Is commercial spaceflight’s “Netscape moment” near?
by Jeff Foust
|“I’ve been going to space investment conferences for about ten years,” Jurvetson said, “and this is the first year in which I’ve seen just an array of opportunities—six or seven this week alone—that are truly exciting and, I think, very venture-fundable.”|
Strictly speaking, the Netscape moment for the emerging commercial spaceflight industry, aka NewSpace, hasn’t yet arrived. While there have been smaller rounds of financing, including the nearly $300 million Abu Dhabi-based Aabar invested in Virgin Galactic three years ago, there has yet been no major IPO or other similarly large investment on the same scale that would qualify as that industry-shaping moment. However, at the Space Frontier Foundation’s NewSpace 2012 Conference last week in Santa Clara, California, there was considerable optimism that such a moment was in the offing.
Such optimism is to be expected from those in the industry seeking funding, and hoping to be the company that creates the NewSpace version of the Netscape moment. But people on the financial side are increasingly optimistic as well. Steve Jurvetson, managing director of the venture capital (VC) firm Draper Fisher Jurvetson, said that his company, which has invested in SpaceX, is seeing more opportunities in space companies than they ever have before.
“I’ve been going to space investment conferences for about ten years,” he said in a speech at the conference on Thursday, “and this is the first year in which I’ve seen just an array of opportunities—six or seven this week alone—that are truly exciting and, I think, very venture-fundable. And I couldn’t say that in any prior years.”
Asked after his speech why he thinks there’s such a wave of opportunities, Jurvetson said there wasn’t any one specific factor changing the investment quality of the companies. Part of the increase in “venture-fundable” companies might be just a selection effect, he suggested: companies that previously wouldn’t have thought of approaching VCs were now doing do. He also speculated that prospects for lower cost access to space opened up new opportunities and improved the business case for companies that wanted to do other things in space.
“We think the biggest opportunity, that may be obvious to everybody in the room, is that getting things into low Earth orbit is getting cheaper, and it might become ten times cheaper still,” he said in his conference speech. “If that happens, that opens up a plethora of opportunities for startups.” That includes ventures planning constellations of small satellites for earth observation or communications.
The company perhaps most closely linked to low-cost space access is SpaceX, which celebrated its successful Dragon demonstration mission to the International Space Station two months ago. Larry Williams, a former SpaceX executive who left the company earlier this year to found Capture 10, a business development and strategy firm, suggested that the success of that mission has changed perceptions about the company and even the industry as a whole.
“There are emerging opportunities,” he said in a panel discussion at the conference Friday. “SpaceX is, in many ways, kind of the Netscape moment for the space industry. All of a sudden, we’re seeing a lot more opportunities… It’s an exciting time.”
SpaceX isn’t the only company working on low-cost access that could enable new opportunities. Virgin Galactic, the company best known for its SpaceShipTwo suborbital vehicle, announced plans earlier this month for an orbital launch vehicle, called LauncherOne. That rocket, an expendable two-stage air-launched vehicle that, like SpaceShipTwo, uses WhiteKnightTwo as its carrier aircraft, can place over 200 kilograms into low Earth orbit for a price the company describes as only “less than $10 million.”
|“SpaceX is, in many ways, kind of the Netscape moment for the space industry,” said Williams. “All of a sudden, we’re seeing a lot more opportunities… It’s an exciting time.”|
“We think it’s going to be a fantastic new business area for the company,” Virgin Galactic president and CEO George Whitesides said in a speech at the conference Saturday. “The area of smallsats is really going to be one of the big things coming up over the next 10 or 20 years.” When Virgin unveiled its LauncherOne plans at the Farnborough International Airshow in England earlier this month, it said it had already signed four anchor customers: Skybox Imaging, GeoOptics, Planetary Resources, and Spaceflight Services. “The interest they expressed was in the dozens, if not hundreds” of launches, he said.
That enthusiasm for new space businesses extended to one of the major events of the three-day conference, the NewSpace 2012 Business Plan Competition. Last year’s competition attracted 25 applications, from which five finalists were chosen to compete for a $25,000 grand prize, won by Altius Space Machines (see “The evolving ecosystem of NewSpace”, The Space Review, August 15, 2011). This year’s competition, with a grand prize four times larger (courtesy of NASA), attracted 55 companies and 10 finalists.
The companies presenting spanned the gamut of space services and applications. Only one of the companies, Unreasonable Rocket, was a launch company; it plans to develop dedicated low-cost nanosatellite launchers. Other companies proposed space-related technologies, like restartable solid-rocket motors and reentry systems; networks of microsatellites for scientific and educational applications; or services ranging from a satellite system to track oil spills to a therapy to treat radiation sickness on space or the ground.
The winning company was SpaceGroundAmalgam LLC, a company founded by several space industry veterans that proposes to develop a new type of large inflatable antennas for use on spacecraft. Those antennas could increase the capabilities of communications satellites while still fitting those spacecraft within the mass and volume constraints of existing launch vehicles. The company plans to work with another entrepreneurial space company, NanoRacks, to test this technology on the International Space Station as early as 2014.
In addition to SpaceGroundAmalgam LLC, the competition awarded a second prize of $10,000 to Digital Solid State Propulsion, LLC for its solid rocket motor technology and an honorable mention to Terapio for its radiation sickness therapy. “All three of the winners provide key disruptive technologies and are outstanding candidates for institutional funding,” said one of the judges, Tom Atchison, in a statement about the competition. “These companies, their products, technologies and services, will bring down the barriers to commercial activity in space.”
Those who didn’t win the competition, though, may still find an easier road to raise money for their ventures than in the past. In addition to increased interest in NewSpace ventures among VCs, the rise of “crowdfunding” allows ventures to raise money though smaller contributions from a larger number of people. One of the business plan competition entries, NanoSatisfi, raised over $100,000 on one popular crowdfunding platform, Kickstarter, to develop a cubesat called ArduSat. Earlier this year STAR Systems raised over $20,000 to support development work on its suborbital spaceplane, Hermes (see “Hacking space”, The Space Review, April 23, 2012).
In addition to Kickstarter, where ventures typically offer merchandise or other services in exchange for funding, the Jumpstart Our Business Startups (JOBS) Act, signed into law in the US earlier this year, allows companies to raise up to $1 million per year through equity crowdsourced investment, getting around previous rules that required companies to raise month only from accredited investors.
While such investing is still in its early days, with many outstanding questions about how well such efforts will work and how to avoid fraud, some believe that crowdfunding could work particularly well for space ventures. “This industry, more than almost any, has enthusiasts all over the world who would write small checks,” said Hoyt Davidson, the founder and managing partner of Near Earth LLC, an investment banking and advisory company focused on the aerospace industry.
|“The vast majority of new ventures, in NewSpace or wherever, are going to fail,” cautioned Vanderbilt. “I can tell you from my experience that a fair number of them are going to predictably fail.”|
Despite this enthusiasm, though, some are skeptical that NewSpace has neared or achieved a milestone like the Netscape moment. This is not the first time people have been optimistic about the industry: as Netscape itself was rising in the mid to late 1990s, there was another crop of entrepreneurial space ventures that promised low-cost space access and other applications, from Rotary Rocket to Teledesic. Most of those companies, though, failed or dramatically changed direction.
“The vast majority of new ventures, in NewSpace or wherever, are going to fail,” cautioned Henry Vanderbilt, founder of the Space Access Society. “I can tell you from my experience that a fair number of them are going to predictably fail.” Companies, he said, will show their grand visions and long-term business plans, but he cautioned people should look for the step-by-step approach these companies should have to achieve those plans. “Preferably, where they are currently will have involved accomplishing a few of those initial steps.”
“No matter what your original plan, everything is going to take longer and cost more,” Vanderbilt advised as well. Those who have been waiting a long time for NewSpace to blossom as an industry, though, hope they’ve waited long enough, and that their moment is about to arrive.