Wednesday 11 June 2014

How 4 Students Got a Satellite Startup Off the Ground and $500 Million From Google

How 4 Students Got a Satellite Startup Off the Ground and $500 Million From Google
Nearly seven years before Google agreed to buy his company Skybox for $500 million in cash, Dan Berkenstock had his eyes on a more modest goal: winning a $20 million prize in a Google competition.
In late 2007, Google announced the Lunar X Prize, which promised $20 million or more to the first privately funded teams that could land a rover on the moon, take some high-resolution pictures and videos and transmit them back to earth. The lofty goal of the competition was to reignite the space race for a new generation of engineers and entrepreneurs.
Berkenstock, then three years into a PhD engineering program at Stanford, worked to assemble a group of students and investors to beat out the competition. "They spent about a year on it getting everything lined up," Juan Alonso, an associate professor of aeronautics at Stanford who became his academic advisor for a time, recalled to Mashable. "Dan always had a very entrepreneurial spirit to him. I remember him being very entrepreneurial, well put together and not afraid to take risks."
For better and worse, this particular risk didn't pan out so well. The economy collapsed in late 2008 and those who had made tentative offers to fund the Stanford lunar venture backed out.
"I think we learned one of the most important lessons at that point," Berkenstock said during a seminar at Stanford in 2013. "And that's really a rugged determination. Even after the universe told us 'no' by creating the worst financial crisis in nearly 100 years."
The Google competition lit a spark for Berkenstock. He realized there were enough talented peers around him and influential venture capitalists barely a mile away to fuel a project with the potential to disrupt the aerospace industry. Berkenstock teamed up with two of the Stanford students he'd worked with on the Google project — John Fenwick, a veteran of the U.S. Air Force, and Julian Mann, who had previously founded Astronautical Development — and later teamed up with a fourth student, Ching-Yu Hu, who had worked as an analyst at J.P. Morgan. Together they founded Skybox in the very beginning of 2009.
The original plan was to launch small, cheap satellites into orbit that could be used to send information back home. At first, the team focused on using CubeSats, 10cm cubes which were developed at Stanford in 1999 to carry small payloads into orbit at a very low cost. Soon enough, though, the team shifted course to pursue mid-sized satellites that weighed about 200 lbs. and could support better computing and telescopes to capture and transmit high-quality images back to earth.
As one source put it to us, "they basically went from launching a coaster to launching a dorm fridge, but still, that's way smaller than a suburban, which is what the incumbents have in orbit."
Developing the Skybox concept didn't exactly prove to be rocket science, but raising funding for it sure did.
"This is a company that couldn’t get any traction in the venture community," says David Cowan, a partner at Bessemer Venture Partners. "If you ask them about all the challenges they had in deploying their satellites, the number one challenge was fundraising." (Skybox declined to make anyone available for this story. The acquisition is still pending regulatory approval.)
Cowan balked at the chance to participate in a seed funding round for Skybox in 2009, noting that the VC and aerospace industry viewed Skybox as a "joke" and a "naive pipe dream." But he couldn't shake the feeling that Berkenstock was impressive and the startup had the potential to make satellite technology cheaper and more available. In 2010, he finally "built up the nerve" to lead an $18 million funding round in Skybox.
Even then, he says, Skybox "did not have the financing momentum that you see in a lot of hot startups." It was a fight to convince other investors to consider funding the satellite startup. "Nobody took it seriously until November 2013."
That month, almost five years after it was founded, Skybox successfully launched its first satellite (SkySat-1) into orbit. A few days later, it began transmitting images and data. The goal for Skybox was to create a new kind of big data company that could use satellite images to provide detailed information to paying customers on everything from crop yields to consumer behavior. Now, it finally had some data.
Suddenly, everyone came calling.
"Basically we went out to raise a new round of financing and all sorts of suitors came out of the woodwork," says Deepak Kamra, general partner at Canaan Partners and member of Skybox's board. "There was a lot of interest in the company."
Sources we spoke with noted that Skybox had received interest from aerospace and satellite companies, as well as multiple tech companies. One source said the likely shortlist of tech companies interested included Facebook and Amazon, both of which have made investments in drones, as well as Apple, which may have interest in a service like this for maps.
Though Google wasn't the only company to express interest in buying Skybox, it was arguably the most natural fit. Skybox owed its founding on some level to the competition Google had launched years earlier. Google had signed up as an early customer to get data from Skybox. And, deliberately or not, Skybox had set up its manufacturing facility in Mountain View, California, Google's backyard.
"This was a partnership that was simmering for years," Cowan says of Skybox's relationship with Google. "The November launch was a key turning point in how others perceived the company. Anyone who was theoretically interested in becoming an acquirer suddenly became very interested."
For Skybox, the deal offers access to Google's vast talent and financial resources. It means never having to fight for funding again. For Google, the Skybox deal may help improve maps, expand its treasure trove of data and, perhaps most importantly according to some analysts, work to expand Internet access throughout the world.
"I think it's more about what it teaches Google for their Internet satellite ambitions, which is obviously a much bigger and more ambitious project," says Tim Farrar, an analyst with TMF Associates.
Not everyone was excited to see Skybox get acquired.
"This is a bittersweet sale for me," says Cowan from Bessemer. "I’m supportive of the team and I understand the reasons why they want to join up with Google, but just personally, this has been the most exciting [startup] both intellectually and for the profound implications for our species. [That's] something I’m going to miss going forward."
He added: "And I do think that in the long run, Skybox has a very bright future as an independent company."
In their blog post announcing the acquisition, the Skybox team framed it not as selling itself short, but rather as a new challenge: "The time is right to join a company who can challenge us to think even bigger and bolder, and who can support us in accelerating our ambitious vision."
For Berkenstock, in particular, the acquisition also means he finally won that Google prize.
Posted by : Gizmeon

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