New Space and Incumbents Rejoice!

Posted on Mar 28, 2017

New Space and Incumbents Rejoice!

In this exclusive feature Lisa Kuo from The Aerospace Corporation and Christopher Moran from Lockheed Martin Ventures discuss the 'New Space' race and how this is affecting startups entering the industry. 

At the height of the first space race, only governments with limitless budgets could afford to launch an object into space. Nowadays, anyone with a spare $90m can book themselves a week-long trip around the moon.

This so-called ‘New Space’ race is seeing an explosion of startups and disruptors that are challenging the established ‘Old Space’ incumbents and jostling for position in a market that could be about to take off.

Advancements in reusable rockets, the opportunities for space tourism, the end of the US agreement with Russia to transport astronauts to the International Space Station in 2019, and the massive potential for low Earth orbit satellites are all opportunities for startups to change the game. But the giants of the industry won’t let them have it all their own way.


The state of play

“Space used to be a very niche business segment – the high capital and long return terms used to scare away investors and entrepreneurs alike,” says Lisa Kuo, Head of Commercial Programs and Business Development at The Aerospace Corporation (CA, USA). But things are changing: “We are finally in an era where space technology has become feasible for startups, and investors have a renewed excitement in the space industry.”

quoteAs startups have entered the industry, venture capital funding has surged. In 2015, a series of mega-funding rounds headed by the $1bn raised by aerospace manufacturer SpaceX (CA, USA), along with smaller calls from communications companies One Web (VA, USA) and O3B Networks (Jersey, UK), were the highlights in a massive year of growth for the industry. According to a report from the US consultancy firm The Tauri Group, more venture capital was invested in space in 2015 ($1.80bn) than it was in the previous 15 years combined.

Although 2016 saw no funding rounds greater than $500m, the growth potential for New Space is still healthy. Aerospace, defense and security technology company Lockheed Martin (CA, USA) is among the companies searching for new opportunities.

“We’re constantly looking for startups to partner with and invest in,” says Christopher Moran, Vice President, General Manager and Executive Director at Lockheed Martin Ventures. Moran has a clear wish list for businesses he is interested in: “I look for what I call ’perfect-fit’ technologies – the ones that begin in the commercial space, evolve rapidly and have strong defense applications.”

In this New Space race, the success of established startups such as SpaceX encourages new startups to enter, either as part of the supply chain or by disrupting established models and approaches. It’s a virtuous circle, but Moran sees the potential for competition in the industry to limit the number of firms. “Competition will trim the companies to fit market needs,” he says.

Where, then, will the market coalesce? “I think there will be leaders in launch, mission payloads, sensors, materials and structures, and ground support,” says Moran. As the market matures, Kuo believes we’ll see the development of what she describes as a more stable “space industry ecosystem”.


Startups’ get-up-and-go

Referring to the sector as a whole, Kuo is enthusiastic. “Startups are awesome,” she says. “Staff work together like a close family and everybody has a stake in the company’s success.” But make no mistake, it’s a serious business. Kuo describes those working at the space startups she has encountered as “highly motivated, agile and flexible, with super-human productivity”.

quoteMoran is equally complimentary about the passion startups bring to the table. “The benefit startups bring to a large company is their single-minded focus and speed of execution,” he says.

Although the US Government remains the biggest customer for Old Space incumbents, startups are vying for a share. NASA is hedging its bets, pitting Boeing (IL, USA) and SpaceX against one another in the race to provide its space taxi service to the International Space Station.

It’s not the only challenge the big names are facing. The US Airforce’s decision to award a $96.5m contract for GPS satellites to SpaceX ended United Launch Alliance’s 10-year monopoly. Are startups about to disrupt the market in a major way?

“I think there will be a few strong players, and there will continue to be a slate of startups challenging them,” says Moran, who claims survival is about finding a niche. “These startups find ways to compete in areas the larger companies may not be focusing on.”

As an example, Japanese startup Astroscale hopes that its satellite garbage collector will launch in 2018. It’s a novel and cost-effective solution to a big problem. “It’s always interesting to meet with a company with a new perspective or a new way of solving complex challenges,” Moran adds.


The old guard: not finished yet

Money isn’t the only advantage that Old Space incumbents have over startups – they’ve got the upper hand in terms of people and processes, too.

“Startups will have to make tough calls on expenditures or staffing choice,” says Kuo. “Determining which corner can be cut with minimal impact to the business is an art, and this is where the established companies’ experience really counts.”

Looking to the future, Kuo sees an industry that will grow to accommodate new entrants and familiar names. “The role of space giants and disrupters will be different in nature but they will happily co-exist, collaborate and fuel the growth of each other,” she says. Moran is equally positive. “There is room for many companies and business models as the space industry evolves,” he says.

Lisa and Christopher will be joined by representatives from Phase Four, SSL and SSC at Space Tech Conference 2017, Pasadena, CA. They will be speaking on the 'New Space and Incumbents Rejoice!' panel at the Space Tech Conference - Thursday May 25, at 8:55AM

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