AE Industrial’s ‘Captain’ Kirk Konert On Firefly Beating Musk’s SpaceX, PE Space Race

Kirk Konert is partner director at AE Industrial, where he sits on the board of directors of several portfolio companies, including Firefly Aerospace, Bigbear.ai and York Space Systems. Firefly has become the first private company to win a spacecraft on the Moon, beating SpaceX from Elon Musk with a punch and highlighting the new era of the marketed space exploration.

Global finance: Congratulations to Blue Ghost from Firefly, who finished her lunar mission in March.

Kirk Konert: It was a bit surreal and incredible, watching the blue ghost land gently on the moon. Firefly is the first commercial enterprise to have accomplished this feat. Thus, AE Industrial is the only investment capital company with a portfolio company that has reached this stage. There is a lot of pride for our team. Obviously, we are not the engineers, but we helped the company arrive where it is today, and we are delighted to play a small role.

Girlfriend:: Are we officially in the privatization of space?

Konert: I believe it. We have now exceeded the point to ask: “Is it an investable sector for private capital and investment companies?” We were in this sector earlier than the others, but we now see large Bleu-Gris buyout companies taking substantial bets on space industry, such as Advent International with their acquisition of $ 6.4 billion in Maxar, and the acquisition of KKR of Ohb SE, a German space and technology company, last year. People are starting to believe that there is a real opportunity to invest in capital. Competition for assets has increased, and this is an excellent sign. It is good to be part of a healthy ecosystem where you have larger participating buyout companies alongside businesses on the intermediate market like ours.

GF: LPs care about their lack of yields. What is their reaction to potential spatial sector yields?

Konert: Initially, the LPs were a little skeptical. They somehow considered it an industry too early with a scene and more risky than your traditional acquisition. So far, we have been able to show that this is not necessarily the case. The companies in which we invest are supported by real demand, real contracts and real growth. It’s different from saying: “Hey, we invest in a venture capital company that could make a satellite that could make XYZ.” We invest in companies that are not different from other final markets on which we focus, such as defense, aerospace and industrial services. It turns out that it is a sector that may have a stigma of being a little more risky. But in a way we consider space as another area, and we invest in a way that aligns with what our LP expect.

Girlfriend:: How is this ground going every time a LP is skeptical?

Konert: We are still talking to our existing investors about how we spend their capital and manage the risk in relation to return. And for new investors, we present case studies on what we have done. American Pacific Corporation, for example, is a manufacturer of specialized materials for national security and space programs that we originally bought from a family and improved. We sold it to New Market Corp. Last year for $ 700 million. We also emphasize Redwire. At the time, we made a choice of choice and shoves for this “spatial gold rush”. We predicted that it would happen and [the IPO] was ideal for investors. So, we show these successes and say: “Look, you might see the big titles of an exploding rocket … We do not invest in this. We invest in technology that works. ” In addition, there is an additional value that investors do not price on the space market – things like Blue Ghost landing on the moon. We did not assess this when we have invested in the company. But it is obviously a huge creative event and we will benefit from this option value that we have not subscribed in our model.

Girlfriend:: I understand that you have won the name of Captain Kirk because of your space expertise. What is the background?

Konert: [Laughs] The backdrop may not be as inspiring as you think. We are investing in the supply chain for aerospace and defense commercial companies; There was a space component for these assets. And we started to notice that SpaceX was an element of line in our company and we thought: “Is it something on which we want to focus?” We started to dig and saw similarities with what happened in aviation where the flight was very expensive, but this cost curve has dropped considerably. And then the manufacture of assets has increased considerably. We therefore wondered how we can invest in this integrated growth and dive deep into this industry. It was a decade of experience to become experts in the sector. But we believe in the mission; This brings us out of bed every day to say that we invest in technologies that count in the long term, whether for human exploration in Mars, or the protection of critical infrastructure for national security.

Girlfriend:: What are the main entry barriers for a company like Firefly in a world where musk dominates the reaction of the media and SpaceX is the dominant current?

Konert: You must give credit to SpaceX for having changed the game. This is the reason why we can invest in the space sector, but there is always room so that other large companies participate in the market. And I think Firefly is one of them. They serve a specific niche that SpaceX does not serve. And I think that’s how we see it. We can be complementary to what SpaceX does. Their Falcon 9 is not a perfect rocket for missions that the Firefly alpha should serve. This is similar to what we have seen in inherited companies. We are not going to go face to face with Lockheed Martin and develop an F35 [fighter jet]. We will find mission areas around those where we can cut a niche and hope, develop the whole pie for everyone on the space market. So, I think it’s what we look at SpaceX. We will beat them in some regions.

Girlfriend:: You have already done.

Konert: We did it. Healthy competition is good for the holder or the dominant player. Without that, you create a complacency and global market stagnation. Large competition creates a larger, better and healthier market. I think SpaceX welcomes this. I hope that Elon considers it in the same way. I think he does it according to his vision of the world. SpaceX is good for making satellites for Starlink and their constellation. But our portfolio company, York Space, is better in certain mission areas than SpaceX. York is good for making satellites for more tailor -made and customary missions for national security. It is a different part of the market where we can both play. We will beat them in some places and they will fight in some places.

Girlfriend:: Earlier this month, Firefly obtained a contract from the United States Department of Defense for an orbit mission in 2027, but SpaceX benefits from receiving generous contracts from the United States government. What roles are the regulators playing in this sector and is there room for a company like Firefly to also mark contracts?

Konert: Investing in space has a lot of rear winds with regard to the United States. The threat of rhythm is China, which beats us, in some respects, in certain regions of the space market. Titles are one thing. But if you look at the wider community, they say that we must have more investment in space – a period. SpaceX will have a role to play. The same goes for other companies like Firefly and York. We believe that the best solution, the best technology and the best cost will finally win the day. From our point of view, we see a lot of opportunities and we will also continue to find business markets and others to play, which can be additional growth areas. So we see that it is positive that space is so at the forefront of the spirit of the Trump administration. There will be more contracts for SpaceX, but I think there will be more contracts for industry as a whole.

Girlfriend:: Are there other sectors in addition to space, such as drones or AI, where similar growth is obvious?

Church: This year, one of our portfolio companies linked to space, Redwire, acquired a drone company called EDGE Automy. Now, they have both an orbit satellite on a low earth just above the atmosphere, as well as a drone company that will work just below this expertise in the field in a single company. Before this agreement, Aerovironment, a large drone manufacturer, bought a defense and defense technology company called Bluehalo for $ 4.1 billion.

We have investments in these two areas and see a convergence of all this to some extent. AI will be part of each company. In the future, if you do not have an AI strategy, you will probably lose. The AI ​​will also be used for spatial exploration. We used AI for landing on Blue Ghost’s moon, for example. It is also a key element in the way you invest in your own portfolio companies. Our strategy is to invest in companies that take AI models and use their domain expertise to apply these models to help the customer. What we do not invest are models of great language. We are going to leave Elon Musk and Sam Altman to do this job. We will focus on taking their models to apply it to the problems we are trying to solve in our main sectors.