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Valuing companies amidst a space race

According to various sources, total funding for space companies reached close to US$6 billion in 2019, raking in hundreds of millions from VC funds over the years. Once considered to be costly and redundant to launch and operate, satellite technology is now 'smart' (not just a data transmission pipe); the benefits of unparallel coverage have been rediscovered by the likes of SpaceX, OneWeb, Amazon, Google and Facebook, to name few; the list of space companies expands almost every week.

For some investors, satellites are a means to reach otherwise unreachable populations with the promise to access billions of new customers, for others it is about obtaining otherwise inaccessible data and the ability to provide primary information via space images and sensors. Start-ups such as Capella Space, ICEYE, Planet, Satellogic, Skylo and Spire promise to change the way information is obtained and have scalable, flexible and believable business models. These tech savvy companies offer low delay services, using cognitive algorithms, cloud for storage, delivery and processing (also in space). Not every satellite start-up will be successful and some will struggle (recent example of LeoSat); how can investors distinguish between the duds and those destined to reach the stars?

Capella Space, ICEYE, Planet, Satellogic, Skylo and Spire are all examples of companies that have recently received considerably high amounts of funding, even though each is at a different stage of product cycle and satellite deployment. Combined, these six companies went through 39 rounds of investments raising US$920m from investors such as Baillie Gifford, Data Collective, Mitsui, Softbank and True Ventures. What differs these space companies from more traditional satellite operators is the ability to combine their global reach - which is a unique satellite feature - with the ability to utilize technological advancements.

With IoT (Internet of Things) and M2M (Machine-to-Machine), there are various new use cases for satellites; the cost of connecting a device to a satellite has dropped below US$100. Possible ventures for space companies include precision agriculture, insurance claims, aviation tracking and resource monitoring. Most industries (Energy, Financial Services, Media, Retail, Transportation) and governments use satellite data to make informed decisions regarding weather, available resources, global demand and supply, the competitiveness of their own products.

Space companies are on a rise as access to space is easier and cheaper than ever before. SpaceX revolutionized the satellite launch market through its Falcon rocket with a reusable first stage; it is expected that its second stage will also soon become reusable. The company also allows bookings for flights via their website. Satellites from different companies vary in size and mass as they incorporate different features; Spire's Lemur satellites (carrying GPS radio and AIS receiver) consist of three blocks (units), each weighting 1.33 kilograms and have a dimension of 10x10x10 centimetre. Capella's satellites will be larger, weighting around 100 kilograms each and will offer SAR imaging (synthetic aperture radar used to create two- and three- dimensional images). SpaceX's Starlink system consists of satellites weighting over 250 kilograms to provide broadband services. As a comparison with more traditional broadband satellites, Eutelsat's most recent launch of Eutelsat Konnect built by Thales Alenia Space weights over 3,600 kilograms. Mass is important to understanding the purpose of a spacecraft (payload), its lifespan (number of years it will serve in space) and the opportunity for monetization. A strict apple to apple type comparison does not work for satellites or the companies that make them.

We believe that more priority will be given to space start-ups, meaning more opportunity for high level investments. As businesses keep demanding real- or near real-time access to proprietary data, additional use cases will be developed. This will not happen in isolation; further improvements in machine learning, edge processing and nanotechnology are all going to impact the space race.

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Przemek Bozek

Przemek Bozek

Technology Specialist - Private Equity

IHS Markit

Member since

10 Mar

Location

New York

Blog posts

4

This post is from a series of posts in the group:

Private Equity Investing in Financial Technology

A community for discussing investments made in financial technology providers by the venture capital and private equity community.


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