Why Invest in NewSpace Today?
With all the hype placed on celebrity astropreneurs and their space businesses, it’s mostly forgotten that other, lesser known space startups even exist.
Many of these lesser known NewSpace startups have intriguing plans, capable management, and loads of audacity. Like most startups, they are eager to connect with investors. This creates an opportunity for investors to better understand and potential invest in this emerging industry.
There is still a need for additional capital, astropreneurs, and customers to make this sector take-off in the way many of us dream of despite the attention the industry currently receives.
NewSpace areas outside of rockets that are worth looking at include satellites, robotics, instruments, manufacturing, materials, and computing which may all be necessary for a thriving space economy.
It’s worth mentioning that is not a large amount of exits in this sector, many of the startups are still producing little if any revenue, and there are still far too few customers.
This embryonic industry requires kid gloves, patience, and an optimistic vision. If the industry were any smaller, it might not exist at all. It’s not solely the financing that’s needed but smart investors who can share their wisdom and experience with astropreneurs.
American government agencies are emphasizing their willingness and interest in working with smaller, commercial startups. NASA recently announced partnerships with 22 U.S. companies to help advance technology that support’s its goals for robotic and human exploration. Critics will dismiss this effort but government is simply helping kickstart an industry. I frequently speak with management at startups who are working towards attracting non-government customers in order to diversifying their customer base.
Steve Jurczyk, associate administrator for Space Technology Mission Directorate (STMD) at NASA Headquarters said the following regarding these new partnerships.
“These awards enable us to continue to foster partnerships with the commercial space sector that not only leverage capabilities to meet NASA’s strategic goals, but also focus on U.S. industry markets that are at a tipping point for commercialization and infusion.”[1]
[1] https://www.nasa.gov/press-release/nasa-announces-new-public-private-partnerships-to-advance-tipping-point-emerging-space
Space Can Do Quadrillions
In an exchange with Hoyt Davidson, investment banker and founder of Near Earth LLC Davidson encapsulated why now is the time investors ought to take notice of NewSpace industry.
“From Sputnik to now, the commercial space industry has been about rockets and satellites and the Earth facing services these satellites can enable. New smallsat technologies and reusable rockets may revolutionize this Earth facing commerce, but another very exciting phenomena is also occurring. We are starting to see business plans focused not on Earth to orbit and orbit to Earth, but on wholly space centered commerce. This includes satellite life extensions, relocations, and emergency rescues. It includes space situational awareness, on-orbit repair, fuel depots, satellite refueling, debris removal, salvaging, in-space manufacturing and even asteroid and lunar mining. It even includes new destinations like commercial space stations and space hotels, some made out of in situ resources. (Author Robert) Heinlein said once you are in orbit you are halfway to anywhere in the solar system. Well, it seems that second half is not just for explorers anymore. NewSpace is extending the commercial realm into space and the magnitude of the opportunity is really only limited by the time horizon you choose. The Earth cannot do Quadrillion. Space can.”
In a draft policy released on September 1, 2015 the National Oceanic and Atmospheric Administration (NOAA) announced it was open to purchasing weather data from commercial providers. This announcement helped give additional credibility to the handful of start ups whose business model is focused on development and management of commercial weather satellites.
Additionally, NASA and Defense Advance Programs Agency (DARPA) have their own public/private partnerships which creating new platform opportunities for NewSpace companies to take advantage of. The speed of funding and procurement process with most government programs can be exceedingly slow and cumbersome. Astropreneurs ought to compare other competition, cost of capital, opportunity costs, and other factors when deciding where best to secure financing from for their respective startups.
Markets and History Rhyming
It’s still early days for this sector, as there are relatively few customers outside of governments. Take the small satellite subsector where there are dozens of startups promising their own technological feature to differentiate themselves from competitors.
Dr. Shahin Farshchi a partner with venture capital firm Lux Capital summarized it well with the following comments.
“Daily, on-demand imaging, multispectral sensing, and global broadband were unimaginable until a couple years ago. It will take time until entrepreneurs figure out how to create products from this information, thus opening up new, billion-dollar markets.”
“The rush to deploy small satellites is reminiscent to the telecommunications bubble of the 90s, leading to the connectivity on top of which billion dollar businesses i.e., eBay, Paypal, and Amazon were built. Although some profited, many lost their fortunes on an infrastructure that has served as the basis for the new economy.”
A takeaway, is that investors can help protect themselves by looking across the competitive landscape to understand,isolate and compare who is creating an infrastructure play and who is positioning themselves to be an applications provider.
Having an understanding of past business history can serve as a reminder for investors who can easily get caught up in the frothiness of a competitive investment climate.
I can’t emphasize it enough that investors ought to really spend time understanding customer related issues. You might see many NewSpace business pitches focusing more on the technology rather than the customer.
Investors can invest in many of these startups at a relative discount compared to other industries. Given the relatively few number of investors, short history of exits, investors could be in a stronger negotiating position with astropreneurs. However, as these NewSpace startups begin to generate revenue, returns and exits, that balance could even out.
Takeaways:
- NewSpace is much more than launch vehicles
- NewSpace is a nascent industry with few customers,revenue, and exit history
- American government agencies might be one first customers, but many New Space startups desire to diversify their customer base
- Be cautious of pitches focused more on tech rather than customers
I recommend for investors to take a closer look at the NewSpace Industry today which is primed for growth and can offer opportunity that is not possible in other sectors.
Please join me on this journey of better understanding the ins and outs of NewSpace by following me here on Medium.
Space…It’s Closer Than You Think®
Reach out to me → https://about.me/robert_jacobson
Thank you to Carey Fosse, Bryan Landers,Ellen Chang, Hoyt Davidson, and Dr. Shahin Farshchi
