Everyone is looking for some Space
2020 has been a remarkable year for a topic that I’ve followed closely since childhood — space!
A lot has changed in this space (pun intended) over the last few decades, and this edition of The Squeeze will discuss the history, opportunity, and key players in the 21st-century space race.
Origins of the Space Race
Robert Hutchings Goddard first experimented with rocket technology in the 1920s United States. While he didn’t get anything out of the atmosphere, Goddard had several patents including multi-stage rockets and pioneered the first liquid-fueled rockets.
Liquid Fuel is typically more efficient than solid fuel, and the key component for most spacecraft (excluding auxiliary rockets such as a booster).
Rockets really took off in the 1930s Weimar Republic (Pre-Nazi Germany). Aerospace engineers led by Karl Emil Becker experimented with liquid-fueled rockets with the intent of going as high and as far as possible. This development was key for 3 main reasons:
- Becker and Co. went on to build the V2 rocket during World War 2 on the technology of their experiments in the 30s. The V2 Rocket was the first computer-guided rocket and also the first rocket to enter space
- The builders of the V2 rocket were not fans of the Soviets (who retook previously Nazi-occupied land after WW2) and defected to the United States where they joined the American rocket/space programs
- The build sites of the V2 rocket program were Soviet-occupied after WW2 — including several German rocket scientists. This led to the USSR (Soviets) establishing their own rocket program and developing their own R-1 rocket based on the V2 Platform
Following WW2, the Soviet Union and the United States entered 40 years of the Cold War. The TLDR is that a lot of ICBM (Intercontinental Ballistic Missiles) were built, multiple microaggressions, and Sputnik was built.
Launched in 1957 by the Russian Space Agency, Roscosmos, Sputnik was the World’s first satellite. Given the geopolitical climate of the Cold War, the United States had to respond and established NASA in 1958.
The Soviets followed with Sputnik II (a dog as the passenger), a larger Sputnik III a year later, and then the Vostok I with Yuri Gagarin as the first human to enter Earth’s orbit in 1961.
The Americans had to match, and in 1962, the United States sent John Glenn into Orbit. Not stopping there, this development led to the Apollo program to put an American on the moon. There were failures and tragedies, but the Americans succeeded and Apollo 11 was the first crew to land on the moon.
Several Soviet Orbital flights and 5 US Moon Landings followed before the dissolution of the Soviet Union in the early 1990s. The Soviet Union would never land on the moon.
The 1990s following the Soviet dissolution brought in an era of cooperation.
This resulted in the ISS (International Space Station) where Roscosmos (Russian Space Agency) would provide the rockets to launch NASA staff and other international astronauts to resupply the floating space station that orbited the earth. It is important to note that before the ISS, Russia had its own MIR station in orbit for nearly 15 years.
The 1980s was also an era where NASA introduced reusable space shuttles — however that program effectively ended following the tragedy of the separate Challenger and Columbia explosions that resulted in the loss of all 14 crew.
Since the end of the shuttle program, Russia is the primary means of getting crew into space.
The Opportunity
Now that we know the history of space exploration, we have the context to discuss some of the key business opportunities that exist.
Government Contracts
As mentioned earlier, Roscosmos has a unique position as the main crewed (with humans inside) means to get people into space — this is done using a Soyuz capsule strapped onto a pile of rockets, a methodology effective for 143 crewed flights into space as of this day.
As a result of this dependency on Russia, over $1 billion has been spent by NASA on Roscosmos launches in 2019/2020 at a cost of approximately $90 million per seat to the purchasing country.
The Soyuz capsule is technology from the 60s, and the rockets used to launch these capsules are single-use. If new entrants can deliver on a means to launch customers into space that uses new and reusable technology to bring astronauts into space — significant geopolitical shifts and will occur along with a ripe high-value contract with NASA.
Satellites
There are 2,787 satellites in orbit of which over 50% are commercial. Commercial satellites have a wide variety of uses ranging from TV, Radio, Imaging, Phone, etc. — all to simply transfer data. Versus the cable alternative, satellites can reach anywhere given that a physical cable is not required.
Data usage is growing at an exponential rate with each passing day, and that bandwidth is controlled by monopolies that own these satellite networks. In the United States, annual revenue from Verizon and AT&T is over $300 billion per year.
If the cost to launch a reliable satellite into space can be lowered by private companies not tied to the telecom giants — there exists an opportunity for a competitor to scale with a net of satellites and offer telecommunication services that may break the current monopoly and offer significant returns to the competitor.
Space Tourism
Going to space is aspirational, and it seems that some people are willing to pay up to $30 million to visit it.
There are over 150,000 ultra-high net worth (UHNW) individuals valued at over $50 million each in the world. Offering a <$1 million costing trip to space to even 1% of this population represents a $1.5 billion opportunity that can be used to finance other investments into space such as even cheaper spaceflight to the masses and bundling with satellite launches.
Sub-orbital Freight & Travel
Today, commercial airliners traverse the skies at speeds of just under 600km/h to connect people and freight. The circumference of the earth is approximately 40,000km, and a circumferential trip for the typical Boeing-777 (which I worked on part of for an internship)can be made in 66 hours.
On the other hand, space travel requires speeds of over 20,000 km/h cutting that circumferential lap time down to just a few hours (The ISS orbits at over 27,000km/h).
The leap in technology between air-travel and space is significant, but in-between lies the technological capability for safe, repeatable, and cost-efficient suborbital flight.
To reach 125 miles above Earth, a suborbital vehicle needs to fly at 6,000 km/h, and these speeds can be used to greatly cut down travel times of both freight and people.
Excluding the opportunity of moving people with suborbital flight, freight alone is a significant business opportunity that is further strengthened by the potential for an autonomous network of self-flying cargo carriers free to operate in an open and constant environment (This makes it easier for AI).
Consumers and producers are always looking to move product quicker, and sub-orbital flight presents just that opportunity to both sides of the supply/demand equation.
Colonization & Mining
Government contracts, satellite launches, and tourism are the more near term opportunities in space, but a more visionary opportunity is that of colonization. Companies that succeed in any combination of the first three opportunities could potentially leverage the technology, learnings, and capital investments to deliver on the more aspiration goals of living in space.
Asteroids also contain valuable metals. There may exist a business model where mining metals in space becomes feasible as environmental protections on earth increase, and mineral seams get deeper and costlier to access.
The Key Players
Key players in the private sector of the space race can be broken up into 2 main groups — crewed vs uncrewed missions.
Of these competitors, Orbital and the ULA are established. Orbital has a long history of satellite launches, while the ULA (United Launch Alliance) is a venture between Boeing and Lockheed Martin with a history of launching both satellites and planetary rovers into space.
Now SpaceX, Blue Origin, and Virgin Galactic are where it gets interesting. What’s one thing in common between all these companies? They are built on capital raised primarily from services other than aerospace. Blue Origin is backed by Jeff Bezos and Amazon, Virgin Galactic by Richard Branson from Virgin, and SpaceX by Elon Musk. All three of these backers are disruptors and their primary focus has been on developing reusable technology that can be used for launch after launch after launch.
Reusability is important because from a business perspective this can be less capital intensive and also save manufacturing time significantly. So far, SpaceX is the clear leader of this pack with the launch of several satellites and an extremely impressive crewed launch of 4 astronauts to the ISS (International Space Station).
And of course, we have NASA, Roscosmos, and the CNSA (China National Space Administration) as major governments involved in spaceflight. As mentioned, Roscosmos and NASA are currently intertwined — but the story around China is interesting. China may not have the early start and history of Russia or the United States, but the country is quickly catching up.
Specifically, China plans to send an unmanned rover to the moon to retrieve rock samples- using some really fancy engineering within the next 7 days for the first moon reconnaissance (albeit uncrewed) since the Apollo missions.
This is not all, and other key wins from the China National Space Administration include the launch of a 6G Satellite (I don’t think we really know what 5G means yet) and 11 launches between now and 2023 in preparation launch of a large orbital space station also by 2023.
China has the plans and technology to potentially leapfrog Russia or the United States to become a top-two country in space capability.
So What?
Space is limitless, it’s the unknown, and it’s aspirational. Exploring more of space is a huge technological challenge, but there have been significant strides driven by private industry players such as SpaceX who seek to use space as a business opportunity to break monopolies held by telecommunications giants.
Private space exploration and technology pose significant business continuity risks to incumbent Telecommunication firms and I expect lobbying for the regulation of space to be front-of-mind for the deep pockets of the AT&Ts of the world going forward. I expect this to slow western space innovation in the long-run after rapid early growth. I also expect that regardless of regulation, there will be significant technological gains in the adjacent market for sub-orbital flight in the coming years with the potential to disrupt traditional freight carriers like UPS and Fed-Ex.
Imagine your Amazon Prime order is fulfilled by a Blue-Origin delivery rocket across the continent in less than an hour? That’s an amazing value proposition.
On the other hand, while western accomplishments in space are heavily discussed (driven by private industry), it is extremely important to note that China has an aggressive space expansion plan backed by a cohesive and focused government. Establishing a presence on the global scale is something China is not unfamiliar with, and a strong economic recovery relative to the United States from COVID-19 only helps the Chinese race for space.
