Why investment in space companies is heating up
It used to be that the only way to get to outer space was through the government.
Those days are long gone, as the commercial space industry becomes increasingly crowded with companies geared toward such diverse goals as launching small satellites and mining the moon for minerals.
This has made the commercial sector increasingly active for investors. A January report from aerospace consulting firm the Tauri Group found that space start-ups have attracted more than $13.3 billion of investment, including $5.1 billion of debt financing, since 2000. Nearly two-thirds of that investment funding has come in the last five years.
The Times spoke with Chad Anderson, managing director of Space Angels Network, about the growing interest and what’s next for the industry. Space Angels Network is a New York-based investor in early-stage private space companies, with virtual offices in Los Angeles, Seattle, San Francisco, Zurich, Hong Kong, Stockholm and London, and investor members all over the world.
The investor group has completed deals with outfits like Planetary Resources, a Redmond, Wash., company that intends to mine asteroids for minerals, and Planet, a San Francisco firm that launches small satellites to gather images of the Earth. The typical investment is $500,000 to $1 million.
Here is an edited excerpt.
It seems like every few months a new commercial space company makes its debut. What’s driving that?
Low-cost access to space, hands down.
All of the growth has come, really, over the last 10 to 12 years, so in my mind, it’s all riding on the back of SpaceX. In 2009, they had their first successful launch, Virgin [Galactic] got their first significant funding, and it was sort of on from there.
I think that people look at SpaceX and its lower prices and that is a big piece of the puzzle. But another piece that I think people overlook is that they simply publish their pricing. They say, ‘Here’s this rocket, here’s how much cargo we can carry to what orbit and here’s how much it costs.’
That really changed the game and so once there was access to space and you knew the price of it, suddenly people could say, ‘Oh it cost me $200,000 to launch my small satellite. I have a really good idea. I could build a business from that.’
Tell me about the origin of Space Angels Network.
We’ve been around since 2007. The idea then was to bring some credibility to the sector. We started off as a typical angel group and a handful of successful businesspeople that had put money in space ventures, and they did some good work to build credibility through those formative years.
As the industry has ramped up, we have grown into it. We went from 20 members in 2012 to 220 today. It’s really 100% year-over-year growth in membership for the last three years.
What do you look for when investing in companies?
We’re invested in 34 companies to date and we look for a lot of things that a typical angel or VC [venture capitalist] would look for. Space is a high-tech industry, but we’re still looking for really great teams, really big bold ideas, people that can work effectively in a dynamic landscape. We’re looking for people with ambitious business plans, but a practical route to near-term revenue.
I think a common misconception is that space has really long development times and is really capital intensive, but I’m not so sure that’s true. I think that’s true probably for launch companies but there’s a lot of different companies in space, from satellites to software to observation to other things, that’s less true for.
Are there particular areas of interest?
It’s a dynamic maturing market, there’s a lot going on. And we really look at it ... in sort of three geographical regions –terrestrial, in-space and planetary. It’s really based on where the value is directed.
So terrestrial is like launchers and satellites. Most of the benefit is for Earth. In-space are things that are built or manufactured for space in space. And then planetary markets provide value to other surfaces like the moon and Mars, which are getting more interesting.
Space Angels has invested in that entire spectrum. There’s a lot of interest from VCs in the terrestrial markets because those are existing markets that are being disrupted. There’s no question about “Is somebody going to pay for this thing?” because they are. It’s more “Are there entrepreneurs doing this better, faster, cheaper?”
Space Angels Network recently invested in Astrobotic Technologies, a company competing for the $30-million Google Lunar X Prize, that intends to take payloads to the moon. Why return to the moon?
We landed but we didn’t do much. There’s a ton of interest in spending more time on the moon compared to 24 hours at a time.
I think that there’s a lot of opportunities for infrastructure development. People have referred to it as the eighth continent, and there’s a lot of resources on the moon that can be used to go deeper into space. Getting out of the Earth’s gravity is 99% of the issue. If you can launch from the moon ... it doesn’t take much fuel or energy to get anywhere, so you can basically explore the solar system from that point.
Where do you see the commercial space industry going in the future?
The potential is crazy. You talk to people who were around and starting businesses in the Internet boom, and they talk about how similar it feels.
I think that the investors and members of Space Angels that are getting involved in this … see it as getting in at the ground floor of a new industry. They’re really looking to invest in the next Microsoft while it’s still a group of guys sitting around a computer lab. It’s nice to see it coming together, but we’re really just scratching the surface.
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