money Space tourism is just a tiny piece of a risky new asset class
Japanese entrepreneur and art collector Yusaku Maezawa became the latest billionaire this week to launch himself into space when he boarded a Soyuz spacecraft en route to the International Space Station (ISS).
Meanwhile, William Mountbatten-Windsor, better known as Prince William, has suggested that perhaps dollars spent getting to orbit would be better applied to addressing more terrestrial challenges — and he’s not alone in this view.
The “billionaires in space” critique has gained traction as a result of the high-profile flights of Blue Origin’s Jeff Bezos, Virgin Galactic (SPCE) founder Richard Branson, and one-time starship captain, William Shatner. SpaceX is the brainchild of another billionaire, Elon Musk. Musk himself has yet to achieve liftoff.
But while the optics may be questionable, the argument misses the point that space offers opportunities beyond just launching rich people into orbit.
“Space tourism is an exciting first step but it’s not where the big market opportunity lies,” says Sam Korus, an analyst overseeing the Ark Investments Ark Space Exploration and Innovation ETF (ARKX), rolled out in March of this year.
Jeffrey Manber, co-founder of Nanoracks, one of the first companies to operate commercially on the ISS, puts it this way: “A great space faring nation should not pin its hopes on tourism.”
Other companies are emerging, leveraging the launch infrastructure to sell the same product much in demand here on Earth: data. Earth observation is big and growing, and additional opportunities like on-orbit space services and privately owned space stations are just over the horizon.
There is growing consensus that space will indeed be big. Launch costs have come down by a factor of four in recent years and are heading lower while satellites have seen a 100-fold increase in capabilities over the last five to 10 years, creating a whole new world of opportunities. As a result, Morgan Stanley estimates that the industry may generate as much as $1 trillion in global revenue by 2040. More and more, space is starting to look like an asset class, albeit a risky one.
“What was once uneconomic and impossible (in space) is now becoming economic and possible,” Korus says.
New innovations in the business of space
Of course, the business of space is not entirely new. Earth observation goes back to the launch of the original Landsat satellite in 1972 and is expected to be a $7.5 billion market in 2030, up from $1.6 billion in 2020, according to Euroconsult. Among those driving innovation in the sector are Spire (SPIR) and Planet Labs (PL). Spire went public via SPAC in August with a recent market cap of around $660 million; Planet Labs listed via the SPAC route on Dec. 8 and had an uneven debut on the New York Stock Exchange.
The most recent iteration of the Landsat satellite family, Landsat 9, is about the size of an SUV, weighs in at around 6,000 pounds, and crosses every point on the Earth once every 16 days at moderate resolution. While not exactly an apples-to-apples comparison, a Dove-class satellite from Planet Labs is around the size of a loaf of bread, weighs 10 pounds, and has a resolution of approximately 3.7 meters. The company’s 200-satellite constellation images the entire landmass of the Earth every day. Over the course of its 50-year history Landsat has placed eight satellites in orbit (one failed); Planet Labs launched 48 last year alone.
The key to the Earth observation business model is this scale and frequency, enabling a whole host of new applications, ranging from more efficient farming and flood control to identifying rogue sources of methane and carbon dioxide, says Will Marshall, co-founder and CEO of Planet.
“Every day we take a picture of every farm, every woodland. We can track and stop deforestation in the act, and help governments respond to flooding. We can tell how a crop is doing in a 3-meter-by-3-meter box in real time. We can see an area that needs more water, or more fertilizer. With that kind of precision you can increase crop yields by 20-40%.”
Access to daily data comes in handy as Jon Paoli, GIS Coordinator at Iowa Homeland Security & Emergency Management, can attest. Iowa became a Planet Labs customer in 2019, the year the Missouri River flooded and inundated parts of the state.
Of the Planet Labs data he says, “We could see in real time where the water was and where it was going.” That allowed agency to evacuate towns where necessary and to monitor the threat to critical infrastructure.
Cheaper launch services have helped make all this possible. A decade ago, NASA estimated it cost about $10,000/kilogram to lift a payload into low Earth orbit. Today that number is around $2,000/kg and there are projections that may go as low as $20/kg if and when SpaceX’s Starship vehicle becomes fully operational. And it’s not just the cost — it’s the pace and the variety of available vehicles that has moved the industry away from a few high profile, high risk launch events and towards a more economically sustainable launch on demand model.
Planet’s Marshall cites another reason for the growth, one that has nothing to do with getting to space.
“Launch costs stayed the same for 40 years before SpaceX,” he says. “The reason [we’re here] is the phone you have in your pocket and the computer on your desk. Moore’s Law [the idea that the number of transistors on a microchip doubles every two years, reducing costs and increasing computing power] has allowed us to stuff in more capabilities [in our satellites] per kilogram.”
Space stations
On Dec. 2 NASA formally announced funding for three companies planning to build, launch, and operate privately-owned space stations: Blue Origin ($130 million), Nanoracks ($160 million), and Northrop Grumman Systems (NOC) ($125.6 million). The goal is to keep astronauts in orbit when the ISS is retired towards the end of the decade.
A fourth company, Axiom Space, plans to initially attach its modules to the ISS starting in 2024, eventually separating to orbit on its own in 2028. The model is similar to what has been used successfully with launch vehicles: government as a customer with NASA funding to be supplemented by private capital. Applications for the stations include research, manufacturing, and, yes, tourism.
Of these entrants, only the major aerospace companies are currently publicly traded, though that is changing. Nanoracks was acquired by Voyager Space Holdings, which is reportedly planning to go public through an IPO in 2022. Blue Origin partner Sierra Space, a unit of privately held Sierra Nevada Corporation, recently raised $1.4 billion to help fund the development of both the station and a launch vehicle it calls the “Dream Chaser.” Axiom raised $130 million in Series B funding earlier this year at a reported valuation of more than $1 billion.
“The next decade will be about destinations and in-space services,” says Manber, whose current role includes overseeing international and space station operations for Nanoracks parent, Voyager.
Research should remain a major source of funding in the evolving space ecosystem with other applications like in-orbit additive manufacturing (also known as 3-D printing) for high value products like fiber optics developing over time.
Among the companies exploring service opportunities are Switzerland’s Clear Space, whose focus is on corralling debris; Japanese robotic company Gitai, which completed a $17 million Series B round back in February; and Silicon Valley-based LeoLabs, which is building a radar network to track orbital debris as small as two centimeters across and provide collision avoidance services to satellite operators. The debris issue made headlines recently when Russia destroyed an in-orbit satellite, creating a cloud of more than 1,500 fragments and causing astronauts on the ISS to take cover in emergency escape vehicles.
‘Risk is our business’
In all the excitement, it’s easy to lose sight of the fact that space remains a difficult place to do business, and that getting there can still be a challenge. As Ark’s Korus notes, “There are a lot of data opportunities but it’s still non-trivial getting thousands of satellites into orbit.”
If nothing else, the rise of space commerce and tourism has provided an opportunity to recycle a lot of old "Star Trek"-related bromides. This one, for example: “Risk is our business,” from an impassioned Captain Kirk in an episode entitled “Return to Tomorrow.”
And there is risk. Spire, for one, has seen its stock sell off since it listed and traded at around $4.36/share on Dec. 8. It has been as high as $19.50. There is no guarantee that those private space stations will make it to orbit, or that once there will find enough customers to be economically viable.
Moreover, SPACs in general have fared poorly of late after a rollicking start and space SPACs have been a mixed bag. Rocket Lab (RKLB) was recently priced at around $13.50, in the middle of its 52-week trading range. Space infrastructure company Redwire (RDW) was recently at $7.81, off its 52-week high of $16.98. But the risk/reward calculus has clearly shifted and capital is flowing to the sector — more than $10 billion year-to-date through 3Q, according to Space Capital, a record.
Those who came of age during the early years of the space program remember its engineers as mostly white men in white shirts with slide rulers, pocket protectors, and buzz cuts. That, too, has changed; it’s now a more diverse crew of visionaries who are pushing the industry forward.
Of this new generation of entrepreneurs, Manber says, ““They’re cool, they’re hip, they wear black t-shirts.”
Space: it’s not just for William Shatner anymore.
Mike MacMillan is a writer living in Chapel Hill, N.C. He is working on a book on innovative solutions to the retirement crisis and wealth inequality.
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