M2 Success Summit: Talking To Astrophysicist Max Arshavsky

Our next guest is Max Arshavsky, the co-founder and Managing Director at ZENNO Astronautics, a space flight systems company based in Auckland. Their focus is to increase commercial viability of the space market, through developing propulsion systems for small satellites – CubeSat, for those in the know – which will extend their time in orbit and allow them to work together in formation even. If that wasn’t enough, they are also working on a suite of software for mission planning, development and operation and also getting rid of space junk while they’re at it.

Can you just explain in language that I’d understand what exactly you do?

ZENNO is a space flight systems company. What we do is we build propulsion systems for satellites and software for space exploration.

It may sound that we are almost doing two things in parallel, right? But the reality is, in order to develop a propulsion system for a satellite, you must of course develop the software that controls it.
We see this as a good opportunity to put the software on the market since we do it anyway and continue working on the hardware. So we are a hardware company, that has software that is currently on the market.

I’ve been doing a little bit of research on CubeSat and there is some propulsion options that people are working on, can you describe how yours works?

We actually are not trying to do things better than somebody else who is on the market currently, we are doing a completely different thing. When we think of space exploration, what comes to mind? We think of a space shuttle that goes to space, massive machine. We think of going to the moon. We think of space telescope. These are ambitious great things, right? Traditionally, these are done by the government or the military and they have substantial budgets. They are large machines. But these days, space is actually more and more accessible to private companies.

Rocket Lab here, and many more companies, are actually entering the space exploration and building satellites. Companies don’t like to wait for 25 years before they see any kind of return on their first product. Companies like to do things fast. You want to be able to test, you want to be able to see some money coming in soon.

Thanks to that fact that technology has allowed us to shrink the size of satellites, we are now in a position to launch and develop satellites within a couple of years. The satellites are very small, they are the size of a loaf of bread, and even smaller.

These satellites suffer from one problem when they are in orbit. They are continuously losing energy. What is a satellite in orbit? It is basically throwing something very hard and as it falls, it never quite reaches the ground because it curves away from you. That is basically spinning in orbit.

So they are disposable at the moment?

At the moment they are. What happens is they are primarily lower orbited satellites, and when I say lower orbited, within 2,000 kilometres. The International Space Station is 400 kilometres above the surface. At that altitude, you experience some drag. There is still some atmosphere, but it is so unnoticeable that the force is measured in nanonewtons, depending on the size. It is very, very small. You would never be able as a human being to appreciate the force in any way.

Traditionally satellites have a propulsion system. Every now and then, they expense some propellent and it allows them to stay in orbit or to correct the orbit. The small satellites don’t have that opportunity because the systems that we’ve developed for the larger ones don’t scale well, they don’t scale down at all.

One of the commonly used systems is a cold gas thruster, and that is what an International Space Station uses. Essentially we will have some gas, and if we want to achieve some kind of reaction, we squirt and that allows us to correct the orbit and stay in orbit for longer.

When you have a satellite that is that big, you want to fit all of your business in it. You want to fit all of the controls in it, all the power acquisition and equipment and solar panel and you also hope you will have some space for a propellent. But the truth is, even if you fit in some propellent in such a satellite, you will run out of air quick.

So we are now in the situation where we launch this satellite to orbit and we spend a year or two on it, we spent a few hundred thousand dollars to get it there and it re-enters within a few years, so it is a waste of money.

Now there are propulsion systems on the market that advertise themselves as maybe ready, but in reality nobody is ready currently. And they still are relying on propellent and you eventually run out of it as we’ve discussed.

We thought about how to solve this problem in a more efficient way and we have realised that we can do something similar to sailing, so to speak.

We thought we could live off the environment. The approach that we have is we interact with the magnetic field. There is an electric magnetic field naturally occurring around the planet earth. We can also generate magnetic fields around satellites quite well, we know how to do it. We have been doing this as a species for many years. We have all interacted with magnets and we know that magnets can either propel each other or be attracted to each other and they can turn each other as well. That is in two dimensions, we play with magnets on a table. But in three dimensions you do all these things as well.

So it turns out the idea was originally proposed in the 60s. There was no need for it back in the day but the physicist who proposed it, they thought about it very hard and they developed all the physics that is necessary. They have gone through the mathematics of these things, but they never had an opportunity to develop. Back in the day, satellites were large and there was no need for it. Now we have rediscovered this approach and we have the need to do so and we happen to have engineering feasibility that has only become possible 2-3 years ago, to actually engineer this system. That is what we are working on.

What sort of time frame are we talking about to start loading up these CubeSats?

Another 2-3 years and we are going to release technology in stages. So the first stage is the electromagnetic formation flight, which is basically sending our satellites to position themselves in relation to each other.

So one satellite, is a magnet and the other one is a magnet and without any physical connection between they can orient themselves. That opens up a huge opportunity, even this intermediate step is a tremendous opportunity for space exploration. All of a sudden we can assemble structures in space without any problems. We can have automatic rendezvous systems, a piece of software that runs the magnetic engine and two satellites can meet each other.

They can assemble themselves into a larger structure, you can launch them on multiple rockets. You can have dynamic structures. For example, you can have a telescope and a collection area in a telescope is very important. You can have a structure that is capable of changing the collection area.

It is similar to a human eye. It is not frozen, something that is engineered and forgotten about. It is something that is dynamic, it is living and it is responding to the environment.

Same with the space exploration. Systems that respond to the environment are going to be much more efficient and much more interesting to work with.

What sort of value of industry are you imagining?

We definitely are a Silicon Valley company by that definition. So that technology allows to absolutely change how things are done in space and what is possible in space. We are definitely talking about a multibillion-dollar opportunity, tens of billions of dollars. Even in New Zealand it is recognised.

We are working with investors and even they see it. But in New Zealand it is much more complex for people to see a big opportunity.

I am just trying to figure out the process of going to an investor and saying I want to start this astronautics company in Auckland, can you give me some money? You must be really good at sales!

It was hilarious actually. William, our Business Director, and I, came into a number of investors and during one of the meetings, we very patiently explained what the opportunity is and we already have the physics working and we can demonstrate it is functional. The investor is sitting there nodding and says ‘Yeah, cool story’.

Essentially, the approach the investors take in New Zealand is they see that you seem to be driven, you seem to make sense, the physics makes sense. Actually, the fact the physics makes sense probably saves such ideas. If there was no way to demonstrate that something is possible for a number of people to agree on objectively, it would be much more difficult.

In our case, we find a way to minimise the risk for the investor and to allow us to still deliver on the promise. We will split the process into a number of steps and we will deliver on steps and deliver on promises. We will make a promise that, say in six months’ time, we are going to demonstrate such and such technology which is a part of where we are going to eventually. So, we do it this way and the investor letter can be staged during the early stages of the company.

Can you give me a number?

I don’t think I’m legally allowed.

It comes back to what are you worth as a company. New Zealand is also in many ways disadvantaging businesses, because we in New Zealand tend to have lower valuations for some reasons. When companies go overseas they are easier to have a reasonable valuation.

Why is it important for you to stay in New Zealand, to have a New Zealand company and to grow our industry here and not go and take the big money in America and take the better valuation?

This may come across as a bit naïve in a way, but we at ZENNO believe that New Zealand can be and should be the place for such companies to grow, to originate and to prosper. New Zealand is actually an amazing environment. It is very developed, the climate is beautiful and nothing can happen to you in New Zealand. If you are a complete failure, you can go on the dole and then try again. You are going to have a house, you are going to have food and you are not going to starve.

This is an ideal environment for learning things, it is like a trampoline park with the things strapped to you. You can’t hurt yourself here. I feel like we are almost obliged to do these things in New Zealand.

I come from Russia. In Russia, I think this kind of business would not be possible. First of all, it would take you a few years to register a company. Here we do it online for $150. Secondly, you would be worried about actually surviving. You have to do meaningful things because you know if you don’t make money, nobody is going to help you. The government is not going to pay for you to have a few hundred dollars a week to buy groceries and give you some place to live – it is not going to happen.

You can’t afford such risks in other countries, in many other countries. But there are countries that are much more dangerous and riskier than Russia. There, you can basically not afford anything apart from ten hours of work in a day just to be able to feed yourself and the family.

I have seen some of those places and I moved to New Zealand, and it is our obligation to push forward, we must do it. We are so comfortable here, what have we got to lose? Nothing. Even if we worked very hard, how much does your life improve really? Why do something that has no true meaning? We have fought hard about whether it is indeed a meaningful thing and we believe it.

Many other areas require a meaningful approach and an exploratory approach, something new. Instead of maintaining existing systems, people in countries like New Zealand can come forward and try something that is a little bit risky, try some innovation and make some mistakes.

Do you think that sometimes we do get a little bit too comfortable here, that it does take some outside perspective in terms of reminding us?

Yeah, but it is not our fault. It is definitely necessary to have more than one data point to be able to assess what is going on.

Let’s say a person growing up in New Zealand may not have seen any other kind of life, so how can you blame such a person for lack of genuine feel for how lucky we are? We don’t know how lucky we are in New Zealand because we don’t have data points.

How do you start to form a company with so much potential and then work out the ownership side of things?

So valuation is mostly subjective process. You can do some calculations, but when you are talking about ideas that are potentially going to have such a dramatic effect, I think it really comes down to first of all explaining to the investors or to whoever is interested in what you are doing – explaining what the future is going to be like in very fine resolution. If you simply say ‘It is going to be great,’ it is not very believable. But if you explain why it is going to be great and why whatever we are trying to build is much more fascinating that what we have now.

We are not simply a dreamer, but when you are actually practical about it, that is what I think is important for valuation. As well as, of course, the humans of the company, you can’t ignore that. Whatever the company has done so far, the track record of the company, the track record of the founders, the grit of the founders, the sanity of the founders, the coachability. Some founders are so sure of themselves that they have no desire to listen. It is important to listen.

At ZENNO, we consult with people all the time. We consult with as many professionals as possible to make sure we have all the information here so we can make the best decision. So it is not a process that is done simply by mathematics and plugging things in and coming to some number. Maybe it is the case for companies who are doing sales of such and such, maybe for them it is the case. In what we are doing it is subjective, plus trust.

Right now while you are building this vision that has the potential to have quite a profound impact on the way that we send stuff into space, how do you actually keep the lights on back at the office?

It is a matter of being able to change focus and to change skill. Quite often we will have scheduled meetings and they are actually meetings of very few people. Too many people is just chaos, nothing meaningful can be done when too many people are trying to discuss something. Our meetings are 2, 3 or 4 people.

Every now and then, which is almost every day, we allocate some time to ensure we are still on track. Every week, the directors sit down and we lift our head out of the water and we look again – are we going in the right direction? Is this still the direction where we should be going or not? We do this periodically.

I think working with trust, working with people and working in trust is amazing. No legal system can come close to the efficiency that is achieved when people are working on trust, on mutual respect. The legal system can attempt to patch some holes, but we know that even these days, pushing for a legal system for so many hundreds of years, we still can get around it. It is not going to be perfect.

Trust is the best way to go, especially if you are starting something new, especially if it is going to be something that is going to put you and your co-founders and colleagues through something that is stressful. Respect and trust and being open with each other.

AUDIENCE Q&A

How many Kiwis do you have on staff?

Yeah. So William Haringa and Sebastian Wieczorek are the two co-founders. They are both New Zealand citizens. William was born in the Netherlands and Sebastian was born in Auckland to Polish parents. We are fresh immigrants, so to speak, but more or less Kiwis. I am the least Kiwi amongst the founders. We have developers in house who are also Kiwis, and we are working with overseas companies as well.

You say you are not making a profit at the moment, you have obviously got an end game in mind, how do you keep your investors excited about it when the profits are not rolling in?

There are a few ways to get them excited. So this year, software is going to be the money maker. I actually started delivering to market end of last year, it was a New Zealand space agency that received the product on behalf of the University of Auckland, we’ve done the work for them. Software is just easier, it is super hard still, but it is not hardware. Software is easier to deliver, easier to push to market. So this year we are seeing some revenue from software. When it comes to hardware, two or three years I think.

How do you keep the investors happy? Well, the first consequence is, are you making money or not this year? If we are saying no, it is not necessarily a bad thing because this year we are going to be getting 20 patents. I would rather make 20 patents, than bring in some money in the second or first year. So yeah, our investors, some of them are patient and some of them are less so, but that is the strategy we have.

I am just wondering what sort of product testing you have done? Product testing must be super expensive.

No, not yet. We are doing lab tests and we can actually get quite far along the path doing the lab tests. We can simulate the space environment, it is a vacuum basically. Despite the presence of molecules there, we can simulate certain magnetic fields, we can simulate certain temperatures. All of it can be done on earth. The final stage will have to be done in orbit and we are not at that stage yet. How far off are the tests in orbit? Probably two years away. A year and a half.

My question is about the satellites that have the magnetic qualities, are you developing those or just the propulsion systems for those? Are there any really cool kind of out there designs that people have thought of or concepts that these can be applied towards?

A few missions have been proposed by NASA. Telescopes have been proposed. We are merely waiting for technology to actually become available.

The forces are derived from the magnetic field that is created on board a satellite and what we do essentially, is create and control that magnetic field. When you create an electromagnetic field, the function of it is instinctual from a regular magnet, so you can have things that attract each other, repel, turn, sheer and so on and so forth. There is no expenditure of any kind of propellent.

It is like a Tesla vehicle or an electrical vehicle of any kind that derives energy from the sun; solar panels and a vehicle here on the ground, a car pushes with wheels against the asphalt, there we push with a magnetic field against another magnetic field, that is it. That is the only difference.

Say you do succeed and get the kind of funding that you’reafter and the test in two years’ time goes – will you be able to stay a New Zealand company
and succeed?

We would like to think that it is possible for the company to stay in New Zealand. I don’t think there is a necessity or requirement to go overseas. With regards to funding, we are not here to fundraise. We have secure funding, that is fine. We would like to stay in New Zealand.

Very early on William and I, we had a discussion and we sat down very early on before anything happened and we said ‘Why are we trying to do it here?’ It doesn’t seem like a very wise idea. Why don’t we go to Silicon Valley? We actually like it here, we like it in New Zealand. Why do they find themselves in the situation where they have to go overseas to Silicon Valley? Well, because everybody else is there. How about we don’t leave and then there will be somebody here and then somebody will not have to go to Silicon Valley.

So someone has to start creating the environment here. It is a good place and it has great potential to become a new intellectual hub of the world. We are so removed physically from the world.

We have such an amazing country here, amazing lifestyle. We are not super densely populated, we have a lot of land that is free. It is just an amazing place for this kind of thing to happen. I think it is better that Silicon Valley realistically.

Once you have the technology sorted, will you be launching them yourselves or will you sell the technology to others so then they can use this technology to progress themselves? And also, New Zealand must be quite good with the air space. I hear that is why Rocket Lab succeeds because there is a lack of traffic.

Yeah, New Zealand has good air space. We are not doing anything in the atmosphere, that is why we are not aerospace. We are astronautics, so we are beyond where the atmosphere is. From that standpoint, there is no advantage.

Now, when the product is complete, it is important to understand that Rocket Lab or SpaceX for that matter, they’re in the business of taking you to space. We see it as a solved problem, and it is indeed a solved problem. We know how to build rockets, we have been building rockets since the 1950s. Who can’t build a rocket? You go and raise some money and get some engineers to build a rocket.

Operating in space is what is important. Doing meaningful things in space, that is where value is. Getting to space has no meaning if you are simply going to space. There is no overlap between us and Rocket Lab or SpaceX; they are carrying things to orbit, we are facilitating operations in orbit. So no desire to be sold to Rocket Lab or to NASA at this stage.

Ultimately, is your market the Russians, the Chinese or the Americans?

Probably not the Russians or Chinese. I think Australia, United States, potentially Japan, Europe, definitely. These are the markets that we’re working with. I don’t think China will be. It would be great if they were cooperating, but why would they give away their market for no reason?

From what I know, it is difficult to enter Russia and do any kind of business in Russia of that nature. It is more of a government controlled domain in Russia. Europe, Australia, New Zealand and the States.

What is the best piece of advice you have been given?

Probably from my Mum. The times that she gave it to me, it will always be an unpleasant situation. It never felt nice when she was saying it. I would come from school and have a B grade for a test. Mum would look at it and say ‘How come it is a B?’ I would tell her ‘It is the best, there is no A in the class. I am still the best’. She would say, ‘I don’t care what has been done or what is possible or what everyone else is doing, you go there to get an A’.

So that mantra, basically it is irrelevant what everybody is doing, it is not relevant what has been done so far. Everything that is relevant is what you can do and what is physically possible. That is the criteria.

When we started ZENNO, we thought ‘OK, we are going to give it a go and we will stop when we realise that it is infeasible’. So far, it hasn’t been demonstrated to us that it is infeasible. There are more and more engineers and scientists that are getting excited about it and more and more investors are coming and talking to us, so we are still pushing.