Small-satellite Entrepreneurs, Suppliers Part Ways on Pricing

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Virgin Galactic’s LauncherOne. Credit: Virgin Galactic
Virgin Galactic’s LauncherOne. Credit: Virgin Galactic

LOGAN, Utah — The small-satellite industry is transforming as suppliers who previously focused on providing products and services for individual spacecraft look for ways to profit from the growing number of constellations. There is a mismatch, however, between what many traditional firms are offering and what the entrepreneurs establishing large cubesat constellations are seeking to buy.

“The prices are way too high,” said an entrepreneur attending the annual Small Satellite Conference Aug. 2-7 at Utah State University here. “We would be willing to buy parts but not at these prices.”

Like Space Exploration Technologies Corp., many of the new space entrepreneurs are building their own spaceflight hardware or using commercially available parts to reduce the cost of individual items and gain the flexibility to quickly adopt new technology. Planet Labs, the San Francisco-based firm building a 100-spacecraft Earth imaging constellation to provide daily global coverage, revises its cubesat design every eight to 10 weeks, said Chris Boshuizen, the firm’s chief technology officer.

Steve Jurvetson, managing director of DFJ, the Menlo Park, California-based venture capital firm that backed SpaceX and Planet Labs, lauds that approach, which he refers to as “agile aerospace.” “It is increasingly possible for an entrepreneurial company to innovate, iterate and run circles around its competition,” Jurvetson said during the conference keynote speech. That is the type of company that will attract investors, he added.

Venture capital is pouring into some small-satellite startups. In October, Dauria Aerospace of Mountain View, California, and Skolkovo, Russia, announced a $20 million investment from I2BF Global Ventures. Planet Labs raised $52 million in a capital campaign led by Yuri Milner that concluded in December. Spire, the San Francisco-based company previously known as NanoSatisfi, announced July 29 that RRE Ventures helped it raised $25 million.

In spite of their financial wherewithal, many of the entrepreneurs who plan to sell images or data captured in space to cost-conscious commercial customers say they need to keep hardware, software and operation expenses as low as possible. That business model presents significant challenges for some traditional satellite suppliers who structured their businesses around the need to meet the unique requirements of small satellites built for U.S. government agencies and universities.

While commercial customers purchased less than 10 percent of the satellites weighing 1 to 50 kilograms from 2009 to 2013, those customers are likely to dominate the business from 2014 to 2016, according to a market analysis performed by Atlanta-based SpaceWorks Enterprises Inc. That trend is likely to continue with commercial firms outspending government agencies and academic institutions, said Elizabeth Buchen, director of SpaceWorks’ engineering economics group.

“This huge influx of commercial niche missions providing Earth observation, targeted communications or Internet access through satellite networks is an entirely new business model,” said Robert Meurer, business development vice president for ATK Space Systems. “The space industry was dominated by the government for a long time. Commercial customers can easily outspend and outgrow the government over time.”

SpaceWorks notes a flurry of activity by companies building and launching satellites weighing 1 to 50 kilograms. The firm expects 140 spacecraft of that size to launch in 2014 compared with 92 in 2013. Steady growth of the market will lead to a total of 2,000 to 2,750 small spacecraft seeking launches from 2014 through 2020, Buchen said.

It is not yet clear how those satellites will reach orbit. “Access to space remains quite a challenge,” Meurer said. Many firms have announced plans to develop new launch vehicles to meet the needs of this growing market, including Virgin Galactic’s LauncherOne, Generation Orbit’s GOLauncher 2, Interorbital Systems’ Neptune, Rocket Lab’s Electron, Garvey Spacecraft Corp.’s Nanosat Launch Vehicle and XCOR Aerospace’s Lynx Mark 3. None of the new rockets is operational. Whoever succeeds in offering space access at a reasonable cost “will receive a very warm reception because there will be any number of payloads waiting to go,” Meurer said.

This year, 1,400 people attended the Small Satellite Conference, which began 28 years ago with 400 attendees. Longtime conference participants were thrilled by the growth of their industry and enthusiastic about the potential for small satellites wielding increasingly capable sensors to improve weather prediction on Earth and in space, bolster agricultural yields and extend communication services globally.

“We have talked about the market developing for small satellites since the first conference,” Meurer said. “Year after year, we waited for this groundswell, which we are now seeing. It’s very satisfying.”