Smallsats are at the centre of a surge in financing activity for newspace, but there are signs that investors are starting to itch for headline-grabbing exits to continue supporting the industry’s stellar growth.
Smallsats are at the centre of a surge in financing activity for newspace, but there are signs that investors are starting to itch for headline-grabbing exits to continue supporting the industry’s stellar growth.
The smallsat sector raised almost US$800m between October 2014 and October 2015, compared with US$100m the year before.
Although the US$500m raised by Greg Wyler’s broadband startup OneWeb helped fuel this jump, the period also saw significant rounds from satellite ventures including Spire, PlanetiQ and Dauria Aerospace, as well as smallsats launchers such as Rocket Lab.
But capital is now at risk of drying up unless the industry can demonstrate more significant returns on investment according to Richard Rocket, a former investment fund attorney turned co-founder and CEO of analysis firm NewSpace Global in 2011.
Speaking at the SmallSat Symposium in Silicon Valley last week, Rocket said investors need to see two things: More financial exits and more successful launches – many newspace ventures are relying on unproven vehicles to get businesses off the ground that are also, as yet, unproven.
“Until we have one of them we are going to see a significant slowing down of private investment in smallsats,” he warned.
Rocket called for consolidation amongst smallsat players and for large, high profile deals such as the US$500m sale of Skybox Imaging to Google in mid-2014.
“We need to see more [financial exits] like Skybox,” he said.
“With these public markets it’s unlikely we’re going to see too many newspace companies going public any time soon.”
Smallsat ventures are just one piece of a wider newspace industry that is booming.
Overall, startup space ventures raised a record US$2.7bn in investment and debt financing in 2015, or US$2.3bn excluding debt, according to analysis firm Tauri Group.
Importantly, this activity is not just being driven by billionaires such as Jeff Bezos, Richard Branson, and Elon Musk. Venture capital firms such as Bessemer, Draper Fisher Jurvetson, First Round Capital, Founders Fund, Khosla and RRE Ventures are all playing an increasingly important and enabling role for many space startups. Tauri analysts note more than 50 VC firms invested in space deals last year, the most in any year since 2000.
It recorded US$1.8bn in venture capital being invested in space in 2015, nearly twice as much as in the prior 15 years combined.
Skybox’s high-profile sale, which came when it was just five years old with only one satellite in orbit, is credited for waking up a lot of Silicon Valley investors to the opportunities in space.
It saw Google launch headfirst into the space sector, with the search engine giant saying at the time that the move would help jumpstart its plans to provide universal internet access across the world, as well as keeping its Google Maps software up-to-date.
Satellite maker Space Systems Loral is now close to completing 13 optical Earth imaging spacecraft for Skybox. Arianespace is set to launch a batch of these aboard its smallsat vehicle Vega this year, enabling the group to test the market for high resolution imagery and video with a constellation that can revisit any point on Earth three times per day
With Skybox’s progress, and Google’s influence, venture capitalists that would traditionally back technology startups are increasingly willing to invest in smallsat opportunities.
As Carissa Christensen, managing partner of Tauri and an adviser to several startups, says: “Sophisticated senior investors believe that significant returns from space ventures are possible and are willing to accept the risk for those transformative results.”
