125. Space Tech Investing, Part 2 (David Cowan)

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Today we cover Part 2 of Space Tech Investing with David Cowan of Bessemer Venture Partners. In this segment we address:

  • Why is SpaceX moving the industry forward in the wrong direction?
  • I recently read a Fortune article titled ‘VCs Invested More in Space Startups Last Year Than in the Previous 15 Years Combined.’ An excerpt from the article states “50 venture capital firms invested in space companies in 2015, signaling that venture capital has warmed to a space industry it has long considered both too risky and too slow to yield returns.” David, Why do you think now is the right time to be investing in space?
  • The amount of data that can be collected and analyzed now via satellites is an order-of-magnitude greater than it was only a short time ago. How do you think about the data opportunity and what role does data play in driving space tech forward?
  • When you look forward to the next 10-20 years, what are your thoughts/predictions on how space tech will evolve and impact society?

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Key Takeaways:

 

1- Space sub-segments

David talked about the sub-sectors within the space category and which areas VCs have invested in.
-Aerospace Contractors: Companies that are supply NASA and complete one-off, custom components and systems
-Defense Contractors: Similar to aerospace but serve government’s national security
-Commercial satellites and constellations: This is the most active area for startups. Hundreds of startups have been founded in the segment over the past three years. And many of the entrepreneurs are not experienced aerospace people; more often they are software developers. And a key focus area here is on data… making this sub-sector more data science than material science-centric.
-Mining: There is a new sector emerging around mining operations… with plans to mine the moon and/or asteroids
-Commercial tourism and exploration: These companies are focused on taking travelers to space and, potentially, other planets.
-Satellites Subsystems: This includes equipment such as antennas, solar panels, propulsion, etc.
-Ecosystem of support services for space operators: This includes companies w/ ground stations, satellite tracking, collision, launch

 

2- The Death of Space 1.0

Recall David’s comments that we’ve been operating on space technology that was developed for the Apollo program. This tech was designed to be really long-lasting, militarized, redundant satellite equipment. And by the 1990’s satellites were costing Billions of dollars, taking 10 years to build, and could weigh many tons. Meanwhile, terrestrial-based telecommunications costs were dropping precipitously, causing the entire commercial satellite industry to collapse. So, all the major Space 1.0 companies started filing for bankruptcy including Teledisic, Iridium, Globalstar, Terestar. And NASA continued to be defunded by Congress over the years leading up to 2008 when they defunded even further and canceled the successor shuttle program.

Then, to further exacerbate the problem, the available space for satellites in geosynchronous orbit became exhausted. There was no longer room to launch satellites w/ new tech and capability. So, ultimately space had all the ingredients of a market primed for disruption, which is just what happened in key takeaway #3:

 

3- Birth of Space 2.0

With the proliferation of mobile devices, components in the devices increased in capability and dropped in price. And it just so happens that cell phone components are the same as what you’d find in in a satellite. There’s power mgmt, battery, antenna, radio, accelerometer, and camera. So, founders with fresh eyes asked, “Can we make a satellite out of these cell phone components? And can we put it in low earth orbit, where there’s plenty of available space?”

It was at this time that a physical spec called the CubeSat was created. And Skybox imaging put up their first satellite in December 2013. Many different teams of entrepreneurs could now leverage a standard for developing space tech.

Coincidentally, advances in 3d metal printing had allowed companies like SpaceX to develop much better rockets and to do it much faster. So, while a completely new approach to satellites had emerged w/ the CubeSat, a completely new way to address launch had emerged w/ the SpaceX rocket program. And David believes it was the convergence of CubeSat innovation and launch technology that has caused this renaissance in space today.

 

Tip of the Week:    Vertical Integration and the Space Stack

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