Link To Guest Website: https://www.linkedin.com/company/jgm-consultancy/
Title: “The Future Of The Aerospace Industry & The Finances Behind It”
Guest: Jeff Morris – JGM Consultancy
Interviewers: Jonathan Freedman – Mage LLC & Evan Macedo – Sapers & Wallack / FEI Boston
Click here to read the transcript
Welcome back to Radio Entrepreneurs. I’m Jonathan Friedman and our next guests up, or Evan Macedo, vice president finance and operations Sapers and wallet. It’s good to see you. We’re having
Good to see you, Jonathan. It’s a pleasure to be here. Always exciting to be on the show. You want to
Introduce our guests in the studio. Absolutely.
So our guests, you know, I’ll steal a little bit of his thunder. He’s got 25 years in the asset management industry spent the last 10 years head of the north American equities for Aberdeen standard investments. I spent 16 years researching and investing in the us aerospace and defense industry. So I’d like to introduce our next guest, Jeff Morris, founder of GGM consultancy. Welcome Jeff.
Great. Thanks for having me.
It’s a real pleasure to have you on, and we’ve got a real space cadet or maybe a space general. So a really fascinating background. Tell us, tell us about your background and, and how you made that transition from researching the industry to being in the industry, I guess.
Evan (1m 8s):
Well, yeah, so my, my career has been, the bulk of my career has really been an asset management. So most recently I was running the north American equities business per Aberdeen standard investments, also managing stock portfolios. And then as Evan mentioned, you know, covering the us aerospace and defense industry for six, 16 years, I decided to, to take a different career path. And in 2020 I’ve been doing some consulting. So really just wanted to build on that, that expertise that I had learned in industry and, and, you know, kind of take my career in a different direction.
Jonathan (1m 42s):
So we would imagine there’s a, you know, we all hear of the, the big launches and in fact, it’s quite timely today. We’ve, we’ve got a launch into space. There was one in the last a week or two where the, the, the proverbial billionaire space race. Why is there such an interest in, and what does it tell us a little bit about the aspects of commercialization of the industry and, and, and why there’s so much money being poured into that today?
Evan (2m 8s):
Yeah, so I mean, space space tourism is occupying an awful lot of the headlines right now and, and justifiably. So this is an exciting sort of an exciting industry, but it is kind of a, it’s kind of a niche it’s going to be for only the ultra wealthy for quite a while. There’s also some other things that are happening. I would say more in the, you know, more kind of in the, in the bulk of the industry where we’re seeing the major changes. If you think back to the, to the 1960s space was dominated by the military, you know, NASA, you know, putting, putting people on the moon. And then in the 1990s, there was a big emphasis on satellite communications. Iridium was one of those new satellite constellations that, you know, provided cell phone service everywhere on the globe.
Evan (2m 52s):
Now, what we’re seeing is, is really a transformation in terms of, of widening out the accessibility to space. It’s driven in part by falling lunch costs, you know, these reusable rockets like we saw today. And now, like we see with, with, with space X and some others that really is dropping the cost to get to space. Now what you’ve put up there in the past, they used to build these, you know, these geosynchronous satellites, which we still do, but many of these satellites were hundreds of millions, took two years to build. And now we’re just becoming a much, much smaller, much more agile industry in some respects. So these small, lower orbit satellites are going up, you know, much quicker and cheaper, then you’re also getting higher speed data rates.
Evan (3m 33s):
So it’s really, you know, a lot of new technology is coming to fore. There’s also a lot more capital too. So, you know, in 2018 we saw about $2 billion going into equity investments into private space ventures. You know, that, that had 6 billion last year in a pretty Rocky year for the market. So lots going on, a lot of entrepreneurs getting involved and just sort of new business models, which are, you know, fascinating to see how they’ll evolve.
Jonathan (3m 59s):
So like, sorry, I haven’t, it’s like any industry. I would imagine what we’re seeing in terms of the commercialization and the big players that are there. There’s a whole host of little guys that support them across the board for, for, for many
Evan (4m 13s):
Facets, we see a huge
Jonathan (4m 16s):
Industry in terms of employment. I would imagine that that’s been exponentially growing
Evan (4m 20s):
As well. Yeah, there’s, there’s a whole, there’s a whole supply chain, you know, there’s, there’s the big companies, the big defense contractors that we associate with space travel, you know, they have enormous supply chains, but there’s also, you know, smaller companies, you know, that are, that are, that are launching themselves, you know, I guess pun intended, but you know, smaller companies that are, that are getting involved in and just sort of that accessibility of, of playing in this, in this market is, is, is increasing. It’s increasing. And
Jeff (4m 50s):
Jeff, I find it unbelievably fascinating, this, the whole commercialization to space, the Reece, the space. And you, you, you back when of how you got into it, can you tell us a little bit more about some of the projects you’re, you’re actively working on?
Evan (5m 5s):
Yeah. So my, in my consulting role, I’ve had, I had a few different, a few different projects that ranged anywhere from like technology implementations, to some, some regulatory kind of compliance sorts of things. You know, right now I’m, I’m working for a company called, called corporate fab, which I can talk a little bit about their, their business model, but they’re involved in this on orbit servicing and that sort of a new industry that’s being created. And I’m doing some work with, with that company right now, but they’re just really interested in, in being a part of this, you know, part of this industry and, and helping, you know, kind of helping these, these, these companies, these companies succeed. So my, my, my career of investing in, in the large public companies for 16 years was a great place to get a vantage of understanding, you know, some of the technology and, and just sort of the trends.
Evan (5m 54s):
And, you know, now I’m looking at it from a different perspective.
Jeff (5m 58s):
And I know when these last couple of weeks, we’re seeing the first billionaires of the world, get up into space, float around for a little bit and come back down. I know a lot of people will be excited, which means that there’ll be, you know, maybe not all of the common people, but maybe some of the ultra high net worth people might be able to get up to space and kind of check it out in their lifetime. So do you have any idea of what the next five to 10 years in this commercialization space world that we might be looking at?
Evan (6m 33s):
Yeah. And I think the, you mentioned sort of the space tourism. I think that will be a niche, a niche business for awhile, but I’ve seen some of the business models where, you know, that price point starts to, it starts to come down. And I think over the next five to 10 years, you’ve got, you know, we’ll still see more of the same on more capital being committed, new business models. I’ve seen some estimates over the next 10 years that there’ll be 25,000 low earth orbit satellites being, being launched. This is, you know, this is a, obviously a, a LAR a large number and historically satellites have been all, you can call it disposable. I mean, they, they couldn’t be repaired. They couldn’t be refueled, but now there’s this, I mentioned on orbit servicing where companies like, like morbid fab or building gas stations in space, Northrop Grumman has also been, you know, successful in doing some of this satellite servicing.
Evan (7m 26s):
So I think it’s these new business models will evolve. Another one will be just like, what do we do with the, with the satellites that are, that are, that are not no longer functioning and how do we view orbit? And there’s the risk of collision? You know, what do we do with this, the space junk. You’ve got companies like gastro scale out there with business models about how to, how to deal with that. I think further out, maybe it’s not five to 10 years, but you know, the mining of asteroids and the moon sounds, sounds pretty far fetched right now. But if we think about it, you know, a video, a video phone call from a handheld device was pretty, far-fetched not that long ago and it’s, you know, it’s pervasive right now. So I think we’re going to see some of these new, some of these new business models evolve.
Evan (8m 8s):
And then the, probably the highest conviction prediction I have is, you know, we’re going to see consolidation and fall out. I mean, this, I was investing in through the kind of the tech bubble and saw that, saw that cycle. I mean, we’re seeing a lot of money come into the industry, a lot of great new technologies being brought to the fore, but there’s going to be a, there’s going to be a shakeout in consolidation at some point, you know, we saw this tech stocks, some of them grew to the sky, but then, you know, many, many did not. And that’s sort of the natural, you know, natural part of that, like the capitalistic process, he’s the industry
Jonathan (8m 41s):
Follow a lot of, sort of the traditional geographic sort of concentration. Is it concentrated around aerospace? So universities that have aerospace programs, is it, is it dispersed across the country or there some real hotbeds, you know, in, in terms of concentration of these companies?
Evan (9m 2s):
Yeah. It feels like it’s, it’s fairly well, well dispersed, but, but there are, you know, you seek companies, you’re looking to locate in, into some of the areas where there has been, you know, historical, you know, space activity. So when you’re talking about Florida and we’re seeing, you know, some things in Texas, Colorado is also has a very large, very large space community. You know, Lockheed’s a major employer in that, in that region, but then you’ve got, you know, you’ve got Raytheon, you’ve got ball aerospace out there, you know, max are at some other companies. And then also where entrepreneurs have traditionally been located on the west coast. So it feels like it’s, it’s fairly well, fairly well dispersed, but what’s just some, some concentrations around, you know, around these, these spaceports that have been created.
Evan (9m 47s):
Jonathan (9m 47s):
In terms of the, the applications that are being developed. Yeah. You talked about just an enormous amount of investment into the industry, but beyond that, you know, you talked about broadly the supply chain, but I would imagine for every company that launches a space vehicle for space tourism, there’s probably 50 companies that are, you know, making the fuel injectors and the onboard computers and the, you know, everything that, that there’s the applies. It just must be enormous in terms of the opportunities to service, the small number of companies that are actually launching vehicles.
Evan (10m 24s):
Yeah. There’s, I mean, just the, you know, these, a lot of these different, the different companies and like every little, you know, every little device in widget and it’s, you know, a bit analogous to like a commercial aerospace, like there’s, these parts are all have to be very specifically designed. They have to go through rigorous, you know, there’s rigorous testing and, and the, just the technological requirements, you know, it makes everything that much more intense, but then also, you know, creates opportunity. And when you think about like, what, you know, what entrepreneurs look for is, you know, evolving technology and in a large addressable market and thinking about space, just being, you know, w we don’t know if it’s infinite, but it’s, it’s certainly, you know, it’s certainly very large and, and, and, and evolving.
Evan (11m 7s):
So it’s, it’s a, it’s a, it’s an area where you’re attracting, you’re attracting, you know, some, some incredible minds, some incredible talent and, and very innovative approaches.
Jonathan (11m 17s):
It sounds to me like we’re going to need some, somebody doing some air traffic control at some point with the, the volume of, of activity we have going on up there.
Evan (11m 26s):
Yeah. That’s a, that’s that, that is a question. You start to look at some of these maps of the, of the constellations and things. Yeah. Things look, look pretty, pretty busy. You have pretty busy up there. And I mentioned sort of just that, you know, how to manage the space junk as well as yeah. Just a different orbital planes, et cetera. It’s, it’s, it’s, it’s going to get starting increasingly crowded, but you kind of get further out, you know, once you start thinking about some of these moon missions or to other places, some of these private companies are even have on the manifest of sending, sending, sending missions, unmanned missions to Venus and Mars and so forth. So there’s a lot of room for upside. So,
Jonathan (12m 4s):
You know, I have sort of a, off the wall question a little bit, but my I’m curious, you know, we had the space race as just talking about it in the late fifties and sixties, you know, that was a big point of nationalistic pride and, and getting first. And then, you know, obviously in the commercial sector, we’ve got a lot of competitive forces at play. Is there a tend to be collaboration or competitiveness within the industry because it’s so relatively new, what do you, what do you see from your consulting perspective? The companies hold everything very close to the vest, or there’s a lot of forms and collaboration going on.
Evan (12m 39s):
Yeah. I, I see, I see more of the, of the collaboration of collaboration going on. I mean, clearly there’s, you know, there’d be companies that are in direct competition, but, you know, in many cases, a successful, you know, a successful company that can demonstrate the technology really opens up the opportunity for others to, to, to play as well. You know, it validates that particular type of type of business model and, you know, success also, you know, in terms of capital availability and so forth. I mean, the, the more successful business models that turned from, you know, a technology into, into a business just helps attract, you know, attract more capital and lower the cost of funding and for everyone in the industry, you know, sure there is, there’s probably some rivalries on, on certain programs, but, but I think there’s a realization that the, you know, the opportunity is, is, is so great that, you know, that, that, that Morgan, you know, business models can be better served by, you know, by a degree of collaboration and, and understanding of best practices, fabulous.
Jonathan (13m 39s):
Jeff Morris, GGM consultancy. It’s been a pleasure having you on radio entrepreneurs. If people want to reach out to you, talk a little bit more about your business, talk about the industry in general and how they might get involved or seek out your, your assistance. What’s the best way for them to reach you?
Evan (13m 53s):
Yeah. The best way to reach me is Jeff Morris CFA on, on LinkedIn. And, you know, while I’ve been doing some consulting, I am, you know, I am looking for a full-time role and I have a dialogue going on with several companies looking for something in space or another dynamic industry. So yeah, really, really looking for that. And if anyone, anyone wants to reach me, it’s best to use that. LinkedIn, Jeff Morris CFA. Thank you very much. Okay. Excellent.
Jonathan (14m 21s):
It’s been a real pleasure having you on radio entrepreneurs. I can honestly say it’s the first time I think I’ve talked to in detail about the space industry, but it’s, it’s certainly sounds fascinating and huge opportunities for growth. So wish you continued success and as you evolve and, and, and the industry of all is along with you, and thank you to Evan Macedo, always a pleasure to have you a side-by-side Evans, Macedo vice-president of finance and operations with sabers and Wallach. Thank
Jeff (14m 47s):
You very much, Jonathan. I also want to say that this is an FBI segment, financial international, one of the premier financial networking groups in Boston. If anyone’s looking to improve their networking and meet up with a bunch of senior financial leaders, I would highly suggest you check us out. It’s FEI boston.org. If you want to reach out to me, Evan mosquito from sabers and Wallach, you can reach email@example.com, and then you can go to our team page and get all of my contact information there. So I’d love to talk to you if you want to meet
Jonathan (15m 24s):
Excellent. Evan, Jeff, a great pleasure having you guys on Radio Entrepreneurs, and we’ll be right back with another segment on Radio Entrepreneurs.
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