Q&A: Is space a new investible asset class?

Wednesday 23 February 2022

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Author: Maha Khan Phillips

Mark Boggett, chief executive officer of Seraphim Space, talks to Professional Investor about why he believes that the space tech sector will become a fundamental portfolio asset of the future.

PI: Would you describe ‘New Space’ as an investible asset class, and if so, in what way? 

Last year was another record year with $12.4 billion of private capital invested in the space ecosystem, a huge increase of more than 60%. We expect this momentum to continue rapidly because the space sector is at an inflexion point. The development of new technologies and understanding of the significant role they can play in tackling some of the most pressing challenges means investors are increasingly seeing space as a fundamental portfolio asset class. We see cloud players accelerating their reach in space in the coming year. AWS (Amazon Web Services), the number one cloud player, established a dedicated space unit in 2019 and has partnered with us on a space accelerator to fund space start-up companies to drive innovation and improve accessibility to space data. Investments like this are rapidly transforming the space industry by providing powerful, cost-effective and scalable solutions to accelerate space companies across the ecosystem. As more significant players become heavily focused on the space sector, we are inevitably entering an age where space is becoming widely accepted as a new investment asset class in the public and private markets. Looking ahead, we believe 2022 will see continued momentum in investment and public interest in the SpaceTech domain. Space is ultimately the digital infrastructure which will enable us to map, monitor, manage and connect our planet, enabling changes as the rail roads or internet have done. This is a multigenerational investment.  


PI: What are some of the technologies transforming the space industry? 

New Space is the driver to the rapid increase in funding we’ve seen in the last 5 years into start-ups, growing from $1.5 billion in 2016 to $12 billion in 2021. These dramatic reductions in the cost of launch are driven by entrepreneurs like Elon Musk and Space X and the advent of the cube satellite. Technological advances are overturning traditional models for operating in space, as low-cost access to space becomes a reality with innovations such as reusable rockets. The cost of building and launching a satellite has fallen by a factor of more than 100 times since 2010. Today there are approximately 3,700 satellites in orbit – over the next decade over 100,000 satellites are planned. This will create a new digital infrastructure in space that will deliver capabilities that will define societal change over the forthcoming decade from ubiquitous connectivity to climate change. New Low Earth Orbit (LEO) mega-constellations such as Starlink and OneWeb are gearing up for commercial services. Furthermore, the explosion of new geospatial data and the development of analytics have become increasingly relevant to solving big problems related to climate change. Diversity of higher resolution, more frequent space data is enabling new applications to monitor and track objects and activities on earth. Space data provides powerful tools to help institutions establish a baseline to monitor their operations at scale and track their progress and carbon footprint over time. We expect to see more space companies tackling climate change, as they develop technologies for a wide range of applications such as green-house gas detection, building energy efficiency, weather forecast, environmental monitoring, precision agriculture, efficient routing of air and maritime traffic and more. 


PI: What are some of the drivers for growth?  

Near term, space as an investment theme is also likely to impact several industries beyond Aerospace & Defence, such as IT Hardware and Telecom sectors as the key drivers for growth. Morgan Stanley estimates that the global space industry could generate revenue of more than $1 trillion or more in 2040, up from $350 billion, currently. Yet, the most significant short- and medium-term opportunities may come from satellite broadband internet access. Satellite broadband represents around 50% of the projected growth of the global space economy by 2040. Launching satellites that offer broadband internet service will help to drive down the cost of data, just as demand for that data explodes. 

The key drivers of growth, therefore, clearly come from the opportunity to provide internet access to under- and unserved parts of the world, but there is also going to be increased demand for bandwidth from autonomous cars, the internet of things (IOT), artificial intelligence (AI), virtual reality, and video. 


PI: Are there any other trends/themes that will impact the market? 

The Earth Observation (EO) industry is rapidly transforming with new technologies and will see a significant increase in capacity and modalities in the coming year. First, Maxar is launching its Legion constellation, which will deliver high resolution optical imagery with revisit rates up to 15 times per day, more than tripling its capacity. Planet Labs is planning to double its imaging capacity with the launch of 44 SuperDove satellites. We expect to see a significant increase in commercial SAR (Synthetic Aperture Radar) with more than half a dozen smallsat SAR companies expanding their constellations. Companies like Tomorrow.io, SatelliteVu and Pixxel are planning to launch their first EO satellites, making new modality of weather, infrared and hyperspectral data available to the commercial market for the first time, enabling new capabilities to deliver better customer solutions. We see this trend driving further horizontal and vertical consolidation, especially for well-funded optical EO players to acquire a complementary constellation like Synthetic Aperture Radar (SAR), to enhance its product offerings.  


PI: What should investors know? 

The interest, investment and innovation into space technology is only set to continue and grow exponentially over the next decade. A new ecosystem is beginning to form in the stratosphere that will create the environmental conditions for us to expand our presence in space and collect more accurate data to help solve some of the world’s most environmental and economic problems. With more companies investing every day, investors can be assured that the space tech sector will become a fundamental portfolio asset of the future.  

Mark Boggett is chief executive officer of Seraphim Space. 

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