Developments in House Expertise Drive Investor Curiosity

When Lisa Rich phoned investors in March to raise money for Aurvandil Acquisition, a company that buys startups focused on space technology, her goal was to raise several million dollars.

Ms. Rich, a member of the Aurvandil board of directors, almost achieved her goal within an hour.

“It just doesn’t happen,” she said with a laugh.

Richard Branson flew to the edge of space on a ship belonging to his company Virgin Galactic on Sunday. Jeff Bezos, who has just resigned as CEO of Amazon, will fly into space on July 20 with a spacecraft belonging to his company Blue Origin. And Elon Musk’s SpaceX company has a deal with the National Aeronautics and Space Administration to land Americans on the moon. But mogul slopes are by no means the only people looking up at the sky.

Investors are investing more money than ever in space technology. Space startups raised over $ 7 billion in 2020, double what it was two years earlier, according to space analytics firm BryceTech. That trend continues this year, said Carissa Christensen, CEO of BryceTech.

The biggest deals go to rocket launch companies like SpaceX and Relativity Space, which announced $ 650 million in new money last month, the day after Mr Bezos announced they would go into space.

But startups in all areas of the space industry – including launch and satellite communications, human life support, supply chains, and energy – are enjoying investor attention. Astranis, a satellite Internet company, closed a $ 280 million deal in April. Axiom Space, which plans to build the first commercial space station, raised $ 130 million in February.

“I’ve never seen a market like this before,” says Gabe Dominocielo, co-founder of Umbra, a start-up that develops satellites that take pictures regardless of the weather or lighting conditions. “I’ve received so many calls since last year – as a start-up, the start-up usually phones an investor. Now it’s exactly the other way around. “

The boom, say many executives, analysts, and investors, is fueled in part by advances that have made it affordable for private companies – not just nations – to develop space technology and bring products into space.

Thanks to the technology developed for mobile phones, start-ups like Planet can, for example, afford to build and use satellites that can map the entire earth every day. And analytical skills enabled by machine learning, artificial intelligence, and cloud computing have increased the demand for the data these satellites produce.

“You can do a lot more with a smaller satellite and launch a lot more of it,” said Mike Safyan, Vice President at Planet, “which ultimately opens up new types of missions that you couldn’t do if you just built.” A satellite from the size of a school bus with very expensive space-specific technology. “

Also, satellite companies can now pay to have their technology ride on a rocket, significantly lowering their economic barriers. For example, if one rocket has a capacity of 500 kilograms and the primary payload is 300 kilograms, another company can use 200 kilograms.

Astra, a start-up founded in 2016, wants to make getting into space even easier by offering smaller, more frequent launches – and positioning itself as a building block of the space industry, similar to cloud computing in enabling web start-ups. The company competes in the small launches market with other and more established startups like Rocket Lab, but hopes to differentiate itself with even smaller and cheaper launches. Astra has scheduled its first payload launch this summer and has 50 launches under contract, including for Planet and NASA.

“Astra is filling that niche in the market with hundreds of these companies all developing new technologies, and you don’t want to wait until next year when SpaceX can get you there,” said Chris Kemp, general manager of Astra. “While it’s free, even if SpaceX paid me money to wait a year, the value of going into space in the next month is incredibly valuable to a startup that burns millions of dollars every month. “

“The ability to reuse something and make it consistent and reliable is transformative in the space industry,” said Ms. Rich, who is also the founder and founder of Hemisphere Ventures, which has been investing in space companies since 2014. chief officer of Xplore, a company that develops orbital missions.

The recent wave of transactions has also been driven in part by a flurry of special purpose vehicles like Ms. Rich’s Aurvandil. The sole purpose of these publicly traded shell companies, known as SPACS, is to purchase one or more private companies. They were one of the hottest trends in finance over the past year.

From the start-up’s point of view, merging with a SPAC is an efficient way to raise larger sums earlier. It also changes the calculation for investors.

Some investors have shied away from space startups in the past because the technology often takes much longer than software, such as a social media service or an app, to develop and generate revenue.

“If you work for a software company and you deploy an app that doesn’t work, just create a new app. That mistake may have cost a month or two, ”said Umbra’s Mr. Dominocielo. “If you have a satellite, you’re only spending millions of dollars, and if that satellite goes down, you’ve lost years.”

However, SPACs allow companies to go public earlier than a traditional IPO, so investors can cash out much sooner. The value of the public company is often based in part on projected growth rather than actual earnings.

Ten aerospace companies have announced plans to merge SPAC, seven of them in 2021. Planet and Astra are among the seven. On Wednesday, Planet announced a merger with dMY Technology Group IV that is expected to raise $ 434 million. The merger with Holicity will bring Astra approximately $ 489 million in cash, allowing the company to expand fast enough to keep up with Mr. Kemp’s “absolutely insatiable” demand.

“When you get to the point where you need half a billion dollars in capital to build a missile factory, you have to go public because you’ve passed the risk stage of funding,” he said. “The SPACs play really well there.”

Astra began the merger process in December and went public on Nasdaq last week.

Overall, the nine SPAC deals raised $ 3.9 billion and the companies have a combined enterprise value of $ 20 billion, said Ms. Christensen of BryceTech.

Investors, founders and analysts expect the space industry to continue expanding rapidly. Morgan Stanley estimates the space industry will be $ 1 trillion by 2040, up from $ 350 billion in 2020.

Ms. Christensen said more government contracts, both for research missions like NASA’s Artemis lunar program, and for military and national defense purposes like the Space Force, are expected to fuel the development of the industry. Others see commercial space travel as the “railroad” that will catalyze mass access to the ultimate frontier.

“Everyone is kind of waiting to see if Elon Starship can pull through,” said Rick Tumlinson, a founding partner of SpaceFund, a venture firm. “And then there’s going to be a delay when it actually starts flying, when people get business and the things they want to fly together and the funding, so there’s going to be this boom that is in, I would say, three years ago. ”

“For us, it’s like the week before the Internet,” he said.

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