Germany wants more space startups but entrepreneurs struggle for liftoff

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Germany might be Europe’s best-performing economy and an undisputed engineering powerhouse. But when it comes to space startups, something is amiss.

Germany is traditionally the largest contributor the European Space Agency’s budget and the country’s aerospace heavyweights — namely Airbus and OHB — are the backbone of large-scale European space projects. And yet space entrepreneurs find it difficult for their companies to take off in Germany.

DLR board member Gerd Gruppe, speaking to SpaceNews ahead of Space Tech Expo Europe in Bremen, Germany, Oct. 24-26, said the German space agency would like to see more Germans launching space startups but the appetite is not there.

“In Germany, we don’t have enough young people who want to run their own business,” said Gruppe. “We have an overall lack of high-tech companies and so it is in the space sector as well.”

DLR, Gruppe said, is trying to change the status quo by supporting a range of business incubation centers across Germany and running competitions that offer support, including financial backing, to the most impressive ideas.

One such initiative is INNOspace Masters, an annual competition that has “New ideas for the next space generation” as its slogan.

“With this initiative we try to activate young people to present their business ideas to investors and it works quite well,” said Gruppe.  “We receive a lot of innovative ideas.”

The winners receive a certain amount of funding as well as mentoring from experts at DLR, ESA and Airbus, all of which support the individual INNOspace Masters Prizes.

 

Funding challenges

Tortillas are a staple on the ISS but bread's high crumb quotient makes it a no-go for microgravity. Credit: NASA
Tortillas are a staple on the ISS but baked bread’s high crumb quotient makes it a no-go for microgravity. Credit: NASA

But succeeding in a prize competition is a long way from succeeding as a business, as Sebastian Marcu, whose Bake In Space project won a 2017 prize, has already learned.

Bake In Space is developing a space-certified oven and a type of dough that would allow astronauts at the International Space Station to bake fresh and — more importantly —  crumb-free bread that could be consumed in microgravity without jeopardizing safe operations. Currently, astronauts must make due with with tortillas and many spaceflyers, especially the Europeans, miss freshly baked bread during long-term missions. The space-cultured sour dough would also be brought back to Earth to establish a commercial brand of made-in-space bread.

The idea has received a lot of attention, including a plug on Jimmy Kimmel Live!, the popular U.S. late night talk show. But the publicity has so far failed to translate into investor interest.

“Everyone congratulates us on the idea, everyone likes the idea and they would like to be involved but when we ask them for money, that’s where the interest ends,” said Marcu.

“We are obviously grateful for the 50,000 euros we have received from the competition, but to tell the truth, if you are trying to develop a piece of space hardware like this, 50,000 doesn’t get you too far.”

Marcu said the project carries on largely thanks to the private investment of Bake In Space team members. Bake In Space is not the only German company with bold space plans that had to labor their way through years of zero investor interest.

 

Going to the moon part-time

Thanks to backing from luxury carmaker Audi, PT Scientists' lunar rover design has been making the rounds at car shows and had a cameo in Alien: Covenant. Credit: Audi
Thanks to backing from luxury carmaker Audi, PT Scientists’ lunar rover design has been making the rounds at car shows and had a cameo in Alien: Covenant. Credit: Audi

Berlin-based PT Scientists was one of the front-runners in the Google Lunar X Prize. After bagging milestone prizes in 2015 for their work on imaging and mobility systems, the team eventually withdrew from the competition early this year.

“We didn’t want to [mislead] people, pretending that we are going to make the December 2017 deadline,” said Karsten Becker, head of embedded electronics development and integration at PT Scientists. “We knew we needed more time.”

Relying on their insiders’ knowledge, PT Scientists, in fact, still believe they might become the first private entity to reach the surface of the moon. They still hope to launch their spacecraft Alina in late 2018.

The startup wants to put a type of cellphone tower on the moon and eventually establish permanent telecommunications infrastructure on the lunar surface.

The company now relies on support of German luxury carmaker Audi and telecommunications giant Vodafone. The 2017 movie Alien:Covenant, the latest installment in Ridley Scott’s Alien saga, featured an Audi Lunar Quatro rover designed by PT Scientists.

But it was by no means an easy ride for PT Scientists to get to where they are today. And like Bake In Space, they had to rely on their own resources for a considerable period of time to develop their technology.

“The way we worked is still embedded in our original name as Part-Time Scientists,” says CEO and founder Robert Boehme. “We relied a lot on the motivation, impulse and access to resources of highly skilled engineers willing to dedicate their unpaid free-time to our cause.”

For the first five years, the venture was mainly self-funded. When they first approached Audi, in the early stages of the development, the carmaker took a pass.

“For a startup to have a chance with investors here in Germany, it needs to have a solid business case, profound financial backing, a line of customers, as well as a good level of respect for the existing industry and its players from Day One,” Boehme said. “This makes the early stages quite hard for technology startups like ours.”

The five-years of part-time development weren’t without its risks due to complex worker protection rules that apply in Germany.

“Having people contribute work for you for free is amongst the most risky things to do as a startup, legal-wise,” said Boehme. “The best approach is to agree on set partnerships with entities like universities and small paid job offerings.”

 

Venture capital doesn’t work

According to DLR’s Gruppe, the venture capital and angel investor environment in Germany is rather unevolved. “This is a big problem in Europe,” he said.

Boehme agrees. “Our take on private investors is a very negative one based on the fact that we have, for the past nine years, consistently failed to reach workable agreements with any of them,” he said. “We always parted on topics like shares and securities. Many times investors are heavily focused on getting the next Google or Facebook whilst only investing a couple or hundred thousand Euros and demanding two-digit shares in addition to personal securities from the founding members.”

For PT Scientists, the door eventually opened with Audi and Vodafone. Once the cooperation was established, it quickly became solid and reliable.

“It was very hard to get Audi onboard but once we finally teamed up, they went all in and helped us develop the skills we where missing earlier to work with further larger industry players on a professional level,” Boehme said. “It is hard to get these commitments but once you do, they are almost set in stone and the partners in general are very supportive.”

AlphaLink, another Berlin-based startup is just embarking on the path already trodden by PT Scientists, is experiencing similar obstacles.

“The investment mentality here in Germany is really conservative,” said Daniel Cracau, AlphaLink’s general manager. “We perceive that the willingness to invest into these high-risk startups is limited.”

AlphaLink, freshly spun out of the University of Berlin, is developing next-genertion high-altitude platforms  that aim to overcome some of the major weaknesses of earlier concepts.

AlphaLink’s concept uses several aircraft-like platforms connected at wing-tips that fly in a formation designed to remain stable even in severe stratospheric winds.  At the same time, the aircraft formation has a large combined wing area that can be covered with solar panels, providing enough solar energy to keep the platform airborne for up to a year.

Earlier this year, AlphaLink demonstrated its concept with a small-scale demonstrator flying at lower altitudes and is now looking for funding that would enable them to build a full-size prototype.

 

State funding for the few

“Our application for a state-funded grant has recently been rejected,” admitted Cracau. “But we are not giving up. We are looking at various competitions where we could get some prize money and also evaluating other options to receive state funding.”

Cracau said AlphaLink came to Bremen hoping to find a possible commercial partner who would help them develop the technology.

Boehme said that throughout PT Scientists’ nine-year history, the company has not received public financial support.

“We have received some engineering support from DLR who helped us with the brushless drive development for the Audi Lunar Quatro rover,” Boehme said. “Other than this, getting public funds proved to be as difficult as getting access to VC funds. We tried to access many public programs but always struggled with very strict regulations on intellectual property rights, as well as the very limited amount of funds, most of the time just a couple of hundred thousands.”

Marcu agreed. “I sometimes have a feeling that the public-funding vehicles are reserved for a few who really know how to do that, how to drive the machine,” he said. “You really need to have an expert onboard and if you have that expert on board, that expert would want to be paid well to allow you to access those funds.”

Paying someone well is exactly what these early stage startups may not be able to afford.

 

Too bold for Europe

Boehme says that startups looking at more conservative technologies such as cubesats and satellite subsystems might have a much easier time getting established in Germany.

Even DLR, while obviously proud of their participation in the private lunar venture, appears more confident steering companies with more down-to-Earth ambitions, clear business cases and an obvious client base.

“We are trying to help in particular small- and medium-sized companies to develop a product, which would be competitive on a global market. Not only in Germany and Europe; we want them to be able to go to the U.S. or Australia and sell their product as a part of a mission and this works quite well,” Gruppe said.

“Sometimes, if DLR can help those small companies to make the first steps on a foreign market, this is for those small companies as important as money,” Gruppe said. “We are also trying to support small companies to come in contact with state authorities to cover their demand for satellite-based services.”

But as the story of PT Scientists suggests, all is not lost even for those with the boldest ambitions, although Boehme believes the company’s journey would have been smoother had it relocated to the U.S. Even if some of the remaining competitors in the Google Lunar X Prize meet the extended March 2018 deadline and land on Mars before PT Scientists, the firm is set to go.

PT Scientists has selected SpaceX to carry their spacecraft Alina to the geostationary transfer orbit on a Falcon 9. From there, Alina will continue to the moon on its own, carrying not only two Audi Lunar Quatro rovers, but also three customer payloads, including an experiment designed by NASA Ames Research Center.

“A key message is that you should always stay on track,” said Boehme. “We never changed or moved the goal posts. We have had the same mission design and technology goals from day one and constantly kept developing, demonstrating and pushing those. This gave us the right kind of ground to stand on and say to partners: ‘Hey do you remember the concept we had told you about two years ago? We have a working prototype right here with us today.’”