I had a call last week with someone who is passionate about Space and thinking about working at a variety of startups in the commercial space/space 2.0/whatever the hell we’re calling it these days. It just so happens that Space Angels had also put out their quarterly report that same day so for the first time in awhile, space startups were top of mind.



I think Space is in an odd market state right now. As a seed investor, it’s especially tough because it’s really freaking expensive and you won’t have many proof points until post-series A, if you’re lucky. Outside of that though, if you look at the realistic areas today where companies are being built you basically have launch, satellites (+ enabling tech), telecom, and other services.

Launch:

I’ve previously talked about launch and why I’m not bullish on that area of the market. Not only has the space moved *much* slower than everyone thought it would, but it also has had a few very large failures since I wrote that post.

Satellites:

Most of the commercial satellite use-cases today are focused on earth observation. Planet dominated + commoditized optical imagery pretty quickly. More recently, multiple startups like Ursa (disclosure: previous investor), Capella, Iceye, Umbra, and others have looked at the deficiencies of optical (can’t see at night + through clouds) and targeted SAR (synthetic aperture radar). And then there are various other startups with different payloads for different use-cases, all built on some sort of microsat or small sat hardware.

But when I look at satellite startups today I see a few things that worry me:

Launch is still not nearly as frequent as we thought it would be and because of this satellite startups are second citizens to everyone else in commercial and government space in terms of launch priority. The platforms themselves aren’t seeing any innovation, so you’re stuck innovating on payload. What this means is that existing (well-funded) companies with launch infrastructure/contracts + constellations of satellites (think SpaceX, Planet) have a scary competitive advantage. …Unless you can go full-stack and provide data + make sense of it. But even then, the commercial market around satellite information hasn’t developed at the scale we all thought a few years prior. We still have governments, corporations, and hedge funds that want to buy, but the mass proliferation of the imagery hasn’t happened because interpreting a lot of this data and then mixing it into other datasets is tough. And in a lot of instances, the data isn’t as good as the dream we were promised.

So based on the fact that “agile space” hasn’t really happened and costs haven’t fallen to enable a pace of development that exists in other emerging tech areas, it’s really hard to be a venture-scale satellite data company today.

With that said, investors are still excited by the enabling-tech side of things like propulsion systems for microsats + data transfer. Both of those areas seem to make sense as investable, but continue to rely on a large uptick in fragmented satellite proliferation, which is scary.

Telecom:

A lot of VCs talk about telecom as a massive opportunity, which it is. However it’s also super expensive and large companies are investing billions of dollars to figure out how to tackle better and wider spread connectivity.

I’m not sure as a seed fund there’s room to play in this space.

Other:

This is where things get exciting. Ask the question “so what happens once we’re in space” and then start thinking about all of the things that are unlocked. This includes manufacutring, drug development, tourism, etc.

Read Brandon’s piece for more detail.

It seems the first domino that must fall here is a private commercial space station, which is on its way. This stuff is super exciting and fascinates me, however as a lame investor with people I want to return money to I think, “ok a 2020 launch, add 2 years because space is hard, then start thinking about when a seed stage “space-first” company should be built.” Today doesn’t seem like the right answer.

So I guess the point of this note is to:

1) Write down my current, November 2017, probably incorrect thoughts on space

2) Take a step back and gut check where we are from an investability perspective on this sector. I’m still super excited, I still dream about going to space, and I’m still looking forward to the founder that shatters my beliefs here.