Integrity In Space: Trust But Verify

Space enthusiasts the world over are regularly awestruck by the great leaps forward that new and privately financed space companies are achieving every week. Rockets that can land themselves just minutes after launching commercial satellites into orbit. Unparalleled smallsat proliferation that can monitor space weather or capture images over Ukraine or Israel/Palestine to gain insight into the situation on the ground. Mega constellations that even when only partially realized, like Starlink, provide continuous communication in even the most remote areas. All to harness the power of space advancing life back on Earth.

On the other side of the coin, however, is another story playing out during this booming epoch in space history: some commercial innovators are falling short on delivering on their promises. Even after championing the private investment of hundreds of millions of dollars, many of our senior leaders and their advisors in Washington are justifiably concerned that some of these companies just won’t be able to cross the infamous Valley of Death. Privately, they are asking me what they can do to capitalize on this wave of private sector growth while avoiding spending taxpayer money perpetuating foolish business plans or (even worse) technical Ponzi schemes.

What began again with frothy enthusiasm a decade ago is finally coming back down to earthly realism. Bolstered by profits realized from tech sector exits, venture capital began pouring into “new space” companies, some with only half-baked business plans. Today, many are careening towards imminent death as the go-go era of easy space investment funds wanes. The rate of commercial tech adoption by the government has not yet met the expectations that founders pitched early-stage investors. Even though more US government money is being spent today on space than at any time in our history, commercial CEOs are being let go for not meeting revenue goals pitched during capital raises.

The warning signs are everywhere in the publicly traded markets. Urgent board appeals to approve fifteen to one reverse stock splits just to avoid being delisted. Market capitalizations less than 10% of the funding spent to get to a minimum viable product or share prices trading at less than 1% of their initial public offering price. Bankruptcies occurring with greater and greater frequency, spooking the private equity and institutional investors essential for founder and early-stage investors to successfully exit.

The successful companies, those delivering on promises made to investors, are providing valuable products or services to their customers, and have become household names. Many others appear to be only a few months away from Chapter 11 or delisting from a public exchange. With such a varied landscape of success, how can the Space Force safely partner, contract, and defend the commercial space industry to become a force multiplier for future growth and expansion into the heavens?

Trust…But Verify

It’s actually quite simple – and it begins with embracing the same core value of every branch of the military. Integrity is about fundamental honesty and truthfulness, not the ability to draft impressive proposals. It is a core value and must also be held closely by the people and companies that the Space Force trusts to deliver the products it uses.

Integrity must remain at the center of every trust relationship. President Ronald Reagan, our hopeful but cautious leader of the free world reminded us that in proceeding with treaties with an untrusted Soviet Union, we must “trust but verify.” Today’s military acquisition leaders must do the same as they test new relationships with unproven commercial contractors.

The second space race, which you’ve no doubt heard about at this point, hinges on so much more than one step in the regolith. It’s a race for who will get to make the rules, norms, and values for the next domain, and America and its competitors are in a dead sprint to the finish line. The first step is harnessing the power of industry to get to space – LEO, GEO, cislunar, and beyond. The second and just as rocket-science-hard is defining the norms for ongoing activities in space – and the integrity of our systems and contractors matters.

Today, the Space Force can look to two documents to verify the integrity of its contractors and subcontractors as a part of competitive RFP solicitations. First, audited annual balance sheets of the company’s financial performance over the previous three years must be a proposal requirement. Unless felonious fraud is in play, a simple analysis to determine trend lines will indicate to even the newest government or consulting analyst whether a company will be around to service its current creditors in the coming year. The other document is the pitch deck or presentation materials from a company’s last or capital raise liquidity event. Comparing an audited balance sheet history against these materials can shed light on how well a company keeps its promises to its shareholders and is an essential way to “trust but verify” how well Space Force contractors will deliver in the future. Requiring these simple documents from its contractors, the Space Force will greatly reduce the risk of holding worthless contracts with defunct space companies.

The second space race blazes forward, and its outcome will either establish an autocratic reality fueled by a command economy, or a democratic one leveraging the capitalist innovation of industry. To ensure that the US and its allies come out on top, our Space Force must have faith in the integrity of its products and people, and trust but verify that it’s sourcing the best space systems for the mission — because integrity should always come first.

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