Many financial experts previously didn’t think of the space sector as an investment category, but now that’s changing. Today, few markets are as exciting as the NewSpace sector. It’s not surprising that many investors have become interested in the nascent industry, which is expected to reach a remarkable $2.7 trillion in about 25 years. And the NewSpace sector is anticipated to have a stellar year in 2022 that builds upon the successes of 2021.
Today, large-scale investors have certainly left their mark on the industry. Much earlier in this cycle, Google acquired Skybox Imaging (now Terra Bella) in 2014, while Virgin Galactic became a publicly-traded company when it merged with the Social Capital Special Purpose Acquisition Corporation (SPAC) back in 2018. Since that time, there have been nearly a dozen other SPAC deals either completed or announced, including Rocket Lab and Spire Global. Altogether, these pure-play space stocks comprised roughly a $15 billion (paywall) market cap in aggregate on issuance. These investment opportunities provide investors with access to innovative growth companies at earlier stages in their development, typically restricted to only wealthy individuals or venture capital firms. However, some experts believe NewSpace SPACs may prove to be too risky for individual investors. It’s safe to say that the perception is billionaires and serial entrepreneurs crowd the space sector, but why doesn’t the industry take more advantage of smaller-scale investors?
It’s time the private space sector became open and accessible to smaller-scale investors and venture capitalists outside of NewSpace’s SPACs to engage in a critical movement that improves democratization of the industry and ultimately assists in the sector’s growth.
Fuel Space Startups
The space industry is still partially dominated by government agencies and is increasingly looking for more companies to come to market. While traditional space funding has taken place in the space industry, early-stage funding is still inefficient and slow-moving for some companies. The need for connecting new public capital to early-stage companies in the space sector will help fuel innovation and democratize private investment. RECOMMENDED FOR YOU1‘We Can Control Our Own Destiny’: John Zimmer Shares Lyft’s Vision For The Company’s Future And $1 Trillion Market OpportunityMore stories like thisFewer stories like this2Four New Microsoft Surface Computers Plus A Folding Phone—And Other Small Business Tech NewsMore stories like thisFewer stories like this3The LSE Alumni Turning Their University Into A Startup PowerhouseMore stories like thisFewer stories like this
Spaced Ventures, for example, is an investment firm focused on creating the first investment platform aimed at opening access to high-quality space investment opportunities. This platform, which relies heavily on new regulations permitting this form of non-accredited investment, will likely help smaller-scale, non-accredited investors (with few alternatives to scale their business) provide critical early-stage capital to NewSpace startups. (Full disclosure, my family office, Morgan Brook Capital, is a seed investor in Spaced Ventures.) Other platforms I’ve observed that are in this category include Angel List (for accredited investors only, but with investments as little as $1,000) and Seedvest Technology.
Open Investments Influence Innovation
Private capital from small-scale investors is critical to explore hundreds of technical innovations and business approaches that can offer competitive solutions and better address the needs of current and future space exploration, including for launches and space manufacturing. While it’s likely that few will get to full-scale development, continued investments from independent investors will help these companies — and the industry itself — scale and foster a diversified field in which to investigate new and better ways to perform these services. In addition, these diverse assets will stimulate further innovation and opportunities for future space missions and the development of the commercial space economy.
Further, combining the ingenuity of large-scale platforms with innovative, entrepreneurial advice from individual or small-scale investors can help create fluid vertical integration among startups funded by such investors as larger companies acquire them. The startups focused on innovation could have an advantage when working with small-scale investors because they provide easier access to capital and are often connected to other startup communities that offer learning and support. This shift in innovation funded by public investors then lays responsibility on commercial firms and stakeholders because they are required to stay aware of changing technologies while leading the way in designing system architectures that are economically viable and technologically sustainable.
Once acquired, publicly-traded NewSpace companies with both capabilities will allow for more enterprising, adaptable and flexible solutions to the issues the current space sector faces.
Investing in Space and Humanity
As more small-scale, public investors become involved in the space industry, they can also serve as ambassadors of space education. They can stimulate more knowledge sharing and promote a deeper awareness of space-based issues by proxy. The more these investors become integrated and develop an understanding of the assets they are investing in, the more accurately they can influence space education. Investors typically understand their stocks and this translates into consumer knowledge while offering a transparent outlook on the realities and benefits of space exploration on humanity.
Public investment has multi-fold benefits for human progress. Initiatives by large public and private firms indicate that the space industry will see significant development. As a result, it’s practical to consider how small-scale investments can help enhance U.S. technological leadership while also addressing opportunities and challenges in surveillance, cybersecurity and artificial intelligence. Those innovations will also trickle down to the consumer sector and could lead to significant Earth-based developments, including improved data management, Earth observation, consumer tech and health innovations. Human life will reap the rewards of the innovation sector, just like previous innovations in space technology now help us monitor climate change via satellite or how space’s health technologies gave us X-rays.
What Lies Ahead
Currently, the window of opportunity for space startups to raise large amounts of capital is favorable, but I believe it will only become more dynamic with public investors. By allowing small-scale investment in the NewSpace sector, we can build a more innovative and competitive space ecosystem to push the boundaries of what’s possible in deep space exploration. Although space may be a multi-decade endeavor with many risk factors, these are necessary steps to be taken if we’re to accelerate the ability to finally reach and eventually settle on the Moon, Mars and beyond.
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