Astrocast listing points to financing choices amid rapid growth in IoT nanosatellite sector

The listing of IoT nanosatellite operator Astroscast (Euronext:ASTRO) provides food for study in financing amid enhanced funding choices, rapid sector expansion and growing competition.

Astrocast’s financial moves underline the options that small satellite operators have amid the popularity of SPAC transactions, Northern Sky Research Senior Consultant Alan Crisp told Connectivity Business. The startup and launch costs of small satellites are “substantially lower” than those for “traditional” constellations, pointing to the appeal of the public markets over SPAC deals.

Financing is increasingly urgent for the small satellite IoT sector as several companies go in ramp mode ahead of or in the earliest stages of commercial operations. NSR is forecasting that the sector will generate nearly $1 billion in annual revenues by 2030.

Switzerland-based Astrocast generated $43.5 million in capital as it listed Aug. 25. The company has raised almost $71 million since its founding in 2014.

U.S.-based Adit Ventures led a syndicate of investors in the transaction, with Switzerland-based private equity firm DAA Capital Partners, U.S.-based investor Palantir and Italy-based venture firm Primo Space Fund as other key investors.

Making a change 

Astrocast originally investigated a capital raise through private investment, but the company turned its eyes toward an IPO, CFO Kjell Karlsen told Connectivity Business. A key factor driving the change is that there are fewer commercial satellite investors in Europe than in the U.S., making it difficult to access the U.S. market for funding.

Though the SPAC trend is a major factor in the expansion of commercial space, Astrocast did not make a good fit with this type of deal, Karlsen said. In general, SPACs want to deploy a very large sum of capital.

“We’re a bit small for a SPAC transaction,” he said.

Indeed, Crisp said there are “multiple” other Europe-based smallsat IoT operators that could generate similar funding. They need the money to develop satellite constellations to stay competitive over the long term.

They need the funding as they face well-funded peers like Swarm Technologies. On Aug. 6, SpaceX disclosed its acquisition of the company for an undisclosed amount in a filing with the Federal Communications Commission. Swarm last completed a fundraising round in January 2019 at a $85 million valuation, according to Pitchbook.

“Continual investment is also needed to keep the constellations growing, with limited revenues expected in the first couple of years of service while service latency remains high,” Crisp said. “This indicates the importance of receiving strong investment in earlier stages.”

Astrocast is offering a proprietary low-power global network to monitor remote assets in L-band connectivity. In contrast, most IoT operators offer broadband communications, but Astrocast offers low-power terminals with low-profile patch antennas and two-way communications.

Astrocast’s network enables companies to track, manage and control IoT assets from remote regions globally. It is aiming to serve industries that include oil and gas, maritime and industrial.

The low-power design means the battery needs changing after seven to 10 years, Karlsen said. The Astronode S terminal is two to three times less expensive than conventional bidirectional satellite IoT terminals, according to the company.

Other companies are pursuing opportunities in nanosatellite IoT, including U.S.-based Blink Astro, Australia-based Fleet, Holland-based Hiber and Canada’s Kepler Communications.

Astrocast, which has launched 10 satellites, is formally in commercial operations though in the earliest stages of it, Karlsen said. However, the chip shortage sweeping technology is proving worrisome, he added, noting that plans call for the launch of 100 satellites by 2024. In January, SpaceX launched five Astrocast satellites as part of a 143-satellite launch for a range of customers.

Astrocast believes it has carved its niche, as existing cellular networks cover only about 10% of the Earth’s surface while low-power wide-area networks cover only a fraction of this. The number of devices is growing, with more than 5 billion of them expected by 2025.

On Sept. 6, technology accelerator Wayra Germany announced that it is bringing together Astrocast and Spanish telcom incumbent Telefonica (BMAD:TEF) for an IoT product collaboration as part of a new 5G Tech Lab. Astrocast counts Airbus Defence and Space, Emirati satellite operator Thuraya and the European Space Agency as partners.