There is a startup revolution taking place in the satellite industry. Every month, and sometimes every week, a new company announces plans for a product, a constellation, or an unconventional take on the way a particular service is done.
With this wave of new companies has come a second wave of investors, each trying to identify which ones will be the real game changers. These investors mean business, and startups have to convince them that they mean business too. It’s not uncommon for both entrepreneurs and investors to be unfamiliar with each other when it comes to the satellite industry. Lots of satellite programs and technologies are government driven or government influenced, and not incidentally, early stage investors have historically looked elsewhere to more fast-paced, lucrative sectors. But things are changing, as satellite entrepreneurs have taken the buzzword “disruptive,” and made it a real thing instead of a trite industry expression.
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Small ideas won’t cut it if you want to get an investor’s attention, says Shahin Farshchi, partner at Lux Capital. Having led an investment in Planet Labs (now Planet), Farshchi tracks new companies in the fields of robotics, automation, manufacturing, artificial intelligence, deep learning, and space. Lux Capital has invested in more than 60 companies, including Kymeta and Orbital Insight, over the course of four funds, and has a total of $700 million under management.
“I’m looking for people who have identified opportunities within the aerospace industry that until now were impossible,” he says. “When I say advances in technology I mean disrupting economies by orders of magnitude with the technology, not just making a cheaper sensor or cheaper device. It’s being able to significantly disrupt an industry as a result of an order of magnitude improvement out of economies of scale.”
RRE Ventures General Manager Will Porteous echoes a similar point. He says market demand is the single most important criterion for investing in any company. “For us it’s about seeing substantial, almost overwhelming market demand. Of course we need to see a strong team commercializing a meaningful innovation, but without palpable market demand, we won’t get to a ‘yes,'” he says.
Porteous points to each of RRE Ventures’ space investments as testaments to this principle. Spire had close to 80 letters of intent from prospective customers before RRE Ventures invested. Spaceflight Inc. was arguably supporting more global SmallSat launches than anyone else; and Accion Systems, a startup formed by MIT graduate students, had “substantial commercial traction” around its electric propulsion technology for SmallSats.
Joe Landon, chairman of the Space Angels Network, helped build what today is an organization of around 180 angel investors — all focused on the space industry. Founded in 2008, Space Angels Network has invested in 32 companies including NanoRacks, Firefly Space Systems and OmniEarth.
“I subscribe more to the idea that all startups are hard, just for different reasons. Our challenge at Space Angels Network is to find companies who can quickly identify and systematically eliminate those risks, but that is the same in any industry. There are some unique challenges to space, but so are there in other industries,” he says.
Sunil Nagaraj, vice president of Bessemer Venture Partners, notes that just 10 years ago, space was the exclusive province of governments and large contractors. “Due to standardization such as the CubeSat format as well as cost reductions driven by the consumer electronics industry, satellites can now be built and launched for $200,000 to $400,000. Zooming out, a space startup can now build and launch a constellation of SmallSats for about the same amount of capital that a tech startup can build and launch a mobile app — that’s an absolutely amazing fact!”VS
