167: Space: The Next Frontier of Asset Allocation? With Mark Boggett, CEO of Seraphim Space
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For those out there who remember Star Trek, those opening lines, space, the final frontier, these are the voyages of the Starship Enterprise. Its mission: to boldly go where no man has gone before.

Well, with the films Star Trek and Star Wars, Alien, Interstellar, Apollo 13, all offering tantalising glimpses of the future, it's actually here now. Science fiction is science fact. How the World Economic Forum and McKinsey predict that the space sector will reach a value of 1.8 trillion, that's only one decade ahead as we record here on a sunny London in January 2025.

And our guest today is CEO of the world's first listed space tech fund and a leading global space investor. But with your feet firmly on the ground here sitting opposite me, Mark Poggett, welcome to the Money Miss podcast. Hello, thank you for inviting me on and what an introduction. Well, we also want to welcome a co-interviewer today, Nick Feingold.

Now, Nick was our second guest back in April 2020. Difficult to believe, nearly five years ago, it was recorded remotely in COVID. And I went back early this week and I re-listened to it, Nick, because you caused great laughter with listeners when I asked you about going into the city and your choice of degree. And you said a third class degree in textiles from the University of Manchester Science Technology, where I partied hard and worked little, wasn't necessarily the best preparation.

Now, you've had a great career in finance from Wood Mac, Cantina West, Deutsche Bank, and then creating and building and selling your own equity business. And for the last decade, you've been building Curation Group, which advises companies, showcases underexposed equity stories, and has an investor membership, which I pay the fee to be part of, where lots of innovative and smart thinking happens. Seemed like a good chance to have you here today to join us for a chat about the ultimate new frontier. Welcome, Nick. Thanks, Simon.

It's the first time ever in my life where I've been on a show or been on any kind of podcast and people have actually invited me back. So it's a bit of a landmark for me. So I'd just like to thank you for the opportunity of a second Flypast. Great. Well, look, the aim today is to explore what is going on in the world of space, what's happening right now and where there is money to be made.

So, Mark, I'm going to start with you because you did a degree in accountancy, a master's in economics, and then went to the city as an analyst. But just transport us of your orbit through that galaxy of Williams, the bro, Bruin Dolphin, and venture capital before Seraphim. So I started in the city in 1995, which was really just the start of the technology boom.

So as one of the younger members of the team, I was immediately focused on the technology area and became immediately hooked on these types of businesses. In my first period of time at Williams DeBrow, we were focused on things like, what is mobile phone penetration going to get to? And people were thinking 25% was going to be like way too far. So that's really where I started. A lot of focus on technology.

Technology stocks in the US and US IPOs in the second half of the 90s really sort of focused my attention on venture capital and the guys who are sort of sat on the other side of the table who are not investing into M&A.

buying and selling share prices, they're making investments into companies and joining the boards of those businesses. So as I became more and more exposed to IPOs, I became more and more interested in venture capital and looked to move my career into venture capital in the year 2001. Ultimately ended up in a company called YFM Equity Partners, where over a number of years, I reached the stage of being a main board director. That organization is

is famous for its two venture capital trusts, British Smaller Companies 1 and British Smaller Companies 2. And you can see there the link as to why I've chosen to go down the route with a listed vehicle for Seraphim Space Investment Trust. I don't think anyone doubts the size of the market in terms of the one that you alluded to earlier and the work that McKinsey had done. I think 1.8 trillion was the number you used, Simon. Yeah.

We're seeing rocket launches accelerate in number. We're seeing the price of those launches starting to collapse. Obviously, Musk, Bezos, Virgin Galactica, all of those things felt like the starting point. But where's that sort of commercial versus sort of titanic ego playoff? There was an immense commercial opportunity. The space industry became very stagnant. And it was largely because the customer was the government.

Contracts were awarded to companies on a cost plus basis. There's no one really effectively managing these contracts, so cost overruns were the norm.

All costs and everything to do with space became very inflated. The cost of a launch, 100 million plus, the cost of satellites, hundreds of millions to billions, which take years to actually build and then launch. The industry is largely financed by debt. Companies will pay for a billion-dollar satellite in debt, and then that satellite will operate for 10 years and provide a profit.

The whole industry became very risk averse. Every time that you introduce a new piece of hardware, a new piece of software, or even a new rivet to a rocket, it creates whole system risk.

So as a consequence, the industry stopped embracing innovation, which is amazing to think about. You think about the space industry as being at the forefront of innovation, which it was in the 60s and 70s. But as we got through the 80s and 90s, it went into reverse. So there was a whole period of decades where the space industry had not been embracing technologies, whereas other sectors had really been rapidly changing from a technology perspective.

So it really came down to Elon Musk actually wanting to procure a launch. He wanted to buy a rocket to use a rocket when he discovered how expensive it was and came to the conclusion it would be cheaper to make one than to actually pay for somebody else to launch. You highlight the difference in terms of attitude, which is Musk's attitude is like, actually, we're going to have to blow up a few of these things to find the right way to do it. Well, it's all about the attitude to risk.

The issue was that none of the companies that were procuring the capability were prepared to pay for new technology because of the risk that it brought on board, even if it meant a lower cost ultimately. So this is something that Musk really brought in, which is he started off with a complete clean sheet of paper when it came to building a rocket.

So things like 3D printed components were a sort of core feature of SpaceX. That's the exact opposite of anybody else in the launch market would never consider. So they were able to rapidly take costs out of the system. So this first happened in the launch market, but then very quickly started to occur in the satellite industry as well. So satellites were being developed. And this is really ultimately what brought myself and Seraphim together.

into this market was a recognition that there was also a revolution going on in the satellite industry. So new companies were making satellites but taking components from adjacent industries and making satellites smaller, lighter, cheaper, but more effective. So a satellite that cost a million dollars would have more functionality than a satellite that cost a hundred million dollars.

But the difference there is that for the same amount of money, you can put up a constellation of 100 satellites rather than one satellite. And that is the game changer, the ability to be able to put up large constellations and what that ultimately means for collecting data or being able to provide communication services.

And am I right in saying Musk, Starlink has put up 7,000 satellites? Yeah, it's about that right now. Yeah. We're going to come back to that. The other observation that I read in that report was that, and I quote, we're on the cusp of the super heavy rocket era.

Just help me understand, what does that really mean? The Falcon 9 has really been the workhorse that's completely revolutionized launch around the world. It's revolutionized it in terms of cost because of its reusability, but also through cadence. There's almost a launch a day now, whereas there would have been launch a month just a few years back. So the market has changed completely. What you're referring to there is another SpaceX initiative, which is their new...

rocket called Starship. So this is the biggest rocket ever launched. It's also reusable and it takes 100 tons, 100

100 people into orbit. And the reason why this is the dawn of a new era, we're here in January, they're just about to do their seventh test of this rocket, and it's expected to come into production this year and be commercially available. Why that really counts is it's going to, and we estimate this at this stage, about half the cost of sending a kilo into space.

So this is another significant change to the economics of operating in space. But the other thing is, because of the size, you can actually put up large constellations in a single launch.

Now, again, that is game changing for the areas that we're focused on. And then the next thing is that you can obviously take more into space. So this heralds a new era of building infrastructure in space. So these are things like cell towers in space, data centers in space, manufacturing in space. And we'll come on and talk about that in some more detail. But this is a whole new area of growth that we're focused on. And it's really going to be driven by this new mega launch era that we're on the cusp of right now.

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Give us that 5,000 feet overview of the business. Yeah, sure. So Seraphim organization has three parts. We have an accelerator business that identifies and works with pre-seed and C-stage space companies from around the world. It's a three-month program. 10 companies go into that program twice a year. And those companies then...

engage with the market through our network, and then are introduced to other investors who syndicate and invest into those companies. So we support the growth of this large scale of companies.

About 80% of those companies get funded, and we've been doing this since 2018. Those companies, there's more than 100 companies that have gone through the program now, and they've raised $660 million to finance the next stages of their growth. We've then got private venture funds that invest in seed and series A, so the really early stage, highest risk end of the market. Again, we do that globally, but we cherry pick the best deals that are coming through the accelerator, but we also invest in underprivileged.

other companies that come through our deal flow. And then we've got our growth fund, which is the Seraphim Space Investment Trust.

That focus is on later stage space opportunities globally. And in the parlance of venture community, we invest in B rounds and C rounds and D rounds and E rounds. So typically for the listed trust, we'll invest into companies once the technology risk has been removed. So they've already got satellites in orbit and most of the technology risk have been removed. They've typically got some initial revenues, but we're investing into the scale up and operationalization of that business.

Just a quick interjection in terms of, I run this investment club for high net worth individuals or sophisticated investors. Most of us are pushing on 60. If I was to invest in some of the private stuff that you do, will I still be alive before I see a return?

This might surprise you to hear this. And obviously the past is not necessarily a guide for the future. But our first investment fund, we invested into 20 companies and we returned all of the capital over a five-year period, providing a 3x return to our investors over that period. So we specifically look to invest into companies where this is space serving the needs of earth.

So there are real markets, there are real problems that the companies that we're invested into are providing solutions to. And therefore, the time to be able to make these companies profitable and valuable is much shortened. This is the reason why we focus on that. We don't invest in launch.

We don't invest in areas that relate to the moon, space travel, all of the technologies that relate to permanent habitation on the moon or Mars, the space mining, all of these really super exciting and interesting areas. We're really focused on where is the money.

Let's talk about those investment priorities. One of the observations I've picked up from your report, I'll quote, is only looking down from space to Earth to help provide end market solutions. That's right. Just give us some color on that. The main area that we're focused on is around this new market that's being developed around large constellations. You talked about SpaceX having 7,000. That is...

one end of the scale, really to have a sort of operational system, you need between sort of 50 and a couple of hundred satellites. So we're really focused on the companies that are putting up those satellites. And what those satellites do then, collectively, are creating a digital infrastructure around planet Earth that we consider to be akin to a new internet.

We think that we're in the year 2000, 2001 in internet terms as to where we are in the space market at the moment. And the types of companies that we're investing into are the Googles and Facebooks of this generation. So what are these companies doing? Well, each of them has got satellites that have got sensors.

These sensors are either communicating with Earth or they are looking down at Earth and gathering information. And the different payloads, the different types of sensors effectively have different superpowers that enable you to connect data in different ways. The key thing is, is because these satellites, there are so many in a constellation, that they are collecting data in close to real time.

So we're collecting data about our Earth at very low cost, in high resolution, at close to real time. So this is a whole new data set about our planet that we believe is very valuable. Everything in relation to what we do is focused around AI and making sense of this data set. So let me give you an example to bring all of this together. This is actually a company called ISA, which is actually the largest holding within our listed trust. And what they do is they have a

A miniaturized satellite with a miniaturized radar on that satellite. And what that enables them to be able to do is to look down at the ground in 50 centimeter resolution. That means they can see millimeter movement from space. And they're able to do that day or night. And they're also able to do that through any weather and any cloud cover. And with their current, they just got shy of just 40 satellites. They can see every square meter of Earth every two hours.

What they then do is change detection algorithms to determine how that square meter of Earth has changed over the last two hours, four hours, day, week, month, year.

So, this has a very broad range of applications in anything that can be seen from above. So, big applications in defense, big applications in climate and sustainability, but big applications in insurance and every market you can think of. It's monitoring in another way. It's monitoring the earth, yep. But let me just sort of bring this back to something that I think that your listeners will easily understand.

Everyone uses GPS, the blue dot in your mobile phone. It's generated tens of billions of dollars of enterprise value. It's turned entire industries like the taxi industry globally on its head. But what is within that blue dot? Three pieces of information. It's about longitude, latitude and time.

And that has created and become a utility that we all rely on today. The green dots in your mobile phone that's provided by the types of data by companies like iSci that I just described, there's hundreds of pieces of information about that green dot over time. So if your blue dot can generate tens of billions of enterprise value over years, what is the green dot going to be worth? And our view is

hundreds of billions to trillions of dollars of value that's going to be used by every industry as well as consumers over time.

And just in one of the documents, I wasn't quite sure I understood, we're out of range, we can make an SOS call only. I think one of your companies is involved in that. That's right. Yeah. So that's our most recent investment through our growth fund, the Listed Trust. So this is a company called Skylo. And what they have done, this is a software-only company, and they have a solution that enables them to connect from any mobile phone to geostationary satellites.

So the geostationary satellites are the traditional satellites that are owned by the major players in the market like Eutelsat and SES and JSAT, Viasat. And these satellites are always stationary above a particular location. So you'd have a satellite above London. And as the Earth turns, those satellites retain in that same position above London.

So what this company has enabled is for cell phones to be able to connect directly to those satellites in the first instance so that they can provide an SOS service when they're out of reach.

cell towers. But shortly, and this is certainly going to be starting happening this quarter, you're going to be able to start sending text messages as well from aeroplanes, from boats in the ocean, from the top of mountains, from pretty much anywhere. So this is a service that's rapidly being taken up by the mobile network operators because it's providing a service, it's filling in the gaps, and it's enabling their subscribers to be able to communicate under all conditions.

So it's a huge growth market, but it's actually, interestingly, leveraging the traditional telecommunications market by the traditional SATCOM players. This, of course, begs the question of, in the investment parlance, sourcing ideas. How do you find these companies and themes?

We put a lot of effort in to do that, as you might imagine. So just to sort of put this into context to help people sort of understand how big this market actually is, we receive between 100 and 200 investment opportunities per month, all of them space-related private companies raising money. And we've qualified for that is more than 75% of all of the space deal flow globally.

And this provides us with an information advantage because we're getting to see, well, during the course of the last decade, we've seen 10,000 companies. And we're then able to identify what is cutting edge. Where are those companies and how do they compare against their competitors in terms of capability, in terms of traction, in terms of IP, in terms of valuation? So this is one of the things that we work very hard to maintain. So where do all these deals come from? Well, first of all, we do a lot of thought leadership.

So if anyone who cares to look on our website or look at any of our social media, you'll see that we put out a huge amount of publications. So every quarter since 2018, we've published the Seraphim Space Index. That's a quarterly review of global investment into the space domain. So our other main publication is the Space Map. So every technology sector has a map where...

Someone's pulled it together and identifies all of the emerging venture-backed leaders within the different categories of that particular technology area. We've been producing that since 2017. We release that twice a year. So that in itself is a huge driver of deals because what happens is two things.

entrepreneurs who aren't on the map with their companies get in touch with us and they say, why are we not on your map? We're the best company in this particular area and these are our functions and features and this is why we should be on the map. And we say to them, well, send us your investment deck. We'll evaluate that. And if everything you say is true, we'll add you to the map in the future.

So this flushes out the investments we might not see. It's fair to say that people that aren't on your investment map, you explain to them the gravity of the situation. The first of the puns. I've been so well behaved. I need to get through the fog here because I need to ask you all those inbound prospective situations. How do you filter, manage, cope?

Yeah. So going from the couple of hundred that we see in a month down to the five or six or seven that we want to spend time on is really our expertise. So what are we looking for? Well, we've got a really clear idea of where we want to invest or a very clear area of where we don't want to invest. So that really narrows it down by 70%.

immediately. We're then looking at the companies in the areas that we're actually interested in. And then it's really just a function of where do they sit competitively? Have we seen other companies that are better positioned? Are we already invested in this particular area and have already made a bet? So that's another way of reducing them. And those companies that

are on the cutting edge and are advanced and gaining traction, they become very quickly apparent to us. So we get very excited when we see a company that we know is at the leading edge of a particular part of the market. So those are the ones that we spend all of our time on. We'll jump on an airplane, we'll go over to Tokyo, we'll go over to LA, we'll go and meet the team. As soon as we see a company that we think has the potential to be

the leader within a category, we're all over it. And we then spend two or three months really getting to understand that company using all of our different partners. And this is one of the things that we've not actually talked about, who are some of the actual investors within the Seraphim organization. These are big space companies who recognize that their industry is

going through a significant disruption, they've invested into Seraphim to give them an insight in what's going on and to the changes in this market. But we also use them to help us with our due diligence. So before we continue this conversation, we're going to take a short break to have a note from our sponsors.

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Mark, how many in your investment team? How much resource do you have? Because it's obviously you've got a big body of work. Different funds have different dedicated investment teams. So each fund has about seven or eight people dedicated to it.

So there's a lot of work that's done. So the filtering process is a very significant process, the investment and diligence process. And then we've got a growing portfolio. When we make an investment, we typically join the board of those companies, either as a director of the business or as a board observer. So we then really are involved with the company operationally after we've invested. And that's really where a huge amount of the work is actually undertaken.

And how do you put your investment committee together? Because you're clearly, you know, you have, you may not be omniscient, but you know more than most. Who surrounds you and who challenges you? That's a really good question. We have a independent advisory committee.

And each fund has a separate one. And what we've done is we've brought together experts from the industry to challenge us. So in the case of the Seraphim Space Investment Trust, we have three people. One of them is called Matt O'Connell. So Matt is the founder of a space company called GOI that he scaled and sold for $1.3 billion. He's also a partner at a giant tier one company

US venture fund DCVC. There's a lady called Anne Winblad, who's the co-founder of Hummer Winblad Ventures. She's a legendary software investor in Silicon Valley and a real titan from the software industry. And then the third one is a lady called Candace Johnson, who is one of the biggest space founders in Europe. She founded

SES, one of Europe's largest space businesses. It is a prolific investor and founder of space businesses in Europe. So all of those three individuals attend our investment committees and ask us difficult questions. And when there is any conflicts of interest, we, the general partners of the fund and the investment committee, we stand down and the independent investment committee actually make the investment decision.

I think in one of your earlier investments, aerospace and Airbus were LPs. Is that right? So quite interesting to have that interaction with these big companies. You could say at one level, wow, what do you give them that they don't have? Just explain how that ecosystem works. As I mentioned in the introduction, the space industry is going through a significant period of disruption.

And it's really being led by new technology innovation. And it's happening very rapidly. So the traditional large players like Airbus and SES and Telespasio, these ways of understanding the new trends in the market, the new technologies, the new business models. And one of the ways of doing that is by investing into a fund like ours that's focused on the cutting edge of what's going on in space.

So by being an LP investor, they get to see what we're doing. They get the opportunity to co-invest into our portfolio companies and potentially acquire them further down the line. So this is the reason why they get involved in what we provide for them. But as you rightly say, we're able to...

reach into their business units and ask them for help when we're doing due diligence. And that is absolutely critical. We've got 10 large multi-billion dollar global space companies as our shareholders and limited partners within Seraphim Funds. And in much the same way that the sort of biopharma market takes this approach of using large pharmaceutical companies as shareholders and potential acquirers, we've made the same

structure in the space market and it's working exceptionally well. The thing is that when we find something that's genuinely cutting edge and we take it to these organizations, they just can't wait to engage and they give anything that we share with them a thorough investigation and they share with us what they think about that. Ultimately, in many cases, then wanting to become a customer of the companies that we are identifying.

Keyman Risk, Mark, you seem to be hands firmly on the steering wheel. Who's with you in the cockpit? So Seraphim has three general partners, myself, James Brugger and Rob Desperat. So we've all worked together since 2006. So we're a very stable investment team. So Rob and James have been involved with all of the investments that we've made. James is actually the CIO. And then we have other investments involved.

partners such as Andre Ronser. So Andre worked at Richard Branson's family office for 10 years. He was responsible for all of their space investments. So he led the seed rounds and scale up rounds in OneWeb, Virgin Galactic, Virgin Orbit. So the three space companies he was responsible for all became unicorns. So that's at the partner level. We then have venture partners. So again, borrowing from Richard Branson's team, we've got

Here's our man of 25 years, Patrick McCall, who sits on the boards of various of our portfolio companies, operationally engaging with those businesses to actually help them through the challenges of scaling up. So space is, as you said, dual use.

And we have this very interesting military dynamic. I had an exchange with one of our former guests, General Sennick Carter, who's the former chief of defense staff in the UK. He said, to what extent are the US and the West able to establish the control needed given Chinese and Russian efforts in space? The answer to this question goes back to Elon.

where he was able to demonstrate that a privately financed private company could rapidly develop capability that was much needed by defense. So as a consequence of that experience, the U.S. defense organization has become much more open to engaging with early stage companies that have got cutting edge technology solutions.

So this has been one of the key drivers of the space market for the last decade as defense customers are opening up large grants and large funding windows to support companies that are building new technology capabilities and effectively accelerating the digitization of defense capability.

So a range of things have actually happened to accelerate that. So the Ukraine war, for example.

So the Ukraine didn't have any of their own satellites when Russia invaded, but they rapidly needed to access capability from space and they turned to private commercial companies to get the capability that they were looking for. So over the shoulders of the Ukrainians was the rest of the allies who were then witnessing the capability that the Ukraine government were buying off the shelf,

from the commercial market. And that led to a new realization that they too must embrace this technology. If it's freely available on the open commercial market, that means that their enemies can procure this same technology.

So this has led to a massive acceleration of defense organizations in the US and indeed around the world starting to embrace early stage technology development and actually wanting to invest into those companies so that they can have some influence over how that technology is being developed and ensuring that they have got some control over how that is developed in a defense capability.

So with Trump coming into power in the US, this trend that was already underway has now got a number of thrusters below it because both the US and Europe are now really looking at

developing their defence capability. There's a recognition, there's been an underinvestment in defence, an underinvestment in the digitisation of capability, and now that is being addressed. So from defence spending, space is at the tip of the spear, because the solutions that are available are relatively low cost, but very high impact. So

This is one of the key drivers that's really driving everything that we're doing at the moment, because virtually every company we invest into is dual use. They have a defense application, they have a commercial application. Now, the vast majority of the companies we invest into, the teams, don't see themselves as defense-related companies. They're insurance companies, they're climate companies, they're oil and gas companies, they're logistic companies. But right now, the biggest procurer in the market is defense.

It's a technology that, very simply put, is migrating from nice to have to have to have for corporate purposes and a governmental level as well. Interesting. General Carter, just going back to him, said, we have talked about three domains in military activity, maritime, land and air. We now talk about five, adding space and cyber.

But are we pitting privates against governments in all of this? Well, I think it's more of a sort of efficient use of government resources, you know, our taxes. If they can use contracts that they make available to private companies to enable them to procure the technologies that they need, they can then access the capability that they require at a fraction of the cost of developing it themselves.

So there is more R&D dollars available commercially than there is that any government could afford. So this is a way of being able to tap into the capabilities that they need at a lower cost, but also enables them to be able to keep more closely on the cutting edge. Traditional procurement processes for defense are very long and very conservative.

That rules out most of the companies that provide the latest cutting edge technology solutions that they really need. So led by the US, but defence organisations all around the world have now come to the recognition that if they just continued with their traditional procurement processes, they'll rule out buying all of the solutions that they actually need. So there's been a massive disruption and that is now accelerating. Thank you to...

the new president coming in in the US. I'm just interested in getting to know a little bit more about the trust and the public versus private investment ratio that sits within it. What is the portion of public companies to private companies in the trust is question number one. So we've got 23 companies in total, four of them are public companies. And the rest private? The rest are private. And in amongst the private, is there one where you get out of bed each day and go, that's going to be a 10 bag up?

There are several of those companies within the portfolio. And this is one of the reasons why I sleep at night given our huge discount that we're subjected to at the moment. Because I have confidence that at some point in the future, performance will come through by one or more of those companies.

But we have carefully identified emerging category leaders in a diverse range of different parts of the space market. And we've then backed those businesses. Each of those businesses have got giant addressable markets, but that they have a position of leadership within those markets, intellectual property, traction, and a large opportunity.

They're still early in that stage, though. One of the things that you might find useful would be for me to just give a statement of where the portfolio is at the moment and what's gone on during the course of the last year. And then perhaps we can drill down into some of the underlying companies. So where do I start? So during the course of the last year, the portfolio raised $900 million in funding.

So to put that into perspective, that's about 10% of all of the investment globally in the space domain has gone into our portfolio. So you mean the underlying companies in your portfolio raised a short billion dollars? That's correct. Because the investment trust value is? 222 million. So we've got 23 companies, the top 10 companies that account for about 75% of the total value of the fund.

last year, they grew their revenues on average at 71%. So if you did that on a NAV-weighted basis, it's closer to 200%. 60% of the portfolio as measured by NAV is now EBITDA positive, or they've raised sufficient funds to reach EBITDA positive without requiring any more capital.

So a year earlier, that percentage was 2%. So what is happening is that this portfolio is growing rapidly and is just reaching maturity at the moment. So our most advanced companies have revenues in the order of $50 to $200 million with a sort of enterprise value at about $1 billion.

And we believe that these companies will grow those revenues into billions of dollars over the years ahead. And we believe that these companies have the capability of growing their enterprise values into tens of billions of dollars over the years ahead. And in the last couple of quarters, we had our first company in the portfolio that reached an enterprise value of $10 billion. So we're demonstrating that that can happen. And of the private section of the portfolio, how

How many of those companies would you hope might float on the stock market in the next two to three years? There are five companies currently in the portfolio that are planning for their IPO. We IPO'd a company a couple of quarters ago called Astroscale on the Tokyo Stock Exchange.

Yeah. And the reason I asked that, and the reason that I asked the original question is, I think you look at investment trust, the investment trust structures. In my mind, there's a problem with capital markets in Britain and the way that companies tell their story. I don't think it's specific to your company. But what we're really talking about is a discount on a discount. Because actually, the discount to NAV is one thing. But if you've got companies in the portfolio that haven't been marked up yet...

If you see what I mean, then the discount is even greater than it may appear to be. No, I mean, I think that's a reasonable way of looking at it. You know, because these companies are private and because they are frequently raising capital, they are valued at the price of the most recent round in most cases. So that is reflective of some future value of the business as new money comes in. They're reflecting...

where the business is today and what's happening in the near term. But I would agree with you that those valuations would be conservative. And how much of the trust is SpaceX? No, we don't invest into SpaceX. You don't have any SpaceX? No, we don't. We don't invest into launch as a category.

So we haven't invested in SpaceX. And remind me of the reasons for that again, please. Sorry. SpaceX was already a very mature business when we launched the trust. So it was sort of beyond the scope of the scale of the businesses that we invest into at that time. And then on top of that, we don't invest into launch businesses.

I mean, you sleep well at night because you're saying a lot of optionality, terribly exciting underlying companies. It still must be immensely frustrating. I mean, if you could do one thing, what would it be? We try and do everything that we can do to help people understand what is going on within the portfolio. So we put out a huge amount of information. We've got each of our CEOs that have done a podcast

to talk about their business, to talk about their ambitions and their expectations for where that business is going to get to during the course of the next five years or so. We produce a monthly newsletter and we really try and educate the market in what the opportunity is. The reason for sleeping well at night is because the entire sector is on a big discount. I know it's not specific to Seraphim, it's not specific to space. One of the things that allows me to sleep at night

is the fact that we've got multiple companies that can, if things go right for those businesses, can individually return the fund. And we do expect that to happen. And that is what gives us the confidence. But perversely, one of the things that keeps me awake at night is some of these companies actually just being acquired.

So I've got certain companies in the portfolio that if they were acquired tomorrow at 3x their current valuation, I'm sure all of our shareholders would be absolutely delighted. But I would not be drinking champagne. I'd be drinking beer because those are the companies that we're expecting to deliver

tens of returns over the next decade. This is the reason why we chose an investment structure for the investment trust because of its evergreen structure. It allows us to be able to take positions and maintain them over a long period of time. Mark, what's the breakdown in terms of the retail component versus the institutional component? Retail accounts for about 15%, something of that order. 15%.

That's sort of super interesting to me as well, because I feel that that is an area of the market that a lot of UK public companies neglect is the retail component. How do you talk to those guys? I mean, do they just show up on the share register or is it again as a result of this campaign of...

of doing podcasts and media? Yeah, we do a lot on social media. So we really try and target retail investors on social media, trying to help them understand the story of space and why they should be interested. We put out the newsletter, the monthly report. We try and provide as much of educational material as we can. We speak at platforms where they're available, particularly the

the big platforms like Hargreaves and AJ Bell, where opportunities sort of allow us to be able to reach out to that type of community. Are the press interested in what you're doing? Yeah. If you type our name into Google, you'll see that we're in the press monthly, if not weekly. We're in the Times this week. So we're just frequently referenced. Whenever there's anything going on in space anywhere in the world, the press

call me up for comment. So this is an area that people are genuinely interested in. And actually, when they start to find out interesting things, it really opens up this whole new area that they recognize is going to start impacting their day-to-day lives. And are there any investment banks specializing in space yet? Any boutiques? No.

Space is really becoming its own category for investment, you know, like sort of cyber, climate. Space is sort of on the cusp of becoming its own category. But all of the big investment banks have now got teams that are, they've now got at least one space person in.

Adam Jonas is probably the first person that I came across at Morgan Stanley who wrote about it. He was actually the auto analyst. Right, he was. But obviously, he saw the role that GPS was having in automation and autonomous driving and stuff like that. And I think I may be going back seven or eight years. He's a super brilliant person to know in that space. Yeah. Well, you know, the JP Morgan and Morgan Stanley and all of the big US brokers, you know, have been putting out tomes on space for a decade.

And they've been calling this a trillion dollar market for quite some time. So they've called it very well. And of course, quite a number of companies came to the market via SPACs and a number of those were space companies. So, you know, this is an area that the investment banks are really interested on. This is the reason why Seraphim Space Investment Trust, PLC, has got two amazing brokers. We've got JP Morgan. We've got Deutsche Bank as our dual brokers. You know, they really believe in sort of 10-year outlook for this sector.

You were the third best performing investment trust last year. So there was some recognition, notwithstanding the fact the UK has a dysfunctional investment trust market, or as Warren Buffett has reminded us, buy cheap and stay patient, because there's lots of value in the investment trust sector overall.

I want to move on towards a couple of things that we haven't covered. And that's that although it's not on your investment dashboard, can you look at and give us a glimpse of what we might expect to see? And I'm thinking of tourism, space mining, biopharma. So tourism is something that exists today. You can go and procure a launch application.

on Blue Origin, on Virgin Galactic. This is a market that exists today, still a nascent market. In fact, one of our team has actually been into space on Blue Origin. One of the members of our independent investment committee for our private venture fund, Dylan Taylor, went into space. So this is a market that is available right now. It's going to be driven by cost, but exists today. In terms of

Mineral extraction, this is still a decade or more away and doesn't really warrant any real description. The one that I want to sort of double down on is really around biopharma because this is an interesting market and it's one that we're really focused on and one that we think is going to have a global impact during the course of the next five to 10 years. So let me sort of take a step back to explain where we are in this opportunity. So for the last 30 years,

the International Space Station has had people permanently resident on it. And they fill their time with doing scientific experiments. Some of them for longer than they want to be there. Yes, absolutely. What they're doing with a lot of their time is scientific experiments. And what has been proven during the course of the last 30 years is that in the zero gravity environment, every protein and every molecule behaves differently.

So what that ultimately means is that when you undertake scientific experiments, you get different outcomes to those that you would get down here on Earth. Now, because the ISS is only really a very small environment, what they're able to do are ad hoc experiments. And it then takes years to move to the sort of next stage of those experiments. What we're now moving towards is having commercially available space stations.

where companies can pay to be a tenant so that they can permanently look to develop capability. So we believe that during the course of the next five years,

there's going to become a huge focus around this from the biopharma market who are going to be taking existing drugs and looking at new ways of developing those drugs so for example drugs that are not injectable currently and need to be provided to patients via a drip they in space can be reconstituted in order to make them injectable opening up new markets for existing drugs

Simply put, there are just things you can do in space, which you just can't do in a laboratory on Earth. Correct. And some of the companies invested in have got some really interesting IP. Mark, one of the areas I'm super interested in, in relation to financial markets, is insurance and trading, which is...

Funnily enough, earlier this week, Simon, there was, I think, an Arctic freeze and the natural gas price went up 20%. Obviously, latency, speed to market of that sort of type of information. Have you invested in any companies that are interested in using the data that your satellites or the data that companies in your portfolio are providing for trading or insurance purposes? We've invested into a range of companies that that is the sort of central focus. So we've got two companies in the portfolio that focus on weather.

So Aspire Global has more than 100 satellites in space that collect very detailed weather data. And the idea there is the more data that you collect about weather, the more capability you have by applying AI to get accurate weather forecasts, something that we all suffer from. We have another company called Tomorrow.io that is likewise focused on the weather market. And what they are focused on is

hyperlocal weather, what is going to happen where we are in the next one to five hours, and to do that accurately, and to have that as part of the operational systems of corporate clients. So that weather data is actually part of the decision-making tools where that can be automated as a result of sudden changes in weather. Right.

I mean, think about it. I would like to start this company, by the way, which is the hyper local weather. And actually, you start to sell umbrellas where you know it's going to rain in an hour time, and then you can move across different areas. It is almost like that for retailers.

It's called tomorrow.io, growing very, very quickly because operationalizing weather is very challenging to do. Weather's a giant addressable market, but they're still limited by the capability of the data source. Well, the cocoa price, right, in terms of long-range forecast as well as short-term forecast in terms of crop failures. Yep.

the insurance industry, hurricanes, financial markets. Absolutely. Freezes cause natural gas prices and energy prices to move. I mean, any kind of information advantage in that space. And that's billions in one trade, not billions in a company. Our largest company, ISAI, one of the biggest customers is insurance. I talked about how they use radar to be able to look at every square meter of earth every couple of hours.

in very high resolution. They're particularly focused on applying that for insurance cases around extreme, climate-induced weather events. So if you think about a flood, what they're able to do during a flood is they're able to look at the perimeter of the flood in close to real time, the depth of the flood water, the speed of the flood water, the cars and houses and buildings that are subject to that flood, so that when the insurance company comes to receive a claim, this data is a source of truth.

So they don't need to send anybody out into the market to validate that claim. It can be automatically done. So insurance is moving towards paramedic insurance by actually being sort of data-driven by real events. We have another portfolio company, Plastidon.

Planet Watchers that's focused around crop insurance. So they're focused on the US crop insurance market and the US is subject to tornadoes and hurricanes and fires and floods. And what they do at scale is they automatically identify on a per field basis which fields have been subject and they can go as far as identifying from space as to whether the crops are recoverable or not.

And that is then used to sort of automate the insurance process.

And any hedge funds rearing their head in, excuse the pun, in this space? Yeah, hedge funds have been a very early user of this space data, but they are the tiny market, you know, where they are not a big customer. They get a lot of value from using the data. But in terms of the companies that we're backing, they're not big customers. Insurance companies are big customers, governments are big customers. And, you know, the rest of the commercial market is really where they're aiming at.

space junk there's already a bit of a mess up there any companies in the portfolio dealing with that issue yeah well we've recognized from when we first set up seraphim 10 years ago that we're part of the problem you know we're financing the build out of these constellations so for

So from day one, we've also invested into the solution to those problems to address space junk. So space junk isn't really a problem today, but it will be a problem if it's left unchecked. Right, with thousands of launches due off. The number of satellites that are going into space is exponentially bigger than ever before. So we've invested into a range of companies. So the one that I'm most excited about is one called Leo Labs. It's one of our larger holdings. They use ground-based radars.

to be able to look up into space, to be able to identify an object from a thousand kilometers away that's the size of a two pence piece.

That two-pence piece is flying around our planet at 17,000 miles per hour. And what they're able to do is to look at all of those two-pence pieces in real time and put them into a dynamic database. They make that dynamic database then available to the operators of satellites so that they can autonomously move those satellites in the event that they're on a collision course for a piece of debris.

So they are the biggest player in the market. They already are contracted for more than 75% of the satellites that are operated in orbit. And effectively, it's like a Google Maps for space. If you want to launch into space, you need to use their data set to understand where's the safest route into space at

the safest time. As a regulator, and this is one of the areas that the regulators are really focused on, the regulators previously just didn't have the data set to help them regulate effectively. Now they can by using this data set. So last year was the first year, for example, that a regulator fined a satellite operator for not removing their satellite from space within the defined time period. The decommissioning of satellites. The decommissioning of satellites. The US is leading the way operating

on this. So the previous rules around decommissioning of satellites was 25 years, which was really just a fudge. Based on the average height that you would put a satellite operationally into space, the gravitational pull of the Earth would on average pull it to the Earth in the 25-year period where it would break up in the atmosphere.

So that was what the rules were set up. Now that we're actually putting up much larger constellations much quicker, the US in the last year has moved that to a five-year period.

So that means that now, after the period of time that the satellites are no longer operational, they're broken down, or they've reached the end of their economic life, they have a five-year period to remove those satellites. So this has created- How do you do that? A new market. So they couldn't introduce these laws until such a time as there were companies that were out there being able to sort of provide that service. Right.

We have another company called Astroscale. They're the largest player globally in the market. They actually IPO'd on the Tokyo Stock Exchange a couple of quarters ago. The company's valued about a billion dollars. And what they do is they are commissioned to remove debris from space. So they have a vehicle in space to remove debris. And they're the largest player, and they are contracted by governments around the world. And that's the sort of first A3.

example of the types of companies that now the regulators will require that before they will give a launch license, that the operator must have a contract with a company like Astroscale, or they must have an insurance product that would then contract with a company like Astroscale.

So they can fulfill the obligations to remove the satellite by the end of that period. All sounds very Western centric. If you are in India or China sending up a satellite, who regulates you? Yeah, well, this is space, right? Would be another interesting question because even in today's FT, I see there's an article today saying that they are

selling off the equivalent of 3G and 4G bandwidth spectrum in space? So there's a lot to answer there. Yeah, well, I think the first thing is that the regulation of telecommunications in space works really very well. It's managed by the ITU and each country has the airspace above them

and for the spectrum rights for that. So this is around the geospatialary satellites that sit in an orbit where whenever the Earth turns, the satellites retain in that position. So it remains above London, for example. So that is a market that has been operational for 50 years. And...

and is very well adhered to by all of the players globally. So we have a working model that is out there and has worked for decades. So there's real confidence that this is a market that can be regulated, but regulation is something that is still, for the types of businesses that we're investing into, that are Earth observation, they're collecting data about all of the planet at any one point in time. This is really very much regulated on a per-country basis,

So, for example, in the US, the US has to give a license to any operators that are collecting radar data about the US continent. So unless you've got this license, you can't sell this data or services related to that data in the US. However, if that company happens to be based in Germany, the US regulation has no reach.

All of the data that you require about the US in that format is readily available if you look outside the market. So there are challenges to how this is going to be commercially regulated in the years ahead. But there is a scope and belief that this can effectively be done. And Star Wars is a thing. I mean, I should imagine that the defense side of this equation works a little less well when it comes to regulation and a space arms race. Yep.

There is a trend of countries creating space forces led by the US and the UK has done the same. So space is really now very much a sort of militarized zone. GPS being one of the sort of key elements that these defense organizations want to protect. Previously, if we roll back the years, it would have been the naval fleets, right?

Now it's the capabilities in space that provide that capability that they're looking to protect.

What is clear to me is that this is not going to be the last conversation on the Money Race podcast about space, for sure. But we are going to move to five closing questions we like to ask our guests. Pithy and focus. British astronaut Tim Peake said, space triggers the innate curiosity in us about what's out there, where we came from, and the possibilities those answers can bring. What fascinates you most about space?

Earth has got some giant problems as a consequence of climate change. I truly believe that space is going to help save some of these problems and save humanity. I believe that

Things like solar farms in space delivering clean energy back to Earth are going to become a reality during the course of the next decade or so. This is one of the things that truly excites me. It excites me as an investor, and it excites me as a citizen of Earth to find ways to move away from fossil-based fuels. What do you wish you knew 25 years ago?

I wish I knew a way of evaluating management teams because the only thing that goes wrong is people, people, people. You know, it's very rarely a technology or a market issue that leads to us not being able to scale a business. It's about people and egos and emotions. So this is an area that we continue to work on, but it's the area that we continue to get wrong. So that would be an area that I'd love to know more about 25 years ago.

I was going to go best sci-fi film because that's the one I'm most interested in. And if the answer isn't Alien or Star Wars, I'm not really that interested. Interstellar is my favorite. Yeah, you've got to watch it about three times to work out what's gone on. But yeah, I absolutely love that film. What frustrates you most about the investment business?

Currently, the investment trust discounts and how they're applied across the sector, it is very difficult as an individual fund manager to do anything at all about these discounts. That's the frustration at the moment.

And how have you dealt with any real setbacks in your life? He just discussed it, the discount. I think life is a series of setbacks and it's just about being tenacious. That is the answer to everything in my experience. Nick, I'm going to let you ask the last question. What's the last question? It's whatever you want to ask. Okay.

Oh God, you're blindsiding me now. Any question. Right. If you weren't doing this job, what would you most like to do? I would probably be running an AI fund if I wasn't doing a space fund. That is my area of passion. Outside of financial services, please. Outside of financial services. Yes. Oh, right. Okay. Let's get lateral. Right. Outside of financial services.

Oh, dear. I mean, to say he's not focused on the job is to be... The shareholders are going to really like that. Exactly. I think I would probably be a male model. So that's three of us in the room. Anyway, who tried? We are going to close there because you've been very generous with your time. I mean, talk about summing things up. I'm going to offer a couple, and Nick may or not have a couple, but

that earlier comment that I think was yours that I stole, which is science fiction has become science fact. I mean, this is upon us right now. And in the research that I've undertaken, you know, ahead of this is like, wow. I mean, I just, I've been amazed by, by just how much I didn't know, which, which,

I won't surprise my friends. And I guess the second thing is that it's happening right now and there are these investment opportunities that are live. There are listings of companies that you referred to. And I think SSIT is the symbol for the Seraphim Investment Trust. It's just one of the ways, but it's a fascinating story. And I'm just exceptionally grateful to hearing it. Yeah, I think my summary...

I think what I want to dedicate the rest of my life to doing in financial services is helping companies tell their story because I don't subscribe to this. There's nothing we can do about it. I do understand that you are in a broken system for which you are entirely not responsible, but I also equally understand and concur with Simon. The story of space is a pretty fascinating one. It's one that fascinated us as children. We live in an attention-driven economy.

When I see Elon Musk talking directly to retail America, saying that he'll populate the world with robots and millions of people coming out to buy his shares for whatever reason, whether you think it's fundamentally cheap or not. When I see millions of people buying Bitcoin, in some regards, maybe valueless. We live in an attention-driven economy. The price that UK corporates and corporates around the world in the era of the Magnificent Seven are paying is

for not really understanding the creative aspects of how to get the story across is, I think, one of the reasons for the discount. I think the story from our perspective, to make it easy for people to understand, is that everyone's familiar with what SpaceX is doing. It's on the front page of the news all of the time. And everyone's interested and aware of the rocket launch and how that's dominating the market and how Starlink is now providing internet capability.

What SpaceX is doing is incredible. They haven't put a foot wrong. They've got a valuation of $350 billion right now. Right. But they're only really doing about 10% of the overall space market. What we're focused on is the other 90%.

And we believe that there are many companies that are going to have enterprise values of tens of billions, 50 billions. Because if SpaceX can achieve 350 billion, what else is out there that's the other 90% of that market? And that's what we're seeking. Well, Nick, Mark, thank you for being here on Terra Firma. And until we meet again. Thank you very much. Thank you very much. That was great fun.

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