THE ARTEMIS PROJECT
PRIVATE ENTERPRISE ON THE MOON
Financing the Project
Section 3.3.
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Debt Financing for the Artemis Project

Jim Davidson

Some critics have stated that due to the nature of this project, any private sector funding would have to come from equity investors. In order to convince them to invest their money for this venture, some sort of commercially viable enterprise must be feasible or none of us will get to the moon or even get to launch the rockets>.

Although my MBA was in marketing and entrepreneurship, not finance or accounting, I have quite a bit of education and real-world experience where finance is concerned. I should state categorically that the statement "any private sector funding would have to come from equity investors" is false.

Debt financing plays a reasonable and vital role in space projects. Some projects have such great certainty that bank financing is available. Typically, debt financing looks for reasonable, measurable risk and adequate hedge mechanisms.

For example, a building may be necessary to house Earth-side communications and control equipment. That building will sit on real property. It represents an improvement to that property. It is collateral against the funds lent to build it. Although the venture building the facility may go under, the market for real property and buildings is such that there is adequate salvage value for the loan.

Capital equipment to build things can also be debt financed. Even highly specialized machine tools often have multiple applications and hence represent collateral security for debt. Aircraft for weightless training can also be debt financed since they have other uses. Office equipment can be debt financed. Copiers, computers, monitors, printers, faxes, phones, furniture...all these things can be financed with debt.

I'm not recommending that debt be undertaken, and I'm perfectly aware of the many concerns with an overburden of debt. But there are even ways to finance the most risky portions of a space venture with debt. There is a special class of debt called convertible debt. The debt is issued so that it can be converted to warrants which can be exchanged for stock at a specified price. In this manner, if the Artemis Project succeeds, the debt is converted and the investor reaps a very large upside return. If the project fails, the debt is still owed. If the failure is so deep, the company operating the project may declare bankruptcy, and thus the creditor loses it all. But the upside potential of the warrants is often adequate to entice investors who would otherwise shy away from the risk.

It has also been stated that commercially viable ventures must exist or we won't go to the Moon or even launch rockets>. However, commercially viable ventures already do exist. Communications satellites are a multi-billion dollar industry, and growing. The new interest in low orbit comm-sats means a very large demand for launching rockets in the next decade.

With regard to manufacturing, there is still a great deal of researchinterest in the unique properties of the space environment. None of it has proven an immediate potential, but both vacuum and weightlessness show strong signs of being the bases for a new era of industrialization. Even if these aspects of space are only ever exploited for their research potential, they represent a multi-million dollar industry. Again, privatization and deregulation would be good, especially the elimination of the bizarre subsidies which entice researchers to wait years for a "cheap" shuttle flight rather than incur the expense of a capsule return mission (eg, Photon or Comet). Such subsidies radically distort the market for space transportation and would, if done by another nation, be challenged under the "dumping" provisions of the 1974 Trade Act.

But what is commercially viable right now? Can we get funds together in the next four years to finance a lunar base to be complete within 10 years? I think it will take at least 4 years to raise the kind of money we need. From my experience, the more funds you want, the longer it takes to get them. Also, when you are talking about 100's of millions of dollars, it is necessary to demonstrate during the time when you are raising the money that you can produce revenues and profits from your activities. Thus, if we are going to raise the funds for a lunar base, it would be wise to start selling products this year that can show revenues on the books, and much better if we can sell enough to generate profits at the start of the merchandising program.

Investors and bankers are alike. They are men who will happily lend you an umbrella when the sun is shining, but want it back at the first sign of rain. By producing profits, even at a very small scale, the Lunar Resources Company can demonstrate that it knows how to keep the rain off.

But what can we sell now and what can we sell within 5 to 10 years? Two things have proven markets: entertainment> and tourism.

There can be no question of the entertainment potential of spaceflight. Movies with space themes which have been box office smash hits are numerous. Toys, souvenirs, and collectibles with space themes are legion. Since the 1890s, books on space travel, both fiction and nonfiction, have been best sellers. Since the 1930s, a number of magazines have done very well using space literature as a major element.

And tourism of space facilities on Earth is also a proven market. Moreover, there are some very well-documented market surveys on the potential for space flight tourism which detail a very large market, over 80 million in the US and an equal number outside the US.

Serving those markets is something The Lunar Resources Comapny can do right now. And, indeed, the company has produced products including shirts, mugs, buttons, and posters which it is selling right now. The company is working on a magazine, Artemis Magazine, which will include fiction and fact on lunar activities. And the company is developing plans for other entertainment products and services.

Meanwhile, Lunar Resources is in contact with some other companies. Notable examples include Rand Simberg's Interglobal Spacelines and Lunacorp. Both of these companies have space-related products available today.

We can't pay for a lunar base in our lifetimes by only selling T-shirts, but we won't be able to raise the funds for it unless we sell everything we can think of, and more.

Investors want to put their money in successful firms with a proven profit record. They want to see people who are credible and success-oriented running those firms. They are most concerned with whether the people in charge can be trusted to make good decisions. And they want to see a business plan that is well-conceived.

Before concluding this essay, let me dispel a few myths. You don't have to have money to make money. Someone else has to have it. Nor do you have to spend money to make money. Again, someone else has to spend it. With these two simple principles in mind, you can start any business down the road to success.

Financing the Project

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