29 July 2021

Space: To boldly go where few investors have gone before

Making money from space could soon become as accessible as travelling to it

The space economy has only just begun.

By Holly Huang

July is an auspicious month for space exploration.

Famously, on 20 July 1969, Neil Armstrong set foot on the moon. Years earlier, NASA’s Marina 4 unmanned spacecraft snapped the first images of another planet, Mars, on 14 July 1965. And in 1979, Voyager 2 orbited Jupiter at an altitude of 560,000km on 9 July, coming closer to the Gas Giant than any other man-made object.

Space exploration this July saw two equally ground-breaking events: on the 11th, Sir Richard Branson’s VSS Unity reached space, at an altitude of 86km, with the Virgin Galactic founder one of four space tourists; and nine days later, on the 20th — homage to Armstrong — Jeff Bezos’s New Shepard 4 reached an altitude of 107km, allowing Amazon’s founder and three others to briefly flirt with outer space, which begins at the Kármán Line some 100km above Earth’s surface.

As a die-hard Trekkie and complete Star Wars geek, I found both events somewhat underwhelming, though. In my mind, we had already boldly gone where no others had been before — a long time ago, and in galaxies far, far away.

I suspect others think similarly.

Space as an asset class?

It was only until reading the scientific community’s praise of these achievements that the efforts of Branson and Bezos — as well as Elon Musk’s space transportation service, SpaceX — sank in.

Indeed, these ventures really are just the beginning. Branson’s Virgin Galactic has already sold more than 600 tickets to take fellow space tourists into zero-gravity. At US$250,000 a seat, that’s US$150 million in the bank for Virgin Galactic. Just imagine how many more tickets he’ll sell in a few years’ time, when costs inevitably come down and a raft of successful flights settle the nerves of anxious flyers, making the experience yet more affordable and appealing to aspiring astronauts?

Plenty more, I suspect.

Factions of the investment management community are equally as excited. Fuelling today’s space race is a combination of both private and public capital. In 2019, the space economy was worth US$340 billion. By as early as 2040 — less than 20 years away — it’s tipped to be worth US$926 billion, growing more by almost 300%. Space will by then have become its own asset class, some predict.

But not all of this amount will come from tourism. In 2001, American multimillionaire Dennis Anthony Tito paid US$20 million to hitch a lift to the International Space Station (ISS) from Russia’s Soyuz-TM32 spacecraft, becoming the world’s first space tourist. 20 years later, Bezos’s Blue Origin is selling tickets to space at a mere 1% of the price Tito paid, at US$200,000.

Economies of scale

At this rate, seats could cost as low as US$2,000 by 2041, making space tourism a mass-market and less profitable experience for flight operators, despite unprecedented numbers of people reaching Earth’s orbit. Such a drop in costs is attributed to two trends: the proliferation of reusable rocket technology as exemplified by Virgin Galactic and Bezos’s Blue Origin; and the ability for astronauts to prepare for space remotely and autonomously.

Apart from the Space Shuttle and prior to spacecrafts developed by Virgin Galactic and Blue Origin, all other modes of space transportation could only be used once, making space travel ultra-expensive. Being able to re-use a spacecraft could potentially save tens, if not hundreds of millions of dollars per flight.

Training ‘average Jos’ for space travel tends to be expensive. While information about how much this actually costs is hard to come by, reports claim the current cost of the necessary training and on-site accommodation is well above the US$200,000/US$250,000 ticket price quoted by Blue Origin and Virgin Galactic respectively.

The winning bid for the fourth and final seat onboard New Shepard 4, for example, reportedly paid US$28 million for the flight, training and accommodation. However, the wining bidder’s seat was later withdrawn, and their place was substituted by the second highest bidder, made by Somerset Capital Partners’ Managing Partner and Founder Joes Daemen on behalf of his son, now astronaut Oliver Daeman, for an undisclosed amount. Daeman senior’s number is believed to be not too far from the winning bid.  

Inevitably, training costs will lower, with programmes taking place at home. So where will the rest of the almost US$1 trillion space economy be generated?

Earth solutions

The satellite industry looks to benefit greatly from cheaper space transportation. In yesteryears, sizeable satellites the size of skips and weighing several tons were launched into space, yet their capabilities and data transference speeds were ‘prehistoric’ in comparison to today’s era of 5G telecommunications.

Presently, satellites with the ability to transfer megabytes of data in milliseconds can be facilitated by units just 10cm-squared and weighing as a low as 1kg. These can be launched into space for as low as US$40,000 each, which will likely prompt a flurry of satellite launches in the coming years.

Satellite broadband will mostly drive this trend, with internet providers reportedly favouring such services over current fibre optic services in the long-run.  The satellite internet’s current US$300 billion market value is dwarfed by the potential this will have on services on Earth. Revenues that leverage satellite internet could be worth as much as US$720 billion by 2040, across e-commerce, advertising, social media and many other facets of the digital economy.

Asteroid mining is also closer than most people believe: An asteroid the size of a football pitch could hold up to US$50 billion worth of platinum, let alone an abundance of precious metals and resources that are highly sought after on Earth. Water is one of them, with an estimated two trillion tons of water on near-earth asteroids. Access to such resources could support the estimated 3.8 billion people — almost half of the world’s population — who lack access to water, or find water scarce for at least one month per year.

There is also the opportunity to manufacture in space. The concept is not alien (mind the pun) to present-day astronauts. Residents aboard the ISS frequently manufacture components using 3D printing. For far-flung voyages, space travellers will probably use the materials of distant planets, moons and other solar system phenomenon to create the necessary parts needed keep their spacecrafts and space stations intact. 3D printing was valued at almost US$14 billion in 2020. Just imagine its value in a spare-parts constrained environment such as outer space in 20 years’ time. Would US$100 billion be excessive?

Likely not.

Tomorrow’s world today

The promise of tomorrow’s world are being made in this one. Indeed, this seemingly future opportunity is being crafted by real people using current technology, present-day thinking, and based on contemporary know-how. The good news is that we don’t have all the answers yet, and there is a long runway for space travel in both the medium- and long-term.

Space is a theme that allows investors to capitalise on momentum already created by a wide variety of industries — from the likes of somewhat futuristic AI and big data services to conventional, old-school deep-sea diving equipment — and companies, mostly private, but increasingly others public. Beyond the headline names pioneered by Branson, Bezos and Musk, there are many other companies that are delivering space experiences and services as we speak: DigitalGlobe, International Launch Services, OneWeb, Planet Labs, Stratolaunch, and many others are leading the way.

As this July has proven, mankind’s quest for space is truly alive and kicking, as are investment opportunities — with space’s seemingly lull of adventures from the past 30 years behind us.

I look forward to my own space adventure when it becomes commonplace — just like getting on an aeroplane. Until then, “live long and prosper”.

Image: Shutterstock (license No. 1062694967)

Technology, Thought leadership , , , , ,