Investing in SpaceTech
A recent panel for the startup group Idea to IPO recently gathered a group of venture and corporate investors to discuss investing in the sector.[i] The space industry was a $380 Billion business globally in 2020 and is expected to grow to $10 trillion by 2030 and accounts for 0.5% of the global GDP.[ii] Spacetech is an investment sector that will continue to grow.
Taken literally, spacetech could include everything under the sun. When investors speak of spacetech however, they mean something closer to extraterrestial businesses and the technology that enables them, broadly defined. Most people might think of satellites when they think of space tech, but satellites themselves make up a small part of the sector. However, satellites require many other technologies. For example, Starlink[iii], the satellite internet constellation operated by SpaceX consists of thousands of satellites such as artificial intelligence to coordinate the simultaneous operation of the satellites. Less obvious are the operations that must take place in a zero gravity environment, such as pharmaceuticals, food production and manufacturing.
Space technology can also be broadly classified as commercial, civil, or military and a company might have an application in all three categories. For example, software for a drone might have application in a satellite or a satellite in space might gather information on the earth.
As companies do more business in space, payment solutions might also adapt. A subsector of spacetech is the space decentalized finance, or DeFi. For example, a blockchain solution could allow a peer to peer payment or other transaction to take place in space without ever touching Earth. Companies are working on solutions that hope to avoid the financial regulation and oversight of an earthbound government. Aside from payment, as companies conduct more operations outside of any jurisdiction, the code-is-law nature of blockchain could provide rules for commercial transactions.
Mining seems to be the most promising industry in space. Asteroid mining can be very lucrative an industry, potentially worth quadrillions of dollars. Mining operations might be done by robots or autonomous vehicles transaction with each other through smart contracts due to the long travel times. NASA will even pay companies to collect samples in space. Profitability in mining, however, may be a long time away. Interestingly, the use case to be mined is not gold or silver, but water, since water can supply hydrogen to refuel rockets as they launch further out into the solar system. As another example, moon dust might be used for feedstock for 3D printing.
A current problem is space waste. As of now, there are about 23,000 pieces of debris larger than a softball orbiting the earth traveling at thousands of miles per hour. At that speed, even a fleck of paint can cause damage in a collision. Satellites must be equipped to avoid debris.
The Silicon Valley is one of the hot spots for space tech and Houston, Florida near Kennedy Space Center, Colorado, Los Angeles, Boston and Seattle and throughout the world at every level of the supply chain. Spacetech has long been a global industry.
Space tourism is not only for billionaires. Companies are talking customers to the edge of space for a cost that was millions of dollars and is currently in the hundreds of thousands of dollars. The price is expected to continue to reduce over time.
Generally, there are more startups than there is capital for this growing industry. By one measure, there are over 10,000 space tech startups, most of which are competing for venture capital. Several funds have emerged to address the demand. In addition, there have been some private equity deals and numerous special purpose acquisition companies (SPACs).
Nondilutive government grant money also figures prominently. The US Air Force has been making hundreds of millions of dollars in grants to seed stage spacetech startups. Through a program called Afwerx,[iv] the Small Business Innovation Research (SBIR) program is used by the Air Force to develop and adopt commercially viable innovations as integrated program components or commercial solutions. SpaceWorks,[v] a Georgia Tech spinoff, focuses on space transportation concepts for NASA and the US Air Force. NASA and the Department of Energy also have grant programs for space technology. Foreign governments similarly provide matching funds and grant money to space companies.
[i] https://youtu.be/tcD7NgZcM3I
[ii] https://analytics.dkv.global/spacetech/SpaceTech-Industry-2021-Report.pdf. Haver Analytics, Morgan Stanley Research forecasts, 2020.
[iii] https://www.starlink.com/
