FAANG+S — SpaceX Joins the Club?

With the recent flurry of news and excitement around the James Webb telescope and its space discoveries, commercial space exploration has received a large boost in terms of investor interest. And it’s not unfounded! Let's talk about the most sustainable space industry trends, SpaceX and its competitors worth investing in. 

P.S.: If you want to invest in SpaceX, you have one week left to do so via Dizraptor, a pre-IPO investing app.

Two Main Fields for Investments in Space

Thanks to SpaceX success at commercializing space launches more and more entrepreneurs look forward to making it big on the next venture frontier. The reality of space economics, however, makes this task quite challenging. It’s not that there is a lack of players trying to make money on space exploration, satellite launches, and other commercial uses for space. It’s the lack of ones that have proven to be successful. 

After all, the SPAC mania of 2020-2021 saw a number of space-related projects including the Virgin Galactic (Charles Branson’s space travel company) shares that are now trading almost 50% below their IPO price! 

Why is Space such a difficult industry for outsider investors? First, it involves a combination of grandiose potential with incredibly challenging (from a scientific and engineering POV) implementation. There is a similarity here with attempts to commercialize nuclear fusion and quantum computing. We hear about some incremental progress in these areas every year but time and time again it fails to materialize in the form of actual positive NPV projects. 

Thankfully, the space industry is more mature and complex than the two fields mentioned above. In fact, it’s easy to kind of divide all aspiring and already functioning space companies in two types based on what exactly they target:

Is Deep Space Just Speculation?

Deep space projects are really exciting to a layman and understandably so! Their allure lies in the same prospect of exciting discovery that generally draws people to sci-fi art. Even SpaceX itself kinda tries to tap into the audience for the first type of space projects by constantly reminding the public that Elon Musk’s final goal lies in the conquest of Mars. 

The problem with all the deep space ideas is that at least in the near term our launch and recovery costs for traveling across the solar system are likely to remain prohibitively high. Barring some scientific missions the sci-fi-sounding projects are unlikely to generate any meaningful economic output. 

Asteroid mining, for example, while being very attractive on paper (“We’re gonna mine tons of platinum and rare earth metals in the asteroid belt!”) just doesn’t make any economic sense when you consider the gargantuan costs of launching and returning equipment and mined minerals. This is why a few startups that were trying to make asteroid mining happen have quietly gone de-facto bankrupt over the last several years. 

Moon Express is the largest with a record VC round of $10 mln

Space cables and elevators is another popular semi-sci-fi area of interest. These are supposed to make moving objects in and out of Earth’s orbit a mundane task and save us tons of money on launch costs. The problem here is that we are nowhere near close to having at our disposal the materials with strength and durability to withstand mind-blowing pressures space lifts entail. Carbon fiber, nanotubes, etc aren’t even close to that. And if we ever obtain these materials the impact on our industrial development will far overshadow anything that might come out of space lifts. 

You really should question the viability of a technology when even Japanese mega-corps plan to have working prototypes no earlier than in 2050. And these are guys who expect nuclear fission, quantum computers and hydrogen cars (lol, Toyota) to arrive “very soon”.

Moon exploration? Well, this is more grounded. Unfortunately, the moon does not seem to possess any readily available resources that would be easy enough to mine to justify the costs of going back and forth or establishing a base there (for a private business – governments are another matter). Helium-3 mining idea is popular, but it needs two things to happen: nuclear fission to become viable (we are not close to that) and helium-3 actually present on the Moon in large quantities which is so far only speculation. 

In fact, we have a more or less “deep-space” startup on our radar that we mention below in our review: Astrobotic technology. These guys are busy with a whole array of cool tech look automatic rovers, robots for space exploration, etc. However, their major investor and customer is NASA and so far what Astrobotic does is make NASAs scientific missions less costly and more efficient. Which is fine (and more than that – very commendable) but not that much of a deep market in terms of size and demand. 

That’s not where the big money is. It actually lies in Earth’s Orbit.

Orbital Economy Being the Hottest

According to Dizraptor app analysts, there are two main factors that work in favor of orbital economy vs more “pie-in-the-space” startups. These are the decreasing cost of space launches and exponentially rising demand for internet capacity.

In simple terms: humans consume more content every year and our insatiable lust for data and broadcast capacity is pushing us to use orbital satellites as means of communication more actively. Combined with cheaper options of sending people to space this creates a large and quickly explaining industry.

Public Space Giants to Watch

Space economy has reached a capacity of around $410-420 billion dollars per annum. Over the last five years, the CAGR for the space industry was around 8%, easily outpacing the global GDP growth rates. This is indeed a rapidly growing industry with huge potential! 

And it’s also an industry that has plenty of established players that you can have a look at thanks to this great illustrative diagram from Morgan Stanley’s 2017 report on the space industry (things have not changed much for the mature industry players since then).

As you can easily see there is more than one way to play the space with publicly traded companies. We will describe a few of them below.

Internet access growth. This is an interesting way to bet on space through the shares for established tech giants. After all, don’t Alphabet and Facebook benefit from the expansion in their ad audience thanks to the satellite internet?

Component Manufacturing. Companies like Honeywell and even defense giants like Lockheed Martin serve as reliable and almost indispensable component suppliers for satellites and rockets. Special mention goes to specialized semiconductor producers like Analog Devices that supply the space industry with hyper-quality microchips.

Satellite fleet operators. You can be sure that large operators like Inmarsat are on our radar. They are tried and reputable providers of satellite communications for a wide range of earth-bound clients.

Defense plays. Well, given all current geopolitical moods it’s useful to remember just how good the defense industry is at lobbying in the US and set buy orders for stocks of Boeing, Northrop Grumman and Lockheed Martin.

Space Startups Taking the Helm

It is not just the “old guard” that investors should look at. With SpaceX proving that you can innovate and outcompete giants like Boeing, the investment in orbital space startups is on the rise. There is already a number of very promising companies listed below.

While you can see from the graph above that both the funding size and number of companies for the space industry have grown considerably, the number of really promising startups is still not as big as to evade classification and description. The table below gives a simple grouping of the most funded space startups. 

Groupings like this should be understood as a simplified guide to the industry. Some startups (like SpaceX) excel in more than one field of activity and there is a considerable degree of heterogeneity within these groups. With this said let us dive deeper into the categories outlined above.

Space launches. Whatever helps us to decrease the price for sending a pound of payload to Earth’s orbit is almost certain to get funded. After all, SpaceX itself was created precisely around the idea of radical launch cost-cutting through reusing the rockets. 

Many startups in this category don’t target complex reusable rockets though but instead try to come with cheap, quick to assemble launch vehicles. A notable company we should mention among these is Relativity Space. Created by the former SpaceX engineers Relativity tries to make 3D-printed rockets a thing. The idea here is rather elegant: 3D printing whole parts of rockets at once allows to radically decrease the number of separate details (and thus required suppliers) and simplify both rocket assembly and supervision, paving a way toward cheaper mass launches.

Satellite Internet. With launches getting cheaper and satellite tech evolving towards miniature, yet very powerful satellites space communications are experiencing a boom in activity. And there are many niches for smart players to occupy here without directly challenging companies like SpaceX. 

Kepler communications, for example, targets IoT (Internet of Things) segments, allowing for data exchange between connected devices. Astranis works with geostationary satellites that target very specific regions requiring a reliable satellite signal. Kymeta goes for highly advanced, new generation antennas that allow ultra-crisp signal quality.

Geospatial analytics. Remember those old-school paranoid thrillers about high-tech enabled spy surveillance like “Enemy of the state”? Well, the bad guys in those movies were amateurs compared to what private satellite analytics startups offer their companies. A combination of 24/7 highly specialized satellite micro fleets with super-advanced machine learning techniques (no, we don’t like the term “artificial intelligence”) gives you a gigantic information edge over the competitors. 

Planet is the leader with its hefty funding of clients from climate organizations to government agencies and agricultural conglomerates. However, other startups offer their own unique features like Hawkeye 360 with its amazing radio signal detection capabilities, while LeoLabs surveils the surveillers by monitoring the satellite fleets around Earth.

Orbital/Space Infrastructure. The broadest and heterogenous category, that unites startups working on supplying key infrastructure and equipment for the next era in the commercial exploration of space. 

Astroscale focuses on orbital debris removal, which at this rate will soon become an attractive utility industry in itself. Astrobotic technology is an ambitious startup targeting space robotics with landers and rovers that can work on the Moon in the future. Special mention in this category goes to Reaction Egines with their Synergetic Air-Breathing Rocket Engine (SABRE). It can propel both airplanes and rockets and allow shuttle-like takeoff and landing for space vehicles. 

SpaceX — the First Space One-Stop Shop

With all of the above considerations laid out, it might be a time to ask oneself, “Is there an easier way to invest in space without trying to own dozens of public companies and sneaking into private rounds of obscure startups?” You bet there is – it’s SpaceX that is right now in the process of raising another investment round.

SpaceX wins on two fronts. It has the leading tech and engineering talents to tackle the launch issue and at the same time address the question of satellite internet/big data. More importantly, with its brand recognition and established financial position, SpaceX has the potential to become the acquisition machine in aerospace technology, creating lots of synergies with the acquired companies.

Plus, if we draw further parallels between the space industry and tech, SpaceX has the advantage of being the “go-to” infrastructure play in the space industry. In many ways like how Amazon, Alphabet and Microsoft immensely benefited from the rise in SaaS startups and tech in general. 

Right now, apart from capturing a very solid chunk of the space launch market SpaceX is aiming to become the go-to player in the satellite communications space. Given its previous success with overtaking the heavy payload market share from the like of ULA, Starlink might really be the future space internet gold standard.

It is now possible to become a SpaceX investor before the company goes public. In Dizraptor, a private equity investing app, an investment in SpaceX is available to accredited investors from $1,000. 

Download Dizraptor app to invest in SpaceX with a tap!