Prizes vs Funding (was Re: An alternative to the Heinlein Prize)

10/07/03 00:00:00    

By Michael Mealling

p. In An alternative to the Heinlein Prize Jeff Foust discusses the fact that the recently announced Heinlein Prize for Accomplishments in Commercial Space Activities rewards past achievements when its support of future endeavors would do more for advancing commercial space activity. Specifically he suggests resurrecting the FINDS model: bq. Because these companies can make big initial strides with a small amount of funding, a little bit of money could go a long way. Instead of giving one person $500,000 for past accomplishments, the prize could award $100,000 each to five promising, but cash-strapped, commercial space startups. Different permutations could spread the money further, such as awarding four $100,000 and four $25,000 prizes. The prizes would ideally be in the form of grants with some modest reporting requirements, allowing the startups to conserve their equity for later investments.

p. While I very much agree with Jeff here, there are problems with the FINDS model.First of all, it didn't limit itself to commercial activities. Funding for things such as SETI, near-Earth objects and conferences while useful for those involved, simply drained money away from FINDS. While I don't want to second guess the FINDS funding sources and its methods, my opinion is that it would have been much better spent following Jeff's model plus a healthy dose of entrepreneurial education and market development.

p. Part of the problem with things such as FINDS, CATS, SFF's Enterprise Project, and many other commercial space 'foundations' is that they all seem to be dancing around the idea of being an incubator without actually committing to be one. FINDS funding non-commercial activities, thus being more of a charitable fund. CATS assumed that technology changes instead of customers would drive markets. SFF's Enterprise Project waits for people to come with business plans instead of helping the community develop them. A serious attempt should be made to combine the best of these efforts with a serious and professional attempt at building a real incubator. Something with the following features:

Funding

<dd>The incubator must have funding. It should pick up the slack areas where Angels and VCs typically don't fund.This means initial seed money (usually $10K - $50K) and pre-VC prototype money (the kind that usually gets the prototypes built and the first customer signed up). This does not mean the money is easy, just very targeted.</dd>

Mentoring

Many incubators will pair an entrepreneur with a mentor prior even to seed money. Mentors provide the real world knowledge that a startup entrepreneur needs in order to craft the business plan and develop the contacts needed to build a management team.

Market Development

One of the things missing in space commercialization is fresh thinking around markets and customers. This means providing business development think tanks and market analysis teams that can develop business plan skeletons for entrepreneurs to pick up and run with. Fund focus groups and market analysis efforts instead of conferences.

Ongoing Support

Startups are hard. They need a support team that understands what they're trying to do and can help (not hinder) their efforts. This means help with contacts, advice, access to other capital sources, access to other market segments and customers, etc.

p. The slight problem with this plan is that none of the current crop of space organizations has the ability to do something like this. It is truly an incubator which requires participation from people who typically don't participate in space activist/policy organizations. Of all of us the Space Frontier Foundation has the best access to the seasoned entrepreneurs that can pull it off. Some of the presentations from people like The Colony Fund suggest they might have some of the tools. But beyond that, no one has all of the components. Which means we have to build it.

p. So who's interested in building such a thing?