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Nurturing NewSpace's Most Promising Stars

What does it take to turn a wild idea and turn it into a lucrative one? Commercial space investors and entrepreneurs weigh in.

It would be hard to describe a future where everything’s made in space with more enthusiasm than Andrew Rush — who also happens to be President and Chief Executive Officer (CEO) of Made In Space. The nine-year-old manufacturing company, headquartered in Mountain View, California, has carved a niche in the commercial space market through its space-ready, durable 3D printers, which allow for manufacturing and assembling structures on orbit. “We’re transforming the way we design, build satellites by building them in space or building parts of them in space, rather than building everything on the ground — origami-folding it up and then launching it,” Rush tells Via Satellite. “That’s the 100-foot view.”

But what’s more significant than what Rush and his colleagues are doing is how they’re doing it. The company’s recent successes exemplify the “Commercial Space Dream:” the tale of a seedling, bootstrapped startup founded on the precipice of an extraterrestrial Renaissance, finally ready to blossom.

Rush is certainly in good company. Since 2015, investors have poured their dollars into the space economy, with 76 percent of the total $18 billion invested between 2015 and 2018. “Of that $18 billion total, a little over $4 billion has come from Venture Capital (VC) funds,” says Chad Anderson, Chief Executive Officer (CEO) of Space Angels, a privately held financial services firm founded in 2007, which invests solely in early-stage space companies.

But entering the space market isn’t without unique industry hurdles. Here, we take a closer look at how up-and-coming commercial space entrepreneurs are successfully materializing their plans.

Unearthing a New Marketplace

For decades, the satellite community has been trumpeting the potential for commercial space development. In the 1990s, for example, space innovations from the likes of Kestral and Rotary Rocket gave the industry hope that the world was finally ready to kick off a flourishing NewSpace era. But the broader vision of a robust commercial space economy never really materialized in the 1990s for two key reasons: the cost (too high) and the technology (not sophisticated or reliable enough). To say so much has changed since then sounds like an understatement.

Anderson anchors the current boom to a pivotal moment in 2009, when SpaceX launched its first commercial payload: a 50 Kilogram (Kg) Earth Observation (EO) satellite for Malaysia, which flew into space aboard a privately developed rocket. The launch itself was tremendous in its impact, in no small part because SpaceX proved the market viability for lower pricing. What followed was a global wave of entrepreneurship and innovation, and a rush of new market entrants. “We went from just two dozen privately funded space companies in 2009 globally to 412,” says Anderson. “We’re in the dawn of the Entrepreneurial Space Age.”

But while it may seem like every other graduate student with a degree in engineering is seeking financial backers for their satellite, robotics innovation, or other concept, Anderson —whose firm manages $50 million and a portfolio of 30 or so investments — isn’t concerned about market saturation. There are still huge gaps that aren’t being filled — and the most successful companies will have the perfect solution to fill those gaps. “At these [satellite] conferences, I hear things like, ‘there’s saturation of the market … how many more satellite companies do we need?’” says Anderson. “But then we have customers who can’t get what they need. So, I think we’re just scratching the surface.”

Anderson estimates as many as 75 percent of space investments, Series A and Series B mostly, have been focused on satellites: specifically, EO, hardware, and ground-based communications, followed by launch, interplanetary, industrial and logistics technologies — everything from habitats to space situational awareness systems.

Rob Coneybeer, managing director of Shasta Ventures, a 15-year old firm whose broad range of successful investments includes Dollar Shave Club, is more interested in emerging technologies. “We’re interested in space opportunities that are highly correlated with Moore’s Law. By that, we’re referring to applications where the constant progression of semiconductors makes products and services that are delivered in space, or via space, or thanks to space, more interesting at a really rapid pace,” says Coneybeer. “So, If I was to talk about a satellite that I’m building to take pictures of the ground, or communicate with the ground, about 20, 30 years ago, a lot of those spacecraft would be the size of a school bus, and you’d have to put them on top of a $60 million launcher, or a $100 million launcher, and it would be a launcher that fails maybe one out of 10 times. Today that same capability for a satellite that’s taking pictures of the ground or communicating with the ground is the size of a toaster, rather than the size of a school bus.”

Shasta’s two major space-technology investments include Accion Systems, a Boston-based developer of advanced electric propulsion systems for small satellites, and Vector Launch Systems, a Tuscon, Arizona-based developer of launch vehicles for small satellites. Shasta has also participated in smaller investment rounds at three other space-related startups.

“The question we’re asking is, ‘what’s next after the smartphone?’” says Coneybeer. “We’re looking for these emerging platforms, and that includes robotics, and the space industry.”

For Rising Stars, a Time to Shine

Ralph Ewig says his three years of experience working at SpaceX, as part of the company’s mission operations, inspired him to co-found Audacy in 2015. The communications startup, which began as a Stanford University student project, is focused on building “the first telecom company in space” through the buildout of an inter-satellite data relay network. Or, as Ewig likes to describe it, “a cell phone like network to connect signals to ground communications systems in real-time.”In doing so, Ewig hopes to fuel a key need within the current NewSpace environment, which will be defined by the ability of commercial space providers to service other commercial space providers while in space itself.

In October, Audacy announced it had achieved a major milestone by securing pre-service commercial agreements valued at more than $100 million. The companies who signed service agreements represent a wide range of space applications including Non-Geostationary Orbit (NGSO) EO satellites, Internet of Things (IoT) and broadband constellations, launch vehicles, and deep space missions.

“Most satellite communications are in Geostationary Earth Orbit (GEO), where you move very slowly and sit on one spot on the ground, but for NewSpace, we have much smaller satellites moving much faster, and that’s a challenge,” says Ewig. “They can only communicate when they have line of sight. You had a situation where you had to sit and wait. And wait again. No real-time interactions. So, we went out we solved this problem.”

But even for someone seemingly well-connected, getting off the ground isn’t a given. Like any industry, rolling out the right technology at the right time is crucial.

“We certainly did face skepticism along the way,” Ewig says. “Established space companies understood the problem, but questioned if Audacy would be able to offer a legitimate solution; whereas more recently established space companies saw space communications as an already-solved problem that they could handle themselves.”

However, after Audacy secured its spectrum license from the Federal Communications Commission (FCC)/International Telecommunications Union (ITU), the established space companies started to view the company as “the real deal,” he recalls. Plus, as the newer companies began flying their first operational systems, they also came to appreciate how limiting the current state of solutions is and that Audacy can fundamentally change how they operate, he adds.

“We still have a long way to go, but I feel confident that everyone in industry at this point sees the value of what we are trying to build,” says Ewig. “You have to convince people to take a leap, that what you’re seeing in your crystal ball future will come to pass. It’s always a bit of an uphill battle.”

Rush agrees that some of the uncertainty can be daunting. “What’s always in the back of our minds … is [the fear of] everyone retreating from working together, or trying to continue to incubate commercial models,” says Rush. “If folks say, ‘oh we’re going to [not fully support] space technology development, people operating on the international space station’ … those things will have a chilling effect on the growth of commercial space.”

There are other challenges that are unique to space industry, like overcrowding of LEO (fortunately, the space debris clean-up market is hot). The regulatory hurdles can also be particularly challenging, adds Ewig.

“For example, whenever you want to communicate in space with your satellite or rocket, you have to get a license for the radio spectrum to do so, but the process to get such a license is very difficult,” Ewig admits. “It can take years, and can take millions of dollars to see that through, which is out of sync with the speed at which companies are evolving. On the flip side of that, if you look on the ground, if I buy a mobile phone, I don’t ‘have to get a license for my phone because AT&T can do that for me.”

Above and Beyond

Although commercial space development is still in its early years, “we’re starting to see the exits” says Anderson. “There have been some successful exits, and some failures, but not in huge numbers.”

Over the next five to ten years, we can expect to see more investments made from outside the United States: While the U.S. leads commercial space investments, Europe is close behind. But regardless of where future investments come from, Rush is encouraged by the interest he’s seeing, and the innovations of some of his peers. “As an industry, we are literally and figuratively standing on the shoulders of giants to be where we are today,” says Rush. “You can look at the nineties, you can look at Kestral, at Rotary Rocket … Without those companies’ efforts, SpaceX might have looked very different.”

Anderson says he is always seeking entrepreneurs who develop solutions that meet real market needs. “What we try to avoid is entrepreneurs who are really gung-ho about space and looking to build some cool space tech,” says Anderson. “We see success in entrepreneurs who are from outside the industry … who build really powerful chips and may be looking to go beyond terrestrial markets. A lot of what we’re investing in is the team.” VS