Exclusive: Founders Fund partner talks SpaceX

Axios: Would you have made the original SpaceX investment that Founders Fund made, based on information available at the time?

Nolan: Absolutely. I was extremely confident SpaceX would succeed at that point. If you looked at the launches they had done, it just got better every single time.

• There really were no major technical hurdles left for launch three or four to be a success. It just seemed inevitable that it would work with funding, and Founders Fund helped the third and fourth launch happen.

If not technical challenges, there were still commercial ones. Commercial space launch wasn't yet an industry.

Yeah, that's right. It's kind of a pattern of Founders Fund liking to invest in companies before there's a category.

• The first SpaceX investment was before commercial space launch was a thing. Then we invested again before reusability was a thing and then made another large investment before satellite-based comms was a thing. And then it just keeps going. I think it's a pattern with these multi-chapter companies like SpaceX, where there's a really long-term mission that's extremely ambitious. The way to address it is to build some sort of primitive piece of a future world. For SpaceX, the primitive is space launch and cheap space launch at scale. And if you do that, it unlocks all these other things — all the way to what we're seeing now with AI.

How much of betting on that next SpaceX chapter has been deep due diligence vs. "In Elon We Trust?"

It's both. At this point it's probably unwise to bet against Elon. But it's always good to do your own diligence and we always have.

• The typical sequence would be to look at the economics of the current business, then hear about the next chapter and then come to understand the goals and vision of the next chapter and how that was on the path to making life multiplanetary.
• Then we'd diligence the technology to understand what you have to believe for that to come true — and there were never any miraculous, impossible things that had to happen. It was just good engineering, which, if you give engineers enough time and money, they will almost always get it done. Especially when the mentality from leadership is just really focused on all the things Elon always focuses on like rate of progress and cost structure and simplicity.

Was there ever a point where Founders Fund worried that it wasn't working?

I don't think so. We always knew this sort of project would never be a completely smooth line. Elon's optimization is always maximum rate of progress, not visible progress that gets good press. For example, you see Starlink testing multiple new systems out of one vehicle instead of incrementally doing it slowly to make sure there's never an issue during a test.

• The investment we made, which was mostly on faith — the biggest step function on the existing business was when we invested close to $100 million in 2017 before Starlink was real.

There had been talk about Starlink spinning out via its own IPO. Was that serious?

That's more a board-level thing, but I think it was genuinely considered. The Starlink business on its own would certainly fit the sort of standard public company profile with smooth, predictable revenue growth.

How do you view the "key man" risk of Elon?

Like all the companies in that same cohort, I would think that that's the case for all of them. The company calls it out in the S-1 that Elon's chairman and CEO and CTO and founder. And that's always been part of the reason the company is so successful. I think it's like the Steve Jobs situation at Apple.

If Elon had left SpaceX, would Founders Fund have kept investing?

It's a tough hypothetical. Going to your earlier question of Elon or the tech, I'd say either one would get you there. You don't want to bet against Elon, but it's also probably the best engineering team on the planet.

You personally backed the Twitter buyout, although Founders Fund didn't, did you foresee it becoming part of SpaceX?

No, I didn't anticipate any sort of merger.

How about the xAI one?

No. I think they were things that the company decided made sense along the way. But they were never premeditated. The company is willing to be very dynamic about this stuff, and sees the opportunities that really unlock that next chapter.

• Elon started talking about space-based data centers a year ago. And to a lot of people, this was out of left field. But I think he saw around the corner to where very few people were looking ... Fast forward to today and people are realizing that to scale some of these AI services we don't need to find single gigawatts. We need to find tens of gigawatts.

Any concerns that if someone builds a much more efficient inference mousetrap, SpaceX might be building orbital data centers no one needs?

Elon's said that with their approach the cost structure inherently gets lower, whereas the issue on the ground with the current paradigm on the ground is that it gets more expensive — mostly because of energy consumption.

• In a world where someone develops a quantum or optical chip that uses efficiently zero power, which is an edge case I think is unlikely, then it becomes a question of who will develop the chip. Who has the best chance at a breakthrough? There are companies working on it, but SpaceX does have the Terrafab plan and it's vertically integrated...

How has the SpaceX investment informed other Founders Fund deals?

I think the big lesson from SpaceX is that companies that work can be so much bigger than you think. There's so much potential when you're building something that's foundational to a whole new economy. And when you have a founder that doesn't get comfortable with success, but keeps challenging the idea of what the company can be.

There's been some talk that Twitter buyout investors got bailed out by the xAI merger, and that xAI shareholders got bailed out by the SpaceX merger. Should SpaceX shareholders be upset with the dilution?

I think every SpaceX shareholder will be very happy that that xAI became part of SpaceX. They made the merger when they saw it was the next chapter.

Do you expect to sell shares when your lockup expires, post-IPO?

That's probably something I can't can't speculate on ... It's the sort of thing you just want to keep holding. There's types of businesses where you see the S-curve kind of max out. And then there's other ones where one chapter just keeps unlocking the next one.

Elon will get a giant earn-out if SpaceX can build a Mars colony with one million people. Does he ever get that stock?

I wouldn't bet against him.