Coronavirus pandemic forces small space companies to improvise
It’s difficult to gauge the impact of the novel coronavirus on small space companies because no one knows how long the pandemic will last.
“Uncertainty is really the killer here,” said Space Angels CEO Chad Anderson.
The COVID-19 pandemic is forcing chief executives to scrutinize finances, contracts, suppliers and launch schedules. Their conclusions are as varied as the companies they lead.
Stellar Exploration President Tomas Svitek furloughed employees at the San Luis Obispo, California, space component supplier after struggling to balance concerns about employee well-being with obligations to customers and conflicting local, state and federal guidance on what constitutes “an essential business” that should continue operations in spite of the pandemic.
“I’m quite skeptical about telework for complex, hardware-intensive projects,” Svitek said by email.
The impact is not nearly as dramatic for software company Orbit Logic. Employees of the mission planning and scheduling software specialist based in Greenbelt, Maryland, were already accustomed to working remotely, having practiced during snow days, said Orbit Logic CEO Ella Herz.
Startup founders, meanwhile, are re-evaluating their finances and turning to mentors and investors for advice.
CASH IS KING
Starburst Aerospace is telling its portfolio companies to “seriously audit your bottom line and your top line,” said Van Espahbodi, co-founder and managing partner of the Los Angeles-based accelerator. “What are you expecting in revenue and what are you expecting in costs?”
Startups need to line up those two numbers to ensure they can continue to tell investors what makes them different, he added.
Space Angels, a New York-based angel investment and venture capital firm, is offering similar guidance.
“We are telling our portfolio companies to preserve capital,” Anderson said. “Cash is king in this environment. Make sure you can survive to the other side.”
While investors are not pulling back money already promised and some venture funds still have money to invest, fundraising is more challenging than it has been in years. Venture capitalists are busy supporting companies in their current portfolios.
“Companies that raised money before this started are very glad they did,” said Matt Kozlov, managing director of the Techstars Starburst Space Accelerator, which selected its inaugural class of 10 startups in October. “I wouldn’t want to be starting a funding round now.”
Bluefield Technologies CEO Yotam Ariel agrees. “The pandemic is slowing down investor decisions and the decisions of our clients in the oil and gas industry,” said Ariel, who leads the Palo Alto, California, firm founded in 2017 to build microsatellites to detect methane emissions. “We are fortunate to have enough financial resources to go through this even if it takes a long time.”
RBC Signals, a Seattle-based startup founded in 2015 to create a global ground station network, is counting on its diverse customer base and recurring revenue stream to see it through the pandemic.
“If this had happened two years ago, it would be tough for us,” said Ron Faith, RBC Signals president and chief operating officer. “But over the last year we quadrupled our revenues and diversified our customer base to include government agencies as well as geostationary satellite operators. That gives us recurring revenues I can count on to weather this storm.”
Many space companies executives say government contracts are helping them through the current crisis.
“We haven’t lost any business because of the pandemic,” said Space Micro CEO David Strobel. “In fact, one government agency is trying to get money out quicker.”
Space Micro’s factory remains busy because the satellite component supplier is deemed an essential business due to its work for customers like the U.S. Air Force and Missile Defense Agency.
Startups are also turning to government agencies for financing.
The irony here is that while government agencies are not known for speedy contracting, they are providing “a fast track to liquidity” for startups that succeed in matching government funding with commercial sales and investment, said Espahbodi.
Even the firms able to continue working during the pandemic face challenges.
Employees of GHGSat, a Montreal-based firm monitoring greenhouse gases via satellite, are working from home well but the company was unable to launch its second satellite as planned March 23 on an Arianespace Vega rocket.
“It’s definitely a challenging time, but fortunately we are well capitalized and set up to ride this out,” said GHGSat President Stephane Germain.
Approximately 75% of Space Micro employees, including engineers and software specialists, are working from home. Within Space Micro’s San Diego facility, workers are spread out to comply with physical-distancing rules.
In addition, some Space Micro suppliers are moving deliveries back “a few weeks here or there,” Strobel said.
Similarly, the schedule for some of Orbit Logic’s projects that involve partners and hardware are changing, Herz said by email.
RBC Signals, meanwhile, has employees who cannot travel to job sites in countries like Spain and Israel due to restrictions on movement caused by the coronavirus, Faith said.
In some countries, partners are carrying on work building new ground stations with remote support from RBC Signals. Work on large complex systems that require the firm’s expertise, though, are on hold, Faith said.
For one small space company, the challenge has been timely payment of Defense Department invoices.
The firm’s small business set-aside contracts include a clause mandating payment within 14 days. Instead, the firm sometimes waited 60 days for payment before the pandemic.
“With coronavirus, it will get far worse I fear,” said the CEO who asked not to be identified.
The Defense Finance and Accounting Service (DFAS) requires manual review of certain invoices prior to payment. The CEO suggested those reviews be waived during the pandemic since invoices reaching DFAS had been approved by a contracting officer, the Defense Contract Audit Agency and the Defense Contract Management Agency.
DFAS “understands the challenges faced by vendors during this COVID-19 pandemic” and “will continue to work with vendors, contracting officers and end users to ensure payments are made in a timely manner,” a DFAS spokesman said by email. “DFAS is fully operational and where proper and complete documentation is provided, is making payments as quickly as possible. DFAS does not have the authority to suspend the statutory requirements of a proper contract, invoice, acceptance, and authorization to pay prior to making disbursements to vendors.”
This article originally appeared in the April 13, 2020 issue of SpaceNews magazine.