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Since the Apollo 17 mission in 1972, the last mission to take people to the moon, the interest in human space discovery had seemingly disappeared into the infinite vacuum of space. Humans exploration was seemingly abandoned, and this new frontier was spearheaded by scientific rovers.
The new high frontier is reached by SpaceX and its fellows
The twenty first century was to bring about major change. One milestone of this new area occurred with the foundation in 2002 of the space agency SpaceX founded by the philanthropic multibillionaire Elon Musk. In a sector dominated by governments through Nasa in the United States and Roscosmos in Russia, private firms such as SpaceX or Jeff Bezos’ Blue Origin (founder and CEO of Amazon) were digging in. The recklessness of their investment brought a new space age whose dream is an interplanetary humankind.
How will they realise such a dream? The space industry mostly relies on sending satellites into orbit for GPS systems and telecommunications, that is where there is money to be made but it is very expensive. So, the strategy of Elon Musk is to reduce prices of commercial flights tenfold. Thus, the demand for its flights increases (its company experienced exponential growth without interruption between 2011 to 2014) and the money made from it can fund the space exploration side of the business. He seems to be right. Indeed, costs have already decreased 75% thanks to the price competition driven by the inception of a plethora of new private firms in this sector attracted by its impetus.
So, now it is possible to send 500 kg of materials in orbit for approximately 10 million. And every inch of this market is covered, thus, companies like Vector Space Systems provide services that are on offer for’ Small Sat’ (under 500kg and of which 1,500 are planned for launch in 2018-2020) with a class of rapid-launch, low cost rockets known as the light rockets. However, the key point of cutting prices is the recyclability of rockets, firstly implemented by SpaceX which finally succeeded in this venture back in 2015. This is partially in thanks due to the improvement that the Falcon 9 rocket of SpaceX. The Falcon 9 is taking the advantage of the incredible reliability and efficiency of the Ariane 5 which specialises within the medium-heavy commercial rocket launches. Thus, at the beginning of the year, January 14 2017, the Falcon 9 rocket sent into orbit 11 Iridium NEXT satellites from the Iridium COMM company before landing successfully onto a naval landing platform.
Nonetheless, we must not be dazzled by the brilliant successes of the space private sector. A report from Goldman Sachs published on April 4, 2017 shows that if the commercial space market is highly concentrated between Arianespace (28%), SpaceX (26%) and ILS (7%) (as detailed below in exhibit 26) with SpaceX one of the market leaders. The space military market is way more fragmented thanks to national support and the Falcon 9 only has a share of 13% of the total market, behind China (20%) or the Ariane 5 (18%) and is just a fraction of the combined share from within the USA.
But, visionaries such as Elon Musk carry more than just the weight of a company on their shoulders, they carry a vision for humankind’s future and the future of our planet. And this vision could turn into reality by 2025, the date in which Elon Musk plans the first manned mission to explore Mars and reach Martian soil. The objective is the colonization of Mars and eventually to turn it into a habitable planet for our species. This new accessibility and pioneering into space opens an infinite sea of new opportunities.
An array of new opportunities at every turn are unveiled
The industry is at the forefront to take advantage of this breakthrough. In ways that we could hardly begin to imagine. Let’s have explore the 3D printing impact for instance. This sector is soaring, and now is starting to introduce medical applications allowing the printing of entire organs to be transplanted into needing patients. But the one of the main problems on Earth is our gravity, which creates the usage of thick bio-inks containing chemicals and other materials to provide structural support, says the US company Techshot. So, freedom from the pull of gravity is exciting to those at the forefront of medical science. In space, tissues could be printed with even finer print tip that the ones currently used at present, this combined with lower viscosity bio-inks, containing only the biological materials needed to create a healthy organ and allowing for more robust applications 3D printing can offer. According to Rich Boling from Techshot a space-made heart patch could be ready for human trials by 2025 while the first bioprinter should be launched in 2018.
Since we are talking about 3D printing, after its inception in 2014, the company Made in Space produced the first additively manufactured object in space on the ISS under a contract and collaboration with Nasa. Such a machine could eventually build space stations on the moon or on Mars. The ability to build structures on other planets would not only lay the foundations for settlements but could unlock the potential of extra-terrestrial minerals and raw materials. It is how to make money from the dust of the moon.
But maybe the most profitable opportunity available is the one mining offers, and industry that has been important to the growth and survival of humanity for millennia. Water and platinum grouped metals are insanely abundant on asteroids. Water is easily converted into rocket fuel and would open new facilities for space exploration. But where things get even more interesting is when platinum becomes the topic of discussion. According to a 2012 Reuters interview with Planetary Resources, a single asteroid the size of a football field could contain anywhere between an estimated $25bn- $50bn worth of platinum which along with been an eyewatering amount of money, can further aid the funding available and hasten the industry progression.
For a long while, space mining was governed by a cold war treaty which didn’t mention property rights. But in 2015 former USA president Barack Obama operated a major change, firing the starting gun on regulatory changes that could change the future of space mining. He guaranteed private companies rights to own, sell and profit from resources extracted from asteroids and other “celestial bodies”. In August, Luxembourg followed suit becoming the first European country that officially allows space resources to be “appropriated” by commercial groups based in the country. Indeed, Luxembourg wants to reinvent its future, becoming the frontrunner for this potentially lucrative economy. The country goes all the way in its strategy awarding US group Planetary Resources a grant of €25m through Société Nationale de Crédit et d’Investissement. More than 60 space orientated start-ups have already knocked on the door amid hopes they will bring private investment into the nation because space start-ups have attracted $13,3bn of investment since 2010, as per Goldman Sachs.
Finally, we cannot forget to mention the space tourism industry. The two first space tourists will enjoy a trip around the moon which is projected to take place by the end of 2018. The customers will buy their trip from SpaceX for millions of dollars. Elon Musk declared that other opportunities could follow suit. A tourist seat on a Soyuz rocket costs about $35mn, but Sir Richard Branson (founder of Virgin Galactic) believes he can lower that cost to anywhere between a mere affordable $140,000—to $250,000 a person—for sub-orbital travel. It would reinvent this fledgling sector with big economic fallouts that would ensue because of the increased market potential. There are even more emerging industries in space as in-orbit data plays, or in-orbit manufacturing.
So, in our insignificant age it is all too easy to dismiss the latest billionaire fashion for space exploration as vanity piled upon eccentricity. There is a good chance that the flood of investment pouring into space projects will eventually create a new and vibrant extra-terrestrial economy that will stimulate innovation, encourage collaboration between nations and the public & private sectors. This industry can stretch the boundaries of human imagination. We may truly be at the dawn of a new space age, a revolution which the financial sector should look upon with incredible interest.
New venture capital horizons
As an industry, Space generated nearly $1.4bn in venture capital investment in 2016 (Check out our article on Venture Capitalists). Over the last 3 years, Space VC funding has increased on average 195% to over $1bn yearly, driven by larger one-off VC rounds and higher relative density of rounds >$10m.
These venture capitalists don’t only invest in the hardware companies such as Space X. They also invest in companies such as Planet Labs and Spire which focus on providing the space hardware necessary to collect image and video data.
Moreover, venture capital funding in Space start-ups is expected to accelerate further. The Federal Aviation Administration said that there was a 55% year on year increase in the number of launch applications filed by private companies in the FY’16. This is the result of democratization and lower costs incurred in the industry. But venture capitalists not only fund established industries within space, they also fund less established space venture such as space mining and space tourism. Furthermore, capital markets have also backed space-related company. According to Bloomberg, over 260 deals have been announced in the industry since 1994.
However, venture capitalists do not finance the same way according to the region of the world a deal takes place. Recently, European venture capital funds have barely reached around 1/5th of the total funds of their US counterparts. But some incentives are being implemented. The EU Commission launched the “Fund of Funds” in 2016 committing to funding up to 25% of the total investment, capped at €400mn. So, the total amount that could be collected is €1,6bn and a part of which might be invested in the space industry.
The ESA (European Space Agency) also helps with funding the space industry.
The Advanced Research in Telecommunications Systems (ARTES) helps to convert
R&D investment in satellites and profitable goods. This policy has already converted 67m of ESA funding into 210m of revenue generated by 61 ARTES downstream projects. The ESA has also created BIC (Business Incubation Centres) in which it helps start-ups to apply space technology to non-space commercial fields turning these businesses more investible propositions. So, space is becoming a safer place to invest almost daily.
But the best solution to bridge the gap between Europe and the US is maybe the Space fund launched by the London-based Seraphim Capital in 2016. Mark Boggett, Seraphim Capital's managing director, aims to gather £80m in funding and has already received £50m from the British Business Bank, Surrey Satellite Technology Ltd, Italian spaceflight services company Telespazio, U.S. tech conglomerate Teledyne and India-based IT-focused multinational Rolta for example. This fund will support innovative companies developing Earth-observation technologies and data-driven applications.
It is hard not to see the vast new market forging before us, and therefore the vast field of new opportunities that are presented from with the space industry. Goldman Sachs expects space to be a multi-trillion-dollar market, so it must invest it’s capital because return on investment has the potential to be highly lucrative.
Elon Musk and fellow visionaries such as Christopher Columbus or Francis Drake. They are widening our world, not adding new continents on our maps but new planets, new destinations. More than a multi-billionaire dream, space is becoming day after day more accessible for everyone. The further this industry develops, the more technology can be commercialised and implemented into everyday use in the intermediary. The new road to India that Christopher Columbus was hoping to forge open was the ambition of the queen of the realm of Spain. We need these expensive undertakings to achieve the unthinkable and fund greatness like many before us. History seems to be an eternal cycle and many of us could be soon enjoying the unlimited opportunities that can be realised thanks to the space industry, backed by the world of finance.
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Written by Guilhem Garrel│Independent Stock Analyst
Edited and Corrected
by Vee Venski and Graham Laxton
This article is not a promotion of financial investment. Investing money in financial instruments is risk-reward process. Losses and gains are part of financial investment process. Only invest money you can afford to lose.