How to Lend Money to Astronauts, with Russell Shaw (Equatorial Launch Australia)
Today's episode stretches the lending niche, but fifty-four years ago, humanity landed on the moon, so I'm feeling flexible. And anyway, people lend to airport operators all the time, so it won't be too long until spaceports are seen as similarly stable fixed-cost operators.
When I was younger, if a conversation involved a South African tech billionaire and space, you were talking about Mark Shuttleworth (lovely nominative determinism there, by the way). More recently, the same talking points would more of course be associated with Elon Musk. I'll never not enjoy seeing a SpaceX rocket land back on a barge after a successful launch. But Elon's been busy with other matters, and now there's a new name in the Industry: Russell Shaw.
Is Russell a tech billionaire? No. But I'm not Joe Rogan, so I can't exactly point fingers 🤣 And Russell is involved in an exciting project launching satellites from equatorial Australia.
You should visit Equatorial Launch Australia at https://ela.space/ - the launch footage alone is worth our click.
If you're interested in investing, or indeed if you're interested in launching something into space, feel free to contact Russel on LinkedIn https://www.linkedin.com/in/russellshaw/
You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24
If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.
Regards, Brendan
The full written transcript, with timestamps, is below:
Russell Shaw 0:00
The applications for space and what you can do out of it are so massively, you can just see a whole new industries, emerging industries, which at face value have absolutely nothing to do with space.
Brendan Le Grange 0:14
Surprisingly early in How to Lend Money to Strangers's life, PR companies began to approach me to place guests on the show. I was flattered, and I was delighted: doors that I would have expected to have to kick dow, were now being open from the inside.
But not every guest makes sense.
One thing that I've always been clear on is that there has to be a lending angle. I'm willing to stretch to find that and some of my favourite episodes have been stretches, but I have to link it back to lending in one way or another. I'm very strict on this. I've turned away many great guests for this...
But today I break that rule. Welcome to How to Lend Money to Astronauts with Brendan le Grange.
Russell and I do make a token effort to at least mentioned lending, but I'll be honest, it's 1% lending and 99% astronauts. Well, technically, not even that, because we're talking unmanned satellites. Nevermind 54 years ago today, man landed on the moon, so I'm in the mood to make an exception.
Russell Shaw, CFO and General Manager Commercial at Equatorial Launch Australia, welcome to the show.
Russell Shaw 1:35
Thanks, Brendan. Pleasure to be on the show. And great to chat to you again.
Brendan Le Grange 1:38
Russell, when you and I were studying the person that everyone pointed to for inspiration was Mark Shuttleworth - it's not strictly true, but let's just call him South Africa's first tech billionaire. And he went on to become the first South African in space when he caught a lift aboard a Soyuz rocket as a very early space tourist.
Now, you and Mark share a number of similarities: you both have a Bachelor of Business Science from UCT; you are both, technically, not billionaires; and you both have a space connection. Sure, he may be closer to being a billionaire than you and he actually went into space, but tell me, how did you go from studying accounting in Cape Town to helping to launch rockets from the Australian northern territories?
Russell Shaw 2:17
It wasn't what I aspired to do, for sure. Like many of us - other than Mark Shuttleworth deciding he wanted to go into space - it just wasn't really a consideration for us at that point in time. So after Business Science and Accounting, I did the three year articles up with PwC in Johannesburg.
From there, most people took the voyage north to head up to London to continue their professional development and career there. I wanted to do something different. So I headed more northeast I suppose, or to the Far East is probably more accurate, as I went off and got to transfer to Tokyo. I got a one way ticket and had a wonderful two years there, really learning a new language in a completely foreign environment to South Africa, to Johannesburg - a great cultural shock.
I convinced myself that learning US GAAP would be very exciting... which it wasn't. And after a couple too many quarters of Sarbanes Oxley reporting, as much as I love Japan and Tokyo, I couldn't fathom doing auditing anymore. So I was lucky enough to get a break and took up a job at Macquarie Bank in Australia.
So I moved to Sydney and became an equity analyst there - again in a foreign country in a completely foreign role covering the transport and aviation sector, and only half the job is researched, the other Half is marketing and spending time with clients. I really enjoyed covering the airline sector.
So when I got the opportunity to actually go into the airline industry, I jumped at that opportunity thinking that it's pretty easy looking at it from the outside in. Needless to say it was a lot harder from the inside looking out than the outside looking in. And we spent the better part of the next four to five years fighting to stay alive after a bruising, and senseless one must say, capacity war with Qantas.
I moved from the financial side of the business into the commercial side, running the network and all the pricing and seating inventory and Alliance partnerships for for the airlines - so probably about 50% of the core commercial activities. I really enjoyed that.
That came to an end pretty soon after COVID, though. There was a restructure, private equity took over the business out of administration, and I chose to go and try something else.
So after a bit of time off, some of the colleagues who've I cross paths with going through Virgin Australia had joined a startup in the space industry called Equatorial Launch Australia so I jumped at the opportunity.
And having worked with nothing but multinationals for some time, to go into a startup where I was effectively you know, employee number four or five, was quite a shock to the system. We worked pretty hard to get three NASA rockets launched out of Australia in the short space of three to four months last year, so that's how I ended up where I am
Brendan Le Grange 4:41
When you go to www.ELA.space you're literally met by a rocket launch and you can't help but smile.
So tell me in sort of more practical terms now that you you're seeing it from the inside, as well - what is the ELA What are you doing there? And for my audiences all in the financial services, so just for sort of a basic primer on it, how does that whole space industry fit together globally?
Russell Shaw 5:04
Getting things into space has historically always been the domain of governments - the US and Russian governments have been going at it for the better part of 60 or 70 years.
Manned Spaceflight was obviously the high profile one, but really, in more recent years, the game has been to get satellites up into a space, which would do support communications, satellite TV, and clearly mobile phone, it's probably the most prevalent one that we use satellites for every single day in GPS.
So the access to space has been a real challenge, which has been really confined by these extremely large launch vehicles - the Apollo 5 or the Saturm V, there's a nice Lego replica there you can see behind me, but the size of that rocket and the amount of payload and fuel that it has to get to effectively burn off enough energy to lift itself off the ground, and then continue as it gets lighter and the solid fuel is extinguished, it gets faster and faster up to you know, Mac five, and then up to Mac 17. So it's pretty amazing that these things get off the ground.
The big change in the industry, Brendan, has in recent years, been that the size of rockets has actually got smaller. And so the cost of that access to space, if you are a satellite company, or you are a services company who wants to use satellite services has come down significantly.
If you go back to the 1980s, the Space Shuttle was effectively the first freighter carrier, if you like, to take things into space. And the cost of getting just one kilo into space was around 60,000 US dollars then. So when you think about the size of these enormous satellites, which were going up into, you know, 35,000 kilometres into the sky and into a geostationary orbit, where they effectively cover the same part of the world all day round. Those are enormous costs to get those things up.
Now, what we're seeing, is clearly that the world has changed, technology has improved and Elon Musk and SpaceX, to be fair, has been a major catalyst in actually reducing the cost of access to space from that crazy $60,000 a kilo down to something closer to $6,000 per kilo.
And that obviously makes the economics of putting up a satellite, or a satellite constellation, and then the services that you can associate with that a lot more accessible. So that's been a major change.
And whilst Elon is going one way, in creating bigger and bigger rockets with Falcon 9, and then more recently starship, what we've seen in the industry is effectively smaller launch vehicles as well being developed.
These are smaller vehicles, which can take a payload of, let's say, 150 kilos, or up to 500, or 1000 kilos into space. And a fairly similar, if not slightly higher, but a more similar cost per kilo to what Elon Musk has been doing. And so that again, opens things up for much more precision delivery into space, which means that instead of the satellites going up on a rideshare mission with SpaceX and waiting three years to orbit the earth 1,000 times and making very small adjustments every single time to get to where they need to be for the coverage that they want, they can start generating revenue much quicker than they're not burning as much fuel and they will have a longer life and specs.
So we are building a spaceport in the Northern Territory, which is a multiuser commercial spaceport and our customers, if you like, are effectively those small to medium launch vehicles who are looking to take smaller payloads up into space, which are very bespoke to a particular customer.
Brendan Le Grange 8:15
Why Northern Australia, what difference does that give you two other locations that might be looking to get in the same game?
Russell Shaw 8:23
The big benefit is, again, and you only really know this when you start working the industry, is that the Earth spins faster around the equator than it does at either pole. And so clearly having an equatorial location means that when you're launching a rocket from an equatorial location, the launch vehicle can take advantage of the speed at which the Earth is spinning to get itself up into orbit, which means you can either burn less fuel, or more realistically, you can you can take a higher payload for the same sort of category or thrust rating for your rocket.
Some of the rockets for example, that launch out of New Zealand or out of North America at a much higher or lower latitude than we are, they might take a 240 kilogramme payload at their maximum. Whereas if they were launching from Equatorial launches Australia sign up in the Northern Territory in Australia, because for 330 kilos, and that makes quite a big difference clearly eco when you're trying to pack as much as you can into a really small satellite with very thin thin margins of safety.
So key things you need is that the equatorial location is a real benefit.
The geopolitical stability that that Australia brings, gives us an advantage over places you know, there are some spots in in Brazil, again, a bit of a geopolitical challenge there with a site that's run by the Brazilian military, which really do a great job but perception wise, it's more challenging for international customers.
And then the other big one, which which has a long pedigree is Kourou in French Guiana, which is run by the European Space Agency. It is about eight degrees north of the equator, so very similar to us, we were 12 degrees south of the equator, but traditionally it has been the domain of large European vehicles like Ariane which is a huge rocket and question marks over how much launch frequency they can get for smaller the equals, whereas our site is ideally located.
And it has the requisite infrastructure that you need as well like a port and an airport really close by. But not a lot of people, you know, a lot of people when you're launching, because if something goes wrong, it can be fairly catastrophic. The fuel has been, let's to get the thing up in the sky, if something goes wrong, and things do go wrong, occasionally, it comes back down effectively as a bomb.
So there is a huge regulatory framework that goes over launch. And that's what makes it quite complicated in terms of getting your launch licences, and making sure that you as a facility are well equipped to manage the operation of multiple launches.
Brendan Le Grange 10:36
You and I discussed offline before the recording that isn't actually any lending in here, but obviously there is money involved in this funding to get something like this off the ground to get a project going.
How does that work, who's putting money into to fund the sort of complex and risky project? And how do the economics work? So that if, hypothetically, we had a lender looking to lend money to astronauts, because I'm still going to use that as the the episode title, but yeah, how did the economics of private space work?
Russell Shaw 11:10
The size of the space industry, if you like, it's forecast to get to over a trillion dollars by 2040, from a couple of 100 billion at the moment. So it's a pretty high growth area.
Outside of the traditional government funding and grants, which is very prevalent until recently in Australia, and in both European and the US. It has typically been privately funded through venture capital, venture capital market for space has been extremely successful, I guess from and someone who was looking for fundraisings perspective, particularly, I think 2019/ 20/ 21, there was around one to $2 billion of fundraising efforts that went through the industry each year.
That's clearly like other industries has has turned off quite quickly, over the last 12 to 18 months.
And SPAC vehicles was another one, particularly in the US were fledgling space companies were effectively acquired by a stack and did a reverse listing.
Most of those haven't gone particularly well and the most pretty well publicised one of that is Virgin Orbit, which had a failure in one of its launches, and it has gone into bankruptcy. But there are other companies who are who are successful, there is a an absolute plethora of companies who are probably 12 to 18 months away from doing their maiden successful launch.
And so we're seeing a significant amount of potential participants, particularly that lowering of the market, but certainly from from our perspective, and I think, you know, this will be an emerging trend in the sectors if you look at certain components of the value chain in space, a lot of them do have infrastructure like qualities over time. And clearly we've seen in other industries, you know, particularly communications infrastructure, airports, roads, those have proven to be extremely lucrative places for debt providers, because you have a high predictability of revenue, you've got really good asset backing, and they typically assets which are difficult to replicate or compete against space. And certainly components of that I think, are on that road or on their pathway.
And we're looking at it the same way for us as a spaceport, where we'd like to liken ourselves to an airport over time, and that once our operations are more mature, and we've got greater reliability from those launch vehicles that are using our spaceports, we'd like to think of ourselves as more of an infrastructure stock, where we can use that asset backing to effectively raise more cost-effective debt.
Brendan Le Grange 13:25
It echoes a lot of older, more mature industries, and you can certainly see a pathway, I think.
Russell Shaw 13:29
That predictability of the operation is, you know, is what needs to still evolve within the industry.
SpaceX is doing an amazing job. I mean, you talk about launches every couple of years. I mean, these guys are now launching every couple of days. So they're on track to launch at five times this year. And they do some pretty cool stuff, you know, like they've brought down their cost of access, because they actually reuse parts of their rocket. So historically, NASA would expend, you know, 99% of its rocket, whereas SpaceX effectively once the fuel has been extinguished from the first stage of the rocket, they actually steer and navigate that booster, and it lands back down on a pad. And he's done this 156 times already. So it's pretty proven technology and basics makes the industry look a lot easier than it is for everybody else who are still trying to figure out just how to get the thing up, nevermind to get how to get the booster back.
But I think it tells you and you as you say that the industry in certain areas is maturing. And if you've got that predictability and stability of revenues, clearly, then that means that there's far more funding opportunities going forward, particularly from a debt standpoint.
Brendan Le Grange 14:31
What are the trends or activities happening in the space industry going forward that curious onlookers can be looking forward to or keeping an eye on?
Russell Shaw 14:41
Yeah, so I mean, there's all these sort of, I guess, associated industry so for example, space awareness and space situational awareness is a huge industry where, because the world's gone from 3,000 or 4,000 satellites just three or four years ago to north of 12,000 already, and will be north of 100,000 by 2030.
Now it doesn't help when when the odd Russian did satellite has blown up as well, and then explodes those pieces into 25,000 spaces clearly a big place, but the fact that they're all orbiting the Earth at different inclinations and at different altitudes, means that, you know, you've got to effectively 3D model this.
And there are companies that do this that look actively at whether there's going to be any collisions. In orbit, refuelling is a new industry as well. And even companies which are looking at how do you deal with things, which means sending a fixer be sending something up to take things back down.
And the good thing is, once they generally come back down, they burn up on re entry. So you know, it's not so much of a landing issue is just about getting it to the point where we're stops overeating and starts getting burned up by the Earth's atmosphere. Those are just a couple of examples of, of the fledgling industries.
You know, when you talk about the applications for satellites, in space, you know, Earth observation is critical. And an Australian company, for example, which has found a way in which, by using certain types of scanning, you can actually scan land and effectively find out or discover what the composition of minerals is underneath that land, which can really change the landscape from a mining exploration standpoint, you know, instead of having to draw holes every five kilometres or whatever they do, you can see a lot of this from space.
And clearly that that reduces the cost.
In Australia, because of the vast landmass that we have here. A lot of farmers actually subscribe to satellite data. And then you can combine AI to look at where there may be issues with crops or with disease. And so instead of spraying their entire, you know, multiple acre property, they're actually honing in on a particular area to kill bugs.
So the applications for space and what you can do out of it are massive.
And these are just a handful of examples where you can just see a whole new industries emerging and changes in the way in which people are doing industries, which which at face value, have absolutely nothing to do with space. It all feeds into the risk assessment matrix. And it's just about how lenders I guess, are thinking about that in terms of how their business model their risk assessment criteria will change and how they can use satellite data combined with a I guess, to to make a more informed decision. And, you know, work I think, risk return framework.
Brendan Le Grange 17:08
Russell, spaceflight, I think, is still is the boldest of goals of ambitions and you know, very evocative as a, as an idea, equatorial launch Australia started, you're really have three, as you said, successful launches in the first couple of months of life. So clearly, you're a group of people, you're a company that is equally bold, as you think about yourselves within that kind of future of the space industry.
What are you focusing on? What can people expect to be coming out of Australia, in the next sort of months or years,
Russell Shaw 17:36
The application of what we can do and as these rockets get more powerful, and the the fuels get more efficient, in terms of how they do it, we can see a future for our site where there'll be a lot of launches that actually go up not just to deploy satellites, but to take materials on to the moon, for example.
And interestingly enough, it's it's far more efficient for things going into what they call deep space beyond the moon to actually land on the moon first and then capitalise on the lack of gravity on the moon to to launch or from the moon again, and go somewhere else. So we can see a lot of future applications for for what we do with with these more powerful, smaller launch vehicles going forward.
And then I think it's important that from, from a country perspective, you try and create these to incubate these ideas, and it does require some level of government support initially, and then there's some pretty bold, private venture capitalists to come in. And then I think as a time that as that starts to mature, then you'll move on to mezzanine funding, and hopefully some sort of asset backed security over time. So look, I think it's, it's really exciting.
It's a it is a long term process, these companies are thinking 5/ 6/ 7 years ahead in terms of a just getting their, their launch vehicle into space and sort of the key milestone and then actually building it up and operationalizing it to the point where they can be launching every week or every couple of days, like SpaceX is able to do that sort of the quarter success in a lot of our customers business models, and in turn, it's going to be a success factor for us, for them to be able to do that for us to really get the efficiencies of scale, you know, we're a fixed asset business, we have to build a build everything up and then wait for the capacity to be utilised as the launch vehicle frequencies and launch cadence increases.
So the fruits of our labour comes towards the end, we're spending a lot of money at the beginning.
Brendan Le Grange 19:17
When we talk about logistics of an Australian Space Station, and serving an international market of launch companies, you know, is this a similar exercise to what would be happening on the moon that if they look around the world they choose, okay, this is the launch site for us. This is the best returns in terms of cost per kilogramme for us, we're going to launch from Australia - do they have a rocket sitting in your in a warehouse somewhere that they have to then fly across to Australia? Do they build it in Australia? How does that work given that these huge and complex machines that we're talking about?
Russell Shaw 19:51
Yes, at the moment, I mean, most of the launch vehicle providers would it would have a local manufacturing facility and particularly those in the US where they have have, you know, technologically savvy population and very high tech industry and equipment, most of that stuff is built there there are, there's an additional layer of complexity when when you're exporting some of these products out of the United States, because of something called ITAR regulations, which is really this, this government restrictions in place around what kind of technology you can export. Particularly when you think about rockets and launch vehicles, if you put something at the top of a rocket, it turns into something else. So the US is understandably very cautious about where that technology gets exported to.
And Australia is not there yet, but very close to to effectively getting a what's called a technology safeguards agreement, which is what the US requires, almost like a bilateral treaty with certain countries to make sure that its technology can be exported in a safe in a safe manner to a, I guess, a trusted ally.
So I think, you know, you will see a lot of decentralisation. But as these rockets get bigger, and they get fatter, if you like, they get harder to ship in a shipping container. And so you actually do need to assemble and integrate these things on site. So I think that's, that's definitely a longer term plan for us, again, that the satellites can be flown in, they are the precious cargo, some of these satellites can cost, you know, north of $200 million per satellite.
So it's a pretty lucrative insurance market as well, I think, then premiums will be going up there as well with some of the more recent challenges, but those satellites can take years years to build literally. And so I think, you know, it's probably a little premature to think that those would be built in Australia, but they can be flown in the short notice, whilst I think the launch vehicles do need to, to be built on site as they get bigger and bigger.
Clearly, the risk profile for human spaceflight is so much greater because you're effectively putting, you know, six or nine people on top of a bomb in launching it up into the sky. So if, as I mentioned earlier, you know, there are strict regulations even for us with with launching satellites, which have no people in them and there's no one around strapping six or nine people in at the top of a rocket brings a whole new level of scrutiny and, you know, precision delivery, that that you really need to take into account.
And so the risk to the industry as a whole as if something went wrong. And we've seen this, you know, in the decades gone by with, with Challenger Space challenger, the shuttle, it can set the industry and the those those programmes backfire by a couple of years, and rightfully so to be honest, I mean, the same thing has happened in the airline industry over the decades where a plane goes down, you know, people have to figure out what goes wrong, and then they make the industry safer going forwards. So I can see the same thing happening in in space, but the tolerances are much lower, even though it is still a pioneering and at that, you know, the frontier of technological development, the regulations will be very strict.
And whilst I think it sounds awesome, and I saw an article the other day that you know, you can get from Sydney to London in two hours by using the suborbital space rockets, I'm not sure they're going to be setting up those those launching pads anywhere near a major city, for example. So it kind of defeats the point in my mind if I have to fly three hours north to the edge of the Northern Territory to then get on a shuttle, which is going to take me somewhere else. And then I need another journey on the other side. So I think there's somewhat more limited applications for that at the moment, it's more joyrides of the rich, like we saw with Mark Shuttleworth, many decades ago, that cost will come down. And I think there'll be a space tourism will be a booming industry as well.
But she I wouldn't want to be the first guy on that rocket. Let me tell you.
Brendan Le Grange 23:12
Well, yeah, I think that the actual takeoff process is, I can't really get my head around that ever feeling comfortable. Maybe there are some kids sitting at home dreaming of space where that risk makes sense to them, but not to me.
Russell Shaw 23:26
Yeah, well, the conflict is, you know, in airlines, there is a, there was a margin of safety, built into a plane on everything that they do. Whereas in space, because your margins are so thin. And what I mean by that is, if any padding you put on the space rocket as extra fuel, you have to burn to get the thing up and into space in the first time.
So the margins are absolutely razor thin. In the space, you're talking less than 1% variation. So nothing is is built any stronger than it needs to be to get out into space.
You don't have that issue, if you when you're boarding a plane, you know, the stuff has so many layers of redundancy built in. So that's the inherent conflict. I think with human spaceflight.
Brendan Le Grange 24:03
It's obviously an industry that people would have been enamoured with the idea of space. And it's always something exciting about launching a rocket. So although we're not really speaking lending today, if anybody listening is interested in equatorial launch Australia and private space, in general, where can they go to learn more?
Where can they go to see what you're doing out there and follow your story?
Russell Shaw 24:24
Yeah, thanks, Brendan. So our website (https://ela.space/) , our website gives a rundown of what we've done so far, and what our plans are for the future. We're on LinkedIn and all the other social media.
So that's probably the first point of contact and and yes, if you do have interest, please, please do feel free to reach out we are in a capital raising at the moment. So we'd be happy to speak with you.
Brendan Le Grange 24:42
Russell, thank you so much for coming on. It's been a pleasure catching up in general, but also yeah, to learn what's happening. Yeah, something very different for me, but certainly something I'm going to be keeping an eye on.
Russell Shaw 24:53
Awesome. Well, thanks, Brendan. Thanks. So nice chatting to you and catching up after so many years.
Brendan Le Grange 24:58
And thank you all for listening.
Please do look for and follow the show on your favourite podcast platform and share the updates widely on LinkedIn where lending nerds are found in our largest concentration. Plus, send me a connection request while you're there.
This show is written and recorded by myself Brendan le Grange in Brighton, England and edited by Fina Charleson of FC Productions.
Show music is by Iam_wake, and you can find show notes and written transcripts at www.HowtoLendMoneytoStrangers.show and I'll see you again next Thursday.