Bridging the Series A Gap in Space with Solaris Ventures' Tristan Jennings

Tristan Jennings is founding partner at Solaris Ventures, a niche venture capital firm focused on Series A investments in space and dual-use technologies.

What led you to launch Solaris Ventures?

I grew up in Europe despite being American. I was born in LA but spent my formative years in the UK and Switzerland. In Switzerland they have an apprenticeship program, so that's where I started my professional career on the engineering side at a company called ABB. I worked in their high voltage power division creating CAD models. Then I did my undergrad and grad school with a complete pivot to political science and economics. I ended up at the London School of Economics doing a master's in political economy. After that the pressure was to go into consulting or banking. But given my US background I was able to hop over to the West Coast and cut my teeth here.

I started in LA working in corporate finance and treasury at one of the largest privately held lending companies in the country with a multibillion-dollar loan portfolio, Westlake Financial Services. That company was partly owned by a Japanese conglomerate, Marubeni Corp. After doing some opportunistic work evaluating private investments for Westlake, I moved to the Bay Area to fully satisfy the itch to work with startups and do some VC investing. As luck would have it, I wound up being a founding associate of Marubeni Corporation CVC in 2019. It had a somewhat generalist mandate, so not only was I pitching startups to the investment committee and leadership, but also figuring out the sectors we should look at.

What led me to space technology was my engineering and CAD background. It really helped me pick apart ideas and technologies to a level where I could understand if they would be scalable. At Marubeni, I invested in and covered space for a while, but given the mandate they weren't ready to go very specific, which was understandable. Nonetheless, over several years I built up an incredible network of upstream capital like Seraphim and Space Capital, and was getting very interesting deal flow from them. I realized this is an area where I have a strategic advantage - there seemed to be a lack of capital after the very early stage. I wouldn't call it a valley of death, but it's a significant depression in the capital markets. I also found something very inspiring about the motivations of founders in this sector. Their desire to build was more pure and intentional than other sectors I'd invested in. So I decided to focus on space and launched Solaris.

Why did you decide to focus on both space and dual-use technologies?

It's challenging to find a space technology that has a large market and isn't going to be somewhat dual use. They might not all have government contract SBIRs or TACFI / STRATFI, but the government is typically interested in purchasing their services. Ideally, given the capital-intensive nature of the sector, you want the government to assist with tech development and potentially be a large customer. But you also want commercial interest after the initial development stage. That's actually the goal of a lot of these programs under SBIR and STRATFI: to help commercialize technologies while also having the government become a customer.

NASA realized a while ago that there won't be a high enough selection and quality of companies if they can't help them develop technology. Having milestone payments versus just a purchase order at the end of the contract matters greatly to capital-intensive startup companies. They also recognize they need to help companies commercialize because that'll be helpful for government too. Everyone has a mutual interest.

An example of this is launch companies. Any launch provider that can successfully get to orbit will have interest from government and commercial customers. That is by nature dual use. If we weren't doing dual use in space, we would limit ourselves to a very small subsector. We don't call ourselves a defense firm because we don't invest in a company based on its defense merits first and foremost. But we certainly consider the government customer aspects, which often includes defense. We're space first, but we appreciate that a lot of those companies overlap into the defense sector.

What do you look for when evaluating founders at the Series A stage?

In space and hardware more than anywhere else, it's important for founders to be well-rounded. That means not only can you build and you have engineering understanding, but you're also able to lead engineering teams and think about scaling your facilities and manufacturing, while at the same time interacting with both government and commercial customers. It's less important to be the best rocket engineer or best materials scientist. That's great, but it's important as you scale to understand all the other aspects that come with building a small manufacturing business. You have to deal with supply chain issues, shipping costs, tariffs and keeping the engineering team motivated.

What we've seen with successful founders is they typically have some experience in aerospace. It doesn't have to be directly related to what they're building, but they see the dynamics of the business side versus the engineering side. They understand the tensions between those two worlds and they're able to sit in between very comfortably. There's a minimum threshold of engineering expertise, and it's obviously very high in this sector. But after that point, I think it's more helpful to focus on soft skills like business development, sales, understanding what's coming down the government pipeline and the true market for your technology.

As a VC, you often see solutions in search of problems. In space and dual use you can't afford to do that because you're burning exceptionally high amounts, especially once you've got your facilities and engineering team in place. VCs in the sector can add a lot of value by thinking about the business and guiding the founder from the commercial side. Space is not actually about technology as much as it is about market timing and frontier economics.

How do you think about the nature of the emerging space economy when evaluating investments?

It's easy to get carried away by some of the more sci-fi business opportunities. But there are huge markets already, for example in communications, observation and launch. Given how capital-intensive and expensive space is, if you're able to solve a problem or build a satellite for even marginally less, those unlocks are huge in dollar terms. Legacy communication satellites can cost hundreds of millions of dollars, for example. If you're able to do it slightly better, you have a valid chance of customer interest. Then it becomes about how fast you can get to market and how reliable your products will be.

Launch is another one of those markets. One of the reasons SpaceX was successful is they had a founder with deep pockets who had the patience to figure things out, while recognizing the stagnation in launch contracting. Then they unlocked a huge market after that. There are other areas like earth observation or communications. Space situational awareness and debris removal are developing markets, but it might be more challenging to determine who's actually going to pay for these solutions. We see those as necessarily needing regulation to have a true business model.

That's one side of the spectrum. The other side is what will be a viable business in five to 10 years when launch costs have continued to come down, launches are more reliable and we have more options for in-situ power and resources. An example is helium-3 extraction from the surface of the moon. It's a rare isotope that commands tens of millions of dollars per kilogram on Earth. It's highly regulated and very hard to get, but it's thousands of times higher concentration on the lunar surface. A couple of companies are figuring out how to get that element and bring it back cost-effectively. The price is already known and they can negotiate offtake agreements, but they haven't proven they can do it economically. That's a real business with higher execution risk.

We like to make bets on real markets even though they might be further out. Things like the cislunar economy are interesting. Manufacturing drugs in space is interesting too, but I haven't been convinced it's a big enough market right now, or that we at Solaris have the expertise to understand this market. There are more low-hanging fruits which I feel I can understand better, so that's where I like to spend my time.

What unique challenges do dual-use startups face?

Any VC or founder will say more transparency around what's in the government pipeline would help. The government often reprioritizes. Administrations come and go. Geopolitical situations change. Staying on top of that is a necessary part of the business. The government and the DoD and Space Force have been improving their visibility and communications, so we appreciate that.

The next challenge is working with the timelines of government contracting vehicles. You need to put yourself in a position where the government is going to fund part of your tech development, but you also cannot fully rely on that coming through at a certain date. You have a lease to pay and engineers to pay. While the money is very helpful because it's nondilutive capital, it also means you're stuck managing that process before you can go out and commercialize.

Often you'll see startups really excited to have a large nondilutive grant from the government. Then they get frustrated when the timing slips by a couple of months and they've got bills to pay. If there's any way you can truly dual-track yourself with VC funding and government contracts, that's very helpful. Great founders are at least aware of those problems and plan a little bit in advance.

We love businesses that have a dual-use angle because it's great to have the government help with tech development and also tell you what they need. But the commercial side moves at a different pace. You need to have your heads in both spaces at once.

How do you define deep tech?

I would say it is something that is heavy on the tech risk side, at least initially, but potentially with massive markets once this tech problem has been overcome. There's still a science and R&D level risk that you're taking. It's mostly hardware-based. Deep tech often becomes normal tech within a couple of decades. Deep tech inevitably transitions to the mainstream, at least that's what we hope as investors. It carries a lot of scientific and R&D risk, but the pull of the market potential is strong enough to have startups grow and have VCs fund them.

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