Who Will Get Rich Selling The Picks and Shovels of The Space Age Gold Rush
At twenty-eight thousand kilometres per hour, even a tiny paint fleck can kill you. When NASA was launching regular space shuttle missions, hyper-velocity paint flecks cracked the vehicle’s windows in high orbit on multiple occasions. Space, it turns out, is crowded. A defunct Russian spacecraft smashed into an Operation Iridium satellite in 2009, destroying it utterly and adding another couple of thousand pieces of space junk to the mess whizzing around the planet. Space agencies track these hazards as best they can, but eventually somebody will have to clean up — and, given how dependent our civilisation has become on space-based technology, they can probably name their price.
Morgan Stanley lists the management of space debris as one of ten drivers of investment in what it calls the New Space Ecosystem, but it’s far from the most powerful one. Satellite launches and Earth observation — especially from companies and states monitoring weather, climate, maritime data, providing internet capacity, or GPS services — are attracting rivers of venture capital and public equity, and the flow of money is growing (see table below).
Ten drivers of space exploration: Morgan Stanley
Satellite launches — First things first, we have to get up there
Satellite internet — Down here, all of us will notice better connectivity
Deep space exploration — Supply chains will get very, very stretched
Lunar landings — The work putting men (and women) back on the Moon
Earth observation — A huge new analytics opportunity
Asteroid mining — A new source for (ironically) rare earths
Space debris — Someone has to clean up all that junk
Space tourism — Enjoying the spoils of space wealth
Space Research — Decades of work for the white coat brigade
Manufacturing — Designing the spaceships and everything that drives them
Follow the money
The numbers move around, depending on who’s telling the story — or selling their advice. But they’re all big and they’re all moving in one direction: up. Way up.
Even with the coronavirus suppressing economic activity around the world, CNBC reports that “investment in space companies [was] put at a record $8.9 billion in 2020”. The figures for this year are still seeing growth — nearly 100 per cent growth, according to UK-based venture capital outfit Seraphim Capital.
You call that growth? Ha! Three hundred and fifty-six per cent growth, reports Quilty Analytics, a research and advisory firm focussed entirely on the Satellite & Space industry. These aren’t just blue sky numbers — they’re punching out through the stratosphere and into the hard vacuum of space itself.
Quilty cites US$5.7 billion in investments for the first quarter of 2021, up from US$1.2 billion in the same period of 2020. Seraphim, betting real money in the game through its Space Investment Trust, tracked US$8.7 billion of private investments in the 12 months ending March this year — double the figure for the previous year. Seraphim is betting on 19 startups — “including satellite data specialist Spire Global, quantum encryption firm Arqit and space-based cellular network operator AST Space Mobile”. All three raised money through special-purpose acquisition companies (SPACs), which have proven especially attractive to investors in the “new space ecosystem”.
Getting rich in the rush
Billionaires launching themselves into low orbit for Insta-likes or threatening freelance colonisation projects on Mars have captured the lion’s share of attention lately. But in a gold rush, the one guy sure to get rich is the genius selling picks, shovels and rotgut to the prospectors.
Both Amazon and Microsoft have moved hard into the space race, positioning against each other to build out the next phase of our post-industrial evolution: orbital infrastructure. Even such undeniably old-world brands as John Deere — the tractor guys — have attracted venture bucks from the likes of investment maven Cathie Wood, whose recently launched ARK Space Exploration ETF has so far piled up over half a billion dollars in assets.
Why tractors? Because increasingly they will be self-driving robots, following maps beamed down from low orbit satellites.
Hot money is pouring into SPACs, but even without that kind of equity play the market is still bloated with billions of dollars looking for the next Bitcoin. Reusable launch vehicles, cheap and plentiful microsatellites, and absolutely any technology focussed on climate data collection, are all easy picks for future growth.
Attracting investors
The rise of Rocket Lab demonstrates the attraction to investors. Even before its SPAC, the organisation raised $US200 million over 5 rounds. It listed on the Nasdaq on August 25 after merging with Vector Acquisition Corp in a deal that placed an Enterprise Value of US$4.1 billion on Rocket Lab’s business.
In the APAC region, country’s like Singapore and Australia are putting the industry infrastructure in place to support the growing aerospace sector. Singapore’s EDB says the country already has over 130 aerospace companies operating, and that the local sector has averaged 8.6 per cent compound annual growth for over 20 years. Singapore also hosts more than 30 satellite firms, from startups like Astroscale which focuses on space junk, to major industry incumbents like Inmarsat.
Look also to Australian ventures like Fleet Space — a world leader in low-powered nanosatellites — for outsized returns in the future. Fleet currently has six nano-sats in Low Earth Orbit, with a network of 140 under construction. When launched, they will provide global coverage for the low-power WiFi networks that will deliver the Internet of Things.
Most of the global sector’s growth is going to come out of the US and China, with the EU running a close third. But there are growing numbers of local startups such as Fleet Space and Brisbane-based launch services provider Gilmour Space Technologies, which earlier this year secured A$61 million — a record investment round for a local space company. A solid whack of those funds came from three superannuation funds: HESTA, Hostplus, and NGS Super. With nearly three trillion dollars under management, there is no shortage of local capital for firms like Fleet Space if these early wagers pay off.
Like Fleet Space, Gilmour is betting that small could be big. Its 25-metre launch vehicle is a minnow compared to the mega rockets SpaceX is building, but not everybody needs to blast heavy earthmoving equipment all the way to Mars or the asteroid belt. Increasingly, smaller companies — and even smaller countries — will want to place small payloads into inner space to deliver more prosaic outcomes.
Like self-driving tractors, or pizza delivery drones.