Once the Domain of Billionaires, Space Investment Diversifies

Space investments by billionaire “geeks for space,” such as Paul Allen and Jeff Bezos, have brought attention to the burgeoning commercial space startup sector. But now the field of investors is flourishing, driven not just by interest in space, but also by companies and ideas that are generating real excitement and profit potential.

Claude Rosseau, moderator of the Space and Satellite Investors Roundtable on Wednesday of SATELLITE 2020, noted that “a mountain of money” has been flowing into the space sector for the past five years, provided by both established and new investors. “This is no longer just a play for billionaires,” he said.

Razor’s Edge Ventures was founded about 10 years ago and focuses on companies working on dual-use technologies that offer applications for commercial and government users, said Chief Technologist Tom Loftus. Investments include geospatial intelligence firm Altamira, HawkEye 360, which uses a commercial satellite constellation to provide RF signal ID and geolocation services; and Spaceflight Industries.

“We feel we can help those companies be successful in government markets while also exploring the commercial market,” Loftus said.

Starbridge Venture Capital was founded in 2017 and focuses on early stage and newer technology startups, said Lindsey Yee, principal of Starbridge’s founding team. While space is the draw for startups, Starbridge also looks for markets on Earth that the technologies can serve, she said. Starbridge investments include BridgeSat Inc., which is developing Low-Earth Orbit (LEO) satellites to deliver optical communications, and Made In Space, which is working toward 3D printing in space.

When a company comes to Starbridge, the first question Yee asks is: Who are your customers?

Large, established space companies have gotten more involved in funding startups as well. Teresa Segura, portfolio development principal of Space & Connectivity for Boeing’s HorizonX Ventures, said her team exists because Boeing, a 104-year old company, is looking to the future. The HorizonX portfolio includes terminal company Isotropic Systems, nanaosatllite communications startup Myriota of Australia, and Reaction Engines, a U.K.-based hypersonic propulsion company.

The primary challenge for investors of all sizes is still identifying the potential winners, but with the explosive growth in the number of startups now looking to serve the sector, it’s becoming even more difficult, Segura said. “When making an investment, especially in the early round, we have to be sure they understand the track is going to be expensive and take longer than you think. The more a startup has plans and they recognize [the challenge] and convince us they can do it, it makes us more satisfied,” she said.

Razor’s Edge does not get involved in the seed funding of startups, choosing instead to wait until a company has progressed further in their business and technology development before getting involved, Loftus said. “You have to have real problem-solving [behind your plans], rather than having a technology for which you are trying to find a market. Then you have to have the ability to execute the plan. We’ve seen issues where people just take a lot of money and try to scale a big business without hitting milestones. If you can’t do the business you set out to do, the rest doesn’t matter.”

HorizonX likes to “celebrate the milestones” of the companies in its portfolio, said Segura. It helps them make sure the companies are on track with their plans, while also offering more information on how the technology or solution could be leveraged by Boeing. At the same time, HorizonX wants to help the companies explore government markets. “We have companies that don’t necessarily want government as a customer, but the truth is, government is not looking for the cheapest option. The challenge is you don’t want to be put in a place where you can’t address the commercial market as well.”

In terms of the hot markets for startups, Loftus said many companies are looking into supporting the Internet of Things (IoT) or 5G. It has a lower barrier to entry than the capital-intensive broadband constellation sector, but there is also far more competition for funding dollars. “They are all trying to argue that they are the right company.”

Some of the more traditional space sectors are also the ones the funds research the most before committing any money. Launch is very crowded. “We are in a position of needing more launch vehicles to reach orbit without needing more launch companies,” said Loftus. “Going into an early-stage company at this point would be difficult.”

Segura agreed. “We have to take a hard look before we move forward. … But if you have a solid plan for how to get there, I’m interested.”

Remote sensing is also a crowded field. There is simply too much data available, said Loftus. “The people buying are not looking for raw satellite data. They are looking for that answer that the data provides. Most companies simply don’t have the capacity to ingest more and more data,” he said.

Regardless of the winners or losers, one overall benefit in the growth of space-based startups is that it is expanding opportunities for the workforce of tomorrow, the panel said. “After SpaceX and Planet and Spire made names for themselves, we’ve been seeing a lot more people that worked at those companies decide to go out on their own,” said Yee.

“It’s a passion,” said Segura. “It started in many of us when we were little. And that passion doesn’t go away. People are still excited about it. We have young people at Boeing that want to be there. HorizonX is a talent-retention program in itself. And through portfolio development, we are seeding projects within Boeing. We hope HorizonX employees take what they learn into other parts of Boeing.” VS

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