Payam Banazadeh and De-Risking Enterprises

When embarking on a lofty business venture, entrepreneurs are often concerned with how they can increase their chances for success. At its core, this idea is about de-risking the venture itself — the lower the risk, the higher the chance of success. That’s all well and good, but this notion is somewhat worthless without some actionable information on how to de-risk in practice. To answer that, we’ve turned to the example set by Payam Banazadeh. The CEO of Capella Space has spoken on the idea at length, including in remarks to an audience at his alma mater, Stanford University. Read on for some of his thoughts on how to lower risk and improve chances for success.

Company background

To better understand the journey Payam Banazadeh has undertaken to lower the risk of his venture, let’s first examine where he’s ended up with his business at present. Capella Space is a leader in the planetary monitoring field. Through the use of satellite technology, the company has begun prototyping large-scale constellations of orbiting objects that can continuously monitor the surface of the Earth without gaps due to time of day or weather.

To understand the innovative technology, one must first look at the way planetary monitoring has been conducted in the past. Often, this work has employed the use of optical satellites, which operate much like cameras taking photographs from space. While these satellites have produced some memorable images over the decades, they are often constrained by a set of limitations. One such limitation has been their reliance on outside light sources, making them practically useless for imaging the planet’s surface at night. Another limitation comes from their inability to image the surface when clouds are present — something that affects 50% of the planet at any given time. Taken together, these limitations mean that only 25% of the planet is visible to optical satellites at a time.

To address this issue, Capella Space employs the use of Synthetic Aperture Radar (SAR) satellites. Rather than relying on external light sources to function, these satellites actually emit their own form of energy that they can direct towards the planet’s surface. When the energy bounces off the planet and returns to the satellite, it can be used to construct a high-resolution image of what the surface looks like. Two key benefits of this technology are that it can be used at night and it can penetrate cloud cover. This means that with SAR, 100% of the planet is viewable at all times, making it an ideal technology for use in continuous imaging applications.

Technology risk

When speaking on the idea of retiring risk, the CEO has touched on several key areas of potential risk that can affect a new company. One is technology risk. The idea here is that technology for a new venture can be uncertain and, if it fails, it can destabilize the entire venture that is predicated upon it. The risk posed by unproven technology can be severe enough to scare away early investors or cause them to invest far less than they might otherwise. This can be a problem for ventures where the technology is the product, or the product requires a piece of innovative technology to exist.

One of the key ways to retire technology risk in a new venture is to create a prototype of the technology that can serve as a proof of concept. In the absence of a functioning prototype, proof of expertise in the field can also serve as an appropriate de-risking tool. These two routes have both been used by the CEO in the course of his work with his company. For example, the company recently launched its first satellite into space, known as Sequoia. The satellite has begun to beam images back to Earth, showcasing its ability to map surface features like rivers, seaports, cities, and forests. The ability of the satellite to provide continuous and repeatable data from these images is helping to prove the value of the company’s operations.

Experience accrual

Prior to the launch of the prototype, another way in which the CEO de-risked his venture was through the accrual of expertise in the field. An engineer with a degree in Aerospace Engineering, the company head has a solid list of credentials in the field of space exploration. These include time in satellite research labs at The University of Texas at Austin as well as a range of high-level work at NASA. Through this expertise, he’s able to inform his work at Capella Space and demonstrate lower levels of risk for investors.

De-risking a product

Of course, in the case of the space company, the technology is actually different than the product it’s seeking to sell. Though its operations are conducted through the use of technology, its product is actually data. The inherent risk here is that there may not be a high enough demand for that data to justify the company’s efforts. Here again, a viable de-risking strategy involves proving the concept that is in question.

This has been accomplished in a number of ways at the engineer’s company but perhaps the clearest is through its collection of advance deals for the use of its data. By setting up deals with other companies and agencies for access to its data before its operations come fully online, Capella Space is demonstrating the very real value others place on its product. This, in turn, helps to retire some of the perceived risk associated with the product and helps entice more investment in the firm. This can, ultimately, contribute heavily to its eventual success.

Success is, understandably, at the forefront of the minds of most entrepreneurs when they embark on a new undertaking. They want to maximize their chances for it and minimize their chances for failure. Otherwise said, they want to minimize their risk. Doing so often requires an approach that examines each aspect of a company individually and seeks out ways to de-risk that singular component. The example given above of the work of Payam Banazadeh can be instructive for anyone engaged in this pursuit. By looking to the ways in which he’s retired risk in his work, other entrepreneurs can draw conclusions about how to minimize risk for their own undertakings.

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