In early June, six leading industry figures sat down to discuss the rapidly expanding space economy. This virtual roundtable, hosted by NewSpace Capital, explores everything from why the space industry is more about data than launches, to how one can succesfully invest in the space economy. Get the key insights from the roundtable or watch along below.
Space technology is where computer technology was in the 60s
The space industry is in a pivotal moment in its history. The space economy is reaching the point that computer technology reached in the 60’s. Felix Von Schubert, chairman of NewSpace, likens the evolution to where computer technology was in the 1960’s. ‘So there is a pendulum swing, as with most things, now, it’s worth realizing that space technology is where computer technology was in the 60s. We are about to have our first IBM’s.’
This comparison is continued into the telecommunications industry with Rajaa Mekouar, Founder & CEO of Calista Direct Investors, discussing this concept.
‘I think we need to take your comparison back to telecoms, because it took many years indeed for those infra towers to deliver mainstream services on 3G and 4G. I think the digitalisation that makes tech become mainstream, which Covid also supported, is going to accelerate. And I bet you that in three years, space tech will be mainstream, we won’t need to demystify the sector anymore.’
Space investment is more about data than launches
Hassan Karimi, managing director of KHK & Partners comments on his company investing in SpaceX, and how he believes it has drawn a lot of attention towards the industry but not necessarily in the right way.
‘I don’t believe that investing in SpaceX is investing in space. However, I think there’s one thing that everybody will recognise about SpaceX, and its charismatic founder, is that a lot of attention has been drawn towards the space industry. That increased interest for space from the public opinion is a net positive to the overall development of the industry,’ Karimi continues ‘Elon Musk is claiming that people are looking at space as a way to cater for this instinct of survival. I’m not sure I fully agree with that. I think it’s more about curiosity than instinct of survival.’
Companies are often mistaken for purely space purposes. People fail to recognise that some of the main applications of these companies is more about data. Rafal Modrzewski, the CEO of Iceye, a company that builds and operates its own commercial constellation of SAR satellites. He discusses the application of his company which started by monitoring ice on the planet to track global warming, and how it has evolved into watching areas that have otherwise not been monitored. ‘Whenever I’m asked whether Iceye is more of a space company or a data company, I’m actually leaning towards the latter.’
Modrzewski discusses the example of how data applications within the space economy are far more relevant and profitable. ‘Our mission is to convert business models through increasing efficiency. We help insurance companies with compiling constant 24-hour data which would usually take months, and is far more accurate’.
Space has been a target of investors for years, just not utilised correctly
The space industry is seven times larger than the artificial intelligence and the robotics industry combined. Space has been part of the ‘investment strategy for years’, with large corporate investors already playing a role. Bogdan Gogulan, CEO of NewSpace, opens on how space has existed in the investment sphere for some time.
‘It is not well understood by institutional investors, such as family offices, multi-family offices and more traditional companies like insurance and pension funds’, opines Gogulan. ‘Not many people understand how the industry has evolved over the past ten years, and the fact that it is now ready for Private Equity investment’.
David Caillard, Managing Director at Karroo Capital talks about this preconception of the space industry. ‘I think we’ve established that space is not niche, it is becoming more mainstream. It’s moving very fast as we’ve seen with other technologies. Whether it’s the likes of the internet, electric vehicles, and all the infrastructure that’s going around, these things are happening very fast. And I think that this is what’s now happening in space.’
Space is a medium to deploy earth technology
‘We are not looking to deploy satellites just to have the satellites up there. We are deploying them for the service they provide. Space is purely the area in which it is best to use this technology.’ Modrzewski comments on how space is an area in which to install satellites that support earth applications, specifically data applications that aid in preventing environmental disasters.
Modrzewski talks about the entire ecosystem of space investment and the discussion compares the space to the telecom ecosystem.
‘This is not why this ecosystem exists. It’s similar to mobile towers. Mobile towers are a critical part of the mobile ecosystem, but it’s a tiny part of it in terms of the value. It’s really all the applications that are enabled by the mobile towers, it’s all the communication connectivity, marketplace tracking, all the application downside. Added to these, all the supply chain side that feeds into this in terms of the components, the materials. All that forms a much bigger part of the ecosystem, which is exactly the same with space and satellites. There’s a large ecosystem at play, which requires this infrastructure to exist.’
Private Equity is the way to mitigate risk profiles
In the space economy many of the companies that are looking for investments are already well established. David Caillard talks about the ‘inflection point’ reached by investors. ‘I think that a lot of the risks that they (investors) don’t want to take; whether the technical risks or the market risks have now to a large extent been taken out. So really the opportunity in front of them (private equity) is to be able to scale these businesses in a way in which they have the capital to do so. And that is the compelling opportunity that sits in front of them.’
Many of them are past the point of venture capital risk mentioned by Caillard. Karimi uses Iceye as an example when explaining this. ‘We are no longer in the traditional VC type of risk return profile where it’s binary, i.e. 0 or 1. There are businesses such as Iceye, which are proper businesses, with proven technology, solid base of clients and have extraordinary growth profiles. So from our perspective today is being able to identify today the winners of tomorrow,’ and adds ‘I don’t think we’ll be able to invest directly in early growth space companies over the short term given we don’t have yet the required expertise in-house. That’s why people like Bogdan have been extremely helpful with that regard to help us understand the fundamental trends and identify the future winners.’