The New Space Spark: Retrospective of the Start of a Revolution

Dan Hart began his three-decade career at Boeing in 1983, a path that led him into many enviable adventures — from working in Europe, gaining experience from engineers who had worked on programs like Gemini and Apollo, and overseeing dozens of Boeing's space programs across the U.S. Department of Defense, NASA, and other agencies.

Yet perhaps the coolest experience of all began in spring of 2017, when Richard Branson called Hart with an offer to lead Virgin Orbit.

“I was leading Boeing’s Government Satellites Division and had an incredible portfolio —X-37 GPS, WGS, TDRS, satellites in the classified area — but I had been with Boeing for 34 years,” Hart tells Via Satellite. “The idea of moving to another culture, and the energy that Richard brings, and the vision that he brings, was really enticing. It was getting back into a big, hands-on development program like the ones I grew up with. It was returning back from a career point of view, and then moving forward and in a new, faster, visionary culture. It was doing something that had never been done.”

Hart’s six-year tenure at Virgin, which ended in spring 2023 when the company filed for bankruptcy, captures both the serendipitous narrative and the cautionary tale of New Space — an era that began in the late 2000s, and continued through the early 2020s. It will go down in history as the period characterized by the commercialization of Low-Earth Orbit (LEO), the proliferation of small satellites, billions in venture capital funding, and, of course, the presence of tech celebrities like Branson, Elon Musk, and Jeff Bezos.

Thanks in large part to these hallmarks, the space market is valued at approximately $447 billion in 2023, up from $280 billion in 2010, and is on target to hit $1 trillion by 2030, according to a report by McKinsey.

“One thing everyone agrees on is that New Space has undeniably changed the industry for the better,” says John Gedmark, who co-founded Astranis, which builds small, low-cost Geostationary Orbit (GEO) satellites. Gedmark helped start the Commercial Spaceflight Federation in 2005. At the time, he says the prospects for the traditional space industry were “grim.”

With the 2011 retirement of the Space Shuttle, which left America without an American-made rocket that could launch astronauts to the International Space Station, the crossroads the industry faced were clear, Gedmark continues. “Either we could go down a path of complete reliance on the existing players, or we could invest in New Space companies. President Obama wisely chose the latter, and later that decade SpaceX flew two American astronauts to the Space Station.”

Yet the 2010s and early 2020s were also filled with financial challenges and technology failures that offer a slew of lessons for the next generation of space and satellite entrepreneurs.

When New Space Was the Next Big Thing

While investments in commercial space companies have been happening since Baby Boomers were little kids, venture capitalists weren’t handing over billions of dollars to space startups until recently.

The investment environment in the past was much more cautious and conservative, says Carissa Christensen, an analyst and the CEO and founder of BryceTech, who has spent most of her three-decade career in the space industry.

“If you were a global fleet operator like SES or Intelsat, or a regional operator, you would plan to build the satellite and sell the capacity on the satellite before you deployed it,” Christensen says. “Often, you'd lease the satellite pretty much completely before you launched. Maybe you’d go to a bank for a loan, you might go to an institutional investor like a pension fund or an export/import bank for financing to manufacture the satellite. The business case focus was financial engineering around maximizing returns, without much expectation that the venture could fail.”

Today, the market has shifted, says Christensen, recalling conversations she had with multiple venture capitalists in 2014 and 2015 to learn about what was driving them to a high-risk market that had experienced fairly significant losses in the late 1990s with companies like Iridium and Teledesic.

“Two reasons stand out,” she says. “One, people like Elon Musk and Jeff Bezos, ‘winners’ of tech entrepreneurialism, were investing in space companies. That opened the door — you could look at space deals or you could bring them to your partners, and they were more mainstream than they had been.”

At the same time, small satellites took off, which lowered the barrier of entry.

“If you're going to start a company and have to fund a massive 18-wheeler-sized satellite that costs a quarter of $1 billion to manufacture and nearly another $100 million to launch, that would be a pretty hefty capital raise,” says Christensen. “Whereas, if you can build a couple of much smaller satellites for a few million dollars and have them ride share for a relatively low price to get to space, you can actually start a company with $10 million or $20 million, demonstrate capability, and then seek incremental investment to move to the next milestone.”

Mark Boggett, founder of the space tech VC firm Seraphim, also hoped to seize upon the space-tech momentum in 2014.

“I've always been a big fan of Elon Musk, and I was watching with great interest what was happening with SpaceX,” he says. “The question I was continually asking myself was, ‘What comes next?’ That’s when I started really thinking about the satellite market, and what satellites are going to do for us in the future.”

Today, Seraphim and the Seraphim Space Accelerator have supported more than 100 space-tech companies globally through its portfolio and alumni including major success stories like Iceye, LeoLabs, Astroscale, and Spire Global.

“Traditionally space was very much a risk-averse industry … concerned about adding any new element either to a rocket or to a satellite from a rivet to a new piece of software because of the impact that it might have on the on the end vehicle,” says Boggett. “The industry was really not focused on innovation.”

But in 2014, what became obvious to Boggett was that the space industry was about to catch up on 20 years of Moore's Law, the golden rule on increases in computing power.

“The reason why SpaceX actually exists is that [Elon] Musk wanted to go and buy a rocket. He needed a launch and when he found out how much it cost, he was like, ‘hang on a second. I can build a rocket for less than that,’” he says.

Mike Collett, founder and managing partner of Promus Ventures, whose portfolio includes Spire Global, Iceye, and Rocket Lab, points to the fact that many New Space investments have seen dramatic revenue and workforce growth.

“These companies have expanded down their value chain to manufacture key components for their assets, as well as manufacturing for the industry,” says Collett. “Some have white-labeled satellites for other companies using the excess capacity they have built up over the years. Others have expanded back-end services such as flood analytics to provide detailed analytics that are an offshoot of their closed stack. The consolidation of parts of the space value chain has increased the value of available services as well as decreasing build costs.”

As a result of all of this success, traditional space operators and technology purveyors, which took longer to acknowledge that LEO was a burgeoning area of activity, now want to join the movement, like traditional operator Eutelsat acquiring LEO constellation OneWeb.

“As smaller, cheaper, and more agile assets in the cubesat form took off, the world of assets operating in GEO that dominated the industry for many years started to decline,” Collett says. “Larger companies had to adapt to this new world of cubesats and the many benefits this new technology offered.”

A Constellation of Great Ideas and Technologies

One New Space success story Spire Global started out as a tiny venture launched in 2012 by International Space University graduates in San Francisco. Remarkably, it was crowdfunded by a KickStarter campaign.

“Everyone said, ‘They can't do anything’ or ‘They're not relevant,’” recalls COO Theresa Condor, who has been with the company since the beginning. “That was still the overriding mindset in 2012, when you just had us and only a handful of those companies. Now, fast forward and you have reports coming out every year of the amount of private capital that has gone into the space sector. It keeps going up and up.”

A combination of early successful launches, as well as a solid bit of luck, piqued the interest of other investors.

“I think what helped us is that we had a differentiated strategy and approach, especially at the time,” says Condor. “We were looking at RF [radio frequency] as listening satellites as something that made sense and made the best use of the nanosatellite form factor on this exponential technology curve. I think we are the largest multi-use satellite constellation out there today, and that gives us a lot of very different monetization opportunities across that single network.”

Today, Spire has designed and built more than 170 satellites and sells its RF solutions to maritime, weather, and aviation industries, along with the space services business in which governments and businesses can deploy their own applications in space through Spire’s infrastructure.

Jordan Noone recalls the early days of Relativity Space, another New Space darling. Noone, whose first engineering job after graduating from college was at SpaceX, also benefited from a bit of luck and a lot of desire to make a big impact when he co-founded the company in 2016, when he was in his early 20s.

Today the company, a manufacturer of 3D-printed reusable rockets, including the Terran R — employs more than 1,000 individuals.

“When we started Relativity, I can't say we had this great insight on the timing in the industry playing out and all these other companies popping on top of the industry and bigger aerospace defense interests because of geopolitical pressures,” says Noone. “We were two young kids with an idea, wanted to start a company, [and] did a Google search on how to get venture capital because neither of us have taken a finance class or anything. And it's kind of the joy of the haphazard nature of it.”

Navigating Market Challenges

While buoyed by good timing and a mostly robust economy, it wasn’t all roses for New Space entrepreneurs.

The cost of launch, for example, hasn’t changed as much in the past five to 10 years as people expected it to, Collett says. “Wild predictions a decade ago — even five years ago — of how many successful launching companies would be sending satellites into space were just that. Ultimately, many projected the price of launch to be much cheaper than what it is today.”

In reality, the continued high market pricing for launch was not a difficult projection to make but most extrapolated what they hoped would happen versus the very low success rate of new launch models, he adds.

“Many startups chose to project out lower launch prices into the future to make their deck models look more attractive and convince investors to back their companies,” says Collett. “Although the rideshare model still is cheaper than a decade ago, launch is still expensive and a major cost factor with those who need their payload into orbit.”

Also, many space startups that went public in the last few years in the wave of special purpose acquisition company (SPAC) mergers have not realized the bold valuations they touted.

“Outside of SpaceX’s continued stellar performance and valuation ascent, market capitalizations and multiples of newer space startups that have floated their stock over the last five years have reset dramatically,” he says. “The end of the low-interest rate cycle spawned numerous space companies floating their stock via SPACs. More importantly, many of these companies promised investors the moon — literally — and most haven’t delivered.”

Hart alluded to similar financial factors that led to Virgin Orbit shutting down. Namely, bad timing, markets shifting, the slowness of governments to act, and general confusion over the cost of launch were key contributors to the company’s end. Inefficiencies and attrition from COVID were also major factors.

“Remote and hybrid work, critical teams periodically shutting down with contagion, and an intense development/operations program didn’t mix well,” says Hart. “Our efficiency tanked.”

What’s Next in New Space

Noone, who remains an executive advisor for Relativity, co-founded Embedded Ventures in 2020. It’s a space-tech-focused VC firm with a portfolio that's split between three different primary sectors: space infrastructure, advanced manufacturing, and digital engineering.

“There are many companies out there that a generalist fund can write a memo on,” says Noone. “We look for the companies where we're one of the few that can evaluate the technical nuances [and] mentor the founders from day one for what are very difficult-to-enter sectors. We'd like to be day-one checks into those companies.”

One of the companies Embedded is most psyched about is called Zoo (formerly named KittyCAD), which focuses on modernizing the software toolkit for the hardware designer. It also invests in defense tech startup Anduril and space data and tracking company Slingshot Aerospace. Embedded recently funded a second incubated project, still in stealth mode.

Hart, meanwhile, is now a guest lecturer on space tech and space travel and an advisor to young companies in the space sector when he’s not playing drums in an ’80s cover band.

He’s particularly excited about a number of developments on the horizon, such as the growth of small satellite architecture associated with both space defense and security, and new commercial applications.

Listening to him reminisce about the handful of successful launches he was part of with during his Virgin years — in particular, a January 2021 mission — makes two things clear: he isn’t done with space, and the excitement of being part of an out-of-this-world venture is still worth the potential heartache.

“We were a human-assisted launcher so safety was constantly on my mind,” recalls Hart. “Then seeing it operate and seeing the team after months and months and years of brutal — couple of steps forward, couple of steps back —seeing it on launch day was unbelievable.

“The amount of pressure that then gets released into your body, to where every neuron in your head lights up — you get this warm glow,” he continues. “When you suddenly see years of brutally hard work come together and succeed, you can barely relate to people except having this kind of silly smile on your face, looking at each other, like — ‘Do you believe this? You know it all worked! It all worked!’” VS