Business Matters, Even in Space, Especially in Space – Thoughts and Highlights From Ascension 2017

Hey, am I at the right conference? A first-time visitor might be forgiven for feeling a little confused. There was certainly no shortage of bleeding-edge science and engineering – asteroid mining, anyone? – but for much of this three-day event, the air was abuzz with talk of bootstrapping, venture capital funding (or lack thereof), pivoting, culture-building, and various and sundry other facets of the startup entrepreneur’s makeshift world of visions and fantasies, dreams and nightmares. One could easily lose sight of the fact that all of the many ideas floating around shared a common thread – they were all centered around launching, running and growing a space business in Canada.This really shouldn’t surprise anyone. It’s not only that space is big business; it’s also a great place to launch new businesses and new careers. This is the clarion call that brought about nearly one hundred science and engineering students from across Canada for “Ascension 2017: Canada’s National Space Conference for Students.”

Hosted this year by the University of Toronto Aerospace Team (UTAT), the event is presented annually by SEDS Canada (Students for the Exploration and Development of Space). SEDS Canada chairman Elias Solorzano gives full marks to the conference team, directors and volunteers at the University of Toronto – and to the event’s 18 distinguished speakers – for making it such a great success.

But are all of these students budding entrepreneurs? Eric Choi, Senior Business Development Manager at Magellan Aerospace, helped put it in perspective during one of the breaks: “When I was in school, it was about ‘How can I get a job?’ Today it’s ‘How can I make a job.’” That mindset speaks to the times we live in, and it applies to all kinds of industries and professions, whether you start a business or even if you work for one as big as Magellan. And when you put that notion into the context of space, it can quickly get the mind a-spinning.

So it was this past Saturday morning. In less than two hours, attendees got a sweeping overview of how the business of space works in Canada. The New Space crowd was represented by two small firms, Kepler Communications and SkyWatch. Old Space was represented by Magellan, one of Canada’s most established aerospace companies. The audience also heard these business leaders’ thoughts on Canada’s space policy: issues, strengths and weaknesses, what could and should be done to help push the industry forward.

Innovation, and Great Companies, Start Here

Jeff Osbourne, co-founder and VP, Business Development at Kepler Communications, devoted his session to the nuts and bolts of building a space startup – or, as he put it, “managing the chaos.” “There’s a lot of things that you need to worry about, and what I believe separates a company that succeeds from a company that fails is how capable you are of managing the chaos, how capable you are of prioritizing: What are the things you need to do today, what are the things that can be put off till tomorrow, and then actually executing.”

Jeff built his talk around two lists: First, all the rules you’re supposed to follow to build a company (none of which he and his partners followed). Second, all the things they did instead – good, bad and otherwise. It’s a given that no business can succeed without a solid product or service offering but, as was the case with Kepler, at first you might not really know what that offering is, or if there’s even a market for it. “All we really had, and all anyone can really count on, was our team.”

Together with four colleagues from previous adventures, including the University of Toronto Institute for Aerospace Studies (UTIAS) and UTAT, Jeff wanted to forge ahead in classic “ready, fire, aim” fashion. This brought them in very short order to the oft-dreaded pivoting stage, going from where you thought you were, or should be, to where you actually need to be. In Kepler’s case, this took up a full third of the company’s three-year journey to where they are today. “We wanted to provide in-space telecommunication services. We realized there was no short-term market for this, so we pivoted towards a high-volume data forward service, and there wasn’t really a market for this. Then we went to this medium-volume data forwarding service – moving hundreds of megabytes per month for those guys – and we found there wasn’t scalability in that. So now we’re focused on machine-to-machine communications. There were a lot more pivots in between these, but these were the major ones.”

Dark humour and self-deprecation notwithstanding, Jeff did point out that Kepler Communications is in fact one of Canada’s true space sector success stories. The company has evolved from “nothing but a crazy idea” in 2014, to a $25K prize in an entrepreneurship competition in 2015, to $3 million seed unding in 2016, to launching their first satellite later this year. Jeff’s take-away? “If you’re unwilling to be dynamic and change what you’re doing, what you’re designing, what you’re building, to what people actually want, you’re going to fail.”

It’s the Customers, Stupid

James Slifierz, co-founder and CEO of SkyWatch, had a lot to say about pivoting as well. Unlike Jeff’s example, in this case James and his team had a well-defined product even before they had a company: “We used to build software for some of the world’s top astrophysicists, allowing them to access data in real time from seven different NASA space observatories.”

Their turning point came when this project won an international award, which in turn garnered considerable attention from the media and investors. Until then, no one had been talking about starting a business. “We had no business plan, no business model, we weren’t anticipating building a company. But we decided to build a company on the assets. And the only assets we had when we started were attention – and a really crazy idea that we were conveying.”

That crazy idea was actually a clear and compelling mission: “Our goal was to be the largest deliverer of intelligence from space. We wanted to be the number one source where people went to get intelligence from space.” The business challenge? Moving from servicing a “market” of a few dozen scientists to creating a sustainable, revenue-generating customer base. In the conventional business world, the logical next step would be to identify that market and the strategy for getting there by way of some serious and expensive market research. In today’s startup world, the end goal is the same, but not the means, or the dollars it takes, to get there.

“Before we spent an ounce of time writing code on this project, on our website we said that we already had this built, and if you want access, let us know. We were trying to (a), determine and validate that there was demand, and (b), use that as a way to do real, hard, customer-driven research into trying to understand what the problem was. Within four months we had 1500 companies signed up, which was mind-blowing. Fifty percent of our traffic came in through organic search; twenty-five percent was referral, and the other twenty-five percent was from blogs writing about us.

“The make-up from those 1500 company interviews? Seventeen industries – and they had proposed around 500 unique use cases. And what was consistent in all those discovery interviews was that the reason they were not doing this today was the time and cost of trying to figure out where they would acquire that data from, and how they would maintain it.”

This, James explained, was the key to SkyWatch kingdom. “The fundamental thing that the space industry is getting better at but still lacks is that we tend to not do a good job of understanding non-traditional markets that we would sell into. And we think [erroneously] that non-traditional markets care about what we do. And the proof of that is that all of these companies that signed up for our platform don’t care about space at all, and actually don’t want to take the time to learn about it. So what we realized we had to achieve was, we had to build an API, a product, that they would view no differently in their organization than any other product that their team used to build products. For us, that was the breakthrough moment.”

Welcome to the New Old Space

Eric Choi’s session focused largely on the policy side, however he did draw one parallel between Magellan and today’s startups – namely, the pioneering spirit that has long typified the Canadian space industry’s decades-long history.

He traced the company’s roots back to the early 1930s (albeit to a business that Magellan acquired much later), when a two-man Winnipeg-based company MacDonald Brothers Aircraft Company started making pontoons for float planes. Long before the term ‘pivot’ meant what it does today, Magellan was evolving across many products and indeed several industries. In the case of space, from building suborbital vehicles in the 1960 (Black Brant) to developing science payloads that went on the rockets, to NASA space shuttles, to the ISS. Eric highlighted just a few of its major contracts, notably RADARSAT Constellation Mission (“Canada’s ‘space innovation flagship; among CSA- and government-driven projects.”)

Eric also noted along the way that in its space-specific activities alone (one of Magellan’s four lines of business), the company engages businesses of every size and shape, creating jobs and other economic benefits right across Canada. All of this, he added in closing, is to say that Canada’s space industry is strong, well-established and growing on both a national and a global scale. Even for those not willing or able to deal with the Wild West risks and opportunities of the entrepreneurs’ path, the opportunities are nevertheless boundless. And, yes, he added, “We’re hiring!”

Two Questions From the Audience

What are the advantages that in the aerospace sector in particular can be leveraged in future startups?

Jeff Osbourne: “The talent base in Canada is unique in that there is a bigger supply of talent that is being underutilized. We have an incredible talent pool of people coming out of schools – and they all go to the States, or they go to companies they don’t necessarily enjoy working at, they go to companies that maybe don’t offer the kind of growth opportunities that you might have in the US or in certain places in Europe.

“The second answer is that, for a satellite company in particular, there are increasingly favourable regulatory things that Canada is spearheading that are going to make Canada, in my opinion, a centre for New Space companies to get regulatory approval for space constellations, satellite constellations. That’s something that’s really been developing over the last six months – where being able to get access to things like frequency, space station licensing, is a little bit easier in Canada than in some other countries.”

Eric Choi: “Given what’s going on in the world right now, I think we could stand up a little bit taller and say that Canada is actually a great place to live. I think that after the Avro Arrow nonsense all those years ago, you could say that turnabout is fair play. I can get some really talented people up here and just say, ‘This is a welcoming, open place, a diverse place, and it’s a fantastic place to live.’”

If there’s one thing you would change about the regulatory environment, what would it be?

James Slifierz: “Pull the CSA out from under ISED. Or, [appoint] a space minister, which I think would become even less about the economic implications and more about the geopolitical implications. If there are geopolitical problems in space, how well-equipped do we have as a minister to negotiate that on a world scale – [someone] who is very specifically in line with understanding the problems that that poses. I think that’s something that should be strongly considered.”

Eric: “There’s a process of government procurement in general that needs some streamlining. If you look at space activities, there’s basically the CSA, Public Works, ISED and the DND. All of these organizations have laudable goals, but they may not necessarily be aligned.”

Jeff: “Procuring government contracts as a Canadian company is quite difficult when you’re a small company. In the US, they have what is called the Small Business Administration, and they have interesting regulations where a certain number of contracts that the government gives out has to go to small, disadvantaged businesses; these are things like aboriginal businesses, women-owned businesses, small & medium enterprises, businesses in economically disadvantaged businesses. Canada doesn’t have this.

“Canada likes to tout the value of getting access to SRED (Scientific Research and Experimental Development); basically if you are a research and development company, you get 40 cents back for every R&D dollar that you spend. Which is great in principle. The challenge is that you need the dollar first. And it’s difficult to raise money in Canada, so to get that dollar so you can get forty cents back is tricky. To me, it’s sort of putting the cart before the horse.”

James: In the UK, the [Satellite Applications Catapult] program has been pretty successful [helping companies raise private finance and connect with the best grant-funding sources]. The UK might have one of the smallest space agency pledges per capita, and yet they have a ten percent year over year growth in their space economy, which is one of the fastest next to the US. So it’s a good example of how you can think about engaging the private sector, especially at those early stages – and still saving money at the public level. I think it’s a good model to look at as a starting point into what we could potentially do here.”

Editor’s note: The story was updated on Monday, March 13 at 1:30 p.m EDT to reflect comments submitted by Eric Choi.

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Contributed by: Larry Hicock is an author, filmmaker and business/technology writer. He is the president and creative director at Sparketers, a small marketing agency in Toronto that specializes in B2B marketing communications and industrial video. His most recent initiative is a feature-length documentary that will be released this summer.