Sunday, June 14, 2015

Jobu Won’t Save Your Space Start-up: Do it Yourself

          By Glen Strom

The May 31st post “Mother’s Milk is Drying Up for Space Companies” outlined how governments are cutting back on funding for the space industry. Companies can no longer expect to succeed with government contracts alone.

Pedro Cerrano’s fictional voodoo god, Jobu, from the movie “Major League.” Any resemblance between Jobu and a federal government minister, past or present, is entirely coincidental. Photo c/o The Orange County Register

That story was about existing companies. What about start-ups? How are they affected?

The short answer is this: don’t factor government funding into your business plan. As Pedro Cerrano would tell you, don’t worship at the alter of Jobu. You can’t rely on him.

You probably need an explanation about who Cerrano is. We’ll have to take a side trip into the world of voodoo for that.

A comedy movie from 1989 called “Major League” tells the story of a major league baseball team that was built to lose so the owner could move the team out of Cleveland. The team surprises everyone, though, by tying for first place with their bitter rivals, the New York Yankees. A one-game playoff will decide their fate. They need a big game from Pedro Cerrano, the team’s power hitter.

Cerrano is a great fastball hitter but he can’t hit a curveball to save his life. He believes that a voodoo god named Jobu (pronounced Joe-BOO) can help him hit curveballs. Over the course of the season Cerrano appealed to Jobu for help, with little success.

It’s late in the game and Cleveland is behind. Cerrano comes up to bat. The Yankee pitcher gets two quick strikes on him with curveballs. Feeling abandoned by his unhelpful voodoo god, Cerrano curses and declares that he’s done with Jobu—he’ll do it himself. On the next pitch, another curveball, Cerrano hits it out of the park.

Cerrano learns not to count on an unreliable saviour. Neither should you.

Have you based any part of your start-up plan on government funding? You’re putting your faith in Jobu. Governments blow with the wind. They can pull the plug on you at any time.

That’s assuming your start-up can get any money at all. Recent events suggest you probably can’t.

The Canadian government announced on May 29th that they would give $13.1Mln CDN in funding through the Canadian Space Agency's (CSA) Space Technology Development Program (STDP) to 21 technology companies. Sounds good, doesn’t it?

You’ve probably heard the expression the devil is in the details. Substitute Jobu for devil.

If you look at the list of companies in the announcement's backgrounder, you’ll see that the government’s investment is limited in any one project to a maximum of 75%. The companies must provide a minimum of 25% of the money.

You might also notice that many of the projects are for enhancing existing technologies. And most of the companies that are creating new applications seem to be beyond the initial development process.

According to the 2014 edition of "The Space Economy at a Glance," the "total Canadian space sector revenues amounted in 2012 to CAD 3.3 billion (USD 3.3 billion)" in 2012. The CSA budget during that same period is listed as being slightly over $300Mln CDN or approximately one tenth the total amount. Source and graphic The Space Economy at a Glance 2014.

The June 11th, 2015 post “Small Canadian Firm Uses Tiny Materials to Big Effect,” is a striking example.

Integran Technologies of Mississauga, ON received $200,000 CDN from STDP to “test and optimize a novel nano-material that has equivalent or better performance than aluminum in mechanical strength and stiffness.”

Integran has financial backing from Ontario Power Generation, the crown corporation for electricity generation in Ontario, and Babcock and Wilcox, a big energy products and services company. Integran also has a developed product and licensees in Canada, the United States, Mexico and China.

The message for brand-spanking-new companies with nothing more than a concept seems to be this: Let us know when you can make some money and maybe we’ll give you a few bucks. Until then, we’ll concentrate on the sure things.

That doesn’t mean don’t take any government money. If you can get it, sure, take it. In fact the May 28th, 2015 post “Government Organizations of Interest to the Space Industry,” even offers up a list of agencies which may be able to help you find funding. Connect with them.

Just don’t count on government subsidies. The Jekyll and Hyde personality of government is nothing to bank on.

Glen Strom.
If your plan depends on government funding for your company to succeed, you have a bad plan.

Yes, that’s harsh. So is bankruptcy.

Listen to Cerrano. Don’t depend on Jobu. Do it yourself.

Glen Strom is a freelance writer and editor with a background in business and technical writing. He's also the editor of The Gazette Weekly, the newsletter of the Canadian Space Society.

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