In the last few weeks, public attention has been drawn to the business of space exploration in new and different ways.
High-profile space travel adventures promoted by billionaire tycoons like Richard Branson, Jeff Bezos, and Elon Musk have caught the imagination of numerous editors and broadcasters, if not necessarily that of all their readers and viewers. Given all of the celebrity frenzy, one may think that the entry of privately-funded space initiatives was a sudden change or disruption to the industry. But in fact, behind all the trappings of celebrity show business, the core nature of the space industry has been quietly evolving for quite some time now.
From the Mid-Twentieth Century to Now
From its Cold War origins in the military-industrial complex of the 1950s, aerospace technology development was viewed as the exclusive purview of large industrial conglomerates and state-owned companies whose business models for exploitation of outer space relied predominantly upon government acquisition programs and defense contracts. And at the same time, access to launch services was primarily centered around national agencies and major defense contractors.
However, in the last ten or fifteen years, an ecosystem of new space technology ventures has grown up, motivated by the commercial opportunities offered by on-going progress in low-cost data processing and telecommunications systems. These developments in turn have been driven in no small part by the market demands of the wifi networking and cellphone industries, which have contributed greatly to the availability of cheap standardized components that implement efficient data handling protocols.
Smart Satellite Networks
Many of these innovative startups have been exploring new ways to deploy specialized sensing and data processing devices using constellations of small satellites. These small spacecraft, about the size of a large loaf of bread and built out of standardized cubesat building blocks, can be cheaply launched into low-earth orbit, where they pass overhead about every ninety minutes. Like Lego building blocks, these basic units can be combined in numerous ways to provide the common elements that all spacecraft need, such as electric power, communications links, and thruster and positioning controls.
The flexibility provided by this constellation of smart mesh-networked satellites can significantly reduce our dependence upon traditional space-based communication links like the humble TV satellite dish.-
As with the “terrestrial” internet infrastructure (i.e. the cell tower network), these spacecraft constellations are being used as the architecture to support a myriad of business applications. For instance, specialized sensors can be combined with on-orbit data filtering and interpretation to provide useful decision-making information directly to individual customers on the ground. This technical strategy reduces the need to first transfer large amounts of data to terrestrial data-processing centers, before distributing the analysis results. At the same time, the raw data can be stored and archived within a spacecraft mesh network – for example, a distributed set of blockchain servers – which can help mitigate a variety of political and regulatory considerations. Such approaches give rise in turn to new models for delivering and selling time-sensitive information.
As an example of this successful approach to space, venture-backed Planet Labs delivers extensive proprietary timely data to its clients from its constellation of 200 imaging satellites. The San Francisco-based company, which was founded in 2010, recently announced its decision to go public through a merger with a special purpose acquisition company (SPAC) that trades on the New York Stock Exchange.
Recent advances in the business of space tech was the subject of a recent panel session at Linqto’s Global Investor Conference, which featured the founders of two innovative technology startups in conversation with two venture capital fund managers.
Watch the “Space Economy Bursting Forth” Panel
A Space Economy
The participants discussed how the new global and commercially-driven space economy is rapidly evolving. Previously, many people involved in space came from government-supported enterprises where the funding has mostly been for cool science and technology, whereas venture investors need to focus primarily on funding cool businesses. This mindset is changing over time, as more commercially-motivated projects are funded and deployed, and the community develops stronger business-oriented skills and capabilities alongside the technical prowess.
Some of the unique technical resources available to space-based enterprises are almost infinite electrical power, a free source of heating and cooling, near-zero gravity, and minimal external disturbances. Unfortunately however, these resources are essentially available to all comers, so it can be difficult for a business to carve out a defensible niche. The valuable “secret sauce” within a successful space venture has to come from elsewhere in the intellectual property spectrum.
The time horizon for business success is another key topic of interest to startup investors, many of whom are looking for a two-to-five year timeframe to reach a liquidity event. This type of investment target often appears feasible in domains like software applications. In those areas, suitably flexible founders frequently have the ability to adapt and reorient their business strategy, as they learn more about the capabilities and limitations of their technology, as well as the evolution of the target market. In the ‘traditional’ startup world, pivoting is the popular buzzword for this phenomenon.
However, pivoting in the space tech world is a lot more difficult to do. For most space ventures, everything centers on proving space heritage. Investors are keen to see a clear pathway to an on-orbit demonstration of the prototype product actually functioning as planned. The major challenge for many startup businesses is getting over the hurdle of reaching the first launch, which can take several years to achieve. Before that point, pivoting to refocus on a different model and market is virtually impossible. That being said, the access time for small satellite ventures to launch opportunities is getting shorter. What was previously a wait of two to three years is now getting closer to twelve months.
All in all, the outlook for early-stage investors in this sector is certainly looking up!
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“Planet to Become Publicly Traded Company through Merger with DMY IV.” Planet, Planet Labs,2021,www.planet.com/investors/press-releases/2021/planet-to-become-publicly-traded-company-through-merger-with-dmy-iv/.