Emerging Space: Is Perception Reality?
Viewed through the 2017 press reel, the emerging space market is vibrant, novel, and changing the face of the space industry. Indeed, hot on the heels of SoftBank’s $1.2B investment in OneWeb in December 2016, Planet’s acquisition of Terra Bella, Thuraya and Iridium’s partnerships with smallsat constellation operators, SES’s contract for an O3b expansion, and SpaceX’s $350M venture capital investment all made headlines in the past nine months. This hints at a mood in the industry bordering on strong, unhampered enthusiasm; the reality is far more down to Earth.
Yes, interest in emerging space – those players targeting new applications or a radically new way of addressing existing markets – has certainly risen in recent years. The rate of start-up founding has demonstrated exponential growth since 2000, exceeding 50 companies formed per year in 2015 and 60 in 2016. Yet many of these companies have struggled to bring their product/service to market and gain customer traction. NSR’s The Emerging Space Market Opportunity report identified that a majority of emerging space companies remain in an R&D phase. Only a handful of satellite operators are found among operational companies, a population to date comprised mostly of suppliers or downstream analytics services tenuously dependent on the development of more satellite operators.
Over time, the share of operational and acquired companies will increase, but emerging space remains an early stage market whose potential far outstrips current value. Investors agree, having placed $10B into the market between 2000-2016 and an additional $1.7B to date in 2017, half of this into companies that remain in an R&D stage.
A mere third of emerging space companies have attracted external investment, with many players still striving to win funding or bootstrap growth. Not all will succeed in this, and given widespread market saturation alongside applications that will be slow to develop, many players will close or fall dormant.
Until more satellite operators become operational and fuel downstream applications, strong and growing interest in emerging space will not transition to a broad impact on the market through new services.
Nonetheless, emerging space players offer the industry as a whole an opportunity to reassess how it approaches space applications and defines the scope of the addressable market. Emerging space players are fortifying the space industry in key ways, by driving competition, delivering novel applications, identifying new customers, developing unique technologies, and above all presenting a mindset focused on innovation. Even before reaching operations, emerging space companies have sparked a response among some traditional players that has resulted in more robust offerings and renewed creativity: competition with SpaceX for U.S. Government launch contracts prompted ULA to diversify its business to support the LEO economy, while, following the emergence of smallsat constellations, Digital Globe invested in the high revisit Scout constellation to complement its high resolution WorldView assets.
The Bottom Line
Belied by the huge amount of media attention and popular appeal, the emerging space market remains at an early stage in development with limited impact on the broader space industry to date. Few companies have reached peak operations, and delivery of promised game changing products and services continues to shift to the right. The emerging space market is undoubtedly vibrant, novel, and with strong potential to change the face of the space industry – but the perception of its success is far different from reality.