Axiom Space’s recent private trip to the International Space Station just landed, but Axiom’s main business isn’t space tourism. With the ISS slated to be shut down at the end of the decade, and NASA making it clear that they’re setting their sites far beyond low Earth orbit (LEO), Axiom is part of the charge to build privately-owned space stations with their upcoming Axiom Station.
In turn, C5 Capital is helping them get the capital they need. They recently led a $130m Series B round. Axiom is a big play for them, but it’s a significant departure from most of their existing portfolio. They’re a cybersecurity investment firm, first and foremost, with their main space investment being Satelles, which is a GPS backup network that prevents outages that might affect national infrastructure.
So what does this big investment in space stations mean for C5 and their outlook towards space? In an interview with SpaceQ, Kurt Scherer, C5’s Managing Partner for Impact Partners, revealed how they’re building and securing the future space economy.
From military aviation to cybersecurity to space investing
Scherer’s’s involvement in cybersecurity is one part of a long career in security and defence. Starting as a United States Marine Corps (USMC) aviator, Scherer moved to the security- and defence-focused consultancy Booz Allen Hamilton in 2002, where he rose to lead their National Innovation Center. He moved to C5 in 2018, becoming COO in 2019 and Managing Partner for Impact Partners in 2019.
C5 was founded by André Pienaar in 2005 to fulfill what Scherer called “a need for a mid-stage venture capital firm to focus on cybersecurity.” They have three funds under management, two of which are “exclusively” focused on cybersecurity. They’ve seen robust growth in the cybersecurity market; Scherer said that “cybersecurity is one of the number one or number two agenda items on every Fortune 500 company in the world.”
Pienaar, Scherer, and the rest of C5 have been looking at space and thinking “the exact same thing was going to happen with space.” Scherer said that “what’s been surprising is that it has accelerated even more so than we predicted.” He pointed to the “over $15 billion in total financing in 2021, double what was set in 2020, which was also a record in the number of [funding] recipients and deals.” C5 was seeing explosive growth of launch technologies, LEO satellite constellations, communications and Earth observation capabilities, and knew there was opportunity there.
They also felt they were in a good position to take advantage of it, considering what Kurt described as a competitive advantage in “understanding the intersection between commercial and government markets.” Satelle is a good example of the kind of “dual use technologies that they’re focused on: it has national security uses, but is also used by financial markets to provide highly accurate timing. C5 believes that Axiom may become one as well.
C5’s Axiom play
Scherer sees the Axiom Station as a key investment in the future of space, and as the “first private space station, and the replacement of the ISS.” He’s confident that Axiom will come out of the gate first due to Axiom’s licensing of “exclusive right to the port on the ISS, allowing them to essentially utilize some of the systems on the ISS like power, and others, that will give them a leg up.” He said “it’s not an unfair advantage, it’s a negotiated advantage…which will keep them ahead of any other stations being developed.” He sees space as a market that will go to “a trillion dollars by 2030,” echoing Seraphim Capital CEO Mark Bogget’s predictions of upcoming “multi-trillion” waves of space development. It should be noted that Axiom private space station competitor Nanoracks, has the Bishop Airlock attached to the ISS and is already using it to conduct commercial operations, though not for visiting spacecraft. It’s primarily used to deploy small satellites and other payloads.
Axiom will be a key platform in building that space economy. Scherer said that you can “leverage” the space available on the platform, as well as a straightforward source of electric power, proximity to satellite constellations, and the ability to “launch things from the station instead of from Earth.” That latter capability will be particularly important for space-based manufacturing, and Scherer pointed to the ability to “assemble material structures in microgravity that can be stronger and lighter than anything formed on Earth.”
Scherer said that C5 is “tracking over two dozen different areas of value that are going to be created” in the “investable segment landscape of space.” While he couldn’t go into complete detail, he said that it includes “everything from structures and materials, to datacenters, to human launch services, to communications…a broad range of different ways that different companies are going to make money.” He pointed to the rise of space-based data centers, more speculative technologies like fractional power systems, and the growth of the lunar economy. Scherer said he’d read SpaceQ’s recent coverage of Lonestar’s upcoming lunar data centers with great interest.
C5 is confident that Axiom’s station they’re investing in will be a critical fixture within this wide and growing economic landscape.
Securing the space economy
Returning to that question of where cybersecurity stands within this landscape, Scherer said that security will play a critical role.
As the space economy grows to that enormous trillion-dollar size by the end of the decade, security will become vitally important. Scherer said it was “literally the high ground of cybersecurity…as more nodes are created and more information is shared between the Earth and space, that information has to be secured.” He added that “whether you’re talking about a commercial threat, or a military threat, data that is not secured becomes a vulnerability.”
Scherer believes there are historical antecedents to this belief, and that “the same pattern we saw with moving from non-encrypted to encrypted communications in email or in the cloud” will happen in space. So they’re looking at “investable areas around communications, Earth observation, analytics, digital physical protection, asset tracking, navigation, space, situational awareness…places where the data component is going to be really, really critical.”
Scherer, owing to his military background, described it as a “warfighting domain.” Just like the Earth, the sea, the air and the Internet became domains where intra- and inter-state conflict takes place, he sees it as a growing issue in space. In this new domain “the need to protect this territory and ensure that national interests are protected” will be key.
That said, Scherer was clear that he doesn’t believe that there will be physical threats to the station. It will be a privately-owned station whose security will be in the interest of a wide number of national interests, reducing the likelihood of any serious physical threat. Instead, he sees it as being more akin to securing the terrestrial Internet. Scherer believes that C5’s role in building the Axiom Station will put it in a good position to prosper as it tends to this need for space security.
Investing “to preserve our way of life“
Scherer (and, presumably, C5) doesn’t see a contradiction between a security focus and a profit focus; in fact, he sees those two as being inextricably linked.
Throughout the interview, Scherer pointed to private enterprise’ growth in space as a key advantage for “the United States and its allies.” He believes that “a bottom up, free enterprise, decentralized approach” towards space and orbital development is what distinguishes these countries from the “strategic and traditional top-down” approach of their counterparts in space.
He sees that as a key part of his work as a venture capitalist. Whether flying a helicopter in the USMC, or investing in promising firms, his “mission as a venture capitalist is…to preserve our way of life.” He sees his role as “finding the right leaders and technologies” that embody that bottom-up decentralized approach that allows new ideas and new technologies to flourish.
He described C5 as “mission driven capital,” and that their investments in space, cyber, and even energy—including the Axiom Station— will help build companies that will “make a huge change in how we live our lives.”