Today I’m sharing an interview which I’m really excited about, with Gabe Dominocielo. Gabe is a co-founder of Umbra Space, a provider of high-resolution Synthetic Aperture Radar (SAR) imagery. SAR is a technology for imaging the Earth’s surface with satellites. Since radar is able to penetrate through clouds, SAR can generate clear imagery even on overcast days, offering a more continuous and reliable source of Earth observation data than traditional cameras.

Gabe is the type of entrepreneur that we probably need a lot more of in the space industry, one that never wanted to start a space company. He isn’t clouded by childhood aspirations to see the Earth from orbit or to walk on the Moon. He co-founded Umbra because he thought it would be a great cash-flow-generating business with attractive unit economics. When he talks about Umbra, he doesn’t benchmark it to rocket companies or lunar lander businesses. He compares the company to liquor stores or fast-food franchises (one particular food chain he talks about a lot), businesses that don’t have the luxury of burning tens of millions of venture capital dollars based on the promise of distant future profits.

In an industry where sometimes revenue projections can seem hallucinatory, this type of sobering practicality is refreshing. Gabe is also just a fun guy. Hopefully you’ll enjoy reading this newsletter half as much as I did writing it. Lets dig in!

How does Umbra differentiate itself from other SAR data providers in the technology and in the approach you take to customers in distribution?

We have the highest quality data at the lowest price. But it turns out that doesn't actually matter. Being able to take pictures from space at the highest resolution is a great marketing thing. What really matters though is how many pictures you can take from space at high resolution over high-demand areas.

There's a real distinction here that people don't understand. They think that all the radar providers are essentially the same, but the reality is that Umbra takes 10 to 15 times more pictures over a high-demand area than anyone else. That’s what directly translates to making more money. So we can make 15 times the amount of money as anyone else. Which is great.

Help me understand what you mean by “high-demand area”, why would taking pictures of the same port or parking lot 20 times be better?

No, by high-demand area, I mean like an entire region. Like the Middle East or the South China Sea. At the speed your satellite is orbiting, it’s passing over that region for only a few minutes. Any satellite can take a certain number of images during that pass, so you image some fraction of that region. Our satellites can take 10 to 20 times as many pictures of that area as other SAR providers. But there is essentially infinite demand for imagery of that region. So every incremental image we take, we sell at the same price as the previous image. So we can generate more revenue per satellite pass.

Having an abundance of imagery doesn’t just make our business better, it also lets us behave differently. If I fly over North Korea and can only take two pictures, I'm going to be an asshole about those two pictures. I’m gonna charge people tens of thousands per picture because I need that to make my business close. But when Umbra flies over a high-demand area, we're taking 20 to 30. So I don't care. I'm like, “Let’s take the picture and put it on the internet. Let's look at the pompoms in the North Korean parade. Let's have fun. I don't care if you share it with your mom. Do you want to know the price of it? Here's the price. Do you want to task it directly through the computer? That's fine. Just do it through our website. No biggie, do it through our API”

So you’re saying that because the supply is so low for the traditional players, they have to charge an insane amount for every picture.

Essentially you're going to charge 10 or 20 grand per image to close a business case. It's a premium product. Whereas we may have the best product, but we sell it like it's a taco and we’re a Taco Bell. It's a commodity.

You didn't start your career in the space industry. You had an entrepreneurial career in legal services prior to that, and then you confounded Umbra. Why go into the space business?

It's probably because I have a low IQ. Really though it had to do with the economics of the spacecraft. I understood in my gut that if we could take large volumes of better pictures and sell them for a reasonable price over the internet, it was probably going to be a good opportunity. Being in the space industry to me is not a thing I aspired to. Though, I love the space industry and I even love the weirdos who are mean to me on Twitter. I would feel differently if Umbra did not have such great unit economics.

It seems to me that not having an affinity for “space” is actually kind of an advantage in that it guards you from falling in love with your technology.

I always say that I'm not in love with the technology or “space”. I don't want to go to space. I don't care. I love my job, the people I work with, and the positive impact we have on our customers. The satellites are units that produce money. I'm not like, “Oh, oh, the radar waves are so great.” It's a very, very sober way to look at your business. If you are in love with your technology, then you might try and force something to work that doesn't make money, which is super dangerous.

You were quoted in a recent TechCrunch article saying something that I really enjoyed. You said, “I talked to founders all the time. I tell them, if you can do this on your own or you can just grind it out on government contracts, you're going to be so much better off, understand the need and demand from the government and you'll also be able to build to that and continue to get money without diluting.” Can you talk more about that? Because we don't have a ton of data points on how to build a “successful space company” and I think this diversity of perspective is interesting.

We do have a million data points, but none of them are funded by Silicon Valley. Think about it. Every rich person who has a successful aerospace and defense company has taken zero dollars from Silicon Valley. I'm from Santa Barbara, which has a massive aerospace and defense ecosystem. Where I’m from, everyone’s like “Oh yeah, I'm Joe Schmo at ‘insert weird aerospace name’” and they’re a small defense contractor, but the dude has a $20 million house and throws off $5M is free cash flow on an annual basis to his single member LLC. That’s not sexy in Silicon Valley. There is a world of defense and intelligence, which is these small prime contractors of very smart people who have contracts with the government and are just normal people who drive nice cars and have nice houses and have 12 SBIR’s [Small Business Innovation Research awards]. It’s the people who are like “I’m gonna change the world” who make no money.

I would love to better understand that, because I don’t know those stories and those companies

Why would you ever hear about them? There's a taco chain where I live in Austin that makes great tacos. The owner of it lives in my neighborhood. His house is gigantic. He easily does more revenue than most publicly traded EO companies. More power to him, because he doesn't care. He just makes $10 million a year, has a Ferrari, and makes huge charitable contributions to the causes he cares about. He doesn't need an article in Space News. You know what I mean? He's fine.

So can you elaborate more on that path? What does it look like “grinding it out on government contracts”? What are those contracts? Are they SBIR’s? Are there other contracting mechanisms you have in mind?

I think that there's probably three ways to do it. One is, you can grind it out on SBIR’s (Small Business Innovation Research contracts) and try and win them. It's hard, but you can probably do it as a few guys in the garage. I mean, submarines get built on SBIR’s. General Atomics was started on small grants and still doesn't really have outside investors. That's a great example.

And General Atomics just acquired one of my friend’s companies. I have no idea what it was acquired for, but probably not like single-digit millions. They do analysis on radar, 3D modeling on radar data or something. No one would ever know who that founder is or what he's doing. But he had a great outcome for himself and his family. So there's a gigantic ecosystem that has nothing to do with the Valley or any of this startup ecosystem.

Yeah, I don’t know if this resonates with you, but it seems to me that with hardware the unit economics are almost baked into the product the first couple years of the company when you're grinding away, and people think that you can fundamentally change that at a later date. But historically that seems really hard or even impossible.

Everyone knew what we were doing. It was not a secret. Our FCC license was public, 1200 megahertz of bandwidth. We had a public license for 25 centimeters. We can do below that now obviously, but this is eight years ago. There's no excuse for all the other guys to not be pursuing that. None. Now the writing's kind of on the wall, others must meet our level of service, cost and data quality at a minimum and Umbra must also continue to improve our products and continue to treat customers with respect. Data buyers are being hammered with just tons of super low-cost, or even sometimes free, high-resolution data that we’re dropping on the market.

There's a Warren Buffet quote, it was like, “All your trades are public, why are you one of the richest people in the world? Why doesn't everyone else just copy you?” And his response was, “No one wants to get rich slowly.” The thing is, we got to space last of all the SAR companies and we've raised the least amount of money. Every single path we have taken has been the hard one. Do you think my wife is happy that we spent eight years grinding away? She’s not.

But I mean, we took the hard path. Do you know how difficult it is to build a 1200 megahertz radar? A 12 foot antenna? It is much easier to buy a 300 megahertz radar or an antenna. But if you tell an investor, “No, Umbra is going to do the thing that just doesn't exist, treat customers like partners, sell data in a different way than it has been traditionally sold. It's going to be 10x harder, will take longer, but the unit economics are incredible. Most investors said, “I'll go with the people who are using proven technology and are going to save the world.”

That wraps up part one of this two-part interview, part two will hit your inbox next week and it will include Gabe’s answers to questions like

• Why do you think you’ll be able to unlock a commercial market that has been so historically challenging to grow?

• How do you think about being last amongst the SAR companies to get to market?

• Do you have concerns regarding your partnership with Maxar?

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