth. If you can do that, you know, the impact it could have on earth observation and SATCOM can be pretty monumental. So that’s sort of been an area where I’ve been thinking and looking more. And then two other areas I’ve been thinking more about in space is sort of in space on orbit compute, you know, you know, what, what happens if, if all these satellites can sort of do their own computing on orbit and filter through the mass volumes of data that they’re collecting to send down, you know, not just filter data. So take out all the pictures with clouds in them and just send me the ones that are usable, but even more like actually do the analysis on the satellite, understand some of the end user needs and just send down what’s most useful. You know, what that can do in terms of a time to valuable data perspective and reduce cost of downlinks, downlink budgets like that, that could be a big unlock. And then the other one is sort of in space networking.
You know, what can happen, you know, when we can sort of interlink all these different satellite constellations and satellites generally where they can sort of route data in between them to find the most optimal path down to earth. Maybe you don’t even have to send data down. We have more space stations, just routing information throughout space more efficiently in the way that we’ve got a really robust way to route data packets here on earth to basically kind of make the internet function that seems to be an interesting and important area for space. So meeting more companies there, but honestly, like still having concluded if, if we think there’s, there’s venture scale opportunities there, I’m sure some firms think absolutely and some think absolutely not, but still working through that. I don’t know if there are other areas that, you know, you’ve been paying attention to where you think, God, there’s, there’s not a category winner here yet. And when one emerges, it’s going to be absolutely massive because this space is absolutely massive. But we’ve looked at,looked at everything I feel like, you know, yeah.
Mo Islam
Well, I have some thoughts to your question, but luckily I’m not in the hot seat today. I get to ask the questions. And I actually, actually, actually, actually kidding aside, there are a number of other things I would actually, I want to, I want to get your thoughts on. So the first point I’ll make is the point on like, you know, not finding like the compelling opportunity right now. I’ve heard that, you know, you’re not the first person to say that you know, on an extreme case, on an extreme basis, you know, we recently had tests from Bessemer on the call, on the show, I should say. And, you know, she said like, you know, we haven’t made an investment in space in many years. And that’s because we just haven’t found anything compelling. And that’s okay. We’re just, I mean, it’s not like we’re not looking, but we just haven’t found anything. And I think that’s, I don’t know if I grew with that. I think that’s a very, it’s a very extreme position to take on the space industry. But I do think like, as time goes on, there’s no question that, you know, there’s a finite number of problems to solve, right? And you have to pick the right order of when you’re solving those problems, right? It’s like when there’s lots of problems that I can point to right now that will be businesses in 10 years, but they’re not businesses today. Right?
So it’s a question of like, are there enough finite problems to solve in the next five years that actually generate like real capital and in an environment where money is slightly more difficult to find than it was even, you know, three, four, five years ago. The question I would actually ask you is, you meet with a lot of companies. You’ve seen a lot and you’ve also invested in a number of space companies. Specific to space, what are some common mistakes that you’ve, or maybe like, yeah, mistakes is probably what I’m looking for. Like mistakes that you’ve seen founders make either when telling their story where you’re like, not compelling to me, or be founders that you’ve worked with, like in your as in your report codes, where you feel like these are some common mistakes you’ve seen founders make in the early days that anyone listening to can maybe glean some insight from.
Mike Palank
For sure. So yeah, I think storytelling is important. I think at the end of the day, especially if you’re raising around, that’s not a growth round. I think a lot of the, even at A, maybe even B, I think a lot, you know, it’s, it’s investors are people, you know, we all respond to great stories. And so I think telling your story in the right way and you know, some engineers, engineering led companies are really great storytelling and some are not. So I’m just kind of give you the brass tacks and you know, storytelling, there’s a bit of flair. There’s a bit of entertainment to it. Like there’s, I always tell people, go, you know, go read Joseph Campbell’s book, you know, the hero’s journey. And there is kind of a tried and true format to great storytelling. And I think you should try to craft your, your sales pitch, your investor pitch into a really tried and true storytelling format narrative. Because I think the more compelling of a story you tell, the more folks are going to listen, pay attention and remember but that’s one thing. But I think more tactically, maybe even more importantly is one is just speed. I think a lot of, I’ve seen this a lot, especially series A, B investors, space companies fit a different profile. When you got to raise an A or B, you probably don’t have the revenue levels. If you have any revenue that a SaaS company would have, it’s like, you can raise a series A as a SaaS company if you hit whatever, two, $3 million in revenue. It’s really solid. People will take the meeting you’re not going to have, most space companies aren’t going to have a lot of, if any, revenue at series A, maybe not even series B.
And so it’s a bit of a different profile, but what I’ve seen a lot of investors ask in these rounds is just questions around speed. I think everyone’s trying to pattern match to an Elon type. And it is a pet peeve of mine, even at sea, I’ll meet companies and it’s like, we plan to get our first satellite up, you know, two years or three years. And I understand, you know, all the bottlenecks that sort of, you know, kind of the reasons why it takes so long. But I think what people are looking for is someone to say, I’m going to get my satellite up in a year. Or if it’s, if they say two years or three years and someone pushes back and says, you know, why not? Why not next year? What would it take to like, maybe take a step back and think in first principles, throw out rule books and be like, well, if you put a gun to my head and said, you got to launch this next year or else here’s how I would do it. And some of these things may not be feasible with the state of things. Sometimes there’s just long lead times for products that are unavoidable. Obviously capital is a constraint, but you know, let’s just say you had the capital. Could you do this in a year versus three years? And I’ve seen it. I’ve been on calls where some of our founders have been asked that question by other VCs. And I’ve seen some fumble with that answer and some get kind of ingenious with it. And again, even if your answer maybe isn’t truly possible, not something you can actually enact today, it just sort of like unlocks your thinking to these investors and I just, I would encourage any founder, like if you build your deck and you have your timeline for your first thing going up, like see if you could shave a year off that and how crazy would that be? Could you craft a story?
Cause that, if you can do that and tell a compelling narrative around how you can do it in order of magnitude faster than other people. I mean, Apex, what they got their first satellite up within a year of funding. I think that’s something that Ian leaned into from the very beginning was he was just going to go insanely fast, and he actually has been able to do it and look at the capital he’s been able to attract. So I think that’s, that’s a testament to like, if you can come up with a good strategy or even just a narrative to how you’re going to move an order of magnitude faster than other companies in the space, you’re going to stand out. And then they’re going to start thinking, is this the next Elon type? Because everyone’s saying first thing up in three years. And this guy’s saying, girl’s saying two years or one year, there’s something different here. And so I would just encourage founders to think creatively and how you can speed things up, and if things aren’t there to make that possible now, like just say like, if this existed or whatever, like then I could like, but maybe just make clear like what are the real true bottlenecks that are preventing you from, you know, getting things done in order of magnitude faster. So that, that’s a key piece of advice I’d put out there and would love to see more of that. And then, you know, to the extent you can, I think it was really smart what Varda did, which is getting that contract to use their technology to test hypersonics, kind of hypersonic reentry, which was not their core business, maybe not even related to what their long -term core business is. It was $65 million or whatever it was in short-term revenue.
I’ve backed a company building a power solution for the moon. I am very long-term bullish on the moon to your point of like, some of these things I think hold enormous potential in the long run. But as a VC, yeah, you think long-term, we’re investing in companies that will mature over time, but you also think in 18 to 24 month increments, like, what are you going to do in the next 18 months that’s going to unlock the next round? And can you earn sources of revenue trustfully that will sort of show, you know, sort of show hustles, show ingenuity, you know, just give you money to help operate the business? Like be thoughtful about short-term opportunities of revenue, even if they’re sort of outside the core focus and you obviously have to be careful with getting distracted. But again, in the case of Ardis case, I think it was a really smart move to go after and then win that contract. And so I encourage all of our companies and other companies to think about short term opportunities. And that’s also including government opportunities, non diluted governments, Sibbers, DARPA funding.
I mean, you name it, there are vast pools of capital from various government agencies that can be tapped into. Don’t wait until it’s too late to start thinking about those. I think that should almost be your plan when you’re making your very first deck. Almost have a slide if it’s relevant of here are the specific programs we think we can go after to win government money. Here’s the dollar amounts attached to those, the dollar amounts we think we can win. I mean, Starfish did a really good job of that. I think in their series A deck, they had a slide where they just, they literally spelled out six or seven government opportunities and how they can expand and what the dollar amounts were. One of those came true and they won their Space Force contracts, rat-fi. But it was very helpful, I think, in raising their Series A for investors to see that they had this plan of attack to go after short-term government revenue. And you would think all companies do that, but a lot don’t. And they get into it after the fact and sometimes, cash is getting low. Where else can we get money from? Let’s go after government money. And maybe by then it’s too late. So I think having a plan of action to go after non -dilutive government money from the get -go doesn’t mean you actually have to have like a government, you know, business development person, but you should have a plan thought out. And I think that that could be very valuable.
Mo Islam
You know, I want to I want to actually pull on a thread that I think you have a very unique perspective on, which is, you know, you’ve you’ve mentioned earlier, MaC, you know, leans into the racial diversity and thinks about that when it comes to building a firm. The space industry is not a very diverse place. And that’s changing. But, you know, historically, you know, not super diverse when it comes to like, at least where the decision makers live. Right. Curious what you’ve seen, how is that changing? Because that’s something that I know is top of mind for you guys. But what is your perspective on diversity in the space industry?
Mike Palank
Yeah, it’s, it’s a really important thing. And honestly, an area where I get a little bit of unease being one, the, you know, the white GP at MaC, the guy that’s, you know, focused on space investments where there just is less diversity. And I think all of our space founders are white folks. And, you know, obviously I see a lot of economic opportunity here and a lot of opportunity for humanity to benefit. But how do we bring more people of color into this industry? And it’s an area of focus of mine. And obviously there are a lot of people working to bring more diversity and there’s some really great fellowship programs that work to bring in people of color into internships and fellowships, which I think is very important because part of it is just build the pipeline, introduce people from different backgrounds or different communities to the space sector, show them the promise and sort of help them from the bottom up. And then maybe also attracting some folks that are senior into the space industry that are people of color. So there’s different ways to go about it. But it has been a challenge.
And I’d say in four years, maybe I’ve met five, six companies, space companies that were started by someone of color. So out of hundreds, hundreds and hundreds that I’ve met, definitely less than I think 1%. And I’m not sure. I remember, one of our first investments was into a publishing business called Blavity, which is a publication focused on, you know, black millennials. And they have a great event. that’s called Afro tech. That’s sort of the largest tech gathering for people of color in the country and suggested to the CEO of Blavity, like maybe we should do like a, you know, like a space track and have some, there’s former black astronauts, there are, you know, black executives working in the space industry at all levels. Like it’s not like there are none let’s bring them in and highlight the space industry from people of color’s perspective. And the kind of thought was like, we’ve got enough problems here on earth to figure out before we start thinking about space. And it’s an honest comment. And I think a lot of people of color may hold that view of like, we’ve got to figure other shit out before we can start to think about going to the moon or something.But I think that’s the problem of storytelling and miscommunication and not sharing the right information. I think, yeah, I think anyone should be thinking about and could have a career of some type in space. And I think if it is just the realm of white men, which it’s not, there are other women, but if it’s mostly the realm of white men, we’re gonna be in trouble. Like I think there’s plenty of research out there that shows diverse teams of all types outperform.
You want that diversity of thought. And so we 100% need more participation from underrepresented communities in the space sector. And the fellowships are a great way to attack that. To be honest, I’m still thinking about other ways where we can bring in more diversity. Part of it, again, maybe tapping into my media background, is just like, we need, it’s like, I remember the first Star Wars movie that had a black Jedi. My partner, as young boys and, you know, he said they were so excited to see that movie because they’ve loved Star Wars. They love Luke Skywalker. They’ve just never seen themselves represented in those movies. And the first time they saw, you know, a black dead eye, it’s like, okay. Like it got them very excited. Like, you know, most of the sci-fi movies, like they don’t have black protagonists. Like maybe we just need more space movies with people of color in them, you know more content where people are watching it, it’s more in the zeitgeist and maybe that filters its way through and also helps with this, but I don’t know.
Mo Islam
Well, I’ll say that, you know, look, remember the Artemis mission, right? The goal of the Artemis mission is to land, or Artemis is to land the first, well, I’m not saying it’s the main goal, but I think one of the things that will be very exciting about Artemis is that it’s gonna land the first female astronaut and the first person of color on the moon, which I think that in and of itself is gonna inspire a whole new generation. So I think that the future, I mean, there’s, for sure a lot of work to be done, but I think the future of what this industry is going to look like from a diversity perspective is I think I tend to be a bit optimistic about it. I think it’s pretty bright.
Mike Palank
Cause space is cool. Like who doesn’t, who wouldn’t love space? I mean, my, my seven year, six year old brings his friends over. He’s got, you know, friends of color. He’s got black friends. They come over and they see my space Legos. I see my satellite or my telescope over here, my Falcon nine, you know, model and they, they love it. They freak out. Who doesn’t love space? Space is just, it’s inherently exciting and interesting. We just have to make it more accessible, more visible to people. And yeah, like that stated goal, the Artemis mission to bring a woman and a black person to the moon is amazing and we need that. And when that stuff is televised, that’s gonna have a huge impact. So it’s more stuff like that.
Mo Islam
So as we wrap up here, Mike, I just have one final question for you. Tell us a little bit about, and you alluded a little bit to underhyped, I would say, sectors which you mentioned, or subsectors which you mentioned, like you’re very bullish on the moon, which I know there’s a lot of wariness around what the actual economic, like what the ROI is of doing business on the moon. But I’m curious, like, you know overhyped, underhyped, give me some quick hits on areas of the market where you’re like, we’re trying to stay away from those and these are the areas that we tend to lean into.
Mike Palank
For sure. Yeah. Hopefully I don’t get any angry emails from this, but I’ll speak my mind. I’ll start with underhyped. I mentioned, you know, I think lunar is underhyped. I’m long-term bullish. I do think there are some key unlocks. You know, the U.S. Postal Service air mail was a key unlock for commercial aviation. I think we still need, you know, some of those air mail U.S. Postal Service moments for space. What are those things that are going to unlock a true in-space economy, a true lunar economy, DeLion at Varda and Founders Fund has talked about this. Once Varda scales, the need for like more water, more power will grow. It might make sense to mine that water on the moon and bring it to Varda factories in space, first taking it up from the earth. But like the demand for water may not be large enough to necessitate or sustain a lunar business right now, but when Varda scales, maybe it will. So we need some of those sort of enabling companies and technologies to sort of hit some level of maturity first but I am long-term bullish in the moon. There are a lot of assets going to the moon over the next five years. For certain use cases, it may not be too early to invest in the moon. I obviously made a power investment with a company called Volt to Space, but I do think lunar is a bit underhyped. I think Earth observation is underhyped. I think people look at the SPAC companies and their performance.
I mean, Planet just made a fairly large layoff this week or last week. People are just like, there’s no business in EO, but we’re in such early endings and there’s so much value that can be gained by maturing the EO industry that I think there’s a lot of runway ahead of it. I think fewer VC share that sentiment, but I definitely think EO is under hyped, over hyped. Maybe that’s what people want to hear. We looked at a few bus manufacturing businesses driven in part because we have three satellite companies, Wyvern, New View, and Zona, and all three had major bottlenecks from satellite manufacturing. And like in Zona’s case, it was like, they want to build out a constellation of 300 over time. Do we just spin up a factory and start making these ourselves from the get-go? Do we outsource it to someone else? And there’s some really good legacy bus manufacturers and some not so good ones. And this was sort of a reoccurring theme on board meetings that sort of led me to like, all right, let me go meet as many bus manufacturing businesses as I can there are legacy ones and there’s obviously the Primes that are doing this. And then I got to meet, I knew Ian from Apex when he was still at Village Global. We had done a few deals together. I remember over lunch when he was telling me about the vision of what Apex would be. I met the team at K2 when they were just getting started and love those guys, solve the problems that they were going to solve firsthand like a lot of areas just had some concerns or like, you know, how big can these things scale? We’ve got eight, 9 ,000 satellites up now. How many new satellites will be launched annually, you know, over the next 10 years? There’s all kinds of projections from 20,000 to hundreds of thousands.
You know, the big mega constellations are likely going to be vertically integrated and do these themselves. So if you take them out of the equation, like how many new satellites can be built and launched over the next 10 years? Is that enough of a business to have a venture scale outcome in some of these companies. Now that being said, K2 and Apex have been able to raise a lot of capital, bring in some A plus investors. Love to see how they thought about market growth and underwrote those investments. Maybe I’ll be kicking myself for not investing in those companies, but for us, my perspective at the time was, it just, I didn’t know if I saw the venture scale outcome at the time. And we’ll see if that was totally divided over time, but all the money going in, I wouldn’t mind some of those dollars flowing into some of my more under-hyped companies like NEO. Sometimes these companies can attract a lot of capital and VCs don’t pay attention to other areas. Is bus manufacturing overhyped? We’ll see. That’s been our conclusion to date, but time will tell.
Mo Islam
Yeah, no, very fair. And, you know, we’ve referred to wide ranging number of overhyped underhyped type businesses. And you know, the one obviously that we hear more often than on his launch, but we don’t need to get into that. It’s a whole it’s a whole other role game. But, but Mike,
Mike Palank
I mean, I mean, launch, launch is overhyped and over invested and you know, we only back. Well, yeah, I think if you’re doing something truly novel that can really put you in competition with SpaceX, you’re probably worth consideration. If you’re building another version of Falcon nine or something scups subscale to that, it’s going to be challenging. We’re going to see, I think a big shakeout launch, but I don’t disagree. Launch is probably overhyped.
Mo Islam
Yeah, yeah, we’ll see. I think there’s a lot of there’s, you know, it’ll be a very interesting next couple years. A lot of the companies we’re here talking about are going to have some, you know, very big moments. But Mike, really appreciate you being on the show. Thank you. This is great. It’s such an interesting perspective from someone with such a unique background, but you guys have done such impactful work in space in a very short amount of time. And, you know, your name comes up a lot. I mean, I’ll say it, I’ll say it for sure. I’ll give you guys credit like, you know, you know, from from four years ago, I’d say being sort of newbies to the industry to now hearing your name and you guys have invested in a lot of the great businesses in space. So congrats on all the success so far.
Mike Palank
I appreciate that Mo. It’s a passion area for us. We love it. Want to continue to do more in this space. And yeah, I remember when you guys launched, you know, it was like, this is, this is amazing. This is a must read. And now to be on your podcast. It’s a nice full circle moment. It’s been great getting to know you and Ari and the team.
Mo Islam
Yeah, well, we appreciate the support. Thank you for the thank you for well, we’ll say I’ll send you a I’ll send you the new version of the payload t shirt as soon as it’s out. So well, looking forward to having back having you back on the show. Mike, thanks so much.
Mike Palank
Alright, love it. Perfect.
All right, sounds good.
