We’ve just celebrated the 60th anniversary of arguably one of the finest and most successful space agencies in the world, NASA. Last week was also the most anticipated time of the year for space enthusiast for two reasons. First, it marked the beginning of World Space Week (October 4th – October 10th). Second, the largest gathering of the space industry took place: the International Astronautical Congress.
In fact, if you observe closely enough, the past few years have been full of events for the space industry. And one of the main reasons for that has been the boom in the number of space startups. But for an industry that has been around for 60 years, a major question arises. Why now? Why do we see these increasing number of space startups sprouting up in all corners of the world at this point of time?
There could be a myriad of reasons. But one that stands out tall among all them would be funding. It’s the same money that has driven new industry in the past and will continue to do so in the future. And before few eyebrows gets raised since I prioritized money above innovation, vision, skill, and the ease of starting up your own venture in the 21st century, the fact remains that a company that plans to image the entire Earth every day and make global changes visible would have been unjustifiably denied any funding by investors in the 1990s. Planet, a company doing exactly what is described above raised $183.1M in the last few years. And it’s just one of the many examples that further cements the fact that market mindset has changed in terms of investing in the space sector.
The year 2015 is considered as a major turning point in terms of investment in the space industry. The year saw a total of $3.3 billion of non-governmental investment in commercial space companies. Of that, venture capital groups alone invested $1.8 billion in commercial space startups, more than in last 15 years combined  .
In the year 2016, that figure came down a little as $2.8 billion was invested. But the figure went up again in the year 2017. Hailed as the ‘year of commercial launch’ by Space Angels CEO, Chad Anderson, private investors poured in $3.9 billion into commercial space companies last year . 72% of that amount went to launch companies. The year also saw 37 commercial launches, 51 government launches, and 120 firms making investments in the private space sector, which broke the previous record of 89 in 2015.
Things look great in 2018 as well. Nearly one billion dollars were raised by private space companies in the first quarter of 2018, according to the report from venture capital firm Space Angels . Launch companies continued to dominate this quarter as an investment of $117 million was made. As compared, the average investment in satellites was $21 million. The second quarter showed major improvements for the satellite industry as number of satellite deals increased 25% in those three months .
The trend is compelling and speaks volumes of the current scenario. But to understand the situation, we need to move away from the common bias. Think ‘space startups’ and the first few names that come into our minds are SpaceX, Blue Origin, and (maybe!) Virgin Galactic. Part of the reason for the bias is that these ventures are led by charismatic billionaire CEOs which help draw media attention and make the headlines on a regular basis. But we also need to give them the credit where it is due. Elon Musk, Jeff Bezos, and Richard Branson entered the space arena and took a risk to put in their money when almost everyone thought that space exploration was something for the government agencies to do. This early faith shown by the tech moguls started a snowball effect and now investors are pouring billions into these space ventures. And it does not only include the above-mentioned companies. A major attraction for investors has been the ventures looking to use the data from space in fields such as agriculture, natural resources, and disaster management (downstream applications). All these factors, coupled with low-cost access to space have accelerated the development of the commercial space industry and have attracted the venture capitalist to put their money on the final frontier.
Another important determining factor is the massive support the private sectors have received from government space agencies all around the world. The often common but misleading thought process is that eventually, we are heading into a showdown between government space agencies and the private space companies, where only one will survive in the future. The reality is quite different. The relationship between government space agencies and the commercial space companies is symbiotic. This means that some areas of space applications that will be best served by government agencies and some areas will be best served by commercial space companies.
Recent happenings from all over the world further prove this point. In August 2018, NASA awarded six private companies a total of $44 million as a part of “Tipping Point” competition . The UK government recently passed the Space Industry Bill. The world’s first fully commercial astronaut training ground is to be set up in the UK. Also, Seraphim Capital launched “Space Camp Accelerator”, which is the UK’s first dedicated accelerator program for startups in the space-tech industry  and other specialised incubators such as AstroLabs have already selected their first cohorts. The Japanese government does not want to be left behind in this race and stated to establish a fund of close to one billion dollars to support the development of space startups in the country. The young startups will be eligible to get an aid of up to 10 million Yen each to cover costs like research and patent applications . The other space giant in Asia, ISRO, recently laid out its plans to launch incubators across India to groom space startups . Also, the country is in the process of getting its first space park in the Indian state of Kerala, which will incubate and promote startups in the sector . Clearly, we see a pattern all around. Government agencies are making a conscious effort to promote and encourage the space startups in their respective nations. And this is only the beginning.
But What About the Bubble?
The whole article would be incomplete if we do not talk about “the bubble”. Here we are faced with two contradicting, but interesting sets of opinion that people have about the space industry at this moment.
One of them believes that the space industry is at a place where the Internet was in the 1990s. That it is just about to boom and change the human lives for good. That it will be the driving force for the economic growth around the space fairing nations. And this is exactly where the other set of opinion comes in. They are quick to point out that if the space industry is where the Internet was in the 1990s, aren’t we approaching a potential bubble burst? Such a comparison might sound pessimistic and unnecessary at first, but it’s worth giving it a thought.
The launch and satellite industries receive much of the flak in this regard. Some believe we will begin to see some form of a consolidation in the near future. A simple Google search will show that there are several companies trying to develop small launch vehicles. And some of them might never succeed. Similarly, there is an unprecedented number of companies planning to build satellite image constellations. Do we really need all of them? Probably not. Only a handful of them might actually survive. We’ll get to know in the next five years or so.
The exciting times are ahead for the space industry. We are certainly through the second wave of revolution in this sector. The need of the hour is to also look beyond the launch and the satellite industries so that the other sections of this sector are not neglected. The venture capitalists are ready to put in their money. The government is ready to extend their support. And the general public seems to be really excited about space exploration again, something we have never seen since the end of the Apollo era. So to all the astropreneurs out there, if you have an idea that you are really excited about, the best time to start is NOW.
Posted by Gourav Namta