Red Planet Capital: The NASA-backed VC Firm That Never Was
I’ve been on a roll with these defense tech articles I’ve been writing recently. It’s become its own little mini-series.
I recommend reading them in this order:
I wasn’t planning to write this post until I happened to get a notification from Bloomberg about this article:
Inspired by SpaceX, NASA Built Missteps Into Moonshot Strategy
When I read through it, I was like, “Okay, I got one more article on this series in me.”
Bloomberg covers NASA’s latest efforts to return to the moon, with private companies’ help this time. The article is directly relevant to my last article on SpaceX.
This quote is the most interesting:
“Unlike other NASA programs, if there’s a failure in this program, it’s not a total loss,” Jim Bridenstine, the former administrator for NASA who oversaw the creation of CLPS, said before Astrobotic’s launch. “We modeled this after venture capital.”
Really now? You don’t say?
Where did they get that idea from?
You would never believe it, but NASA had plans to have a venture capital firm back in 2006!
Courtesy of the Washington Post — NASA Invests in Its Future With Venture Capital Firm’ Red Planet’ Nonprofit to Fund Aerospace Innovation
From the article (emphasis added):
“Hoping to tap the innovation and daring of small aerospace and biomedical companies, NASA has created and funded a nonprofit venture capital firm that will invest government money in promising but underfinanced companies.
“The fund, called Red Planet Capital, is the government’s third experiment with venture capitalism, after similar efforts sponsored by the CIA and the Army.
“Red Planet marks the first time that the federal government has started a venture capital fund for civilian purposes, but it is hardly a stretch. That is because a former president of the CIA-sponsored venture fund is Michael D. Griffin — now the administrator of NASA.
“NASA could see that a lot of technical innovation is coming out of companies that don’t traditionally do business with the government, and we wanted better and faster access to that creativity,” said Lisa L. Lockyer, NASA program manager for the project. “The administrator has been very supportive of the idea.”
Bloomberg’s article excites me so much because I had an idea for a venture capital firm at NASA years ago when I was a grad student at MIT! To find the Washington Post article during my research on the prior three articles I was writing was a confirmation of my instincts and dreams.
You might ask: why did NASA’s Red Planet Capital cease to exist?
The answer is buried deep within a RAND (contraction of “Research and Development”) Corporation report: “Venture Capital and Strategic Investment for Developing Government Mission Capabilities.”
From the report, which cites an unnamed former “senior NASA executive”:
“[RPC] ceased operations in 2007 when the Office of Management and Budget gave guidance that government-run venture funds would not receive funding in subsequent budget years. This policy apparently did not apply to IQT, which continued to be funded by the Intelligence Community. This policy choice reflected the Bush administration’s concern that government-sponsored venture capital projects might displace private funding, and that clear mission-related gaps between government agency and private-sector technology development practices had not been demonstrated for the fledgling NASA and DOE initiatives.”
Ironically, the reasons why RPC shut down are completely disproven by SpaceX’s current success: the aerospace firm is worth $180B in its last private valuation round, backed by the likes of Sequoia Capital and Founders Fund, and is NASA’s preferred vendor for the Artemis program, which has the mission of “going back to the Moon for scientific discovery, economic benefits, and inspiration for a new generation of explorers.”
The fact that NASA is still following Griffin’s philosophy set with the Commercial Orbital Transportation Services (COTS) and Commercial Resupply Services (CRS) programs and continued with the Commercial Lunar Payload Services (CLPS) program is a testament to the 11th NASA Administrator’s pragmatic vision.
One can only hope that other government agencies learn from NASA’s success in spurring commercial activity by servicing government needs and apply those lessons to their initiatives.
I’ll leave Griffin with the last word:
“But I had come to NASA from some prior experience as president of In-Q-Tel, which in short form could be characterized as the CIA’s [Central Intelligence Agency] venture capital fund. I was running a technical venture capital fund whose purpose was to make products and services available to the intelligence community.
“I came away from that experience with the belief that a little bit of government seed money, on the order of 5 percent or 10 percent, could accomplish some good in the commercial world.”
