Thursday, April 14, 2016

Investor Interest In Space Business Growing

COLORADO SPRINGS — Space-investment experts are seeing rapid growth in private funding available to space-related startup businesses, but the road from the garage workshop to “unicorn” status with a valuation of $1 billion or more is fraught with pitfalls.

Panelists at the annual Space Symposium organized here by the Space Foundation agreed that 2015 was record-breaking, with $2.7 billion available in investment and debt financing for space ventures. That included about $800 million for startups from venture capital funds and angel investors, according to Chad Anderson, managing director of the 200-member Space Angels Network.

Private investors putting their money into space startups are attracted by the lowering cost of launch and the capabilities enabled by miniaturization of spacecraft, he said, noting that Blue Origin owner Jeff Bezos wants to drive launch costs ever lower with reusable launch vehicles.

“If you went to Bezos’ talk yesterday he talked about infrastructure and the importance of low-cost access to space,” Anderson said of a rare public appearance here by the Amazon founder (Aerospace DAILY, April 12). “I don’t think that the importance of that can be overstated. Once you have that system in place, you’re going to see the industry open up, and more entrepreneurs coming in and more entrepreneurs being able to afford to take risks.”

William Porteous, general partner and chief operating officer of RRE Ventures, which includes space companies in its $1.5 billion “early VC” portfolio, agreed that “more affordable and flexible” launch has contributed to the rising interest he and his partners have had in space startups. Among the companies they have backed are Spaceflight Industries, which brokers rides to space for small payloads, and its BlackSky Global offshoot, which is developing a fast-revisit Earth-imaging smallsat constellation with a user-friendly data feed.

But Porteous cautioned that it usually takes longer than expected for a new space market to develop. “It is our belief that markets generally break later and faster than you think they’ll do,” he said.

To date only one private space-centric company – SpaceX – has reached the unicorn level, with an estimated value of $10-12 billion, and even with good financing business failures are inevitable, according to Carissa Christensen, managing partner of the Tauri Group, which has just published a report on startups on its website.

“Planet Labs, which has raised $200 million, certainly some people point to as having potential there,” she said of the San Francisco-based Earth-imaging startup. “There’s upside with raising substantial capital, and there’s downside.”

Christensen noted that the Iridium “Big LEO” constellation of low Earth orbit communications satellites failed after raising $5 billion and launching its fleet, which remained in orbit and was the basis for post-bankruptcy profits for other investors. Planet Labs launches relatively short-lived “flocks” of its CubeSat-based “Dove” imagers, which adds another wrinkle to that company’s business equation.

Higher up the investment “food chain,” it is generally too early to say whether investors will be able to cash in via initial public offerings or other mechanisms, panelists said. But the signs are better than they have been.

“Ten years ago venture capital did not exist in this industry,” said Chris Quilty, senior vice president of Raymond James and Associates, a space-industry specialist. “Every new company, if you went back and traced them, was a Darpa spinoff or a Lockheed spinoff, maybe it was a billionaire. So that fact that there’s an alternate funding source in the industry means a lot.”

Source: http://aviationweek.com/national-space-symposium/investor-interest-space-business-growing