With the new Star Wars movie set to release on December 18, it marks a good time to consider the investment potential that Space offers. If you have been paying attention to the news, you may have seen Blue Origin’s New Shepard spacecraft (Amazon CEO Jeff Bezos’s space company) had a historic spaceflight, marking the first time a rocket flew into space and was able to land safely on the ground (known as a VTOL, or vertical takeoff and landing). Headlines made by other wealthy entrepreneurs targeting space -- including Elon Musk’s SpaceX and Richard Branson’s Virgin Galactic -- are foreshadowing a turning point in the private sector’s investment into the space industry.
This week’s chart looks at the supply chain to the International Space Station (ISS) and illustrates a shift from national space programs to private enterprise as the main providers responsible for transporting all of the food, water and other supplies to the astronauts conducting research at the ISS.
According to Leah Libresco from fivethirtyeight.com, “At present, the only ways to resupply it are Russian Progress ships, Japanese H-II Transfer Vehicles, and private companies’ crafts (Orbital ATK and SpaceX). Private ships are becoming a larger proportion of cargo flights… This will be the first year that the majority of space station cargo flights are launched by private companies. Four of the remaining seven cargo supply missions scheduled for 2015 are slotted for privately owned ships.”
This shift is part of a broader trend of private investment into the space industry, an area that for decades had been dominated by government programs due to its complexity and costs. The technology really hasn’t changed much overtime. Bessemer Venture Partners noted that “Computing systems in orbit today resemble 1960’s era mainframes, and for the four decades following 1963, there was no reduction in launch costs. Space-based imagery, communications, and travel are still largely inaccessible to the public.”
The space industry today resembles where the computer industry was a couple of decades ago. Like the computer industry, as costs continue to come down, electronic components get smaller and technology advances; the economics of the space industry will improve and so too will the business prospects. The opportunity set is virtually limitless – communications to remote places (no wires needed), data collection and analytics, space tourism, mining in space as well as all the businesses that can service these industries are likely just the tip of the iceberg.
Venture capitalists are already starting to tap into the potential with several companies securing venture capital funding. Examples include Spire, which uses small satellites to collect and analyze data that can be used to detect everything from marine piracy to more accurate weather forecasts, or Rocket Lab, that provides more cost effective rocket launch technology designed to put smaller more cost effective satellite and communication equipment into space, or even those mentioned earlier, like SpaceX that provides UPS-like services to the ISS or Virgin Galactic which is aiming to make space tourism a reality.
Key Takeaway: Investing in space has historically been the domain of governments and in the imagination of science fiction writers, but as you are enjoying Star Wars, imagine the possibilities and what commercial enterprises in space might look like over the next decade. This is no longer just an idea in a book or movie, but a largely untapped opportunity for venture capital managers with the expertise to capitalize on what may be private investment’s final frontier.
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