Investing in space: How the US is leading the way
Space, as Captain Kirk famously described, is the final frontier, and that has held true for all but the wealthiest investors – until now.
Technological advances have made low-orbit satellites cheap to build and launch, democratising space by enabling private sector involvement in an industry whose high-orbit, fixed-geometry satellites were historically the preserve of government and academia. Welcome to Space 2.0: a brand new ecosystem, attracting an increasing amount of investment from US business.
As of 2016, over 110 venture capital firms had invested in space companies, according to a report by The Tauri Group, now renamed Bryce, which estimates that more venture capital was invested in space in 2015 than in the previous 15 years combined.
“Investment is being driven by either private individuals or by venture capital-type funds accustomed to putting big cheques behind small businesses to drive rapid change in an industry,” says Daniel Domberger, co-lead of Media & Technology at Livingstone, an M&A and debt advisory firm that has participated in such deals within the space sector.
“The money coming in is not yet what we would call mainstream private equity. They will need more scaling, more established management teams, more tangible business cases.”
Space start-ups received about $2.83bn in funding in 2016 as 114 investors bought into 43 ventures across 49 deals, Bryce estimates. This aggregate figure was up from $2.43bn in 2015, while three acquisitions last year were worth $963mn in total.
Most money is coming from the United States, with Europe and Asia lagging. Major private equity investors include Bessemer Ventures, RRE Ventures and the Space Angel Network. These firms see profit potential in the new generation of low-cost satellites, which are primarily used for communications and observation; for example, satellite images could be used to monitor climate change on agricultural land, which is then used to make investment decisions. Other uses include city planning and mapping population growth.
SpaceWorks estimates that over 3,000 microsats will be launched between 2016 and 2022. Only 130 were launched in 2015. These microsats represent a real disruptive influence in the space industry. Rocket Lab – recently valued at $1bn – will be delivering to its customers a rocket (The Electron) that will carry ‘payloads of microsats’ into orbit. The cost of these microsats is coming down significantly, thus attracting even more interest from commercial partners.
Satellite data ignores borders, providing clear views of things that can be seen no other way. Taking multiple photos over time can show development trends, every half hour over months or years. Both the photo itself and then the changes that are shown over time are of massive value.
“What’s important is how directly you can commercialise this,” says Graham Carberry, a partner at Livingstone and an aerospace specialist. “The shorter the route to the money, the more money will flow. We’ve reached a tipping point where people are seeing direct commercial benefits to controlling the data.
“There will be a point when the data becomes sufficiently widespread that it's less valuable and then growth will taper out, but we're a million miles from that right now. The potential is still very, very significant.”
About 450 nano-satellite launches have been announced for 2017, of which roughly half are already in orbit. That compares with 471 launches in total from 2012-2016, according to nanostats.eu.
Big data goes intersteller
“There's a heap of opportunity for private capital that up until a few years ago wasn't really viable. Now that it is, we're seeing a lot of relatively early-mover capital. Space will see a lot more investment, because we're creating a whole new ecosystem,” says Carberry.
“Companies with a viable use for satellite data need someone to help them control, build or rent space on satellites and get that data back down, so we’re seeing growth in space services as a market as well, it's not just manufacturing services that relate to space.”
Early leaders in the sector are attracting some “racy” valuations, but Carberry downplays the danger that the influx of cash will lead to a bubble developing, with most private equity money still reluctant to invest. Also, supply and demand are creating one another, with low-orbit satellites creating new uses that were previously unviable – as such, it is similar to waves of investments in other technology-led industries. However, a shortage of launch sites is creating supply constraints.
“Whenever you create a new market, there is always a risk that it doesn't work out,” says Domberger. “The technology may not be appropriate for what it's being applied to. Or the market maybe be smaller than once thought. People may be less willing to pay for it than you think. A lot of these possibilities go into these business plans and investment cases. Some are over-enthusiastic and some are over-conservative.”
With scores of start-ups in the nascent and fragmented small satellite sector, consolidation is all but inevitable. “This market is developing so quickly and a lot of consolidation will be driven by the need to secure access to either componentry, or platform, or capability,” says Domberger.
“There are relatively few people who know how to do this stuff well and if you're one of the big aerospace and defense groups, and you can get your hands on the best teams doing the best work in the sector, then you can be in a very strong position to drive further consolidation and dominate the market.”
Big players in space
Space holds a unique fascination and it’s the likes of entrepreneurs Elon Musk, Richard Branson and Jeff Bezos who have captured the popular imagination with their daring schemes to offer commercial flights beyond our atmosphere. Such plans may seem to sceptics like little more than elaborate publicity stunts, but Livingstone believes these could prove to be highly profitable.
“It depends on what your investment timeline is. If you're an Elon Musk or a Jeff Bezos you can afford to be quite long in terms of your position around these things and make investments over time,” says Carberry.
Bezos is thought to have invested more than $1bn in Blue Origin, while Google and Fidelity invested $1bn in Musk’s SpaceX in 2015, according to Bryce.
“I wouldn’t bet against Musk,” Carberry explains. “He's transformed the automotive industry and it's not like it's his first rodeo; the guy knows what he's doing. Amazon is famous for selling stuff online, but Amazon Enterprise is an extremely large and lucrative business. And there's a reason these two individuals are heavily focused on space.”
How changing your company's software code can prevent bias
Two-third of tech professionals believe organizations aren’t doing enough to address racial inequality. After all, many companies will just hire a DEI consultant, have a few training sessions and call it a day.
Wanting to take a unique yet impactful approach to DEI, Deltek, the leading global provider of software and solutions for project-based businesses, took a look at and removed all exclusive terminology in their software code. By removing terms such as ‘master’ and ‘blacklist’ from company coding, Deltek is working to ensure that diversity and inclusion are woven into every aspect of their organization.
Business Chief North America talks to Lisa Roberts, Senior Director of HR and Leader of Diversity & Inclusion at Deltek to find out more.
Why should businesses today care about removing company bias within their software code?
We know that words can have a profound impact on people and leave a lasting impression. Many of the words that have been used in a technology environment were created many years ago, and today those words can be harmful to our customers and employees. Businesses should use words that will leave a positive impact and help create a more inclusive culture in their organization
What impact can exclusive terms have on employees?
Exclusive terms can have a significant impact on employees. It starts with the words we use in our job postings to describe the responsibilities in the position and of course, we also see this in our software code and other areas of the business. Exclusive terminology can be hurtful, and even make employees feel unwelcome. That can impact a person’s desire to join the team, stay at a company, or ultimately decide to leave. All of these critical actions impact the bottom line to the organization.
Please explain how Deltek has removed bias terminology from its software code
Deltek’s engineering team has removed biased terminology from our products, as well as from our documentation. The terms we focused on first that were easy to identify include blacklist, whitelist, and master/slave relationships in data architecture. We have also made some progress in removing gendered language, such as changing he and she to they in some documentation, as well as heteronormative language. We see this most commonly in pick lists that ask to identify someone as your husband or wife. The work is not done, but we are proud of how far we’ve come with this exercise!
What steps is Deltek taking to ensure biased terminology doesn’t end up in its code in the future?
What we are doing at Deltek, and what other organizations can do, is to put accountability on employees to recognize when this is happening – if you see something, say something! We also listen to feedback our customers give us and have heard their feedback on this topic. Those are both very reactive things of course, but we are also proactive. We have created guidance that identifies words that are more inclusive and also just good practice for communicating in a way that includes and respects others.
What advice would you give to other HR leaders who are looking to enhance DEI efforts within company technology?
My simple advice is to start with what makes sense to your organization and culture. Doing nothing is worse than doing something. And one of the best places to start is by acknowledging this is not just an HR initiative. Every employee owns the success of D&I efforts, and employees want to help the organization be better. For example, removing bias terminology was an action initiated by our Engineering and Product Strategy teams at Deltek, not HR. You can solicit the voices of employees by asking for feedback in engagement surveys, focus groups, and town halls. We hear great recommendations from employees and take those opportunities to improve.