XCOR Ready for Liftoff

The rocket scientists and space enthusiasts out in the desert in Mojave aren’t a homogeneous bunch, said Jeff Greason, but they do have one thing in common: space matters. Private development of rockets and the space vehicles powered by those rockets is too important to fail. It is important to the country’s future as a place of technological innovation, said Greason, president of XCOR Aerospace. Greason and XCOR’s contribution to that innovation is the Lynx, a two-seat space vehicle that will take passengers, scientists and payloads into sub-orbital heights. Test flights on the Lynx may begin sometime in 2011. XCOR certainly isn’t as well known as Scaled Composites, the Mojave company started by aerospace pioneer Burt Rutan. Greason certainly is much quieter and soft-spoken than the brash billionaire Richard Branson, whose Virgin Galactic will take paying passengers into space aboard the VSS Enterprise, built by Scaled Composites and currently based in Mojave. Greason’s reputation is such, however, that he was asked to serve on the federal Review of Human Spaceflight Plans Committee, also known as the Augustine Commission after its chairman, Norman Augustine, a former CEO of Lockheed Martin. At XCOR, which he started in 1999 after getting laid off at the Rotary Rocket Company, Greason wears many hats but primarily focuses on getting the Lynx airborne. “My number one job is as the money comes in to see that it is spent effectively and we make as much progress as humanly possible and we get this ship built and flying,” Greason said. Question: Is there a bright future for the entrepreneurial NewSpace industry. Answer: I think so. Everything takes longer than one might wish. The economics of space transportation are not subject to different laws of physics or economics than the economics of all the other kinds of transportation. What has been missing in space is not some law of physics that mandates it is going to be accepted. It is simply that there has not been competition among multiple systems, there hasn’t been the development of markets that has sufficient traffic volume to make the economics of reusable vehicles or of high production rate expendables work. The economics of space transportation right now look like the economics of air transportation might look if you only made ten 747s a year and they each made one flight before you threw them away. Q: Where does XCOR fit in the NewSpace industry? A: XCOR is one of the companies developing reusable suborbital spacecraft to take a variety of payloads up to and back from the space environment. In our case three markets are people, it might be individual paying their own, those might be researchers either government or industrial who are conducting some sort of experiment; payloads, which is basically anything we take up and bring back; and what we characterize as upper state missions. Where we carry an expendable rocket as a payload and that rocket launches while we are up at altitude and takes some other payload up to do some other thing. We can put about 10 kilograms of nanosatellite into orbit using that method. Q: How far away are you from getting your craft into space? A: Wouldn’t I like to know. It’s something we are always cagey about. XCOR has very much always been a company characterized by always managing to make a little progress regardless of what the conditions of the market are but that doesn’t mean we are decoupled from the conditions of the market. We do a little more when investing is moving quickly and more slowly when it’s moving slowly. Right now things are looking pretty good. If things continue to look as they look now I’d expect the first test flights to begin in the latter part of next year. Q: You are still reliant on outside investors? A: We are. We have built up a fair amount of revenue streams over the years and that is an enormous help in managing the business. But the revenue is mostly from sub-system pieces. We have developed technologies and competencies over the years. We had to develop our own engines because there was nothing on the market that met our requirements. We’ve now gotten a fair revenue stream from providing our services as an engine supplier or engine developer to other companies. We had to develop our own pump technology because there was nothing on the market that met our requirements. That’s turned into a quite nice line of business. We have some work outstanding with the United Launch Alliance, which is a very large aerospace company that launches most of the satellites for NASA and the Department of Defense. We developed our own composite material, which is definitely more than I wished to do. There was nothing on the market to serve our requirements for making composite liquid oxygen tanks. That material doesn’t burn even in a pure oxygen environment. We get revenue from these things either because there are private companies that want the kind of products we’re talking about or the government sometimes has different applications than what we might have for a technology and they are interested in seeing where the technology can be stretched to. Our core business is in the complete vehicle that relies on all those pieces and that is harder to get customer financing for although we have gotten a little bit of that over time. Q: Once you get the space vehicle flying then it will make its own money? A: We will operate the first one or two. Our long term vision is there will be other independent owner-operators but that is going to take some time to develop. Our core business is what we call wet leasing of the vehicles to the other operators but again you have to operate the first one or two before you can teach someone else how to do it. But even there when we are operating the vehicles ourselves we are not in the retail business. We wholesale the services of those vehicles to other companies that provide the end customer experience. That is a different model than some of the people out there. Considering that we had to take on the burden of developing not only the vehicle but the engine, the structure and many new technologies than I typically wished to do I prefer to slice off as small a slice of the business as possible because even that small piece is quite large. Q: Is the state of California supportive of what you and the other NewSpace companies are doing out here? A: I can’t say I noticed any special support or love from the state government toward what we are doing. Certainly at the local government level it’s a very supportive environment. But I speak no secrets by saying California is not the most business friendly state in the United States and I don’t think that aerospace is viewed as a strategically important industry by the state of California. Q: What do you see the space port’s role in the NewSpace industry? A: Mojave is really the only place in the United States where there is a concentration of several different companies working in different aspects of this field of space transportation. There are certainly other places where there are companies; this is not the only place where this stuff happens but it is the only place I can think of that has a number of different companies. That provides a lot of value for companies that want to be here. There are other natural features of this location that make it very good: the access to joint civil military airspace, the facility itself, and the low population density and the fact that because of all the other kinds of activities that are here nobody is concerned about the noise or other issues associated with doing these kind of operations. I think there will be multiple locations where this kind of thing is done but I think Mojave is very well positioned to be the R&D hub. When it gets into routine operations there are different considerations. You want to be close, at least for the participant flights, to the major markets. Also at some point we look forward to the day when that happens but at some point there will be a sufficient volume of traffic that it would be in the way of the other R&D activities here. Q: Did you have much of a business background when XCOR started? A: I’m very much not the classic entrepreneurial type. I was a technical manager; I ran projects both for Intel and the company I got into this industry with, Rotary Rocket Co. I was drafted by my team to run this company when we were laid off as a group from Rotary Rocket. The team was unwilling to give up and came to me and said ‘Boss, what are we going to do now?’ Eleven years later so far every time I reach down into the hat there is one more rabbit. Q: Did not having that business background present a challenge? A: Sure. In commercial space transportation hasn’t yet had its cadre of successful companies that establish the business model that everybody else can copy. Yes, it was a challenge but I also think it was one of the keys to our success because I came into this role motivated more by my desire to see it accomplished than my desire to be the one who accomplishes it. There is an awful lot of activity in this sector that is very much tied to an individual and because of our background we were always forced to approach it more as a business and have had to earn our living from the earliest days of the company. Q: How did you get appointed to the Augustine Commission? A: I was asked by a senior NASA official if I’d be willing to do it. I don’t have special insight into their thinking process but I believe what they were looking for because of the growing role that entrepreneurial space companies are starting to play they wanted somebody with that background. It needed to be somebody who wasn’t a likely supplier of the near-term big ticket services that NASA was looking to buy because that would be a conflict of interest. It needed to be somebody who could work effectively with other people; some of the people in this business have really strong personalities and are not really used to working in a team environment. Q: Any thoughts on the committee’s final report? A: I think because our charter tasked us with coming up with a fleet of options instead of with the one best answer I think we were able to take a broader and in some ways deeper look at what’s confronting us as a national space policy than some of the previous presidential commissions. When asked to come up with one answer there is always a temptation to file off the rough edges and not confront policy makers with any choices that are too different. When you are looking at a set of options you can explore the corners of space more effectively and show what the options are. I will add that on the one hand we had a fair bit of impact on the debate of national policy. Early in the administration, Congress was informed of the options we came up with. Looking at the subsequent debate in Congress I don’t think the national policy will look very much like any of our recommendations. That’s really too bad. Q: What is XCOR’s role going to be in that time? A: I view the government’s space activities as largely decoupled from XCOR’s market. The private sector is making progress and will continue to make progress whether the government chooses to take advantage of that or not. At some point the government’s space program is going to have to confront the fact that they’re not going to get Apollo-like budgets again. That means they cannot sustain an Apollo-like NASA infrastructure. When that happens the taxpayer will get better value for their money by purchasing the services from the private sector that the private sector is able to provide and only paying for government’s unique capabilities in those areas where the government is the only customer. That’s a painful transition that many national policy makers would like to see happen after the next election or any other particular election cycle you are looking at. Jeff Greason Title: President, XCOR Aerospace College: California Institute of Technology in Pasadena Career Achievements: Holds 18 patents