Space Investors Willing To Forgo Near-term Returns for Long-Term Payoffs

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COLORADO SPRINGS, Colo. — As the flow of private investment into entrepreneurial space companies grows, some investors say they are willing to accept long waits for a return on their investment in companies that have the potential to change entire industries.

Scott Nolan, a partner in San Francisco-based venture capital firm Founders Fund, said during a space finance panel at the 31st Space Symposium here April 15 that he received a skeptical reaction when the firm invested in SpaceX several years ago, given the company has no plans to perform an initial public offering of stock or otherwise allow investors to recoup their investment.

“When we first invested in SpaceX, people thought it was a crazy investment,” he recalled. “But, at a high level, we don’t focus too much on how quickly we will get returns.”

Nolan said his firm has funds with lifetimes of up to 12 years, allowing them to focus more attention on what returns companies can offer. “What we’re really concerned about is whether a company will change the entire industry,” he said. “I think there’s a lot of companies in space that are doing that right now.”

From left, Chad Anderson, Scott Nolan and panel moderator Dara Panahy of Milbank, Tweed, Hadley & McCloy. Credit: Tom Kimmell
From left, Chad Anderson, Scott Nolan and Dara Panahy of Milbank, Tweed, Hadley & McCloy. Credit: Tom Kimmell

Chad Anderson, managing director of the Space Angels Network, said the commercial space industry has attracted more $13 billion in investment in the last decade, about a fifth of it from venture capital firms and smaller angel investors who invest in the early stages of new ventures. “Early-stage investors are playing a very significant role in the development of the private space sector,” he said.

Those investors, Anderson said, are often motivated by more than just money, seeking what he called “blended returns” from their investments. “People want more from their investments than just money,” he said. “They want to change the world in a way they believe in.”

Those investors willing to be patient can both change the world and make a lot of money in space, argued Dylan Taylor, global chief operating officer of Seattle-based Colliers International. “Space is really domain expansion,” he said, allowing companies in terrestrial markets to expand into the space realm.

Taylor said a “back of the envelope” calculation he and a few colleagues made recently estimated that, by 2030, up to 10 percent of the world’s gross domestic product could be linked to space in some way. “If you take that view,” he said, “the upside of space is unbelievable.”