On Tuesday, November 8th some 90 people gathered at the Shaw Centre in Ottawa for the 1st Canadian Space Policy Summit organized by the Canadian Space Commerce Association. Representatives from industry, academia, not-for-profits and government discussed a variety of policy issues with a planned outcome of putting together a recommendations report to be disseminated, and in particular, provided to Innovation, Science and Economic Development Canada (ISED) Minister Bains.
The Symposium was organized with an opening keynote by Canadian Space Agency (CSA) president Sylvain Laporte followed by a Space Policy and the Canadian Innovation Agenda plenary with four follow-on panel discussions. This is the third of three stories on the event.
The Commercial Ecosystem from the 2016 Space Policy Symposium
In the previous two stories(1,2) in this series I’ve focused on space policy from the stakeholders perspective in relation to Canada’s civil space program. In this final story I’m going to focus primarily on the commercial space policy.
At least half of the Canadian Space Policy Symposium schedule was dedicated to commercial space for ideas and opinions shared came from academia, industry, the investment community and government. This included three panel discussions.
The panels focused on Funding and Finance, Start-ups and Accelerators, and Leading Critical Technologies.
Funding and Finance
In the Funding and Finance a few interesting points were made by the panelists which was moderated by Chris Sallaberger, CEO, Canadensys Aerospace and included Alex MacDonald, Senior Economic Advisor, NASA Office of the Administration, Christopher Baird, Senior Director, Ministry of Public Services and Procurement and Hassan Khan, CEO, Quantius, an alternative commercial lender.
Sallaberger, in his opening remarks, said he doesn’t like the term New Space, he says “I think space is going through a revolution really, and what people refer to as New Space, really is, the way space is evolving. And I think this very commercial approach to space, this world where government acts more as a procurer of services rather than a developer, a facilitator of commercial space business, is the way the world is evolving, and one that we as a country really need to be ah, aware of, and to be supporting of, if we want our industry to thrive, innovate, create wealth and jobs in Canada.”
In response to Iain Christie’s earlier remarks on the need for new funding from the government, Sallaberger went on to say that it’s really important to discuss how we “spend that money, how we use those resources to really support the industry” and that the panel would in part discuss it.
Alex MacDonald, a Canadian, was not representing NASA on the panel, but was appearing as an individual. His first point was that of the G8 countries, Canada spends the least on its space program in terms of actual dollars and the second least per capita. Sallaberger pointed out that while this is true, Canada has done well with respect to exports of space products, though those gains are in jeopardy at this time.
MacDonald also pointed out that one of the reasons why Canada’s space program isn’t as as well known in its own country as NASA, has to do with the fact that NASA has centres spread out across the country, whereas the Canadian Space Agency is headquarters south of Montreal with no other centres located regional across Canada, something he says “is critical” that Canada should do.
Christopher Baird discussed the Build in Canada Innovation Program which has the government being the first customer for a companies new technology product. he said five space related technologies have received funding through the program recently. This seems a really low number, however many some of the products developed by the space sector might not be something the government would use. Of note, he said that there has been a significant groundswell and positive energy in the public service sector. He also said important procurement changes are underway, in part as a result of the focus on innovation by the government.
The last panelist, Hassan Khan, comes from the investment community. Quantius, an alternative commercial lender, has to date focused on loans to the high tech, telecom and medical technology sectors but they have an interest in aerospace and defence, advanced manufacturing, clean technology, agri technology and biotechnology. Most recently they provided funding to TheRedPin, an online real estate brokerage and WireIE, a broadband telecom solution supplier.
Hassan identified four problems space companies face. The first problem, particular to Canada, is a private capital challenge and that it affects every knowledge base sector in Canada. He said Canada “exports about $5 billion in intellectual property innovation each year.” This is a very interesting point which he elaborated on. Specifically he said that at the “university, at the incubator, the R&D level, innovation has been created, capital has been provided from governments, from the taxpayers and a whole bunch of other sources to subsidize that innovation, but because the partners are not there, later on when the capital stops, to take those companies and keep allowing them to grow, they stall. And then the only other option becomes acquisition to another market where that growth can keep happening.” So by leaving we’re “subsidizing profits that are enjoyed elsewhere”. He concluded this point by saying “is our main challenge innovation or commercialization?” he said it’s both but that commercialization needs “much more focus.”
The second problem he identified was the lack of private capital, and he cited that venture firms are looking for the next Uber, SpaceX or Facebook and they don’t “necessarily focus on the solid companies that might become a solid $100 million or $200 million revenue company”.
The third problem he identified was the companies themselves. He said most of the enterprise value is not always on the balance sheet that a vendor or bank can wrap their heads around. He mentioned value in the form of patents, software, proprietary designs, trademarks and spectrum licences which become the true initial assets and form the intangible value of the company. He said there needs to be a way to look at these intangible assets as you would a bricks and mortar business. This is obviously something Quantius itself is trying to do.
The fourth problem was a challenge in timing and duration. With respect to timing, he’s talking about companies who have a bunch of possible contracts, whether it’s government or from a prime, and don’t know when they will happen, but when it does, they need capital in place. As to duration, companies assume a duration length for a project, however circumstances, sometimes beyond their control, push a project into another fiscal period, so access to capital needs to be flexible for the actual duration of the project and not the expected duration.
As the panelist discussed various points, a few other interesting points were made.
MacDonald said that while NASA and other U.S. organizations are very pleased with the level of talent coming from Canada, they wonder why Canada is letting them go. He says the issue of letting top talent leave Canada is an issue that should be addressed.
Hassan mentioned that there’s a new mindset in Canada from the first generation of technology innovators who have cashed out, and are now looking more broadly at opportunities in Canada.
Start-ups and Accelerators
The Start-ups and Accelerators panel was moderated by Mark Tinkler, COO, Canadian Space Commerce Association and panelists included Chris Sallaberger, CEO, Canadensys Aerospace, James Slifierz, CEO, SkyWatch and Chairman, MaxQ Space Accelerator, and Brodie Houlette, Co-founder and CCO, Promethean Labs and President, MaxQ Space Accelerator.
In discussing start-ups and accelerators the following useful points were made:
- Tinkler brought up the point that an independent study of 6,000 people in Canada by the Canadian Federation of Independent Business showed that only 15% of them took advantage of the government Scientific Research and Experimental Development (SR&ED) Program. The point being that space companies should look to using this program more. Sallaberger noted that it’s sometimes difficult for the space sector to take advantage of the program.
- Sallaberger said to be successful in space you need to be internationally focused and take advantage of everything internationally as well. He also brought up the point that countries like Luxembourg have identified opportunities in the space sector and are making funds available and changing the law to make it attractive for companies to open offices there. However, the opportunities do come with string attached including having to relocate a portion of your business there. Nonetheless, they are getting companies taking advantage of the opportunities including Planetary Resources and Deep Space Industries.
- Slifierz brought up several points including; that ambition is lower in Canada; 1/3 of the audience at U.S. conferences he attends comprised of youth, something you don’t see in Canada as much; he said it’s cost effective to do business in Canada as a start-up and that talent is available and strong, especially in engineering skillets. On the other had he said, and it’s point heard many times, access to capital is really hard in Canada and there’s very low activity in merger and acquisitions. Sallaberger rebutted one of these points, saying it’s not that Canadians are less ambitious, but rather there are less opportunity.
- Houlette said that barriers to enter the market are lower than in other jurisdictions and that lower regulations also help.
Leading Critical Technologies
The Leading Critical Technologies panel was moderated by Charity Weeden, Senior Director Policy of Policy, Satellite Industry Association and panelists included Dan King, Director Business Development, Robotics and Automation, MDA, Simon Grocott, Deputy Director, Missions, UTIAS Space Flight Laboratory, and Prahant Shukle, Director General, Canada Centre for Mapping and Earth Observation.
The final panel really didn’t address specific technologies, but rather focused on questions which were outlined by Dan King of MDA and public private partnerships mentioned by Shukle.
King framed his thoughts by asking the questions of the what, who, why, and how in context of technologies including the reasons and rationale in developing critical technologies;
What – We can’t forget we’ve already developed critical technologies and it should be noted it took time to develop these technologies. However, if there are other new critical technologies that Canada identifies as a need to develop, we should make sure we cover the complete scale of what’s called the Technology Readiness Level (TRL), where 9 at the top of the scale is a product that is ready for operational status and TRL 1 is the entry point for a new idea where basic principles are observed and reported.
Who – What other sectors within the Canadian economy could benefit from space technology? For instance, the downstream applications, meaning data collected from a satellite could be used by the oil and gas sector to help their business.
Why – Why do we invest space? There could be national objectives for security, satellite communications, inspiration. King said an ideal situation is where you serve both national objective and commercialization, which is a key factor.
How – Take some of the existing critical technologies, refresh them, but also create the environment where they could be further commercialized. And an area that we need to improve on is public-private partnerships. He cited SpaceX which has leveraged public-private partnership with NASA to grow the company and help fund new products.
NASA technology Readiness Levels. Credit NASA.
Shukle said while satellites, and the numerous options available is fantastic, it’s the sensors he’s interested in and the downstream data they enable. In speaking about sensors he recounted the history of radar use in Canada and how it went from a ground level application to being used in aircraft, and eventually in space. The capability developed over the years enabled Canada to become a leader in Synthetic Aperture Radar (SAR). Importantly, Shukle stressed, and coming back to sensors, is that this capability was a public-private partnership.
Shukle went on to say with respect to public-private partnerships “our work is not about the technology push, our work is about the policy push. That’s really critical, if we’re to build a sustaining relationship between the public and private sector, we’ve got to recognize that there is a sweet spot, that we as Canadians have to come to, in terms of the technology push and what our technology innovation is capable of driving towards, and our ability to sustain it, both from an economic perspective in a country that’s the second largest one in the world, but with some of the lowest population densities in the world. Which means a very low rate of GDP (gross domestic product) per square kilometre. Our ability to invest absolutely depends on the partnership between the private sector and the public sector, and if we don’t get that right, if we don’t get that technology innovation component right, with the policy pull component, my own intuition, tells me, that it’s not sustainable. But if we get it right, and you think about the billion dollars that we’re going to have in natural resource projects over the $650 billion natural resource project or so over the next 10 years, I think that’s way more sustainable. So we need to work on that kind of a partnership.”
He also said how we figure out public-private partnerships will help us address fiscal realities and that we have to be careful not to focus too much on this concept of innovation, which he says “is dramatically disruptive.” Innovation happens in 10% steps along the way. And rather than have have one company succeed and 99 failures, he would rather see innovation happen in steps with more companies succeeding.
When discussing the Innovation Agenda for the space sector there are four primary factors that need to be considered;
- Space Policy – We know now that a new space strategy is forthcoming in June of next year. That new strategy will be influenced in part by the new Space Advisory Board which will shortly be selected by Innovation, Science and Economic Development Canada (ISED) Minister Bains. A strong signal by the government in delivering a clear space policy with both short and long term goals will go a long way in growing the commercial space sector.
- Investment by the Government – While the government continues to solicit input on the Innovation Agenda, it will soon have to make decisions on what investments to include in the 2017 budget. Unfortunately for the space sector, a new space strategy being released about three months after the expected budget could mean little, if any, in the way of funding for new programs. However, this does not preclude the government from making new program funding a part of the budget if it so chooses. Successive governments have consulted with stakeholders for years and should by now have some idea as to what they should be investing in.
- Investment by Stakeholders and the Financial Community – Here we have a dilemma. Without a clear space policy, companies have been leery of investing any appreciable resources into research and development. At the same time, the investment community hasn’t seen much “buy-in” by the government in the space sector and have been leery in investing in start-ups.
- Public-Private Partnerships – A sustainable space program needs to include the right balance of public-private partnerships. This is an issue that government and industry need to work out by creating a new mechanism so that many companies can take advantage of these partnerships, rather than a few.
The path to a growing commercial space sector appears to be finding the right balance between government investment and investments by stakeholders, including the financial community. This will be based on an Innovation Agenda that builds on a new space policy with realistic short and long term goals and that signals to stakeholders that Canada intends to be a leader and will compete globally in the space sector.
To find that the right balance will take all stakeholders working together, but for this to happen the government must first send out a clear message, meaning action, and soon. The government is heading into its second budget in its mandate and now is the time to act. That was the message telegraphed to government from stakeholders assembled at the Canadian Space Policy Symposium.
1. Part 1 in the series: The Canadian Space Agency Perspective from the 2016 Space Policy Symposium
2. Part 2 in the series: A Balanced Space Program from the 2016 Space Policy Symposium