WORKWEEK

Building an Economy in Orbit

Like most developing economies, the new space economy starts with heavy industry. Rockets. Launch providers are for space in the 21st century what railroads were at the dawn of the California gold rush. They’re unlocking cheap, reliable access to orbit — albeit with the challenges of opening up a new frontier.

Then comes the pioneer entrepreneurs taking a shot at building new enterprises on top of that new infrastructure. Satellites. Today’s satellite operators are building data platforms and communications empires. They deliver shipping companies details on the movements of their competitors, hedge funds views of grocery store parking lots, and nations with cutting edge weather data to track climate change. Others are working to blanket the globe in high speed WiFi — and charge for it.

To support the dozens of new satellite startups that have launched in the last five years another cohort of companies is rebuilding the space supply chain. Originally only large enough to support large government contracts and agencies, supply chains are becoming nimbler and updated with modern software.

Then come service providers who can now exist because the number of satellite operators have reached a critical mass. Space Tugs are a new kind of space craft built for towing satellites between orbits. SaaS startups are launching with products to manage the complexities of launch and satellite management.

Most interesting are the new age use cases. Manufacturing in zero gravity. Asteroid mining for rare earth minerals. Space tourism. The companies that can only begin to take shape today because the rest of the space economy has taken flight.

Launch

Launch Providers: Rocket launch is at the core of the new space industry. The market is dominated by SpaceX which was the first to pioneer reusable rockets — rockets that land vertically — cutting launch costs dramatically.

They’ve done ~165 launches and with the launch of Crew Dragon in 2020, returned human space flight capabilities to the US, which vanished after NASA retired the shuttle program in 2011.

Their workhorse reusable rocket, the Falcon 9, can carry ~50,000 pounds into orbit and their new Falcon Heavy, is the world’s most powerful rocket with a payload capacity of 141,000 pounds. Most satellite companies rely on SpaceX’s ride sharing program to get into space.

A SpaceX rocket in the final stages of landing from a vertical descent

Most importantly, SpaceX’s scale and frequent launches have dramatically dropped the costs of launch, unlocking access to space. At ~$5,500 per kilogram, launch is now cheap enough to support a wave of new space startups.

SpaceX is also credited with training some of the best new talent in the industry on how to build spacecraft on a budget and with timelines required for profit seeking, private companies.

SpaceX’s Falcon Heavy

Much has been made of Blue Origin and Virgin Galactic, the other two space companies founded by billionaires, but neither has deployed cargo to space or delivered any humans to the ISS. ****There are also traditional defense industry players like Lockheed and Boeing but the costs are drastically higher and the rockets are less efficient. SpaceX’s success has even pushed the director of NASA to condemn cost plus contracts.

Note: In cost plus contracts companies aren’t paid for a delivered product. Instead they’re paid a fee for the project, plus labor costs, plus material costs. They effectively incentivizing companies to draw out timelines and costs as long as possible. If you ever see a government project balloon in cost and get pushed out years, you can bet it’s a cost plus contract. The entire defense industry works on cost plus contracts.

Small Launch: There are also a handful of upstart startups that aim to compete against SpaceX with small, dedicated launch. While SpaceX’s ride share program is cheaper, satellite operators don’t get to choose where a SpaceX launch is going. Space is a big place.

So if you’re a small sat company looking for a specific orbit around the earth, maybe to compete your satellite coverage or observe specific weather patterns, you can hire a small launch provider to bring your payload where it needs to go.

Episode: Rocket Lab

My favorite of these is Rocket Lab, the world’s second largest rocket company. Based in New Zealand and founded in 2006, Founder and CEO Peter Beck built the company’s first Electron Rocket on a shoe string budget long before space was popular. Today Electron rockets have launched 148 satellites into space and their components are used in 1700 satellites in orbit. I had Peter on the podcast last year on the verge of Rocket Lab’s SPAC, valuing them at $4B.

Check out the episode on Youtube.

Notable Launch Startups: SpaceX, Rocket Labs, Blue Origin, ABL Systems, Relativity, and Astra

Construction of Rocket Lab’s Electron Rocket

Satellite Operators

Rocket launch only matters if there’s a market to pay for it. By far the biggest customer base in space right is satellite operators. Satellites come in two major types, observation and communications. Spy satellites do a bit of both but we don’t know much about those.

Earth Observation:

You’ve probably seen incredible satellite shots of the earth like these from Planet Labs:

Aerial View of the Arc de Triomphe from Planet Labs

Aerial view of fields in Nebraska from Planet Labs

The reality is most satellite operators are data companies. Planet has launched 452 satellites, with 150 currently in orbit, all to generate a unique data edge: cheap aerial footage of the earth.

Spire Global uses a constellation of ~100 satellites to pick up on radio signals that cargo ships are legally required to broadcast. Then they sell that data, providing shipping companies with exact details on where their competitors’ ships are.

The key for Earth observation satellite companies is finding a market for their differentiated data. Shipping companies and hedge funds don’t care about the intricacies of launch, they care about what satellitle providers can do for them.

In the competition between satellite makers a few things matter:

Capacity: How many satellites do you have in orbit? How much area do they cover?

Capability: What kind of satellites are they? What sensors do you have on board? What communications equipment?

Adaptability: Can they update over the cloud? Can they remain competitive against newer models? Do they need to be retired every 10 years?

Supply Chain

The same supply chains that have created relatively cheap, powerful smartphones are today being used to build cheap, high performant satellites. The combination of advanced computing, software enabled photography, and new sensors have unlocked the cube sat — small, modular satellite systems.

To fuel competition in new satellite boom, other startups are focusing on novel components. Akash Systems is building better radios at a fraction of the cost of existing solutions. Others like Rocket Lab are building off-the-shelf satellite buses that can be customized for each mission.

Development of Rocket Lab’s Photon Satellite

Episode: Hadrian with Chris Power and Delian Asparouhov

Hadrian is building software powered factories for the space and defense industries. The space industry relies on a cohort of independent ‘Mom and Pop’ machine shops across the US. As the owners retire and shut down their businesses there is a massive and growing demand for precision aerospace parts.

Hadrian is using computer guided tools and a modern software stack to make it incredibly simple to have parts machined and shipped. As CEO Chris Power Said on the podcast:

“The vision that I see in the future is that some aerospace engineer can do design and engineering on their laptop.

They ping Hadrian’s API, and a week later a satellite shows up or a fighter jet shows up. We’ll start with components but then we’ll go into assembly and build that up over time.

You want to abstract the physical world into an API. The same way that Amazon abstracted servers and compute into a scalable API for software engineers. That’s the ultimate vision.

By doing that, we should see an order of magnitude increase in the pace of innovation in advanced manufacturing in the country and secure a foothold in the future.”

— Chris Power, CEO and Founder of Hadrian

That is the space industry today. Launch, satellites, and supply chain. The most interesting parts of the industry though — space tugs, asteroid mining, zero g manufacturing, private space stations — those are the new age use cases. For more on that check out part two on Friday.