The role of the International Space Station in the commercialization of space
How CASIS and the ISS are helping establish the future viability of space-based industry
At Silicon Valley Bank, our clients aim for the stars — at least metaphorically. We were fortunate enough to speak with someone who is in the business of stars, well, at least space. Warren Bates is the director of business strategy and portfolio management for the Center for the Advancement of Science in Space (CASIS), the nonprofit entity tasked with managing the International Space Station U.S. National Laboratory.
Ann Kim: I would like to think that everybody knows about the International Space Station but maybe not as many about CASIS. Can you give us a brief history?
Warren Bates: Back in 2005, Congress designated the U.S. portion of the ISS as a national laboratory, thereby opening the doors for academic and commercial access to the space station in ways that did not exist previously. Then in 2010, Congress directed the National Aeronautics and Space Administration to run a competitive process and select a nonprofit entity to manage the ISS National Lab. CASIS was selected, and it entered into a cooperative agreement with NASA in July 2011.
We went through a startup phase, building out our team and understanding the market. While our portfolio was initially heavily weighted toward early-stage academic research, we have now reached a point where more than 50 percent of our payloads are from the private sector. They range from innovative startups and Fortune 100 companies to government agencies and world-class academic institutions. Projects include fundamental research and development that could potentially lead to very impactful discoveries and applied research where we’re accelerating a company’s time to market in life science, materials science, remote-sensing and technology development.
What are the key advantages of using the ISS?
There are three major reasons why anybody would want to access low Earth orbit (LEO). One is the microgravity environment, which can have unique effects on physical or biological systems for an extended period of time. The second is the vantage point: The ISS really is a big satellite bus that provides a platform for applications in remote sensing; it has a unique orbital inclination and passes over 90 percent of the Earth’s population while orbiting the Earth every 90 minutes. The third is the extreme environment of space for analyzing the accelerated degradation of materials. Rapid hot-and-cold cycling, increased radiation and the atomic oxygen — all present unique research opportunities.
One example is our recent partnership with Target, which put up a $1 million prize for projects that could address cotton sustainability. It takes 700 gallons of water to produce one cotton T‑shirt. This is a major sustainability issue that Target wants to address. There were many ideas for how to reduce that number, whether it’s using Earth-observation data for optimal watering or studying the roots of cotton plants and how they grow in space to develop hybrids.
How important is the role of the ISS?
Based on a recent study, the American public views the ISS as a valuable investment: Eight in 10 Americans say the space station has been a good investment for the country, according to a new Pew Research Center survey conducted March 27 to April 9, 2018.
Our job is to drive new demand and support the creation of new markets in LEO while fully utilizing ISS resources and maximizing value for the American taxpayer. For instance, we work with the Michael J. Fox Foundation, which is focused on Parkinson’s disease. They have identified a protein that they know is specifically relevant to a large percentage of people with the disease. The structure of that protein is currently unknown; and until you know the true structure of the protein, you can’t best design a drug to bind specifically to it in a way that will minimize side effects and maximize efficacy. If you crystallize that protein in space at a high quality and then bring it back to Earth, you can use X-ray or neutron diffraction and mathematical modeling to back into what that protein looks like. Once you know the structure, you can develop different drugs that might bind to it. The development of any drug is a potentially lengthy timeline, but its ultimate value can be enormous.
What is your perspective on innovation in space infrastructure?
When you talk infrastructure, I think of a few things. First and foremost, it’s transportation. Our customers need reliable, repeatable, inexpensive access to space for iterative R&D programs in space. We also need to continue to adapt facilities to have more automation so that human interaction would be less necessary and things could operate 24/7. In the future, we will have more commercially owned and operated platforms in space outfitted with research capabilities that are driven by demand from the market we’re currently cultivating. Those facilities will be much more standardized and developed toward iterative, repeatable research programs.
How do you cultivate interest and help prove out different business models?
We work collaboratively with a wide range of potential ISS National Lab users to develop research projects and programs that will be impactful from an economic, innovation or social perspective. We are growing a network of investors, and through that network we are able to distribute different information and investment opportunities to bring in folks who have not yet made their first investments in space, thereby infusing more capital into this emerging ecosystem. We are an unbiased resource that can tell them what we’re seeing in the market. In addition to the investor network, we have our sponsored-program product that is focusing our unique laboratory on complex problems we are facing terrestrially. Target is one of several sponsored-program examples that is leveraging more than $30 million in funding from external sources.
How do you work with startups?
An example is our partnership with MassChallenge — a really successful nonprofit business accelerator. We are leveraging MassChallenge to educate startups that can use the ISS National Lab and its capabilities for their innovations. We want to send something to space that’s really going to take advantage of the unique environment. Out of that have come some real innovative projects. One company, Angiex, is developing a cancer therapy that targets the tumor vasculature and tumor cells. Nearly all cancers require growth of a distinct vasculature to enable tumor growth, and Angiex’s drug may potentially treat more than 90 percent of cancers.
What will be the future impact of commercial space stations?
If I’m trying to build out a business case for having a commercial platform in low Earth orbit, I’m thinking about the potential revenue streams. The ones that are spoken or written about frequently are space tourism and sovereign astronauts. You’ll hear a number of innovative commercial space station companies talk about in-space manufacturing as another revenue stream, but it is something that’s projected for late 2020s/early 2030s. When I’m looking at a model for investment, I like to see some predictable, recurring cash flow. Iterative research programs can provide predictable revenue that can help stabilize revenue volatility in a business model, so that’s what we’re trying to develop for the future commercial space station providers. And we’re seeing indications of growth — in commercial investment, in the number of impactful projects and in the number of companies involved. As a result, we are optimistic that the demand for R&D will continue to grow and eventually be a major revenue stream for future commercial space stations.
With NASA planning to transition the ISS by 2025, what does the future hold for the ISS and space-based enterprises?
Will we be at a point in 2025 when we can say that the R&D market is going to be large enough that it can support the ISS? I don’t know. There are a lot of policymakers who want to ensure that we do not have a gap where there is no U.S. presence in LEO. For that to happen, one or more commercial space station platform providers need to close a business case in a way that convinces people to invest in their vision. NASA is likely going to be part of that business model, but I imagine they don’t want to be the only part.
The ISS is mankind’s greatest engineering achievement. We need to make sure that we get everything out of it as possible — to inform that future, to lead us to that future. The ISS is approximately a $100 billion asset. CASIS receives $15 million a year to manage utilization of the ISS National Lab. With that annual $15 million and other critical support from our partners at NASA, we have developed an ISS National Lab research portfolio that’s projected to generate more than $900 million in revenue, selling into more than $110 billion of addressable markets. It’s accelerating time to market by, on average, one and a half years for a subset of the projects. All we can do is provide data to show that demand is growing. I think in a transition of this magnitude, we should have a criteria-driven decision. If we have limited time left with this space station, we need to be making the most of it. That said, the Boeing Company, which maintains the U.S. segment of the International Space Station, says the technical life is far beyond 2025. We are fully supportive of a transition to a commercially driven LEO economy, and it’s superexciting to play a role in this and help stimulate commercial activity in low Earth orbit. Let’s not regret ending this thing too early.
I would like to than Warren for taking the time to speak with me. For folks in the Bay Area, the ISS conference is this week — check it out.
I am always looking to speak to people in the aerospace industry, so if you are an entrepreneur or investor, send me a message.
