History of GPS points the way to future of space tech
We will soon be living in the “mirrorworld”, experts say: a blending of the real and digital realms that will transform everything from the way factories operate to how we navigate the streets. Our devices and machines will soon blend GPS information with data captured by embedded cameras about the physical reality around us. Whether we end up wearing contact lenses that give us enhanced information about what’s in front of us or using holographic car dashboards that project directions onto the windshield, the online world is going to start merging with three-dimensional reality. This will have major consequences for business, manufacturing, entertainment, communication and many other aspects of our daily lives.
The mirrorworld is just one example of how GPS technology has enabled waves of innovation that have traveled far beyond what could have been predicted when it was designed for military purposes more than four decades ago. It was the US Department of Defense that developed and launched the satellites that began sending positioning information to receivers back on Earth in the early 1990s. By 2000 the technology was fully opened up for civilian use, allowing companies and inventors to create tools that helped unlock its immense potential. Among the inflection points: Google Maps making its API available to software developers in 2005, and the release of the first GPS-enabled iPhone in 2008. The iPhone made location-based apps possible, from Tinder to Postmates to Yelp to the more recently launched scooter startup Lime, a contender for the fastest ever company to reach unicorn status.
Fast-forward to the present day, and $1.4 trillion has been added to the US economy, thanks to apps that use GPS to provide location-based services. Take a look at the top ten venture-backed companies of the decade by exit size, and you’ll find that three of them — Uber, Lyft and Snap — relied heavily on GPS and the space infrastructure behind it. This effect shows no signs of slowing down; in fact, it’s likely to keep accelerating. We’re currently seeing the advent of 5G and the growth of the Internet of Things. Companies such as Facebook, Snap and Microsoft are racing to create the headsets, glasses or possibly even contact lenses that will become the iPhone of the AR age. All these future technologies will be built, in part, on location data enabled by satellites circling the Earth.
We are entering a new phase of the entrepreneurial space revolution
For investors, looking at the value that has already been created by GPS is a smart move when evaluating promising companies to back in the future. Even as the value of location-based services continues to climb, new types of space technology are being developed that will have a similarly profound effect on the world. All that’s needed is for companies to build the distribution platforms and applications that unlock their potential.
These transformational technologies fall broadly into two categories: Geospatial Intelligence (GEOINT), or insights derived from imagery and other information captured about current state of the planet and Communications, which includes global broadband internet connectivity. Both segments are at a pivotal moment, thanks to the entrepreneurial Renaissance that has been happening throughout the space industry during the last decade. This began with SpaceX’s entry into the launch sector, making pricing transparent and providing a new generation of satellite manufacturers with a more accessible stepping stone to space.
This in turn spurred innovation among companies building and operating satellites, who are increasingly able to make smaller, lower-cost models and to experiment with the types of sensors and transmitters attached to them. The number of satellites orbiting Earth is expected to 5x in the next decade as SpaceX, Amazon and others plan giant constellations: 12,000, in Amazon’s case, with 1,500 scheduled to launch in 2020 alone.
Those three companies all aim to provide global broadband internet: a service that will unlock untold value as it powers networked machines, enables streamlined logistics, and provides connectivity on planes, ships, farms, oil rigs and in other remote locations. Meanwhile, GEOINT satellites outfitted with an ever increasing variety of sensors are also proliferating. These allow people to monitor environmental conditions, inspect natural resources and industrial assets, track consumer spending habits and collect data that could impact almost every industry that exists.
Gaps in the space “tech stack” present opportunities for investors
The rockets launching these constellations and the satellites themselves are part of the infrastructure layer of these new tech stacks. As we saw with GPS, what’s needed to fully unlock the value created by this technology is a distribution layer. This means platforms that make it easy for developers to build applications that transform raw data into practical solutions for specific industries. As we have seen with the iPhone and Google Maps, once applications start to be built on top of this distribution layer, the worth of these platforms can grow exponentially. They will be the real estate that the future is built on.
What’s exciting for investors is that this layer is still in the process of being created and there are obvious gaps waiting to be filled. Amazon Web Services is one of the companies getting involved in this game. It launched its own series of ground stations, which control satellites and receive data from them, in May 2019. SkyWatch, a Canadian startup which offers simple access to Earth observation data, announced a $7.5 million Series A funding round in January 2020, with Space Capital among its investors. Another Space Capital portfolio company, Isotropic, is developing high-bandwidth, low-power terminals to receive a wide variety of satellite signals. These will allow the satellite industry to reach untapped markets.
Each of these platforms helps software developers and other businesses create targeted, practical uses for the data transmitted by hardware in orbit around the planet. And, just as we’ve seen with GPS, there are almost unlimited uses for this data. In the realm of agriculture alone, satellite signals are being used by FluroSat to provide analytics for precision agriculture and Arbol is working to unlock parametric insurance at scale.
Agriculture is a large industry but a small part of the pie; there are countless other industries that are poised to be revolutionized by satellite data, from fintech to insurtech to cybersecurity. To ensure this happens, investments must be made in the distribution layer of the space tech stack now. Early movers will scoop up substantial opportunities to lock in value that we could continue to multiply in decades to come.
To learn more, read “The GPS Playbook” from Space Capital and Silicon Valley, where it is predicted that space-based Communications and Geospatial Intelligence could generate $1 trillion of equity value over the next decade
Written by Space Capital
