COMMERCIAL spaceflight start-ups all admit this about their fledgling industry: that the pie remains firmly lodged in the sky. At a meeting of such “astropreneurs” in Seattle on October 16th, Tom Nugent, president of wireless power company LaserMotive, admitted that investors remain understandably reluctant to stump up cash for ventures where a failure of technology could take months to rectify, cost many millions of dollars, or even human lives.Chris Lewicki, the Chief Asteroid Miner (his official title) at Planetary Resources, an extra-terrestrial prospecting company which plans to mine asteroids for rare metals, proudly listed Larry Page and Eric Schmidt of Google among the firm’s investors. But he added that neither would advise anyone’s grandmother to commit her life savings to the venture.
The problems with financing private space enterprises are legion. Many new aerospace technologies are highly capital- and labour-intensive, have long development timelines, serve markets that are nascent (if they exist at all) and rely on launch systems that can be slow, expensive and unreliable. Selecting the best investments also demands a level of expertise that is, well, “rocket science”.
This is the polar opposite of what most Silicon Valley venture capitalists seek. They prefer to give tiny companies small sums of money to develop easily understood services that can scale swiftly to profitability using the (almost) free infrastructure of the internet. And if those services stumble, as Twitter and others have on occasion, the consequences are seldom explosive, let alone fatal.
For existing private space ventures, then, financing has tended to flow from the deep pockets of starry-eyed billionaires—many of whom, ironically, made their fortune online. Amazon’s Jeff Bezos, Microsoft’s Paul Allen and, most famously, PayPal’s Elon Musk have all sunk millions into developing next-generation rocketry. With the recent successes of Mr Musk’s SpaceX, however, things are finally starting to change.
The Space Angels Networks claims to be the only global group of angel investors dedicated to aerospace and aviation, and to have invested in more space industry start-ups than any other. Although it has been around since 2006, membership in the group has doubled in the last year and now stands at around 30 individuals. These space angels may be wealthy but they are hardly the super-rich: investments have ranged from as little as $50,000 up to a modest $1m. According to Joe Landon, the network’s Seattle-based managing director, while his members are all enthusiastic about space, they also expect to earn a timely return on their investments.
For companies like LaserMotive, which initially drew on Mr Nugent’s savings and prize money from a NASA competition, this surge in interest has proven a mixed blessing. LaserMotive is about to undergo a round of funding, possibly through the Space Angels Network, that should secure its immediate financial future. In return, Mr Nugent will have to shelve his dreams of using lasers to power space elevator-climbing robots or ultra-efficient rockets, and focus instead on turning a profit. This means developing laser-powered drone aircraft for the American military. Similarly, while Mr Lewicki talks persuasively of his decades-long plan to harvest mountainous asteroids for platinum, Planetary Resources’ initial business will actually be in the construction of low-cost imaging satellites.
Where angels dare to tread, venture capital (VC) is not far behind. A consortium of VCs recently invested over $90m in Skybox, a start-up developing the same kind of imaging microsatellites as Planetary Resources. Being relatively cheap, low risk, high-tech products with a rapid development cycle, the satellites are more Silicon Valley than Kennedy Space Centre. But they do indicate the growing confidence of investors. Many more such “payload” start-ups are in the pipeline, planning everything from 3D printers in orbit to space-based pharmaceutical laboratories.
The largest single boost to the credibility of the private space industry, however, came this summer from what might be considered an unlikely source: public money. In August, NASA invested over $1.1 billion in three commercial launch companies to develop and test rockets with the ultimate aim of carrying a human crew. NASA’s early investment of $440m in Elon Musk’s SpaceX dwarves his own financial stake in the company and accounts for nearly a quarter of its current $2 billion valuation. (It will also pay the company $1.6 billion for 12 cargo deliveries to the International Space Station, the first of which was successfully concluded on October 10th.) As he mulls the possibility of a public offering of SpaceX next year, Mr Musk will surely take comfort in the fact that he has the biggest angel of all on his side: Uncle Sam.
Click here to subscribe to The Economist
Business Insider Emails & Alerts
Site highlights each day to your inbox.