A quick personal story: I started my journalism career largely in business journalism. While I fell into it by accident, it ended up being the smartest career move I could have engineered. That’s because in a similar way to gravity, every business – whether in space or not – is accountable to the principles of the market. And in the heady startup world, having a solid business plan with flexibility built in is the price of admission to get a seat with firms possessing capital.
At Space Canada’s SpaceBound in Ottawa on Tuesday, we heard from several wealth companies that don’t often share the stage at space conferences, allowing the businesses and government officials in the room to learn more about how capital markets, angel investment and venture capital operate. The experts on the panel shared several principles for business success in the space market.
The panel included:
- Gareth Keane, Partner, IQT
- Jeff Gallant, Co-Founder, Gallant MacDonald
- Glenn Cowan, Founder & Managing Director, ONE9
- John Risley, Director, MDA Space
- Moderator: Claire Sturgess, RBC
If you’re looking to put some money in space exploration, here are some tips the panel shared:
Look at companies levelling up the business. SpaceX inevitably comes up loudly and repeatedly when talking about the space business because they absolutely dominate the launch market, sending rockets aloft several times a month. But less talked about in media – and one point the panel raised – is SpaceX’s focus on the spectrum business.
In September, EchoStar entered a definitive agreement with SpaceX to sell the space giant AWS-4 and H-block spectrum licenses for approximately $17 billion USD (roughly $24 billion CDN). It was a fast and unexpected business pivot, so much so that EchoStar cancelled its $1.8 billion contract with MDA Space for MDA to build 100 satellites on its Aurora platform for EchoStar’s direct-to-device satellite constellation. (More about what happened in this SpaceQ story.) The move by SpaceX has large implications for the public markets, even though SpaceX itself is a private company, because the scale of the purchase affects the spectrum market at large.
Don’t be afraid to pursue a behind-the-scenes opportunity. To be sure, nobody could have fully predicted the magnitude of the pivot to military-in-space businesses in as little as five or six years ago. But now, we not only have an ongoing war in Ukraine with implications for satellite imagery, but reports of some countries in space (China, Russia) surveilling and jamming satellites of other countries.
We have an administration in the United States asking its partners to step up military contributions. And the cost of launch has finally become reasonable enough that not one, but two launch facilities in Canada are working to provide sovereign launch capabilities for the military. But even looking back to say, the months in 2020 before the pandemic, we knew that the military had deep pockets and we knew that they pursued innovative technologies. The panellists thus urged folks to keep their eyes open for such opportunities in space, even if the rest of the market hasn’t quite caught up yet.
Look for redundancy and infrastructure opportunities. These are not flashy business deals, but like garbage disposal and water delivery in municipalities, infrastructure and backups (in case of emergency, or changes in international relations) are becoming more urgent in space exploration. Canada, for example, historically relied on partners – principally the U.S. – to provide launch capability and assistance with satellite observations, among other services. But now there’s a push for sovereign capabilities, and just yesterday it was announced that Canada would increase its contributions to the European Space Agency tenfold to $528 million.
Meanwhile, new buzzwords in the last six months alone have been percolating: ideas like power from space, or nuclear reactors on the moon. Again, these aren’t as flashy as watching private companies send rockets to space, but somebody has to think about power, communications, navigation and other services as civilian agencies, militaries and companies begin more aggressively exploring Earth orbit and cislunar space.
One of Canada’s greatest business risks is lack of early-stage funding opportunities. Canada has a small population and as such, is unable to provide the rich Series A, Series B, and other-early stage fundings that are – quite obviously – old hat in the United States, and somewhat common in Europe. This year alone has seen several nine-figure fundings in the U.S. to firms like Apex Space (twice over), Stoke Space Technologies or EnduroSat. So this means an innovative Canadian company wanting to pursue space opportunities has few options: partner up (risky, for reasons cited above), add operations in other countries (possible, but expensive) or even move headquarters (which happened again and again during the 2008-2010 recession).
To counteract this, panellists suggested the government should be making meaningful investments in space to help folks along. R&D tax credits are one popular tool, and a relatively lucrative opportunity in Canada. CSA, as another example, already provides numerous examples of other opportunities through STDP, FAST, ROSEO and similar programs – but the agency needs more funding, which requires more government support. (In fact, this may be why – a couple of hours after the panel concluded – Canada announced it is deepening its relationship with ESA, essentially to give emerging Canadian companies more business opportunities.)
Don’t be afraid to back the “winners.” Canadians are trained to seek consensus. To be sure, this is not a trait that we should fully abandon. But in the world of venture capital – where funding rounds move fast, where the stock market changes on a whim, when multiple companies are competing in narrow niches – the panellists urged Canada to be more aggressive in supporting the winners.
That said, there are real-world consequences: this may mean siphoning off a procurement opportunity, for example, to have fewer companies receiving money in favour of a smaller pool getting more support.
Think in cycles. The IPO market is not in great shape right now, and the stock market tends to move up and down in five-to-10 year cycles – all of which to say that the continual challenge of any investment is to look to what the opportunity will be in the following decade. Prediction is a hard business on its own – which is why we have entire companies making stakes in this. But it also comes down to not only commitment, but a willingness to wait out other market fluctuations and if necessary, pivot to other products as the market changes.
This may sound like slow thinking on Wall Street, but the panel correctly pointed out there are still rich families out there that are thinking about how to preserve and grow their wealth for future generations. So there is value in embracing the long road and imagining a gradual scale for growth.