We meet Rafal Modrzewski at the IAC. He is wearing a classic blue suit and pointed dress shoes. One can hardly recognize a geeky tech-head in him. His story as a new space prodigy started from Aalto University, where he was studying Radio Science and Engineering. What started as a university project grew into a global scale business, which is to date attracted $34M. Iceye is recognized as one of the most promising companies in Earth observation, and Rafal himself is acclaimed Forbes’ 30 under 30 Technology. At the IAC, Rafal shares a panel with Will Marshall (Planet) and Pascale Ehrenfreund (DLR) among others discussing the future of new space entrepreneurship – what can be done to support the emerging startups in Europe and globally. Certainly, the CEO of Iceye has a word to say about that.
“For new space startups, there is one very crucial element and that is – time. However, when it comes to doing business in space, things are moving too slow on a public side. In order to support new space startups, or any startups really, we have to start working in the same manner as startups do – be agile, act quickly, focus on value. And for that, we need systems in place that reflect new ways of work – systems that respond to change, allow test new capabilities quickly and not wait for 5 years before the new tendering process begins.”
The problem is, the systems are not agile at all. There isn’t lack of money, lack of passion or lack of people that can execute. There are various standards, conditions, and processes that space businesses are bound by, and that often stands on the way to growth. Slow tendering processes topped by complicated legal framework give new space entrepreneurs hard times to execute what they are meant to. Plus, the amount of paperwork one needs to go through, the cumbersome application process and the response time takes months if not years to prepare.
“The fact that we have public initiatives and grants is great, but the mechanism definitely needs more attention,” says Rafal. At the IAC, he raises the topic in front of the decision makers, as he believes this needs to be changed. “I understand that it may sound harsh for government officials, but this is the only way to draw their attention to the problem. Hopefully, the discussion will lead to practical improvements and clear the path for future generation of entrepreneurs.”
Rafal believes it’s impossible to run a new space company without close collaboration with the government. At least today, that is the case. “It is like building a key resort in the middle of the desert. Technically, you can do it, but practically – it is clearly not the easiest way to get yourself a good vacation spot.“
According to Rafal, public funding instruments should be perceived as an opportunity to accelerate the growth for your startup. It gives you access to relevant industry players and your potential clients, and it does not exclude the possibility to talk to private investors.
“Anything that requires sending stuff into space requires significant investment. The best way to fund your space startup is to use both public and private money. The former is important as in the end, you are serving general public – through governments. But the latter is faster to get.”
It may sound obvious, but fundraising is yet another process in the company you as a CEO will have to go through. You can think about it as hiring. Let’s say you want to hire a good engineer. You list your desired skills and expertise, then you find a headhunter who selects the best suited CVs for you. After that, your HR will do an interview, and then you do another round of interview before you make a final decision to get the new person on board. Same goes to fundraising. If you want to do it well and efficiently you approach it as a process, not some random task you need to do in between your schedule. Somehow I have a feeling that many startup founders do not realize that. Here’s how you do it:
- Define your steps. When it comes to company financing, planning is generally a good habit to adopt early on. Outline your process, this will bring your more clarity about how much time you may need to secure the round.
- Do your homework. See what types of funds are more likely to invest in you and bring value beyond money to your business. Don’t waste VCs time if you are raising a seed round.
- Use CRM or Excel sheet for that matter. List all your funds there and track the progress with each particular one and measure your success rate. Start approaching funds you want to address less, and move towards funds you want to have on board no matter what. This way you get to practice your negotiations so that when you reach to your dream investor, you’ll be all pumped with knowledge and experience.
- Play the numbers game. Accept the fact that to a big extent, fundraising is a numbers game. You will need a good number of funds, and the more you have on your list the higher your chances are. Do not rely on luck. Most likely it will not be the first or the second fund that you will get a deal with, and that’s ok. Think about it as dating – you need to date a few people before you find the one.
- Take responsibility. Fundraising is the job of the CEO. Nobody will do it for you. Your job is to manage the company, thus making sure it has the resources to function and grow. Plus, your job is to hire the best people – your C-level team – who will manage the company while you are fundraising.
Rafal Modrzewski is speaking at TechCrunch Disrupt that will take place in Berlin on November 29-30. Get your tickets now with a special -15% discount.