For Founders

The Space Tech Renaissance: A Guide To Space 3.0

After decades of taking a back seat to the internet revolution, the next version of the Space Race has arrived. While much of the renewed public excitement around space tech is being driven by long-term visions like colonizing Mars, there are plenty of space-focused innovations happening closer to earth which will likely define the next decade. 

19
 min read
Published: 
May 23, 2022
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Note: If you’re an early-stage founder anywhere from pre-idea through pre-seed, consider applying to On Deck Founders

Note: This article is adapted from a live discussion for the On Deck community featuring On Deck alums Ming Lu and Vik Duggal. If you’re an early-stage founder, angel investor, or exec interested in joining our community, consider applying to one of our programs - you’ll be in great company.

Note: If you’re an early-stage founder anywhere from pre-idea through pre-seed, consider applying to On Deck Founders.

Note: This article is adapted from a live discussion for the On Deck community featuring Josefin Graebe. If you’re an early-stage founder, scaling founder, or senior exec interested in joining our community, consider applying to one of our programs.

After decades of taking a back seat to the internet revolution, the next version of the Space Race has arrived. While much of the renewed public excitement around space tech is being driven by long-term visions like colonizing Mars, there are plenty of space-focused innovations happening closer to earth which will likely define the next decade. 

As of May 2021, there were over 10,000 space-focused companies on earth and more than 5,000 leading investors — with both figures representing a rapid increase from prior years. According to Space Capital, investors have poured $252.9B of capital into 1,694 different companies over the last 10 years. The pace of investment in space tech is large and accelerating —  in 2021 alone, space tech investment alone represented 3% of all venture capital flows around the globe.

Source: Space Capital Quarterly Report

The space industry has thus matured far beyond its origins as a government-only project during the Cold War, and is now being led by private initiative — although public funding still plays an important role.

 In this map of the space tech sector, we’ll cover the origins and catalysts of the current renaissance in space tech as well as the major verticals, companies, and investors that are likely to define the next decade of innovation in space.

Paving the way for a new era in Space Tech

Space tech has been government-led dating back to 1958, when NASA became the answer to the USSR's space advancement. In this era, NASA, with thousands of employees of its own, partnered with outside contractors like Raytheon, Lockheed Martin, and Boeing to drive forward its projects. Talent, knowledge, and funding were primarily flowing within a closed ecosystem during this period.

Today, space tech advancement is no longer solely the arena of government-led initiatives and agencies like NASA. A large ecosystem of innovative startups working on ideas from satellite fleets to space mining to microgravity manufacturing is quickly emerging. 

These ideas are getting major funding from both public and private sources of capital, the latter of which has been significantly growing in importance. For example, according to the ​​2021 Q4 Space Investment Quarterly report by Space Capital, during Q4 2021 alone, VCs invested $14.6 billion into 174 space tech companies. That’s a 52% increase in total funding over 2020, highlighting how quickly capital is flowing into the sector. 

This surge in capital and interest in the space industry begs the question — what has changed?

What’s causing the space renaissance? 

US Policy Shifts

The US government has increasingly relied on private partners in space over time. In 2006, the Commercial Orbital Transportation Services Demonstration Agreement kicked off the commercialization of resupply missions to the International Space Station. By 2011, NASA had paid SpaceX $479 million for missions under this agreement and the Obama administration’s National Space Policy in 2010.

There were additional investments and directives under the Trump administration to further expand the commercial space sector. Meanwhile, launch and reentry regulations became streamlined, reflecting a collaborative process to account for the innovative approaches developed in the private sector.

Increasing capital inflows and the variety of funding sources

According to Space Angels, an investment firm focused on the space industry, receiving an early investment from the likes of NASA or the US Air Force can still be a deciding factor for enabling startups in the space industry to get started. 

SpaceX is the perfect example, with roughly half of its first decade of operation having been funded through NASA contracts. That flow of government money is expected to keep fueling industry development.

“The government plays a larger role in new markets where there’s not as much economic incentive. And then once that economic incentive starts to develop, that’s when the private sector can come in and take over.” - Chad Anderson, CEO of Space Angels

But the US government isn’t the only player with deep pockets  Notably, Jeff Bezos has funneled over $5.5 billion of his own money into Blue Origin, an aerospace manufacturer and sub-orbital spaceflight services company. He’s not alone — Elon Musk, founder of SpaceX, and Richard Branson, who started spaceflight company Virgin Galactic, also put personal stakes into their space-focused plans. 

Outside of the government, the biggest financial influx is coming from venture capital and private equity firms. VC investment in space tech for 2021 represented more than 3% of total VC funding for the year, and is becoming an increasingly big part of venture funding.

Source: Bryce Space and Technology Start-up Space Report 2020

Private investments are also becoming more tailored to the space tech market. For example, large-sized investments are critical for deep tech industries like space that require a lot of up-front capital expenditure for trailblazing research, heavy machinery, infrastructure, and manpower. 

Since many space projects have longer time horizons than other types of startups, investor patience is critical, which has increased the prevalence of permanent and long-term capital funds that are getting involved

Publicly-traded companies are also starting to dabble with space tech investment. Corporate investments can take several forms including straightforward equity investing, debt financing, or investment via corporate venture funds. 

Acquisitions are also part of the equation — six corporate acquisitions of space tech startups took place in 2019, for an estimated total of $106 million. Strategic partnerships are popular as well, since they allow big companies to keep watch on emerging technologies while providing distribution and access capital to startups in the space. 

Finally, SPACs were also a popular option last year for space companies looking to raise capital by going public.  For example, Planet Labs, backed by Alphabet, went public in December with a $2.8 billion SPAC deal. It’s just one of several space tech companies to do so in the past couple years, including Astra, AST SpaceMobile, BlackSky, Momentus, Rocket Lab, Spire Global, and Redwire.

From early angel investors to SPAC exit strategies, Peter Kant, CEO of Accion Systems points out that space tech startups “now have the full funding ladder.”

A strengthening pool of talent

Funding is a critical factor in startup development; another valuable resource is talent. While software tech talent has traditionally had their choice of employers, the same wasn’t always true for engineers working in industries like aerospace. 

“Years ago, if you were a young engineer coming out of college with an interest in space, you really had just NASA or a government agency. Now, there are dozens and dozens of startups to choose from. You can actually pursue a career in space,” says Phillip Ingle, a Managing Director in Investment Banking at Morgan Stanley.

The space tech ecosystem is now starting to arrive at the same stage the internet startup ecosystem reached in the wake of Paypal and Google, where there was a diaspora of former Paypal and Google employees who famously went on to found a new crop of iconic startups of their own. Following a similar pattern, former Blue Origin and SpaceX employees are now striking out on their own and taking their knowledge and experience to build their own space tech companies.

Former employees of successful industry pioneers are key to kickstarting an ecosystem not only because of their relative depth of experience, but also because they have a network of peers to recruit for their ideas.

 While NASA is still a large employer with roughly 17,000 staff, the headcount of the private space ecosystem is catching up. The two largest private space companies account for nearly 14,000 employees (SpaceX has over 9,500 people and Blue Origin has nearly 4,000). 

With an increase in investment and a talent pool to execute on ideas, a self-sustaining space ecosystem is clearly starting to emerge. 

“The space launch industry and space systems industry has matured to a point where we can now build a layer of abstraction above those commoditized services we will be purchasing many of,”  - Will Bruey, Varda CEO and founder.

Plummeting launch costs

The real liftoff point for the industry has been the removal of a key historical barrier to entry — launch costs. Up until the advent of the Falcon 9 in 2010, getting into space was cost prohibitive, making it commercialization unviable and effectively confining space innovation to the public domain.

SpaceX’s great breakthrough in developing the Falcon 9 was to precipitously bring down the cost of launching into space. For comparison, NASA’s Space Shuttle orbital delivery cost was roughly $20,000/kilogram of payload. Today, SpaceX’s Starship does the same for $500/kilogram.

Historical costs per kilogram of payload delivered to low Earth orbit.

With major players like SpaceX and Blue Origin focusing on developing more efficient reusable rockets and other novel solutions, and  with the trend toward more streamlined policies and regulations, the cost to launch a satellite has declined in recent years from roughly $200 million to $60 million, and are likely to fall far lower as large fleets of commercial satellites are manufactured and launched within the next decade.

As a result of this exponential collapse in launch costs, commercialization has become increasingly viable, driving a new wave of innovation in space. 

Mapping Verticals within “Space 3.0”

When Delian Asparouhov, co-founder of Varda and a contributing speaker at On Deck Deep Tech joined us on the Deep End podcast, he summarized the history of the space industry as having had three distinct eras, including the present:

  • Space 1.0: Government Space Programs — this era started with Project Mercury, the first human spaceflight program of the United States in 1958, and lasted until around the time the Space Shuttle was retired. This era was entirely driven by governments, and characterized by extreme cost overrun, government bureaucracy. Governments like the USA, USSR, and later others were able to achieve incredible technological feats, but rarely with direct commercial applications.
  • Space 2.0: Early Privatization —  this era ran from roughly 2005 to 2015, with the primary players being RocketLabs, SpaceX, Planet Labs. Companies in this era fell into three categories: either rocket companies taking satellites into space, satellites providing earth observation, or satellites providing internet connectivity (i.e. Iridium, prior to Starlink). These were the earliest commercial use-cases for space. 
  • Space 3.0 is the present era — the second wave of commercialization. The key difference between the space industry today and that of a decade ago, according to Delian, is that in Space 3.0 “you are sending actual atoms up to space and back”, whereas Space 2.0 was just sending photons up to space and back (GPS, earth imaging, internet connectivity, etc.). Sending atoms, Delian points out, is much more challenging — and potentially more rewarding.

Within this framework, some of the emerging verticals of “sending atoms up and back include”: space tourism, satellite manufacturing and launch at scale, microgravity manufacturing, and space mining. In addition, satellite internet and data collection, which began with space 2.0, are continuing to expand.

Space Tourism

Space tourism is one of the highest-profile examples of the new wave of Space 3.0 projects — although commercial space flights are typically still only accessible to the ultra-wealthy. For example, Axiom Space’s planned flight to the International Space Station (ISS) this year will cost the first fully private crew of astronauts $55 million a ticket.

Virgin Galactic, Blue Origin, and other companies are appealing to a similar high-net-worth clientele to meet the current price points necessitated by the economics of space tourism, so such flights are still a ways off from becoming commercially viable at scale. This naturally restricts demand for space tourism for the time being: the firm Canaccord Genuity estimated in 2021 that the market for space tourism would reach a size of only $8 billion by 2030.

However, innovation is taking place that may be able to address the demand for space tourism at a less exorbitant price point. 

For example, Space Perspective, a Florida–based luxury-spaceflight startup, raised $40 million late last year floating the idea of launching giant balloons to the edge of Earth’s atmosphere for six hours. The goal is to create a way of going into space  without having to endure the extreme conditions of a rocket launch. The maiden six-hour flight costs $125,000 per ticket. 

SpaceX, meanwhile, became the first private company to send NASA astronauts to the ISS and is planning an all-private crew mission for spring of 2022.

Satellites & Launch Providers

Satellite launches currently comprise the bulk of commercial space activity. With the cost to launch satellites decreasing dramatically, more companies are focusing on launching them at higher rates and for a variety of use cases.

The market for low earth orbit (LEO) satellites is already worth $4.1 billion, and is expected to grow to over $10 billion by 2028. In fact, satellite companies are now second only to rocket manufacturers in terms of VC investment share — having received  $1.9 billion in 2021 Q2 alone.

Within this vertical, there are several buckets:

  1. Earth imaging. For example, Capella Space is the first U.S. commercial Synthetic Aperture Radar (SAR) provider through its satellites. SAR renders images of Earth in day or night and even through fog, clouds, and smoke.
  2. Launch providers. Launch providers include Loft Orbital, which offers customers a “satellite bus” service to deliver payloads into space, Rocket Lab, which produces its Electron rockets to launch small satellites, or Astra, which provides launch services for payloads destined for low-earth orbit.
  3. Satellite manufacturers. This bucket includes companies like Australia’s Fleet Space Technologies, which is planning on launching a constellation of 3D-printed small communication satellites. This will be the first fully 3D-printed satellite, following in the footsteps of the company’s 3D-printed antennas.  

This is just the beginning of an emerging new complex of infrastructure. For example, Varda’s Delian Asparouhov has said that he foresees an entire economy built around satellite infrastructure, including repair robots, satellite taxis, and refueling stations.  

He also pointed out that a big area of opportunity for startups in this space to become what he calls the “Dell” for space — whereas right now we are in the “Wozniak and Jobs” era of small-scale satellite manufacturing, a company that could provide off-the-shelf satellites created via assembly lines could scale production at a much cheaper cost to service the increasing demand for large numbers of satellites.

Satellite Internet & Telecommunications 

The growth of satellite and launch providers is, in turn, fueling growth in satellite-enabled internet and telecommunications. 

The big player in this vertical is SpaceX’s Starlink, which has launched a large fleet of low-earth orbit (LEO) satellites aiming to provide internet access to people anywhere on earth when it becomes fully operational.

Other companies are following in the path forged by Starlink. A startup called Astranis raised $250 million in series C funding in 2021 to fuel production of its MicroGEO satellites, which are small geostationary satellites that continually provide connectivity for particular geographical areas.  

Another large player in this space is Amazon’s Project Kuiper. Similar to Starlink, Kuiper aims to provide broadband internet service to underserved regions with the provision of a large “constellation” of LEO satellites. Amazon announced in late 2021 that they plan to deploy their first two satellites (of a planned total 3,236 satellites that they will eventually launch) by Q4 2022.

Beyond providing broadband, other companies are focusing on the use of satellites to enable other forms of telecommunications infrastructure. For example, Swarm — which was acquired by SpaceX in August 2021, is developing connectivity systems for remote IoT devices. Meanwhile, Skyloom is building spaceborne infrastructure based on optical communications technology and relay satellites. 

Data Collection 

Another growing vertical within space tech is data collection startups — products that monitor the earth from space to help inform decision-making. 

Some examples of various startups in this category:

  • PlanetWatchers monitors crops and helps farmers make insurance claims in case of losses.
  • Slingshot Aerospace helps companies in the aerospace and defense industries make sense of collected data from a variety of sources, including satellites.
  • MethaneSAT will deploy satellites to monitor methane emissions to combat climate change. 
  • TreeView, funded by the UK Space Agency, will use satellites to track deforestation for carbon sequestration and storage

Beyond these examples, other companies are being built to serve the emerging space ecosystem. Data security is a major concern even in space, and companies like Arqit are already focused on creating quantum-secure communications utilizing satellites.

Microgravity Manufacturing 

The thesis of space manufacturing is the idea that some manufacturing processes can either happen more effectively in space, or can only happen in space, where the product being manufactured (such as a bodily organ) can be printed without significant gravitational forces.  On the efficiency side, making fibers for ZBLAN fiber optic cabling, for example, in space could create a more consistent, faster product than would be possible here on earth.

A prominent startup in this space is Varda Space Industries, which was founded in 2020 and raised a $42 million series A in 2021, aims to build “the world’s first commercial zero-gravity industrial park at scale.” Their stated goal is to “expand the economic bounds of humanity” by increasing the zone of human economic activity beyond earth’s atmosphere. As this goal would imply, Varda is quite ambitious, with plans to create a “free-flying space factory” and their own “in-house reentry vehicle” to help facilitate their vision. 

Another company who tried doing something similar in the past include Made in Space, Inc. Although it was acquired in 2020, it did receive a contract to send a ceramics manufacturing facility to the ISS to create turbine components later that year.

Space Mining

One of the potential future sources of growth within the space economy is space mining — extracting resources like rare earth metals from the moon, asteroids, or other extra-terrestrial bodies and bringing them back to earth.

When Peter Diamandis of Singularity University made the prediction that the first trillionaire would be made in space, he was referring to the prospect of value creation from asteroid mining, which he called “trillion dollar assets.”

There is starting to be some motion on this front. In 2020, companies contracted with NASA for the first time to extract samples of regolith from the moon by 2024 — which Milken Institute Review called “the beginning of the era of commercial space mining.”

Although the global space mining market was estimated at a mere $1 billion in 2021, it is projected to triple in size by 2026 — and that is likely just the beginning, given the enormous potential value of being able to mine virtually unlimited resources that remain scarce here on earth.  

TransAstra, for example,  is aiming for water and mineral extraction from both the Moon and asteroids. A proposed method for water extraction includes vaporizing trapped water to then collect it into storage containers which could be transported back to Earth or other space locations. Meanwhile, China’s Origin Space launched the NEO-1, the first commercial spacecraft focused on mining missions.  

But for the most part, space mining still requires a lot of development and research in the underlying infrastructure and is far away from real economic viability. According to Delian Asparouhov in his appearance on the Deep End podcast, bringing back materials mined on asteroids to earth would be prohibitively costly even if many current technical challenges were solved.

 However, if large man-made space facilities such as those Varda is proposing to build do succeed, it may provide an economic incentive that would make asteroid mining a formidable industry — so space mining may be a longer-term prospect that will likely be reliant on the larger maturation of the space industry and ecosystem to succeed.

Space Cleanup 

With an expected 50,000 satellites expected to be in Earth’s orbit within the next decade, thinking ahead about space junk — which could become a serious obstacle to the economics of launch —  is pivotal for the future viability of the space industry.

 Fortunately, companies are already emerging to start building solutions. 

  • Analytical Graphics Inc. is tracking spacecraft and debris in space to help to give satellite owners information about their property, which also allows them to track space junk that may damage it.
  • ELSA-d (End Of Life Services by Astroscale-Demonstration) will utilize magnets to grab debris and push them toward earth to burn up in the atmosphere. 
  • RemoveDebris, a project in cooperation with Airbus, will use nets to clean up space debris. 
  • The European Space Agency is also working on its own space junk solution, and is planning to build a self-destructing robot to eliminate a 100kg piece of debris from a previous mission.

It is likely that more scalable solutions will be needed since launch is such a potential bottleneck in the space economy, and companies in this space will be critical to the ongoing health of the ecosystem.

Key Investors

With the space tech ecosystem maturing rapidly, investors are feeling bullish on the various startups cropping up. According to Bryce Space and Technology’s Start-Up Space Report 2020, in 2019 there were 127 VCs who made their first space tech investment that year.

Image Source

Here are some of the players making investments in the space tech industry:

  • Founders Fund, one of the most prominent venture funds in tech, which was one of the early investors in both SpaceX and Varda.

The Space Gold Rush?

In his appearance on the Deep End, Varda co-founder Delian prophesied that the way space will get colonized will be similar to how California initially became settled. 

Although early explorers like Lewis and Clark paved the way by pioneering uncharted territory, it was really the California Gold Rush that created the economic incentives necessary for a thriving series of settlements to emerge far from existing human civilization on the Pacific Coast of the American continent.

Similarly, Delian believes the same pattern will likely apply in space. Once the economic incentives exist to create a “gold rush” dynamic in space, that is when human settlement will finally leap beyond the new frontier. 

As with any new frontier, the opportunity is immense — and so is the risk. Startups in this area are paving the way for an industry with a potential for value creation that no other can match, but the challenges and time horizons involved for innovation in space to bear fruit are commensurate with that potential. Space 3.0 is well underway, but the space industry is just beginning.

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