Return on Space

Luxembourg has around 50 new space companies, a number that was greatly boosted by the 2016 launch of the…

Luxembourg’s economy ministry wants its space sector to generate 5% GDP in future, up from 2% now. To achieve that it would need to find another SES or several smaller ones. Has it already?

Luxembourg has around 50 new space companies, a number that was greatly boosted by the 2016 launch of the initiative. Their activities are diverse, ­covering satellites for Earth observation, entertainment, communications or defence, components, space exploration, space resources and data analytics activities for terrestrial applications.


“They [the economy ministry] use space resources like F1 in the car industry. The most advanced are doing asteroid mining. This created a lot of momentum,” co-founder of the Luxembourg Space Tech Angels Fabrice Testa says. “This allowed the country to attract some other players like Kleos and Hydrosat, which are not space resources companies but who came anyway.” Many already have an established reputation in the industry. A recent Newspace People ranking of global space race visionaries featured at number 1 Niels Buus, of nanosatellite firm Gomspace, which has a Luxembourg subsidiary.

Kyle Acierno, former managing director of lunar microbiotics firm Ispace Europe, ranked 27th. Meanwhile Jason Dunn, the director and co-founder of Made in Space, placed at 44. His firm, which is opening a research and manufacture facility in Luxembourg, develops robotic devices for in-space construction of structures for future human habitation.

The sky is the limit

Despite the influx, Luxembourg is a long way off reaching saturation point on innovative new space companies, suggests Testa. “There are so many problems on Earth with the climate, water management and disasters, for example. […] Today, there’s a lot of data that’s not exploited enough,” he explains. Among the companies working in under-explored subsegments, he cites Spire Global. At the end of 2018, it was the first firm to partner with the European Space Agency to use the EU’s Galileo constellation to gather advanced weather data. According to CNBC, this data will be worth $2.7bn over the next 25 years to Spire.

While the barriers to entry for space activities have fallen dramatically thanks to technological advances, depending on the type of activity, new space firms may take years to turn a profit. As a result, some need substantial investment at different stages of their development and not only from national institutions. Luxembourg learned this to its detriment when the state invested €25m, including €12m in direct capital investment, in asteroid mining firm Planetary Resources in 2016. Two years later, financial difficulties forced it to refocus its activities on mini Earth observation satellites before it was bought out by blockchain firm ConsenSys Inc. in November 2018 and left Luxembourg.

A folly?

Critics have pointed to the Planetary Resources loss as a sign that the diversification was a folly, especially since many firms struggle to raise needed finance. As founder and CEO of Cloudeo Manfred Kirschke said during a roundtable at the Space Forum at ICT Spring 2019, raising money for space “was always hard”. Over his career, he estimated that he has helped raise €350m, through private equity and bank loans. “But never VC money. I think it’s still difficult. You have to have a good story,” he said.

That said, judging by last year’s record high space investment levels, which Bryce Space and Technology calculated at $3.23 bn, the sector is gaining traction with risk-tolerant investors. Admittedly, the lion’s share went to Jeff Bezos’ Blue Origin ($750m), but what is interesting for Luxembourg firms is that space investors outside of the US are growing as are investments in non-US firms, as the chart overleaf shows.

Luxembourg investment

Luxembourg is further proof that tech finance is not limited to the US. In 2016, the economy ministry earmarked €200m for space activities, of which €40m have been spent in developing the sector through R&D funding via the LuxImpulse programme. The Luxembourg Space Tech Angels will also play a role in the seed-stage investment. Testa himself bought a minority stock in energy firm Maana Electric.

The Luxembourg Space Fund, scheduled to launch in the second half of 2019, is expected to provide some €100m in public-private venture capital for seed or Series A new space companies via an alternative investment fund. The vehicle, in which the government previously said it would take a 40% share, has faced criticism for being too small. But industry experts say something is better than nothing.

“The Luxembourg Space Fund will be important to kickstart ‘early-stage companies’ at seed stage, but it has to have a defined destination,” says Germany-based Space Ventures Investors chief Simon Drake. He says its success will partly be down to the selection of startups it finances. “A fund is a portfolio and a balanced one at that. So, a space fund will inevitably have to decide between managing a portfolio or becoming the machine of change,” he adds. Testa is more concerned about the lack of venture capital for space technology in Europe in general but such vehicles are growing. In 2017, UK-based Seraphim Capital was the world’s first venture fund to focus on space technology with a £70m space fund. Incidentally, it invests in Luxembourg-based Spire.

Growth stage

It’s not just the early-stage space companies that struggle for finance. Globally, the sector is underinvested by some €1bn per year, according to CEO and managing partner of private equity NewSpace Capital Bogdan Gogulan. He says more finance is acutely needed for the Series C+ growth stage companies. “We’re demystifying this market for investors by showing that 70% of companies that operate in this market are at growth stage,” he says of the growth finance firm, which he launched in Luxembourg in 2018. “Many [of these businesses] have been around 10, 15 or 20 years and now they’re facing a rapidly expanding market, a high capital expenditure market and they need working capital.” He expects more private equity firm specialised in space to follow as investor interest grows.

And there is considerable confidence it will grow. Co-founder of Cryptology Asset Group Joram Voelklein said at the Space Forum at ICT Spring that now is exactly the right time to invest in space. “I think it’s the first point in time where investors can look at this sector, do good investments and really make money out of this.”

Completing the puzzle

The pieces for a sustainable space sector in Luxembourg are gradually falling into place. Whether the various financial vehicles are enough to sustain the companies until they can stand alone, as Testa says of the Luxembourg Space Fund, “they can always fundraise another round”.

Gogulan says that the regulatory framework created by Luxembourg in 2017 has helped bolster investor confidence in space technology. What is more, he points out that Luxembourg is not alone in this venture–know-how and other space actors located in neighbouring countries also add to the value chain and the sector’s sustainability.

And, even if the country struggles to nudge its space sector to 5% of GDP, there are other measures of success. “There are indirect returns for Luxembourg, hiring people creates an economic activity in Luxembourg. Creating IP knowledge […] that will also generate revenue,” said Testa.

This article was originally published in the June 2019 edition of Delano Magazine.