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Space Access investing panel
Esther Dyson discusses investing issues during a panel session of the Space Access ’06 conference on April 22 while panelists Joe Pistritto (left) and Stephen Fleming look on. (credit: J. Foust)

Small steps forward for NewSpace

To say the entrepreneurial space transportation industry has been on a roller coaster for the last decade would be a mild understatement. In the late 1990s business appeared to be booming, thanks to the expected demand for launches of constellations of low Earth orbit telecommunications satellites. When ventures like Teledesic went bust at the beginning of the current decade, they took many of the new players in the launch industry with them. Those that survived did so by retargeting their business plans on new markets, principally space tourism. That approach was validated by the success of SpaceShipOne, whose victory in the Ansari X Prize competition raised the profile of the industry as a whole and provided the impetus for the passage of legislation that helped remove much of the regulatory uncertainty surrounding the industry.

So where on the roller coaster are space entrepreneurs—collectively known in recent years as or, more recently, NewSpace—today? The rate of ascent, one can argue, has slowed from a couple of years ago, with no manned commercial suborbital launches since SpaceShipOne’s prize-winning flights over 18 months ago. On the other hand, there are no obvious signs of a downturn: interest in suborbital space tourism remains high, and several companies are making progress on their vehicles. Instead, what emerged from the Space Access ’06 conference in Phoenix—the annual gathering of many of the major companies in the industry—was evidence of gradual, incremental progress, with neither major breakthroughs nor significant setbacks.

Suborbital developments

While recent attention on the suborbital spaceflight market has primarily been limited to Virgin Galactic and Space Adventures, several other companies continue to develop suborbital vehicles for space tourism and other applications. The company arguably furthest along is Rocketplane Kistler, the venture created within the last two months when Rocketplane CEO George French bought Kistler Aerospace, a company with long-dormant plans to develop a two-stage orbital RLV.

What emerged from the Space Access ’06 conference in Phoenix was evidence of gradual, incremental progress, with neither major breakthroughs nor significant setbacks.

That acquisition, however, has not distracted the company’s engineers from continuing their work on the Rocketplane XP suborbital vehicle, director of business development Chuck Lauer said in a conference presentation. The first XP wing, a structural test article, is nearing completion, and will soon undergo destructive testing. The company also expects to take receipt this summer of an RS-88 engine on loan from NASA; the company will use the RS-88 on its first XP for incremental flight tests starting in 2007. To aid in the development process Rocketplane has moved many of its engineers from its Oklahoma City headquarters to Guthrie, a town 45 minutes to the north, where Spirit Wing Aviation is performing the work to turn a Learjet into the XP.

XCOR Aerospace is also making progress on a number of fronts including development of composite liquid oxygen (LOX) tanks and the first rocket-powered aircraft for the Rocket Racing League. Business has been good for XCOR, which has now grown to 25 employees and plans to hire several more, including engineers and project managers, by the end of the year. Company president Jeff Greason said that XCOR generated $1.1 million in revenue in 2005, and will earn $3.5 million this year from existing contracts alone.

While the company’s emphasis has been principally on components like propellant tanks and engines, the company has not set aside plans to develop its own suborbital spacecraft, the Xerus. Greason said that a couple of employees are devoted to working on the suborbital concept. “We do not have all of the funding needed to complete the vehicle, therefore I will not set a public schedule for it,” he said. “However, we have more than half of the funding needed to complete that vehicle.”

One of the most distinctive ventures in the suborbital arena has been Armadillo Aerospace, a project funded by John Carmack of id Software fame. Carmack said his team is developing two vehicles that will compete in the Lunar Lander Challenge, a NASA Centennial Challenge prize competition planned for the X Prize Cup in New Mexico in October. A smaller vehicle will vie for the “Level 1” prize, which requires hovering for at least 90 seconds at an altitude of 50 meters while translating 100 meters from its launch pad (and then repeating the process back to the starting point). A larger vehicle also under development will compete for the Level 2 version of the challenge, with 180 seconds of hover time and the ability to land in simulated lunar terrain.

After the competition, Carmack said Armadillo plans to use the larger vehicle for suborbital flights, noting that it should be capable of flying to 100 kilometers, eventually carrying passengers or payloads. “There is the real possibility that we’ll be flying this vehicle to 100 kilometers by the end of this year,” he said. One unresolved issue is where such flights would take place from: Carmack said they are looking into using private land in Texas for the flights, and will consider New Mexico as a backup, although it’s a bit far away for Dallas-based Armadillo than it would like.

Carmack added that he has been looking into some options for using his suborbital vehicle for orbital flights, such as clustering a number of identical vehicles together. Alternatively, he said is looking at LOX-based monopropellant options, which would reduce the mass of tanks and plumbing on the vehicle and thus increase its mass fraction. One option that looks particularly promising is liquid oxygen mixed with frozen, powdered kerosene: a high-energy propellant that generated words of caution from some conference attendees. “There is a long list of very experienced people over the last 60 years” who died working with such propellants, cautioned XCOR’s Greason.

The scramble for COTS

One of the biggest developments in the last year, though, has involved orbital, rather than suborbital, vehicles. Last year NASA announced its intent to purchase commercial services to transport cargo and crew to and from the International Space Station, filling a key logistical requirement with the impending retirement of the space shuttle. NASA followed through with those statements early this year, with a request for proposals for Commercial Orbital Transportation Services (COTS), a program with $500 million available though the end of the decade to help fund the development of commercial vehicles to service the station. The announcement triggered an avalanche of proposals: some people at the conference said that as many as 60 companies submitted proposals before the early March deadline, although other accounts put that number closer to 20.

With no decision yet made by NASA on which proposal(s) to fund, many companies have laid low and disclosed few details about their bids, or even if they did submit a proposal. Several companies at the conference, though, spanning the gamut from established aerospace companies to tiny startups, were willing to discuss their plans.

“There is the real possibility that we’ll be flying this vehicle to 100 kilometers by the end of this year,” Carmack said of a design Armadillo was developing for the Lunar Lander Challenge.

At one end is Space Systems/Loral, one of the leading commercial satellite manufacturers. The company submitted a proposal to develop the Aquarius rocket to provide low-cost delivery of bulk cargo to the station. (See “Low-cost launch and orbital depots: the Aquarius system”, The Space Review, January 30, 2006.) Aquarius, SS/Loral’s Andrew Turner said, would allow the delivery of easily-replaceable items like food and water at low cost by reducing the vehicle’s reliability, akin to the losses inherent in aqueducts and power grids. One challenge, he said, is that NASA set a goal of 90% reliability for “low-value cargo” in the COTS proposal, higher than what Aquarius can offer, although he said NASA was open to alternative reliability values. If funded through the COTS program, turner said, Aquarius would make its first launch in 2010 with a total development cost in the low hundreds of millions of dollars.

At the other end are two proposals by small startup companies. Len Cormier of PanAero LLC presented “Space Van 2010”, a two-stage horizontal takeoff and landing design, with staging taking place at Mach 5.5 and an altitude of over 80 kilometers. Space Van 2010 would cost $300 million to develop and would be able to carry a pilot and 1,400 kilograms or four to five passengers to the ISS at a price of $1.3 million a flight. The same vehicle, Cormier added, would serve other markets, like orbital space tourism, LEO propellant depots, and even deploying massive constellations of LEO communications satellites. “This is my best design in the 50 years I’ve been working in this field,” he said.

George Herbert of Venturer Aerospace offered a different approach: a capsule launched on a Falcon 9 rocket from SpaceX. The S-550 capsule could carry up to six people or several tons of cargo to the ISS. The capsule would be reusable for up to six flights, although an external aeroshell would be replaced after each flight. Herbert said he is also interested in using the same design for orbital space tourism flights, either as dedicated missions or by flying paying passengers in spare seats NASA does not fill for ISS resupply missions.

Sitting between the two extremes is Rocketplane Kistler, which plans to use the COTS contract to accelerate development of the long-delayed K-1 RLV. The K-1, Lauer said, would be capable of carrying five to six people to the ISS, using the same approach technique as the Japanese HTV cargo vehicle under development to rendezvous and dock with the station. Like the other companies, Lauer said that the company would also use the K-1 to serve what he believes will be a burgeoning orbital tourism market. “For Bigelow’s space hotels, this model requires hundreds of people per year in order to pay for the investment in the physical infrastructure,” he said, referring to Bigelow Aerospace’s plans to create inflatable orbital habitats for tourism and other applications. The first K-1, already 75 percent complete, could fly as soon as 2008 with COTS funding, Lauer said.

ITAR delenda est—or not

In past years, many Space Access attendees expressed their dismay about the regulatory environment, worried that bad regulations, or simply the lack of certainty about how some vehicles would be regulated, could jeopardize the industry. Most of those concerns have been ameliorated by the passage in late 2004 of the Commercial Space Launch Amendments Act, which created a largely friendly regulatory structure for commercial human spaceflight.

“This is part of the problem,” he said, referring to the slogan “ITAR delenda est”. “This kind of the rhetoric will undermine efforts for reform.”

While there is still some various rulemaking activity regarding passenger and crew guidelines and experimental permits, the CSLAA has meant that much of the NewSpace industry has turned it attention to an issue that concerns much of the aerospace industry in general: International Traffic in Arms Regulations (ITAR), better known as export control. The industry has railed against the stringent ITAR rules in the last several years that has made it very difficult, if not impossible, for US companies to export vehicles or satellites, or even hold technical discussions with potential foreign customers. At the conference, several people were spotted wearing buttons with the industry’s apparent rallying cry: “ITAR delenda est”—ITAR must be destroyed.

That’s the wrong approach, warned Berin Szoka, executive director of the Institute for Space Law and Policy, a think tank formed last year to focus on legal issues associated with the commercial spaceflight. “This is part of the problem,” he said, referring to the button’s slogan. “This kind of the rhetoric will undermine efforts for reform.”

Rather than a broad-based attack on ITAR, which does serve an important role in regulating the flow of weapons and related items, space activists instead need to paint the space-related portions of ITAR as a threat to national security, by inhibiting innovation and encouraging other countries to build up their own capabilities instead of purchasing US-built components and systems. “This is the only argument that really matters,” Szoka said.

He warned that there is no quick fix to the ITAR problem. Instead, he said a three- to five-year plan is needed, starting with a cessation of attacks on ITAR and a focus on the national security argument. Over time, the industry needs to gather quantitative data on the “perverse” national security effects of ITAR and offer detailed reform proposals. What button slogan does Szoka recommend people use in place of “ITAR delenda est”? “An ITAR that works for America.”

That’s not to say, though, that ITAR is the only political issue weighing on the NewSpace community. Jim Muncy of PoliSpace brought up a couple of issues in a presentation: operationally responsive space (ORS) and COTS. For ORS, Muncy said an effort is underway to include an AFRL Center for Entrepreneurial Space access (ACES) in defense authorization legislation. ACES would exploit the overlap between the military’s ORS needs for quick, low-cost launch and the companies developing their own launchers for commercial human spaceflight and other applications, by bringing the two together to cooperate in the development of relevant technologies. The other, he said, was to suggest that NASA double the funding for the COTS program to $1 billion, allowing more companies to be selected and increasing the odds that a viable commercial system emerges, which in turn takes some of the pressure off of NASA’s overall exploration architecture. “Let’s encourage them [NASA] to succeed by saying, ‘Invest more in COTS,’” he said.

The challenge of financing

What made the COTS program so alluring to so many companies was the pot of money involved, be it $500 million or $1 billion. Despite the growing interest in responsive space access and commercial human spaceflight, companies still find it difficult to raise the tens to hundreds of millions needed to develop their vehicles. For some companies, COTS represents not just a new market, but also their best—or only—means of raising the money needed to develop their proposed vehicles.

“I don’t think there’s a problem. I think we’re early,” Dyson said.

It’s no surprise, then, than one of the most popular sessions was an investment panel, where three angel investors who have put some of their own money into NewSpace companies—Esther Dyson, Stephen Fleming, and Joe Pistritto—talked about what it takes for companies to raise money. Dyson, a relative newcomer to the space industry but a familiar name to those who have followed the commercial development of the Internet, offered some tough love to attendees.

“There’s an awful lot lacking here in terms of the space industry becoming a real industry,” she said. If she was an investor with “real money” (that is, a venture capitalist), and not an angel investor, she added, “I would run fleeing from the room, because I can’t figure out how this industry works, who sells to whom, how the market works. It’s still not very visible.”

Of course, some companies have been successful in finding money, primarily through self-funding (Elon Musk and SpaceX, Jeff Bezos and Blue Origin) or through a relatively wealthy investor (Paul Allen’s funding of SpaceShipOne and the later agreement between Virgin Galactic and Scaled Composites.) Interestingly, none of those companies, nor similar ventures like Bigelow Aerospace and Space Adventures, were at the conference, leaving those in attendance hanging on the words of Dyson and her co-panelists. And, despite her earlier tough comments, Dyson remained optimistic about the future of the industry.

“I don’t think there’s a problem. I think we’re early,” she said in response to a question about the difficulty of working with potential investors. “A two-year-old behaving like a two-year-old is not a problem. A five-year-old behaving like a two-year-old is a problem. We’re still very early in the cycle.” NewSpace, it seems, is still pretty new.