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SEP. 10, 2021

Towards an Off-Earth Economy

Since the 60’s the space industry has matured commercially to become the invisible back-office of the global economy. Just in the last decade, 4,000 satellites were launched in space. They provide positioning, mapping, tracking, imaging and communication that is critical to modern society and our way of life. Remove these satellites and most of what we are used to, from TV to smartphone apps will stop working – no more Uber, tracking food delivery or finding singles in your area.

The 60-year-old space industry has been transformed in the last decade by improved access to space, emergence of satellite platforms for Lower Earth Orbit, miniaturization of electronics, changing regulatory environment and growing demand for commercial and consumer applications. The global space industry now spans across multiple markets on Earth and beyond, becoming a key positive element in the technological and economic transformation of our society.
But what is the space economy? It is important to understand that while people usually refer to space as a “market” or an “industry”, it is neither. A “market” presumes the presence of customers, but there is a maximum of a dozen people in space at any given time, so space is not a “market”. The market is in fact on Earth with its seven billion consumers and seventy-trillion-euros economy. Space is also not an “industry” in a way that communications, robotics or electronics are. Space is just a place where these industries operate, so it is a “geography”, a sort of the seventh continent to which we outsource certain operations that are cheaper and more efficiently performed there than down below.
“Commercial space” for an investor is the entire ecosystem that includes the outer space, but also Earth, where all that is required for in-space operations is produced and space services are consumed. This commercial space ecosystem is currently $350 billion, which is seven times bigger than AI and robotics industries combined. And as the global economy is going through a structural transformation becoming more dependent on space-based products and services the commercial space ecosystem is set out to grow to $2,5 trillion by mid-century. For comparison, the global commercial banking industry is just over $2 trillion.
Space is infinite, so lumping it all together, either as a single opportunity or a single challenge is misleading. Instead, space is a number of investment frontiers. The most imminent of them is the Earth and its orbit where over 90% of the current commercial activities take place. Since the 60’s the space industry has matured commercially to become the invisible back-office of the global economy. Just in the last decade, 4,000 satellites were launched in space. They provide positioning, mapping, tracking, imaging and communication that is critical to modern society and our way of life. Remove these satellites and most of what we are used to, from TV to smartphone apps will stop working – no more Uber, tracking food delivery or finding singles in your area.
Many investors still think that space is all about rockets and satellites. However, this is just one, although extremely important part of the ecosystem. The in-space infrastructure. You can compare its role to the role of the retransmission towers for the mobile network. It is critical, but you don’t put them just for the sake of it, or to improve the rural landscape. It is about generating, collecting and communicating data. The infrastructure part is just 1/4 of the overall ecosystem, the rest is supply chain (like electronics and materials) and applications (like Earth Observation and broadband connectivity).
Is space too risky as an investment area? Well, as technology became more reliable, the risk has been significantly reduced both in terms of the occurrences of the risk factors and in terms of the cost – losing a satellite in the past was a multimillion-dollar write-off, but the cost of satellites has since decreased from hundreds of millions to hundreds of thousands. In fact, for many space companies outside of the mega-constellations segment, the cost of the satellite infrastructure is not greater than the cost of the ground IT infrastructure required for storing, processing and delivering analytics of the data collected in space.
It seems that investing in space is no longer a bet, but a process with many known factors and a significant quantified upside.

We thank you for the continued support.

The FAM team