Spacetech brings new worlds of opportunities for investors

Until the dawn of this century, almost all space research was government-led. Private investment in the space sector started only at the turn of this century. However, improvements in technologies, which has led to a significant reduction in costs, has democratised access to this sector. Is this area ready for take-off?

As per the Macmillan dictionary, the word moonshot was first used in the year 1949 “when the idea of sending a spacecraft to the moon was starting to be seriously considered.” Over the years increased attention towards space research led to the establishment of the Soviet Space Program in the 1950s, the US-based National Aeronautics and Space Administration in 1958 and the Indian Space Research Organisation in 1969 among others.

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In these last 70+ years, we have made tremendous progress in space-related aeronautical engineering, satellite technology and other ancillary technologies required for space exploration and research. Today, the word moonshot has become a general word to describe anything disruptive that tackles a big problem, often on a global scale.

Until the dawn of this century, almost all space research was government-led. There were of course private sector companies that worked with these space companies to supply parts, accessories and vehicles, however, the thought leadership, research and development were largely in the hands of the government agencies.

This made sense, as space research had little or no commercial returns back then and thus had to be led by institutions where the return on investment was not the priority. Thus, agencies like NASA, ISRO etc. have worked continuously and consistently over decades to set up strong platforms and bodies of work on which the private sector companies and start-ups, which we will now talk of in this article, can thrive.

Bezos was the first private player

Private investment in the space sector started with the next big source of patient capital - billionaires. Jeff Bezos was technically the first one to incorporate a space tech-focused company, Blue Origin in the year 2000. However, Blue Origin’s operations started becoming public only in 2003 when Jeff Bezos started buying land for the company.

Elon Musk set up his private space travel company, SpaceX in 2002. He spent the majority of his $165m windfall from the sale of his Zip2 and X.com shares (which eventually became PayPal) on buying rockets and setting up SpaceX. A couple of years later, another billionaire, Richard Branson founded a space travel company, Virgin Galactic in 2004.

While the first batch of private companies was focused on orbital or suborbital space travel, many other sub-sectors within space tech have cropped up over the years. ARK Invest, “a global asset manager specializing in thematic investing in disruptive innovation”, in its annual publication titled “Big Ideas 2021”, highlighted Orbital Aerospace as one of the 15 sectors experiencing disruptive innovation.

The report goes on to identify trends that are leading to a surge in the space industry. These include lower costs for rockets and satellites, progress in deep learning, 3D printing, robotics, among others. It adds that “According to ARK's research, the orbital aerospace opportunity – including satellite connectivity and hypersonic flight – will exceed $370 billion annually”. Sub-sectors within the broader space industry include - global connectivity (e.g. Starlink), Hypersonic travel from point to point (Virgin Galactic is reportedly exploring this are in addition to its suborbital space flight) and the aspiration for humans to become a multi-planetary species (SpaceX).

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ARK Invest is the first asset manager in the world to launch a Space Industry-focused ETF. Named the ARK Space Exploration & Innovation ETF or ARKX on the stock exchanges, the fund was launched on 30th March 2021. Strong investor interest in the sector and the popularity of ARK’s famed CEO/CIO Catherine Wood reportedly helped the fundraise $536 million in its first 5 days as a publicly-traded ETF. The fund’s holdings (listed here) are a great reference point for anyone interested in looking at listed companies working in this space.

These trends and opportunities have democratised access to this sector. It is not just a space for Governments and billionaires anymore. We are now seeing entrepreneurs starting to build innovative start-ups with disruptive solutions for this sector. E.g. the Space National Start-up Awards set up by Invest India in association with ISRO highlights some of the leading start-ups working in this space in India.

Companies like Skyroot Aerospace Private Limited, Dhruva Space Private and Bellatrix Aerospace Limited were featured in this initiative. No marks for guessing that this space is buzzing in the US as well where companies like Relativity Space (which 3-D prints rockets), MoonExpress (commercial lunar transportation), among others are some of the many interesting early-stage companies that are coming up.

The increase in attention and investment from the private sector is already leading to an acceleration in innovation in this sector. E.g. SpaceX’s reusable rockets have single-handedly brought down the costs of rockets which was stagnant at exponentially high levels for decades. These are still early days for the private sector’s engagement in space tech, exciting times lie ahead.