AUSTIN, Texas – The Sept. 13 keynote at this year’s Data Center Austin conference seemed a bit of an odd man out: An angel investor, appearing at an IT/data center industry event, reportedly talked about aerospace financing .
However, Luke Nosek probably has no problem with things that seem unusual to outsiders. This summer, he made the news with what seemed like an odd career decision. Formerly a founding member of PayPal, Nosek would also become a former founder of the Founders Fund, the organization he founded over the past decade (along with Silicon Valley figures like Peter Thiel) to support “disruptive” efforts like SpaceX and fund Facebook. Nosek’s new project? According to Axios and The Los Angeles Times, the investor would instead create an entirely new company, Gigafund, which would initially focus on fundraising for just SpaceX and SpaceX.
So at this music center data center conference, Nosek was happy to reveal his penchant for the aerospace company as he discussed what makes SpaceX such a unique and special investment opportunity.
“I don’t know as much about data centers as you do in this room, but I do know how to look into the future in terms of technology,” Nosek began. “And the most important thing about deploying future technology is to have an incredibly talented entrepreneurial leader driving adoption of the technology — it’s about the person, not so much the technology, determining what happens in the future .”
Nosek didn’t look to the future much, if at all, when it came to details of how SpaceX will continue to market itself to investors. But around the time of Nosek’s summer career announcement, SpaceX was valued at $21 billion after a recent $350 million fundraising round. That’s more than double the valuation from 2015, when Google and Fidelity invested $1 billion in SpaceX, pushing the aerospace company’s value to $12 billion. Suddenly, SpaceX became one of only six venture-backed companies in the world worth $20 billion or more. (Others include Airbnb and Palantir, two Founders Fund portfolio companies.) Clearly something has gone right to attract all the financial interest.
Nosek indicated that founder Elon Musk is largely responsible for this trust in his eyes. “His gift was the ability to think independently from first principles [physics, engineering] even if everyone says ‘you can’t do it this way, you have to do it another way,'” Nosek said. “People will tell you, ‘No, it has to be this way’ – even the government told him about the old way.”
Nosek described it to this data center audience, categorizing the aerospace industry as stale for decades. He pointed to entrenched supply chains, overwhelming costs and only a handful of companies allowed to operate in space. He even repeated Musk’s favorite mantra about what was really holding things back from moving forward.
“The old companies were so entrenched that there was no innovation — maybe even negative innovation — for years,” he said. “This was caused by a number of things, but it was mainly the way the US government contracted: it worked on a cost-plus basis. Imagine if data centers worked like this: ‘go build it, we’ll pay you what you spend and give you Lake money.’ That’s how the aerospace industry worked, and then comes Elon. He knows it’s important for humanity to go to space, sees technology deteriorating and knew it had to be for human reasons.”
Nosek had followed SpaceX from its humble beginnings, ever since Musk left PayPal in 2002. “It seemed amazing what he was doing,” he said. “I didn’t know anything about the company, I only knew the updates he posted on the internet: a rocket reached space, they built this new technology called the Falcon 9 and it was going to go to the International Space Station. But at Founders, we had to look under the hood and see the aerospace industry. He didn’t just build technology, he changed the way business was done in the aerospace industry.”
On the horizon
Founders Fund formally invested in SpaceX in July 2008 at a cost of $20 million, and Nosek joined the SpaceX board to assist with fundraising. Up to that point, SpaceX had witnessed the skinny, single-engine Falcon 1 rocket lift off from a mid-Pacific atoll only to fail three times in orbit. It wasn’t until September of that year that SpaceX completed the first orbital launch of a privately funded and developed rocket, though Nosek acknowledges that even that milestone pales in comparison to the company’s May 2017 achievement.
“The company’s ultimate mission, as he told me in his booth in 2008, was to cut costs by a factor of ten,” said Nosek. “It wasn’t until we took that same vehicle and flew it again — that it could be like an airplane and fly over and over again — that cost started to come down. We had two flights this year, but it took years of perseverance. Rockets crashed and Elon literally started doing a blooper reel.
Nosek’s enthusiasm for Musk’s company was evident throughout, making it easy to see why he chose to launch a new initiative reportedly focused solely on SpaceX. But until now, very little information was available about Gigafund. Nosek only mentioned it in passing on stage, and neither SpaceX nor Gigafund’s website provides any concrete information about a relationship. In fact, at the time of Nosek’s Founders Fund departure, SpaceX’s statements explicitly avoided mentioning a formal partnership. “While we wish Luke well in his new endeavors, there is no guarantee of future investment allocations in SpaceX or other Elon-affiliated companies,” said spokesman John Taylor. The Los Angeles Times.
Nosek’s remarks at this conference clearly showed a fondness for and confidence in SpaceX, though he just as clearly avoided discussing in detail what happens from here. Perhaps the best clues to some kind of settlement to be announced came when Nosek compared and contrasted his past investments in Facebook (and Mark Zuckerberg) with SpaceX and Musk.
“From an investor’s point of view, you have a lot of opportunities in a situation like this [aerospace]. Social networks move so fast that you can miss the entire industry, but I invested in SpaceX for six years – and then they got a contract with NASA, so I reinvested,” Nosek said. “It turned out to be everything I hoped for, so I doubled down. With Facebook it was too hard, the price went up so fast you couldn’t get the shares. But with an industry that’s very slow and an entrepreneur that’s pushing like that, you get another chance. They have many decades and many more things to do.”
But even after all that tentative chatter, an event press release for Nosek’s speech may have hinted at a future announcement: “PayPal co-founder Luke Nosek (along with Elon Musk, Peter Thiel, Max Levchin, and Ken Howery) will be a thrilling keynote speech about his next venture with SpaceX as president of the space exploration company. He is also launching an investment company called Gigafund that will help Musk’s SpaceX raise capital.”
Frame image by Trevor Mahlmann