Investment Perspectives: Tailwinds from the 35th Space Symposium

April 18, 2019 • By Sven Eenmaa, Director of Investment and Economic Analysis for the ISS National Lab

The well-attended 35^th Space Symposium wrapped up last Friday in Colorado Springs. Below, we highlight some key data points and implications for the NewSpace ecosystem stemming from the content presented at the symposium and our broad range of meetings with space companies and investors.

The prospects for the space industry look brighter, in our view, following presentations by the Department of Defense and the Air Force on the need to accelerate cycles of innovation, speed up sourcing, and leverage advancements made in the commercial sector. Additionally, the Commerce Secretary conveyed strong interest in “making and keeping America the flag of choice for innovative space companies,” with a focus on the U.S. capturing leading market share in the rapidly expanding space economy. Following Vice President Pence’s targets to return humans to the surface of the moon by 2024 and NASA’s commitment to meeting this challenge, the resulting implications of accelerated timelines as well as increased budgetary requirements continued to gain strong attention as well.

The symposium presented interesting product discussions, ranging from new satellite bus platforms to lunar landing architectures, multinetwork terminals, radio frequency signal mapping solutions, and rapid prototyping software for propulsion systems, just to name a few. We saw increased discussions around space situational awareness and debris mitigation, particularly following India’s mission Shakti impact. Cyber security was a key topic in many sessions, with the commercial sector having the potential to contribute significantly here as well. The Defense Advanced Research Projects Agency (DARPA) announced winners under its Launch Challenge, and the Air Force expects to follow its recent successful pitch day with a space-focused event. Investor commentary was generally optimistic and open to new ideas, albeit selective toward more crowded subsectors, supporting the strong industry capital-raising metrics from the first quarter of 2019 reported by Space Angels.

What also caught our attention was a presentation by the Space Development Agency (SDA) on a new notional architecture for development and deployment of a global, low-latency, resilient mesh transport layer and communication network combined with an Earth observation/sensor layer. This network would address eight critical priorities outlined in the Pentagon’s August 2018 report, starting with advanced missile threats as well as alternative position, navigation, and timing capabilities for GPS. While the exact number of systems required in this architecture is yet to be finalized, the expectation here looks to be deployment of hundreds, if not more than 1,000, additional small satellites within a primary low Earth orbit(Abbreviation: LEO) The orbit around the Earth that extends up to an altitude of 2,000 km (1,200 miles) from Earth’s surface. The International Space Station’s orbit is in LEO, at an altitude of approximately 250 miles. constellation, but also extending situational awareness from the Earth up to lunar orbit.

Importantly, this architecture looks to leverage recent years’ private-sector investment growth with resulting launch cost declines and technology advancements. SDA’s interest here is not just in rapid launch capabilities and volume-produced satellite bus but also in various payload capabilities, command and control software, user terminals, etc. A more detailed plan of this architecture is expected to be presented to the Pentagon by the end of fiscal year 2019. First assets could be deployed in orbit by 2022, leveraging the insights to be gained from DARPA’s targeted Blackjack program deployments in 2021.

With SDA’s focus on increasing agility and significantly reducing the Department of Defense’s timelines to add new capabilities, the approach here aims to be disruptive relative to prior processes. However, there is clearly much that has yet to be ironed out in terms of plan specifics in the context of other capabilities/assets deployed and criteria for various systems and subsystems, including individual technology, cost, and reliability hurdles. In addition, questions remain on the government’s ability to support an expected rapid growth in small launches in general. Nevertheless, the presented plan looks to imply a potentially significant market opportunity for the commercial sector, including several NewSpace companies.

In our view, an ability to make the cut as a vendor and gain share in such architecture deployment would provide a well-needed competitive scale advantage and validation for many in the NewSpace sector. Coming out of the SmallSat Symposium this February, we had highlighted investor concerns around interdependence of many of the NewSpace business models in terms of key value drivers that are yet to be validated, excess market entry in subsectors such as launch, as well as the dearth of sizable exists so far (see the ISS360 article “Investment Perspectives: Smallsats Focus on Business Execution”). The procurement and contracting processes with the SDA look to be faster; however, questions still remain as to whether startups are ready to meet the rigor and resiliency required from these markets, whether they have in-house expertise to compete for this business and manage related sell cycles, and whether go-to-market through a prime contractor would be required.

In summary, industry data points from the Space Symposium were encouraging for the NewSpace sector, and we now look forward to further announcements and progress on SDA’s promising plans, as well as follow-up news confirming the defense sector’s increased use of commercial space technology advancements.