2020 was a record year for space VC investments. 2021 could be even better with ground-breaking space missions and strong investor appetite. Despite the coronavirus pandemic, SpaceX became the first commercial company to successfully send astronauts to the International Space Station last year. The US, China and UAE completed historic missions to Mars. Back on Earth, new applications reliant on space became increasingly relevant as COVID-19 swept around the world. Governments and businesses embraced satellite data to track the spread of COVID-19 and support public safety/first responders. Satellite IoT and Earth Observation made remote asset inspection, tracking, and monitoring possible, delivering essential services. And autonomous drones enabled “contactless” delivery of much needed medical supplies around the world.
These trends will likely accelerate in 2021 as the use cases become integrated into regular workflow. In addition to being essential to everyday activities, space technologies are demonstrating their unique ability to solve pressing high value problems around the world. With the above in mind, here are our top predictions for trends in Space 2021:
SpaceX continues to generate excitement with new milestones. SpaceX is leading the transformation in almost every part of the space value chain from launch to smallsats and spaceships. After a record-setting 2020, SpaceX has ambitious targets of launching 48 Falcon missions, three crewed missions to the ISS and fly Starship closer to Mars. All eyes will be on the Starlink broadband trials and how SpaceX can close the business case for mega-constellations in the coming year. SpaceX’s “Better Than Nothing” trials are going well in the US delivering better than expected speeds of more than 100 Mbps, but the company still needs to drastically cut the cost of the terminal to turn a profit.
SpaceX has to continue meeting new milestones to convince investors it's worth $100 billion. Morgan Stanley increased its valuation of SpaceX to over $100 billion in October based on progress of Starship, a spacecraft enabling human Lunar and Mars exploration. Prior valuation of $50 billion assumed $40 billion for Starlink and $10 billion for Launch. Starship is a fully reusable transportation system with the most powerful launch vehicle ever developed and spaceship to carry crew and cargo to the Moon, Mars and beyond. Other than helping humanity to colonize Mars, Starship could enable “supersonic” point to point travel on Earth, as well as massive satellite deployment, deliver 400 Starlink satellites at time vs 60 today on a Falcon 9.
China expansion overseas in the New Space Race. US President Biden’s advisors are asking him to cooperate with China on space exploration to ease tensions created under the Trump administration, which viewed China as an adversary and focused on maintaining US dominance in Space. China has invested billions in space programs under President Xi and has made enormous progress to catch up to the US and Russia. Last year, China became the first country to land a rover on the far or “dark side” of the moon. In July, China launched its first mission to Mars. In December, China’s Chang’e-5 spacecraft made history by returning Moon rocks and soil to Earth, becoming the third country that has landed on the Moon and brought back samples.
According to the Institute for Defense Analysis, China now has close to 80 commercial space companies, most of them are focused on satellite manufacturing and launch services. Last summer, i-Space became the first privately owned Chinese rocket company to achieve orbit and third in the world. Although we do not hear much about Chinese space activities in the US and Europe, Chinese space companies have been active in developing markets. Emerging leaders will likely expand to compete globally with the likes of SpaceX in all key areas of the value chain, from Launch, Space Exploration, to applications in Communications, Navigation and Earth Observation.
Growing cyberattacks on space infrastructure. Cybersecurity has become critical in space and we expect to see more cyberattacks on space infrastructure in the coming year. Nation states and businesses are vulnerable to cyberattacks interfering or disabling their space assets due to their reliance on satellites for everything from communications, navigation to intelligence gathering and missile launch warning. Attacks could include jamming, spoofing or shutting down a unit or gaining access to surveillance data.
Cyber defense is a top priority for the newly created US Space Force. The US Space Policy Directive 5 released in September provide guidelines for cybersecurity in space. Growing cyber threats represent new opportunities for commercial startups with GPS alternative and cybersecurity solutions. For example, Seraphim’s portfolio company ArQit is building a satellite constellation using quantum key distribution for cybersecurity applications, whilst another, Xona Space Systems, is looking to deploy its own GPS constellation in low earth orbit.
“Space Junk” poses a growing threat to space operations. The International Space Station had to maneuver three times last year to avoid debris collision. The same year, the European Space Agency (ESA) had to maneuver one of its satellites out of the way of a Starlink satellite. Some 29,000 human-made objects larger than 3.9 inches are circling Earth, according to NASA. Space has become so crowded that debris has become a threat to future missions. And it is about to get worse. The number of satellites in orbit is expected to grow exponentially in the coming years with thousands of satellites from mega-constellations coming online. We are tracking about 200 companies planning to launch more than 100,000 satellites in the coming years.
Better Space Situational Awareness (SSA) are required to track and monitor space assets and debris to mitigate collision. Two of Seraphim’s portfolio companies, LeoLabs and D-Orbit, are active in SSA and debris removal.
Pandemic has shown space can help solve big and pressing problems. As COVID-19 sweeps the world, governments and businesses embraced satellite data to track the spread of coronavirus and support first responders. Satellite IoT and Remote Sensing make remote asset inspection, tracking and monitoring possible, and enable essential services with limited staff on-site. Autonomous drones enabled “contactless” delivery of much needed medical supplies around the world. In 2021, the trends from the pandemic will likely accelerate as these use cases become integrated into normal workflow. In additional to being foundational to our everyday activities, space technologies are demonstrating their unique capabilities to solve pressing and high value problems.
New US administration will accelerate use of space to combat climate change. The trend of using of satellite data and analytics to independently monitor and manage the risk of climate change will accelerate in the coming year with strong public and private sector interest and more frequent and intense natural disasters. Most importantly, President Biden plans to make a federal investment of $1.7 trillion in clean energy and the environment over the next ten years, leveraging additional private sector and local government investments of $5 trillion. His proposal includes the US achieving 100% clean energy by 2050, make smart infrastructure investments, recommit the US to the Paris Climate Change agreement and stand up to polluters. All of the initiatives above will require data collected from space. Four of Seraphim portfolio companies (Spire, Iceye, PlanetWatchers and SatelliteVu) provide geospatial data and solutions to analyze climate impact.
Space startups leveraging SPAC to raise capital enabling early investors exits. 2021 will be a year of space companies going public through Special Purpose Acquisition Companies (SPACs). A SPAC is a company that raise capital through an IPO to acquire another company. Going public via SPAC merger allows the company to avoid IPO roadshows and 180-day lock-up. SPAC IPO accelerated last year with more than 100 transactions raising over $40 billion. Virgin Galactic became the first “pure play” space IPO via merger with a SPAC in late 2019. Looking ahead in 2021, two Space startups - Momentus and Seraphim portfolio company AST & Science - have announced their merger with SPACs, but we will likely see more activities with low interest rate and high investor appetite.
Emerging category leaders and vertical integration drive industry consolidation. In addition to SPACs looking to make acquisitions, the trend of emerging category leaders in space and established corporates acquiring complementary capabilities to expand into new markets will likely accelerate in the coming year. For example, Maxar’s acquisition of Vricon brings the leading Earth Intelligence supplier 3D data and analytics capabilities, while Raytheon’s acquisition of Blue Canyon enables the defense giant to tap into the growing DoD smallsats market leveraging its strength in sensors and cyber. For defense companies, interest remains high for companies with technologies around intelligence, surveillance and reconnaissance (ISR), space, AI and machine learning. Funding will continue to flow to category leaders in space to fuel M&A and consolidation. While this could lead to failures of weaker startups without unique value proposition, it will lead to a more health and robust industry ahead.