Why Space? Why Now?31st October 2017
Our Analyst, Dr Daniel Carew, discusses the revolution in the Space economy and how the changing economics make it an attractive opportunity for VC.
As the world’s first specialist venture fund investing in Space we have a unique view of the revolution underway in the Space economy. Historically only governments, or the largest corporations, could operate in Space, but that is all changing, and to massive effect. But why is this happening, and why now?
For me, investment in Space is the inevitable conclusion of a number of observable trends. First, the trend of globalisation. Businesses and supply chains are ever more international; the economy is now a complex system where an impact in any one area ripples rapidly around the globe. There is an ever more urgent need to know what is happening everywhere. This first manifested in the rise of drones and UAVs, which serve to see all of a mining operation or possibly an entire city, but Space is the ultimate high ground. It is literally the only vantage point with a view of the entire world. Space data is the largest and most comprehensive data set available, something not gone unnoticed by governments who have spent billions on reconnaissance satellites. The person, company, or country who obtains the view from Space first, is better prepared to understand the global picture, and will eventually win out against those who understand less.
The second trend is one of increased connectivity. Trends in consumer electronics and the consumption of digital media, coupled with globalisation, demand ubiquitous high-quality communication, everywhere. There is an expectation that every device is always connected in every corner of the world. Fortunately, the ability to see everywhere from Space, ie. to get data from anywhere on the globe, also gives the ability to push data to anywhere on the globe. Communicating via Space can offer the highest possible communication speeds between distant points around the world, and connectivity to everyone. This will include high-speed connectivity on any moving platform, either train, plane, or ship, and sensor networks that can be placed anywhere to monitor anything.
A third trend is the inexorable rise of Big data and AI. Tools for both are becoming democratised and readily available. This has created an insatiable demand for ever larger datasets, and satellites, or even UAVs at a lower altitude, are the data collection platforms that can satisfy this need. AI has mostly eliminated the armies of satellite imagery analysts that governments employed in the past to understand pictures from Space. It has also simplified the coupling of Space observation data, and data from terrestrial sensors that are routed through Space networks, to other datasets to gain completely new insights. This additional information, and the ability to rapidly assimilate it, enables a short response time to react to change, which is a key competitive advantage for any business.
The last trend is scale, which is really the parent of the previous three trends. Put simply, businesses that scale can distribute the cost of investment over a larger pool of customers and achieve dominant competitive positions. The internet was previously the largest network, and has given rise to some of the world’s largest and most profitable companies as they leveraged scale to reach enormous numbers of customers at the lowest costs. Again, Space has the ultimate scale. A relatively small number of assets in orbit, built and operated by a staggeringly small number of people, sometimes fewer than 50, can reach everyone around the globe, all of the time.
Finally, a peculiar convergence of other trends in the wider ecosystem is creating an opportunity now. Standardisation of Space electronics and components, a consequence in part of Moore’s law, and the rise of UAVs, which share many of the same components as satellites, has created cheap and miniaturised sensors and payloads. Wider education has created a grassroots community of entrepreneurs who know how to operate in Space. They have been trained in the “move quickly and break things” ethos and are pooling their efforts to dream big. This recent availability of people and technology has created a feedback mechanism that is lowering costs throughout the eco-system, decreasing the cost of launch and ancillary services. At the same time as the cost to access Space is falling, the budgets for immensely valuable government services that underpin modern industry and our society, like the weather service, or earth observation platforms used to measure industrial output and monitor our planet, are being cut. These proven markets, historically established and serviced by government, are being handed to a new wave of Space entrepreneurs with drastically lower cost structures and better access to data. They are now establishing the new Space infrastructure that will be in operation for the foreseeable future, and as can be expected, are starting to dictate the new structure of entire industries.
I have only a vague idea of the total timeline, but I do know for certain, when the new revolution in Space is done, not a single person or business on our planet will be left unaffected. And it is exciting to help make that happen.
Image provided by NASA/NSSDC