🌔VWV Volumes #31: Analyst-in-Training Sujith Pakala on the Privatisation of Space Exploration and Technology
In this week's volume, Sujith shares his thoughts on the trends in the industry, and future of private space exploration and technology
In the previous race toward space technology innovation, we witnessed the birth of numerous planet-applicable technologies, such as GPS systems and wireless technologies that underpin modern communication. The start of a new competition involving even more countries holds the promise of uncovering additional groundbreaking technologies in their wake.
Furthermore, it is rare for such a sizable and promising market to emerge: Morgan Stanley’s Space Team estimates that the "roughly $350 billion global space industry could surge to over $1 trillion by 2040" (Morgan Stanley). Despite investor skepticism regarding its potential, there exists the possibility that this industry could surpass the value of the entire terrestrial market. The gradual growth of this sector adds to my excitement. In contrast to the rapid, overnight explosion of the generative AI sector, the private space industry faces barriers to entry, substantial costs, and stringent regulations. This slower pace allows us a unique vantage point to observe its development over decades and make informed predictions, as I aim to do today.
Key Players
Among the vast landscape of 10,000 space-related startups, many are engaged in deploying satellites for services like imaging, weather tracking, and communications. However, my attention is on the space exploration sector, highlighting key players: SpaceX, Blue Origin, Virgin Galactic, Northrop Grumman, Boeing, Axiom Space, and NanoRacks (SpaceTech).
SpaceX, notably advancing with a $55 million, three-day orbital tour, has secured NASA certification for its crew system and conducts regular missions to the space station. A highlight is the planned 2023 moon trip for Japanese billionaire Yusaku Maezawa, reflecting SpaceX's commitment to exclusive, personalized experiences for the affluent (afar.com). SpaceX's Starlink addresses the demand for improved internet speeds, particularly in rural areas. SpaceX's ambitious goal of establishing a Mars settlement stands in contrast to many of these other players, such as Blue Origin and Virgin Galactic, which solely focus on tourism (SpaceX).
In contrast to these other two companies, Northrop Grumman does not offer any touring services but is more focused on advancing scientific knowledge of space, as evidenced by their recent achievement in launching a space telescope (Northrop Grumman). Similarly, NanoRacks distinguishes itself by not prioritizing space tourism in its business model but focusing on pioneering research and biopharmaceutical manufacturing in space (Time).
Key Investors
Multi-billionaires like Jeff Bezos, the founder of Blue Origin, Elon Musk, overseeing SpaceX, and Richard Branson, the creator of Virgin Galactic, contribute substantial funds to space-related ventures. Venture capital firms like Andreessen Horowitz, Founders Fund, and Lux Capital also play a vital role, focusing their investments on companies that launch satellites for communication or defense. Interestingly, NASA emerges as a major investor in space tourism and exploration companies.
NASA's investment strategy allows it to shift resources towards building spacecraft and rockets for deep space missions and to pursue scientific research, areas traditionally supported by the public sector. This is because private companies are increasingly handling tasks like human transportation to and from low-Earth orbit, which can operate profitably. For example, NASA has invested $415.6 million in Blue Origin, Nanoracks, and Northrop Grumman to develop private space stations, reflecting a similar approach to its $6.8 billion investment in SpaceX and Boeing in 2014 for similar purposes. Additionally, NASA has recently entered into a contract with Axiom Space to create a new space station. (Time, NPR).
NASA's prominent role as an investor serves to further encourage the privatization of the space industry. Initially, the demand for space tourism was driven by the need to transport astronauts to the International Space Station (ISS), leading companies like SpaceX to offer these services to the public. As the industry evolves, NASA and other space agencies foresee an expanding array of requirements. Soon, the private sector may be asked to develop technologies for NASA, like asteroid sampling, which could then be adapted for commercial uses such as asteroid mining. As described by Robert Frost, a NASA Instructor and Flight Controller, the relationship between NASA and private companies is “symbiotic, not parasitic”. (Forbes).
What Does the Future Hold?
The emerging space sector, while offering various niches and opportunities, currently represents a small and stable market. Space tourism, primarily serving NASA, remains limited due to to a small customer base and NASA's specific needs (hbr.org). Market growth is expected, but whether existing companies will dominate or new entrants will flourish remains uncertain. Survivability in this industry is likely reserved for companies with key innovations, and a pattern of only a select few businesses succeeding may persist, while the rest are consolidated through acquisitions (Forbes). However, as space tourism becomes more affordable, new sectors such as mining, space manufacturing, and habitat construction could emerge. And as the number of people living and working in space grows, the increase in demand could sustain an expansion of businesses in this sector (HBR).🚀
About the Author
Sujith is a sophomore from the Bay Area studying Computer Science-Economics and Biology. He is passionate about all things biology, whether it’s start-up biotechnology companies or conducting biological research. Last summer, Sujith was growing fungal materials in a biology lab at NASA. On campus, he is also a Project Lead for the Collegiate Consulting Club and a member of Brown Badmaash and Tempo Performance Company. In his free time, you can find him learning trending TikTok dances or playing volleyball. 🏐
References
Chappell, B. (2014, September 16). Boeing and SpaceX win $6.8 billion in NASA contracts. NPR. https://www.npr.org/sections/thetwo-way/2014/09/16/349078981/boeing-and-spacex-win-6-8-billion-in-nasa-contracts
The Commercial Space Age is here. Harvard Business Review. (2023, September 28). https://hbr.org/2021/02/the-commercial-space-age-is-here
Home. Northrop Grumman. (n.d.). https://www.northropgrumman.com/
Kluger, J. (2022, April 1). The age of private space stations is upon US. Time. https://time.com/6163554/private-space-stations/
A new space economy on the edge of liftoff. Morgan Stanley. (n.d.). https://www.morganstanley.com/Themes/global-space-economy
Quora. (2022, April 14). The Pros and cons of privatizing space exploration. Forbes. https://www.forbes.com/sites/quora/2017/04/04/the-pros-and-cons-of-privatizing-space-exploration/?sh=5c06e5af3319
SpaceTech Analytics. (2021). SpaceTech-Industry-2021-Report. http://www.spacetech.global/. https://analytics.dkv.global/spacetech/SpaceTech-Industry-2021-Report.pdf
SpaceX. (n.d.). https://www.spacex.com/
Tran, L. (2022, October 11). The private companies pioneering the (new) space race. AFAR Media. https://www.afar.com/magazine/these-companies-are-the-future-of-space-tourism#:~:text=It’s%20a%20brave%20new%20world%20for%20space%20travel.&text=Three%20companies%E2%80%94Blue%20Origin%2C%20Virgin,separate%20paths%20into%20space%20tourism.&text=Space%20travel%20is%20all