The space industry holds virtually unlimited possibilities. In space, humans could finally move beyond Earth and become a multi-planetary species. In addition to the tremendous achievement it would be to settle on the moon or Mars, there are many real tangible impacts that would make life better for people living on Earth.
Earth observability, that is to say the collection of data and images from space, has allowed great improvements in efficiency in fields such as shipping, agriculture and natural disaster mitigation. Some analysts are optimistic that lessons learned from space may hold the key to fighting climate change and other major sustainability problems.
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In addition, space technologies can do a lot for everyday life on Earth. Already, GPS systems have unlocked a tremendous number of benefits for humanity as it relates to mapping and navigation. Going forward, new innovations such as space mining and manufacturing could exponentially increase space’s impact on broader GDP and economic development.
However, space has not developed at the pace that the general public may have expected back in, say, the 1960s. Since those first banner achievements such as the moon landing, progress hasn’t been quite as obvious, at least to the public. However, the state of the space industry is rather encouraging. That’s particularly so thanks to the large infusion of private capital and expertise into the industry.
How New Space Exploration Companies Have Changed The Sector
A key change in the space industry has been the shifting role of the National Aeronautics and Space Administration (NASA). Previously, NASA was the key organizer that coordinated, developed, and funded space missions. Today, things have evolved to more of a public-private partnership with large private enterprises such as Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin playing a pivotal role.
Contrary to some perceptions, however, NASA hasn’t necessarily diminished in importance. Rather than being the primary customer in the space industry, it can now empower the commercial sector by providing large funding and contracts to the private space sector. This moves much of the decision-making to wealthy entrepreneurs and their associated space firms. Michael Palank, general partner at MaC Venture Capital, said that “billionaires investing to take humanity forward has been a paradigm shift and I hope to see more of it. We need big bold risk-takers to push the space industry forward.”
Another factor that has slowed development has been growing costs. As Palank explained: “The three biggest hurdles facing the industry include the cost of entry, the risk involved with space activities, and the expense of transportation. These elements are interconnected in many ways. Let’s be honest — space is an expensive industry.”
Tom McCarthy, co-founder and vice president of business development at Motiv Space Systems Inc., noted developments are advancing on the private side of the space industry which will improve mission designs and lower costs in future years: “Commercial launch capabilities, at significant scales, have opened doors to rapid mission development. By making access to space more affordable, NASA, Commercial and the Department of Defense have been able to reallocate resources away from fixed launch costs and redirect toward missions’ payloads and technology development at a much more expeditious pace than had been seen over the past several decades.” Advances in fields such as robotics are helping power new innovations such as NASA’s Lunar Terrain Vehicle. This is part of a broader mission to return astronauts to the moon by 2025 and provide a more tangible sign of progress for the space industry.
The Frontiers of Space Development
This gets to the point that there are many promising fields within the broad umbrella that is the space industry. Historically, much of development has been in low Earth orbit (LEO). Due to its proximity to Earth, LEO has been optimal for items such as communications satellites, the International Space Station and the Hubble Space Telescope which have all been situated in low Earth orbit. Much of initial space tourism efforts would likely occur in this range, as might things such as space-based manufacturing.
Ultimately, however, humanity should look beyond just low Earth orbit. Indeed, many observers have been disappointed with the lack of more crewed missions to the Moon in recent years. However, plans are now in the works to remedy that. And investments by the likes of SpaceX may also put Mars within reach in due time.
McCarthy said: “We are still explorers at our core. Pushing the envelope into new frontiers is paramount to the human condition. Today those frontiers exist in space. There was a time when the mere thought of having humans live on a planetary surface for more than a couple weeks was impossible. Today’s advances in technology and determination have challenged those assumptions.” He added: “Emerging robotics complementing the human explorer suggest that the opportunity to finally establish a sustained presence on another world is finally within our grasp.”
In his opinion, humans must establish a successful regular presence on the moon and this would help create the infrastructure and know-how to pursue Mars colonization. For example, new technologies are making it possible to explore the dark side of the moon, which should serve as a jumping point for more extreme space environments. He advises watching the progression of the Artemis missions in particular for a helpful indicator as to the potential timeline for reaching Mars.
Another underappreciated development is that private companies tend to take a more ambitious development timeline than NASA. NASA, for example, greatly reduced its pace in certain missions after the space shuttle disasters. With taxpayer money at play and less risk tolerance in its DNA, NASA is by nature a more conservative organization. By contrast, a company like SpaceX can have a mission accident and be back in the air with another prototype vehicle just months or even weeks later. The “fail fast” approach to entrepreneurship should allow innovators in the space industry to make more experiments, run more risks, and ultimately achieve more on an accelerated timeline.
[READ:Megatrends: AI and Robotics]
The Future of Space Tourism
Turning to the tourism angle specifically, how viable will space tourism be in a commercial sense? Kevin Heath is the CEO and founder of Space Crystals, a company which aims to grow DNA-infused crystals in orbit. He also has extensive experience in commercial space training programs.
His perspective is that much of the space industry’s growth been slower to develop than previously expected in large part due to the insurance question. It’s already highly expensive to insure against Earth-based disasters such as earthquakes or hurricanes; the cost of insuring space vehicles and assets could be even more difficult to quantify. He also points to issues such as life insurance, property rights in space, and debris as other concerns that add friction to the development timelines.
That said, he is optimistic about space tourism taking off and sees a broad array of products opening up. He categorizes the opportunity set as follows:
— Sub-orbital. Quick parabolic trips to the edge of space (such as what is planned from Blue Origin & Virgin Galactic).
— Orbital. Three- to five-day orbital trips where customers stay in capsule and just orbit the Earth.
— Space station. Trips to a commercial space station for seven-plus days in space.
— Lunar. Seven- to 10-day trips around the moon without landing. Eventually 14-30 day trips to the lunar surface.
— Martian. Two- to five-year trips to the Martian surface.
Heath believes there will be a market for a range of different services based on price and potential risk level: “There will be people that want to experience brief weightlessness, see the ‘Black Sky’ and the curvature of the Earth but don’t want the higher risk associated with launching to space. [These are] short parabolic flights (62 miles into space and then back without going orbital), like Blue Origin and Virgin Galactic, and there will be others that will want to go into orbit, to the Moon, Mars and beyond,” Heath says.
The Future of the Space Industry and Potential Investment Opportunities
What does the future look like for the space field for people joining the industry today? Palank said that: “If I was talking to a college student who wanted to work in space, I would tell them to think about what would be possible when getting to and from space is nearly as easy as booking a Southwest flight from Los Angeles to Phoenix. What is possible when we have the kind of infrastructure in space where you can build factories, hotels, laboratories, film studios? What could you create?”
There is much more research and development to be done, but humanity has the opportunity to build on the past 80 years of achievement and make more bold advances in the years and decades to come.
Heath also added some practical advice for new college graduates going into the field: “I would tell them to first off go work for an established company like Boeing Co. (ticker: BA), Lockheed Martin Corp. (LMT) or Northrop Grumman Corp. (NOC) so they can understand how those companies operate and how they have managed to be successful over the many years.” After a few years at a legacy space company, then Heath would advise the potential graduate to go to a startup or newer space company that is more adventurous or innovative with that prior experience in hand.
This gets to the investing angle to space as well. The industry is both so broad and at such an early stage that there’s not really a clear one-stop shop for space exposure. But there are a handful of space exchange-traded funds, or ETFs, such as the Procure Space ETF (UFO).
The largest space-themed ETF by far is Cathie Wood’s ARK Space Exploration & Innovation ETF (ARKX) which has $280 million in assets under management, compared to UFO’s $49.6 million. ARKX’s top holdings include Iridium Communications Inc. (IRDM), a global satellite communications company that provides voice and data services; Trimble Inc. (TRMB), which develops hardware for global navigation satellite systems and unmanned aerial vehicles, or UAVs; and AeroVironment Inc. (AVAV), which has worked with NASA on building high-altitude solar-powered UAVs.
However, space-focused ETFs have not become nearly as popular or large as other cutting-edge fields such as biotech yet.
Part of that difficulty is in getting the right mix of companies within a space ETF. There are space-based telecommunications firms, satellite producers and operators, Earth observability and mapping companies, among others. However, many of the largest and potentially most interesting firms are not currently publicly traded. In addition, space remains expensive and highly speculative, and Wall Street has lost interest in many companies that don’t yet generate positive operating profits. Several newer space companies have gone bankrupt or run into financial trouble in recent years, and the broader downturn in the tech industry in 2022 is likely to pressure funding as well.
There are also the legacy companies like Boeing and Lockheed which earn billions of dollars from space-related revenues. However, space isn’t the primary line of business for either Boeing or Lockheed, meaning that many investors may not want to own these companies as part of their allocation to the space industry, instead viewing them as aviation or defense investments.
For investors with strong risk tolerance, however, the current downturn in tech industry valuations could mark a great entry point into space investments. Especially as catalysts such as the new moon missions are on deck within the next couple of years, this could reinvigorate more fascination among space and related investments within the general public. SpaceX’s frequent missions are also shining more publicity on the industry, though unfortunately for investors, CEO Elon Musk seemingly has little interest in taking that firm public in the near future. Regardless, there should be some key breakthroughs in the space industry in coming years, and there could be a renaissance for companies and investors operating in the field.
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Megatrends: Investing in the New Space Race originally appeared on usnews.com
