On June 30 XCOR laid off its remaining staff as the company faces serious financial trouble. The company that for years promised to take tourists to the edge of space and provide a platform for researchers to conduct suborbital research with its Lynx suborbital spacecraft, is now on life support. They will hire on a few people on a contract basis as they try to turn around their fortunes. Jeff Greason, one of the founders and the driving force behind the company, had already left the company in 2015. In the summer of 2011 he was interviewed by Eva-Jane Lark for Space Quarterly Magazine. We present that interview here as part of our Summer Reading Series.
EVA Interviews Jeff Greason, CEO of XCOR Aerospace
Jeff Greason is the founder, President and CEO of XCOR Aerospace. XCOR Aerospace is focused on the research, development and production of safe, reliable, reusable launch vehicles (RLVs), rocket engines and rocket propulsion systems. Jeff Greason is a recognized leader in the commercial space flight arena and one of the foremost authorities on NewSpace regulatory policies and rules. In 2009, Jeff served on the President’s Human Space Flight Review Committee (Augustine Committee) which conducted an independent review of U.S. human spaceflight plans. He holds 24 patents.
EVA: XCOR Aerospace, at 12 years old, is one of the first NewSpace companies and perhaps one of the longest survivors in this very challenging, emerging industry. How has your vision of the future and XCOR’s role in it changed since you started the company?
Jeff Greason: Much less than I would have expected. I figured that if our business plan survived contact with three years of reality, we were going to be doing pretty good. Instead, I have to say that, while things have developed very much along the lines that I expected, it’s taken longer – both for XCOR and for the industry as a whole to get through the steps that I was anticipating, largely because of the difficulty of securing capital investment in the industry. The few surprises I didn’t expect – I didn’t expect COTS. I thought NASA would defer any substantial participation in the commercial market until it was too late to do them any good. That’s a positive surprise. The other thing I didn’t expect was the traditional aerospace players to reach out to the emerging players quite as early in the process as has been happening. My only really negative surprise is that of raising capital – I knew it was going to be hard – but it has been even harder than I’d thought and that’s slowed things down. But the large players are joining in a constructive way in what’s going on, earlier than I had expected.
EVA: Your Lynx vehicle and the (suborbital) Space Tourism market are what XCOR is best known for, but that is not your only product and market, is it?
Jeff Greason: No. From the beginning the suborbital market has for us been segmented into people, payloads and upper stages. No single one of those markets has dominated our thinking. From time to time, the popular media will rediscover one of those markets and for a short time, all the articles will be about that particular market. It’s interesting to watch the tides of fashion come and go. But all three of those have always been an important part of our business model and we have plenty of customer interest in all of these market segments. Even within the “people” market , tourism is by no means the only or even necessarily the dominant component. Researchers – people who are being paid to fly into space because they are going to do some value-added activity – are a substantial portion of the market for people. They’re not paying their own way.
EVA: And that’s one of the advantages of a one on one vehicle as opposed to a multi-passenger vehicle…
Jeff Greason: Definitely. The experimenters all have custom requirements of one kind or another. They often need the vehicle trajectory to be designed for their mission or they need the vehicle windows to point in a given direction and that would obviously be much more difficult if you were trying to balance the needs of many different customers on one short flight.
EVA: Can you tell us more about what is currently the largest contributor to your earnings? Also where you’ve had the most recent successes?
Jeff Greason: No one single thing has dominated our net revenues over the company’s history. Certainly, we’ve done a number of rocket engine or rocket propulsion system developments for various customers. We’ve done some work with NASA. We’ve done some work with DARPA. We’ve done some work with ATK. We’ve done some work with ULA that’s currently ongoing.
All of those have been revenue generating activities for us. Generally speaking, we have a technology roadmap of the technologies we need for our own future vision. Once we’ve done some of the initial research and development on those, there’s often a bigger investment that’s required to mature the technology to the point where it is flight ready. We’ve had some success in finding other customers who are interested in the technology that we’ve developed. Instead of having to develop the technology to the fully flight ready status on our own dime, we get paid to do it.
We do have some advance sales revenue for the services of the Lynx and we have some revenue from advanced sales or advanced wet lease payments on vehicles to our two external customers – Space Expedition Curaçao which is a Dutch company that is going to operate on the former Dutch possession of Curaçao and Yecheon Astro Space Center which is located in South Korea. And we’ve done some design service work for vehicles that people are designing where they want us to integrate the propulsion systems for them. We sometimes find ourselves doing a fair amount of design support, on a paid basis, on how to integrate that propulsion system.
EVA: Which product or market has the largest growth potential for you?
Jeff Greason: Suborbital vehicle wet leases and related flights services. That’s where our heart is and it’s in the near term. The key on that one is to get the Lynx flying.
EVA: Any time frame?
Jeff Greason: We’re working as fast as we can and the money situation continues to improve so right now I’m hoping to get flight tests going in the fall of next year – barring surprise. And there are many sources of surprise.
EVA: As you’ve predicted, NASA budgets will be dropping. How are you and XCOR dealing with that? Do you think this provides any unexpected opportunities to you or the commercial space sector as a whole? Or just problems?
Jeff Greason: NASA’s budget dropping is an opportunity if they switch from building things to buying services, but it is a problem for many others. It’s not so much a problem for us because NASA is not a major part of our financial plan but they could represent a very good customer with a need for flight services. Certainly there are others companies that have viewed NASA as an important part of their business model and for them it can be a definite negative. Whatever damage a NASA budget reduction does to the United States, it is a much more serious problem for people who aren’t in the commercial space sector than for people who are. For people who are in the commercial sector, by definition, we have sales that aren’t government, otherwise we wouldn’t be commercial, but it is not uncommon for commercial space companies to have important government revenues and customers. For that portion of the aerospace industry that depends on government contracts for their entire livelihood, and for the entire population of the United States which depends on the continued access to space services, satellites, GPS and things like that; the health of that industrial base ought to be a matter of great concern. So it’s a bad thing for the commercial space industry but it’s a much worse thing for the nation as a whole. The reason I predicted it, is simply because the pressures on the entire budget are going to grow. NASA has enormous potential to be of tremendous service to the country; even more so than it has been. But for various reasons that potential has by no means been fully realized. I think people can legitimately question whether NASA is as valuable a use of taxpayer’s money as some other uses and that makes them vulnerable at a time when the budgets are going to be constrained throughout the federal government.
I think non-defence discretionary spending is going to be declining across the board, and if NASA just manages to decline at the same rate as the budget as a whole, I think they are going to be doing well.
EVA: In the past, you have mentioned the challenges you have with getting parts and supplies. SpaceX has also chosen to make most of their own components from scratch due to these same challenges with quality, availability and timely delivery. Most people, when they think of commercial opportunities in the NewSpace sector, focus only on the perceived excitement and glamour of the rocket companies.
Jeff Greason: Yeah! Everyone likes the part that makes the fire.
EVA: It strikes me that there are opportunities for skilled technicians and entrepreneurs to create businesses providing parts and components to the larger NewSpace companies, and even to the traditional aerospace companies. Is that happening? Where do you see the greatest need for innovative solutions?
Jeff Greason: It’s not happening to a very great extent yet. But yes, that’s where the opportunity is. When this industry becomes successful, it will go through a transition from vertically integrated companies to horizontally integrated companies. Much like the transition that happened in the electronics industry, when we went from computing that was being done by companies like IBM or DEC. IBM used to boast that they started with the sand and ended with the complete system. We eventually went through a transition where now there are companies that specialize in disc drives, companies that specialize in central processing units, companies specializing in memory, companies that make mother boards etc. That made a much better product available at a much lower price with much greater capabilities. That’s going to happen in this industry, but it’s not happening yet. The reason for that is, as you mentioned, the supply chain of components is very thin right now – valves, pumps, tanks. There are companies that do aero structures and that’s very valuable. We’re using that. Engines, reaction control thrusters, life support systems (that has one or two venders), suits – we had to facilitate a company standing up to do suits because we couldn’t find the suits that we wanted.
A lot of stuff goes into an aerospace vehicle. Currently companies are finding themselves, ourselves included, making a lot of those pieces. Which is what makes it tough. In the short term, there’s opportunity there because part of what interests our customers in XCOR is they will discover that we are successfully making some piece, and they will come to us to see if we will make that kind of piece for them. Then they discover we make, not just pieces but whole systems and they often end up transitioning to a whole propulsion system coming from us. But there is only so much one company can specialize in without losing its original goal. We are constantly making new valves. I would love to see valves spin out as a line of business. But I haven’t had the bandwidth to figure out how to make that into a business of its own right without losing my focus. If there were a suitable company out there who wanted to be in the valve business – we should talk! Because maybe we can license some of our designs to them for a fee and then we don’t have to worry about doing next generation designs for all the valves. And that’s just one of many, many examples. There are many opportunities for people who don’t want to or aren’t able to do the end-to-end systems to come in to do pieces of the value chain and start companies.
EVA: That’s my perception. It seems to be an area that is rarely focused on.
Jeff Greason: It will be very difficult to make a go of it in that kind of a supply-chain business until there are a few more companies who are cash flow positive and profitable to be your customers.
EVA: Or in a similar terrestrial niche possibly…
Jeff Greason: Yes I think that’s definitely how I would do it. I’d figure out how can I have two sides of the same product line, one of which that serves the aerospace industry and one that serves terrestrial markets.
EVA: You’ve discussed propellant depots and the importance of ISRU (in-situ resource utilization) in various venues. Is XCOR itself pursuing any technologies in these areas and do you feel this concept is gaining enough acceptance to become a focus for space programs or is the big huge rocket mentality still in charge?
Jeff Greason: The big huge rocket mentality won’t win but that doesn’t mean any of the alternatives will either. By which I mean the proponents of the great big rocket may choose to go down with the ship. And stay clinging to the figurehead of that past glory until the whole enterprise sinks – which wouldn’t be a bad thing.
We aren’t pursuing any technologies in that area directly. It’s a little weird for me as I have two roles that I play right now in the industry. One of them, of course, and the one that’s most important to me, is to head my company. But the other is also to help shape the policy direction so that the industry as a whole will flourish, so there will be a rising tide that we can be a part of.
EVA: I think of you as having become the “accidental space policy guru”…
Jeff Greason: Well I’m already the accidental CEO. The core of XCOR’s business is to develop space transportation capabilities that are truly independent from anything other than commercial market forces, so that we don’t rely on the whims of government agencies to be able to sustain our business. Having said that though, transportation technologies of all types, throughout what history we have, have usually had a relationship with the government. The reason for that is very simple. Transportation enables the economy, so it’s always very important to the health of the economy that you have reliable transportation. Many, many more dollars of the GDP depend on the existence of transportation than ever flow into the transportation sector. So it’s always an arena that’s correctly seen as an important sector for our government policy. And there is always a connection between transportation technologies and military readiness. There’s a relationship between automobiles and tanks, there’s a relationship between commerce shipping and the navy, there’s a relationship between having a civil and a military aircraft sector. So for all those reasons, the government isn’t going away and they will have a presence in the space transportation arena as they do in other transportation. Therefore it would be enormously helpful if that were an influence that fostered the development of space transportation technologies rather than being either indifferent or obstructive.
The days in which the government was an obstructive influence to the development of space transportation are gone. So now the only frustrating aspect is that we have this one sector of government involvement in space transportation called NASA. NASA spends on the order of $3B a year procuring space transportation services. That’s a LOT – in comparison to scale of the commercial market in space transportation. If they choose to spend that money on things that are quite different than what commercial customers want, so that it doesn’t come from the same industrial base, then that taxpayers’ money is spent in a way that doesn’t procure us any new space transportation. It just serves NASA’s needs, it doesn’t have any implications for the larger national capability to do space transportation. If they choose to purchase things that can come from the national industrial base that also serves military and commercial needs, then it would make a big difference for the good. Propellant transfer is a tactic. It is not in and of itself a goal. The real driver, which I’m always beating on, is why doesn’t NASA participate in the nation’s aerospace enterprise instead of having its own parallel aerospace industrial base? We’re seeing now the implications of that. If NASA were to purchase launch services from the industrial base that serves the other two sectors then if their budget went up, they could buy more and if it went down they could buy less. But we wouldn’t be facing this problem that if they buy a little less, the entire enterprise fails because they can no longer sustain large sectors of their own supply chain.
The importance of propellant depots is simply that it had often been argued that NASA has no choice but to maintain their own industrial base because the things they want to do, the human exploration missions they want to do, can’t be done any other way. The importance of propellant transfer technology, (you don’t even necessarily even need the depot, just being able to move the propellant from one vehicle that you’ve launched into another), is that as soon as you have that capability demonstrated, it is clearly, demonstrably not true that you must have this unique capability that is totally unsupplyable from any other source, in order to do exploration missions.
And once we have that capability, you can start planning how to do moon missions with Delta IV heavies tomorrow. Or you can start planning how to do Mars missions with 20 ton vehicles that you can get from ULA or SpaceX and that they would produce on the same production line that they would produce smaller rockets that serve other customers. You’d still share the same industrial base even though the rocket might have a different name plate on it. It’s just that there is an attachment to, not just doing human missions, which I understand and totally support, there’s an attachment to doing them the same way we did Apollo – which really you can only explain as an appeal to magic. They believe that somehow if we just do something that looks enough like Apollo the happy days will come again and NASA’s budget will miraculously climb to Apollo levels. That doesn’t work. We had a Saturn 5 before and we cancelled it. Because the budget wouldn’t support it! And the ideas for how to do Saturn 5 class boosters today are no cheaper.
EVA: Working with the FAA, do you find them positive and enabling or are they a challenge for you?
Jeff Greason: They have been much more of an enabler in the past than a challenge and they do many things that are positive in assisting the industry to develop. There is a natural tension at times between industry and a regulator, sometimes they require a lot of dialogue and a lot of work to move things to a good conclusion but that is to be expected. I suspect they’d say the exact same things about industry. At XCOR, we have a great relationship with FAA/AST. I’ve been working with them now longer than most of the people have been at the agency. We have a good legislative foundation for the regulation of commercial spaceflight in the United States and that regulatory foundation really is the envy of the world in the space regulatory arena right now. A lot of other countries that would like to operate these kinds of vehicles are looking at what the United States has done and almost the first thing I hear almost every time I talk to an operator in another country is that we don’t have any laws like that yet. So we’re in a good position, we’ve done a lot of smart things; we just have to not screw it up.
EVA: As the “accidental space policy guru,” you’ve become an eloquent voice in space policy discussions with your recent speeches and your participation in the Augustine Committee. In your recent ISDC speech*, you addressed the unspoken goal of “settlement” that NASA and politicians skirt around rarely using that term. What foundations do you think are crucial, that are not yet in place or have been insufficiently focused on by governments and the commercial sector?
Jeff Greason: Opening space as a real frontier, as a place for settlement, as a supplier of resources, as a generator of wealth for terrestrial society, is a long term historical movement. We tend to look back at the opening of the West or the opening of the Americas and we look at particular events – the Louisiana Purchase or the expeditions of Columbus and we think that because those were turning points on the road, they were milestones that were reached, that somehow that’s all the mattered. But lots of other things were going on, so these things do have a movement aspect to them. I mentioned earlier in another context that sometimes people have a tendency to think of these things with magical thinking, that if I just create the symptoms that somehow I will create the cause too. That doesn’t work. A lot of smart people, a lot of very passionate people have put a lot of effort since the Apollo era into trying to make space happen by getting a critical mass of people to care about how important it is. I’m not against that, I’m all for it. But the reason why transportation, I think correctly, receives a lot of focus right now is because people believe expanded space activities can actually happen in some reasonably near time frame. And if we don’t solve the transportation problem, it won’t. That doesn’t mean the other aspects aren’t important but I’m not the right kind of guy to tackle that problem. I don’t think about how to do it.
EVA: Assuming XCOR is successful with Lynx and the suborbital markets, what is your next big goal?
Jeff Greason: Lynx is just one more step on our technology roadmap. XCOR has always planned for a fully reusable two stage orbital system. In fact Lynx is what we got when we said we need a simpler, earlier vehicle that will demonstrate and mature the technology that we need for the orbital system. Because we’re a for-profit company, that predecessor vehicle can’t just be an experiment, it has to be revenue generating in its own right and that’s how the Lynx came to be.
EVA: You’ve shown what someone with a keen interest in space can do by deciding to take action. XCOR is the result. Do you have any recommendations for like-minded individuals?
Jeff Greason: Hmmm. Yeah. I could be wrong but I don’t think so. I think that, it’s tough to predict the time frame, but within a time horizon that makes sense to think about, I think we are going to solve the Earth to orbit transportation problem. I think we’re going to get space transportation that’s in a cost range where there are a lot of other markets that open up for doing things in space. What we really need are those markets. We don’t need another trucking service right now. What we need are things in trucks. The challenge of the space transportation business is that unless the government chooses to stimulate the market by participating in it as a customer, then the markets for advanced space transportation are speculative. Everybody believes that they’re there but it’s hard to borrow money on that basis. So the time is upon us to start the next FedEx or the next Flowers.com or the next people who figure out that you can ship fresh fish from Alaska. You know, in the same way that there are many, many more companies that make money by using air transportation than there are Boeings. It’s time for people to start thinking about the business plans for – what if we DO have a way to get things up and down to space for, say, $500 a pound? People have been talking for 30 years about all the businesses we could start. Well, let’s start some.
Frequently research has been done and it’s paid off. It’s simply that nobody could figure out how to commercialize it at the kind of price points that the transportation was at. There was a set of studies done back in the 1990s called the Commercial Space Transportation Study and every couple of pages in that have different business ideas. If transportation got down to this, or that kind of price range, then this or that kind of business would become interesting.
Really the bottom line message is that if people want to get involved but they’re not rocket scientists, we don’t need more rocket scientists, we need more businesses to use rockets. There are a lot of studies that have been done, a lot of ideas out there. One of the interesting things about the space business is that unlike most other businesses, because it’s been fallow for so long, you don’t have to invent a great idea, you can go and look one up!
EVA: Thank you so much, Jeff for a very enlightening discussion!
* 2011 International Space Development Conference