There’s No Shortage of Space in Silicon Valley

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SAN FRANCISCO — Every few months, Skybox Imaging employees take a break from building a constellation of small Earth observation satellites for Hack Day, a contest to see who can do the most creative thing in a single day. Winners of the most recent Hack Day created three-dimensional videos using imagery drawn from SkySat-1, the firm’s first spacecraft in orbit. 

This ritual, an integral part of the computer programming way of life but foreign to most aerospace companies, provides an indication of the culture of the entrepreneurial space companies in the San Francisco Bay Area. These startups favor workbenches over high bays and commercial components over flight-tested hardware. In addition, many of the firm’s senior executives, who are often in their late 20s or early 30s, say their businesses have little to do with space. Satellites are simply a tool they plan to use to provide customers with valuable imagery and other information.

During the last five years, space-related startups have emerged in the San Francisco Bay Area with increasing frequency. The impetus for this entrepreneurial activity is manifold. One of the key drivers, however, is the concentration of talented young software engineers. 

Firms like Skybox of Mountain View, California, and Planet Labs and Nanosatisfi, both based in San Francisco, face the challenge of operating multiple satellites and onboard sensors, communicating with those systems and extracting data. “All those pieces have to operate in an efficient manner,” said Chris Wake, Nanosatisfi’s vice president of business development. “That’s obviously a software problem.”

Before Nanosatisfi set up shop in San Francisco in early 2013, its founders considered other locations, including New York. “At the end of the day, the concentration of software talent and potential to collaborate with other tech companies convinced us,” Wake said by email.    

When Tomas Svitek, chief executive of Stellar Exploration Inc. of San Luis Obispo, California, formed Canopus Systems LLC, a commercial venture focused on small satellites, he moved his entire operation 300 kilometers north to Mountain View, “mostly to have access to a wider pool of talent,” Svitek said by email. “We have doubled in size over the last year.”

Moving to Silicon Valley also made it easier to approach investors, Svitek said. The 80-kilometer corridor between San Francisco and San Jose boasts one of the nation’s largest concentrations of venture capital firms, whose investors often look for business opportunities close to home. “There’s a certain friction to getting on a plane,” said Steve Jurvetson, managing director of DFJ, the Menlo Park, California-based venture capital firm that was an early investor in Space Exploration Technologies Inc. of Hawthorne, California, and Planet Labs. 

Space-related businesses here have been able to attract investors — who previously shied away from the space industry — because of their similarity to their Silicon Valley neighbors. “These firms are savvy enough to pitch themselves to investors as information technology companies offering big data plus analytics,” business lines familiar to venture capitalists, said Burton Lee, co-founder of the Space Angels Network and managing director of Innovarium Ventures, a consulting firm in Palo Alto, California. 

“Investors don’t need to be smart about space, because it’s just like their other software investment,” Jurvetson added.

That similarity helps to fuel speculation that the startups could be acquired by their Silicon Valley neighbors. “They would be obvious takeover targets for perhaps Google, Facebook, Samsung, Apple, Amazon,” Lee said. “If I were these entrepreneurs, however, I would wait to be acquired as their valuations will only increase as they roll out their new space infrastructure and digital products.”

Skybox officials declined to comment on reports that they were in talks with Google Inc. about being acquired. “We are not commenting on rumors and speculation,” said Skybox spokeswoman Sara Blask. 

Like their high-tech peers, the new space-related businesses follow an agile development model, making continual, incremental improvements to hardware and software. “Companies launch new satellites every year for no other reasons than to use the latest and greatest memory, processors and charge-coupled device imagers,” Jurvetson said. For example, Planet Labs engineers have redesigned the firm’s cubesats eight times since the business was established in 2010.

Decreasing launch costs and the growing capability of small satellites to perform the roles of larger spacecraft also has brought the amount of money these startups need in line with digital media and social networking firms. Traditional communications satellite ventures required investments of hundreds of millions of dollars, while the new firms seek backers willing to contribute tens of millions, said Lee, who also lectures and conducts research at Stanford University in Palo Alto. 

Stanford’s Aeronautics and Astronautics Department and the NASA Ames Research Center in Mountain View deserve some credit for the recent boom in Silicon Valley space-related startups, Lee said, noting that cubesats were conceived by Stanford professor Bob Twiggs and California Polytechnical Institute professor Jordi Puig-Suari. In addition, Skybox founders came from Stanford and Planet Labs founders emerged from NASA Ames.

“NASA Ames has been a catalyst for small-satellite innovation,” said John Hines, former NASA Ames chief technologist. Under the direction of NASA Ames Director Pete Worden, the center has provided funding, leadership and visibility for small-satellite projects for many years, Hines said. 

The Bay Area’s concentration of electronics companies, universities, skilled workers and investors is creating “a very conducive environment for startups,” said Bruce Yost, program manager for the Small Spacecraft Technology Program at NASA Ames.