A new space race is forming globally, energized by venture capital and the hype around companies like Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin. The privately-funded space industry is still in its infancy, but there has been an explosion of startups and investors in the sector, and the fever has, in the last few years, spread to Europe. The development of space tech startups will be crucial to the advancement of services we have come to rely on in our daily lives, be it navigation, delivery services or more.
For the past ten years, the space tech sector has seen over $9 billion invested in it, roughly 60% of the space industry’s investments. This is in part because the ‘delivery’ mechanisms (basically, rockets) are now delivering enough capacity to meet demand. So what you put up in the sky and what you ‘get out of the sky’ is now the new focus of the industry. And in Europe, the European Space Agency has been increasingly effective at providing significant amounts of grant funding to innovative startups, even as venture capital ramps up its own interest.
STRUCTURE OF THE INDUSTRY
The European space tech industry has structured itself across two main sectors. The first is the components manufacturers (thrusters, antennas, sensors, etc). The second is the huge and booming area of the data analytics market which is the underlying value of satellites.
There’s also no avoiding the fact that the defense sector and public sector projects are often a space tech startups’ first clients. Thus, for instance, we have Earthcube playing in the military intelligence sector, while Kayrros plays in the energy market and Descartes in the insurance field.
EUROPEAN-WIDE DEVELOPMENT
Space tech hasn’t been a totally smooth road of course. Asteroid mining company Planetary Resources famously dropped out of or “asteroid mining” after financial troubles caused by “delayed investment” in late 2018.
And in Europe the industry is still young. Although there are 66 startups in mapping, only half have appeared recently, which means that until recently space tech was only producing 5 new startups per year in Europe.
Oddly enough, the location of startups doesn’t conform to the normal tech biases. It is France and the UK which have the largest number of Space startups, but Germany, which is second to the UK in venture capital, has very few space tech startups. In fact, Belgium, Switzerland and… drum roll.. Spain have an unusually high density of startups.
In part, this is explained by the fact that the ESA has allocated resources to countries where the space industry is not backed as much by large corporates.
OPPORTUNITIES
New Space startups naturally draw in a high level of technological intensity and it’s no surprise they benefit from the academic world. In Europe, there is significant technology transfer from generable European institutions such as Imec, CNRS, ONERA, École Polytechnique, and CNES through exclusive licenses on patent portfolios. So the technological base in Europe is impressive despite it being smaller in size than in the US.
Space tech startups CEOs are also starting to resemble their colleagues in the average tech startup space: They are younger than previous Space generations, more ambitious and more familiar with the ideas behind growing high-growth startups than as was the case previously.
GROWTH
According to research released this past January by Seraphim Capital, the UK-based space tech accelerator, investment across space tech globally grew by 29% to $3.25bn in 2018. This was split between 182 companies, across the six different parts of the ecosystem. It also showed great appetite for space tech by venture capital investor across the globe.
The six different parts of the ecosystem were identified as being: build ($236m); launch ($1.3bn); products ($477m); data ($845m); downlink ($110m); and analysis ($275m).
Whilst SpaceX generates most of the press coverage it accounted for just 15% of total investment in 2018 ($487m) versus 18% in 2017 ($450m). US companies received the majority of funding accounting for 64% of 2018 investment, a 1% increase on 2017. European companies, however, improved their global share of investment from 13% to 18% over the period, so a 5% increase.
The growth was fuelled by investment into earlier stage investments verses the top 5 companies funded which accounted for $1bn in both 2018 and 2017. The index, which identifies average investment round sizes for each sub-sector, revealed that US companies continue to access materially larger rounds increasingly across Seed, Series A and Series B. The only sub-sector to buck this trend was Build (space hardware, software and engineering, materials, energy and robotics).
Predictably, overall investment in the sector is still driven by investment in Launch technologies, which typically require plenty of cash, and which accounted for 39% of total investment ($1.3bn). The number of Launch companies funded was broadly flat 19 versus 17 in 2017 with investment into growth rounds (B series and later) accounting for $1.1bn versus $640m the previous year displaying a maturing of the sector. In 2018 small sat dedicated launchers such as Rocket Lab ($140m) and Vector ($70m) raised substantial rounds and in the case of the former commenced commercial operations. Investment outside of US launch businesses gathered momentum with Landspace ($43m) and OneSpace ($44m) in China.
Activity related to Build (eg sensors, electronics, battery) was flat on the year $236m vs $262m across 28 companies respectively. Growth investment (B series and later) was flat at $154m versus $141m.
However, European investment escalated to 36% of total versus just 4% previously. Key investments in the year included Reaction Engines ($37m) and Oxford Space Systems ($8m) in the UK.
Investment in satellite constellations and airborne platforms for collecting and disseminating Data rose by 27% to $845m across 51 companies. Investment in growth companies (B series and later) soared by 52% to $444m in this maturing subsector including companies such as Cloud Constellation ($100m). The uplift was largely driven by US investment up from 44% to 65% of the subsector. Notable transactions outside the US included the likes of Iceye ($34m, Finland) and Axelspace ($23m, Japan).
Downlink represents the companies communicating data from these platforms back to the ground stations. Despite being an important element of the supply chain, overall investment was down to $110m from $127m a year earlier. Whereas 2017 saw a large investment into antenna company Kymeta ($74m series E), 2018 investment was focused more on earlier stage with only $34m invested in growth stage businesses. Companies like Phasor or SatixFy are European leaders in downlink technologies.
European companies in this sector accounted for 47% of total investment, including companies such as Goonhilly Earth Stations ($32m). There was a surge of interest in quantum cryptography technologies that could drive investment in this subsector going forwards.
INVESTORS
Despite this growth, fundraisings in European space tech haver been limited and difficult until recently.
Generalist investors are now starting to pay attention. Accel, not normally interested in the sector invested in high-altitude balloon business World View. The London-based fund BGF backed satellite tech startup Open Cosmos. Kayrros’ raised €21m, IcEye’ $34m and AerospaceLab €11m.
And Seraphim Capital says it is seeing “100 plus companies per month” at the early stage after becoming known in the sector as a key gateway investor. Since launching its £70m ‘Space Fund’ in 2017, Seraphim has made nine investments of between £250,000 and £2m, backing several dozen more companies via its Space Camp accelerator programme and angel network. It has already supported 16 startups in the previous programs and is now hosting the Seraphim Space Camp Mission 3 to support seven startups in the industry. So while, around 65% of all venture investment is into U.S. companies, Europe is clearly starting to grow.
However, the launch market is poised to change. The huge bottleneck of lack of capacity of the launch industry (not enough rockets being launched in order to satisfy the need of the market) is being solved by companies like Rocket Lab which is now operational and launching dedicated smaller satellites – nano-satellites rather than the traditional satellites.
Rocket Lab’s smaller rocket is designed to go to a specific orbit to address the needs of the small satellite launch community. They will be joined by other small satellite launch companies such as Vector, and a whole range from both India and, importantly, China.
So the previous bottlenecks of not having enough capacity to get launched satellites is going to be worked out during 2019 and 2020, as the 2018/19 investments come online.
Meanwhile, the outlook is good. According to Morgan Stanley the market for space-related enterprises is worth about $350 billion and could be worth as much as $1 trillion by 2040. And since 2009, $22 billion has been spent in venture-capital funding on some 476 space tech and space-related companies, according to Space Angels data.
EXITS?
In the summer, European space companies Leonardo SpA and Thales SA looked like they might be interested in buying Maxar’s space business, MDA, for as much as $1 billion. Alas, that didn’t happen, but it does go to show that there is increasing movement in the market.
And while space tech is generating a lot of VC interest, not many have yet made it to exit. However, this is not surprising given that typical venture startup-to-exit timelines apply.
EUROPEAN SPACE TECH STARTUPS TO WATCH
A company to keep one’s eye on in the next couple of years will be ICEYE which did the biggest round – $34 million series B – of space tech companies in Europe in 2018. The Finnish company has a technology which is a sensor on its own satellite that’s called ‘synthetic aperture radar’. This allows them to be able to view the ground under all conditions, in all weathers. Previously, this was very much the preserve of only the government and military.
ICEYE is just one example of the many innovative companies currently being produced by the industry.
Here are a few more:
Oxford Space Systems (United Kingdom)
Oxford Space Systems is an Oxford, UK-based company that specializes in deployable antennas and other structures for the global satellite industry. The company has raised $11.4 million to date with funding primarily coming from Space Angels alongside a syndicate of smaller UK-based VCs. Space Angels cited it as one of the hottest European space-tech stories
ConstelIR (Germany)
This is the first company to map precise on-earth temperatures, even from a constellation of satellites. Its orbital temperature monitoring system will be 3% of the overall cost of existing solutions without compromising measurement accuracy.
Hawa Dawa (Germany)
Hawa Dawa blends its proprietary IoT smart sensor data with other data sources including satellite data in order to give precise air quality information. Founded in 2016 in Munich it has gained traction with Siemens, SwissCom, IBM and SwissPro.
Methera Global (United Kingdom)
Methera Global is in plans to launch a constellation of dynamic and flexible satellites focusing its entire bandwidth to a small area of target regions from several satellites. It will increase the capacity 10 times greater than planned systems. Initial customers are the likes of emergency response services that need to access communities that do not have reliable internet access.
Trik (United Kingdom)
Trik is an enterprise drone 3D mapping software with a unique platform for structural inspection. The platform transforms data into a customisable 3D model that can be updated from time to time.
Veoware (United Kingdom)
Veoware operates with the vision to industrialize the space sector so that software, hardware and data become accessible and instantly available. It is made possible with its team of world-renowned experts with many years of experience.
Hiber (Netherlands)
Hiber aims to make IoT connectivity accessible to a majority of the global population. It’s two nanosatellites, launched in 2018, fly over the earth’s poles 16 times in a day and cross the equator twice a day. The company won the Accenture Innovation Award in 2017.
Kleos Space (Luxembourg)
Founded in 2018, Kleos Space was created by Magna Parva Ltd. to develop Geolocation Intelligence Data Service and market disruptive in-space technologies. The company will launch and operate satellite infrastructure generating commercial ISR and geoservices data.
SnapPlanet (France)
SnapPlanet is a startup that provides affordable and easy access to Earth Observation data to empower journalists, citizens and scientists to tell stories related to the space or earth. The startup provides a photographic-centric mobile application that will create beautiful images of the Earth from space in just a few seconds. The data will be available for all users at high-resolution.
Spire Global (Scotland)
The San Francisco-headquartered firm has large facility in Glasgow, Scotland, building nanosatellites that monitor aviation, maritime and weather patterns. It has been granted raised £14.7 million funding from Scottish Enterprise. It will expand and take on 260 people over the next five years, boosting the Scottish space tech industry.
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