by Sabine Pongruber
Is there a better place in Europe to host an Investing in Space event than in London? A bustling city with hundreds of investment banks and more than 700 venture capital funds, according to Crunchbase. Positive vibes were felt by the public at the FT Live Investing in Space event (held in London on 8e – 9e June 2022), and the keynote speakers delivered their message loud and clear: this is the perfect time to invest in space.
Growth is written all over the space
Based on their employment profile, investors are generally optimistic. The size of the global space market will grow from $340 million in annual sales to a realm of $1 trillion over the next two decades. The number of people employed in the space industry as a whole is expected to grow to 400,000 over the next few years. This huge growth could bring challenges and opportunities, some of which were openly discussed at the event. Among the key drivers on the road to success are investment capital, scalability, industrialization of space innovations and one talented workforce.
Capital is attracted by facts
With growing awareness of the space technology market and a more commercially affordable solution, space is an attractive and growing opportunity for returns on investment. Investments are more attractive these days, due to factors such as lower R&D costs, scaling costs becoming more affordable, and the cost of failure has dropped significantly in recent years. . The fact that manned space missions have become much safer has undoubtedly contributed to the perception that the space market is a safe investment option.
Roles and Responsibilities at Risk
There is no doubt that deep technological innovations, which aim to revolutionize the industry, are still very capital intensive and unattractive for many investment banks or venture capitalists. Currently, only a few institutions and agencies can expose themselves to this type of high-risk investment or have the funds to do so. The European Investment Bank (EIB), for example, can take a higher risk to scale up space initiatives because it is supported by the European Commission.
“We are very good at talking to each other”, but this is not enough to push the industrialization and commercialization of space applications.
The United States and Canada use pension fund money to cover risky investments, indirectly using part of their gross domestic product (GDP), as Stephen Nundy of Lakestar pointed out. Venture capitalists (VC) take over the financing of technically less risky projects. Lynn Zoenen, Principal and Managing Director of Alpine Ventures, predicted that capital will be limited and due diligence will become more difficult as more companies enter the space economy. Others, like Seraphim Space CEO Mark Boggett and EIB Vice President Kris Peters, still see plenty of opportunities to attract funds from non-space industrial and commercial ventures.
What are investors looking for?
The best chance of having a VC on board is to have a strong vision coupled with strong technical knowledge. Apparently they also like if the CEO has some sort of economic background. Venture capitalists seek to fund technology that either drastically reduces production costs or revolutionizes the technological status quo (one example for all: reusable rockets). Ideally, companies approaching a VC for funding should have a track record of executing, delivering key milestones on time, and acting with business acumen beyond capital expenditure (CAPEX). Companies need a good knowledge of the activities of the competition and a great awareness of their own competitive advantage. Concretely, some VCs are already streamlining their applications and offering acceleration programs for future entrepreneurs.
Obstacles to growth
Many panelists and speakers underlined the urgent need for the space sector to become a vector towards other industrial avenues. As John Young, head of strategic campaigns at BAE Systems, said, “we’re very good at talking to each other,” but that’s not enough to push the industrialization and commercialization of space applications.
There is enormous potential for the industrialization of space applications if we address the right business challenges and help companies solve daily obstacles.
Opening up to other industries outside of space will be the task at hand, and understanding how space can help business customers achieve their business goals will be key. Some multinationals joining the space sector exist, but more needs to be done to raise awareness of the opportunities space can provide. Hard work lies ahead, and educating the non-space industry is fundamental. The learning curve will be steep and fast on both sides, but they will end up sharing the same talented workforce in the near future. This will solve a fundamental challenge – to scale business and commercialize space applications beyond the space ecosystem. As a result, it will attract more capital. Ultimately, both sides will achieve even greater innovation, and that’s what the space has done successfully and will continue to do.
The challenges imposed by growth are also common in any other industry. Proactively addressing them through meaningful changes in management, tireless communication, and the presentation of new direction and goals will make the winners shine.
There is enormous potential for the industrialization of space applications if we address the right business challenges and help companies solve daily obstacles. Among these are data management, the introduction of new composite materials, the manufacture of new robotics for the medical industry, the application of hydrogen in the energy sector or earth observations for the agriculture, to name a few. A change of perspective will be crucial to our common success. Space professionals will need to quickly learn how industry business models work and independently connect their existing solutions to industry demands.
Why space must take the first step?
The non-space industry is made up of self-sufficient businesses that operate on one income – their revenues and ultimately their profits. Only a few multinationals can invest additional time and resources to develop solutions. But they are happy to implement solutions if – and this is fundamental – they help them operate more profitably, increase the reliability of their products and/or give them competitive advantages.
If the space community can solve real business challenges, the journey will be prosperous. New alliances will form and connect the best of both worlds, and the new space industry will grow.
The opinions expressed in this article are the sole responsibility of the author. The author or its affiliates are not commercially or financially related in any way to the companies mentioned above.
WEME acts on growth and boosts operational excellence with a lean approach. Since 2022, she and her team have been building bridges between the energy industry and New Space. Sabine is based in Salzburg and spends her free time in the mountains. It’s the closest you can get to space on your own, she says.