AUSTIN, Texas—The September 13 keynote at this year’s Data Center Austin conference seemed like a bit of an oddity: an angel investor, appearing at an IT/data center industry event, reportedly talking about aerospace funding.
Luke Nosek likely doesn’t have any issue with things that appear unusual to outsiders, though. This summer, he made news with what seemed like an odd career decision. Formerly a founding exec at PayPal, Nosek would also become a former founding exec at Founders Fund, the organization he created (along with Silicon Valley figures such as Peter Thiel) to fund “disruptive” endeavors like SpaceX and Facebook within the last decade. Nosek’s new project? According to Axios and The Los Angeles Times, the investor would instead be creating an entirely new firm, Gigafund, whose initial focus would be fundraising for SpaceX and SpaceX alone.
So at this datacenter conference held in a music venue, Nosek happily revealed his fondness 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 those of you in this room, but I do know how to look into the future regarding technology,” Nosek began. “And the most important thing in the deployment of future tech is to have an incredibly talented entrepreneurial leader driving the adoption of the tech—it’s about the person, not as much the tech, to determine what happens in the future.”
Nosek didn’t look towards the future much, if at all, when it came to detailing how exactly SpaceX will sell itself further to investors. But around the time of Nosek’s summer career announcement, SpaceX was valued at $21 billion after a recent $350 million round of fundraising. That more than doubled its valuation from 2015, when Google and Fidelity invested $1 billion in SpaceX and rocketed the aerospace company’s value to $12 billion. Suddenly, SpaceX became one of only six venture-backed companies worldwide valued at $20 billion or more. (Others include Airbnb and Palantir, two Founding Fund portfolio companies.) Clearly, something has gone well to attract all the financial interest.
Nosek indicated that, in his eyes, founder Elon Musk has largely been responsible for this confidence. “His gift was the ability to think independently starting from the first principles [physics, engineering] even when everyone is saying that ‘it can’t be done this way, you have to do it another way,’” Nosek said. “People are going to tell you, ‘No, it has to be done this way’—even the government was telling him about the old way.”
Describing it for this datacenter audience, Nosek categorized the aerospace industry as stale for decades. He pointed to entrenched supply chains, overwhelming costs, and only a handful of companies being allowed to operate in space. He even repeated Musk’s favorite mantra about what truly kept things from progressing.
“The old companies were so entrenched that there was no innovation—maybe even negative innovation—for years and years,” he said. “A number of things caused this, but it was mostly how the US government did its contracting—it worked on a cost-plus. Imagine if data centers worked this way: ‘go build it, we’ll pay you whatever you spend plus give you more money.’ That’s how the aerospace industry worked, and then comes Elon. He knows it’s important for humanity to get to space, sees that technology is moving backwards, 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 business, I just knew the updates he put on the Internet: a rocket made it up to space, they were building this new technology called the Falcon 9 and it was going to the International Space Station. But at Founders, we got to look under the hood and see the space business—he wasn’t just building technology, he was turning around the way business was done in the space industry.”
On the horizon
Founders Fund formally invested in SpaceX in July 2008 to the tune of $20 million, and Nosek joined the SpaceX board to assist in fundraising. Up to that point, SpaceX had witnessed its skinny, single-engine Falcon 1 rocket lift off from an atoll in the center of the Pacific Ocean only to fail to reach orbit on three separate occasions. It wasn’t until September of that year when SpaceX completed the first orbital launch of a privately funded and developed rocket, though Nosek acknowledges even that milestone pales in comparison to the company’s May 2017 achievement.
“The ultimate mission of the company, as he told me in his cubicle back in 2008, was he wanted to reduce cost by a factor of ten,” Nosek said. “And it wasn’t until we took that same vehicle and flew it again—that it could be like an airplane and fly again and again—that’s when the cost started to come down. We had two flights this year, but it took years of perseverance. Rockets were crashing, and Elon started to literally make a blooper reel.”
Nosek’s enthusiasm for Musk’s company came across clearly throughout, making it easy to see why he choose to take on new initiative reportedly focused solely on SpaceX. But until now, very little information has been available about Gigafund. Nosek only mentioned it in passing on stage, and neither SpaceX nor Gigafund’s website details any concrete information about a relationship. In fact, at the time of Nosek’s Founding Fund departure, SpaceX statements explicitly avoided mentioning any formal partnership. “While we wish Luke well in his new endeavors, there is no guarantee of future investment allocations in SpaceX or any other companies associated with Elon,” spokesperson John Taylor told The Los Angeles Times.
Nosek’s comments at this conference clearly displayed a fondness for and confidence in SpaceX, though he just as clearly avoided discussing what happens from here in any detail. Perhaps the best clues of some kind of to-be-announced arrangement came when Nosek compared and contrasted his past investments in Facebook (and Mark Zuckerberg) to SpaceX and Musk.
“From the point of view of an investor, you’ve got a lot of chances with a situation like this [aerospace]. Social networking moves so fast, you can miss the entire industry, but it was six years into SpaceX that I invested—and then they got a contract with NASA, so I invested again,” Nosek said. “It proved out to be everything I hoped for, so I doubled-down. With Facebook, it was too hard to, the price moved so quickly you couldn’t get the shares. But with an industry that’s very slow and an entrepreneur pushing like this, you get another chance. They have many more decades and many more things to do ahead of them.”
But even after all that careful chatter, an event press release for Nosek’s talk may have hinted at a future announcement anyway: “PayPal co-founder Luke Nosek (along with Elon Musk, Peter Thiel, Max Levchin and Ken Howery) will be delivering an exciting keynote speech discussing his next endeavor with SpaceX as director of the space exploration company. He’s also launching an investment firm called Gigafund that will help Musk’s SpaceX raise capital.”
Listing image by Trevor Mahlmann