Luxembourg and European NewSpace
This article originally appeared in the Dec. 4, 2017 issue of SpaceNews magazine.
When the government of the Grand Duchy of Luxembourg announced last year its intent to encourage the development of companies in the nascent space resources field, complete with 200 million euros in funding and legal reforms, people both within the broader space industry as well as citizens of Luxembourg itself reacted skeptically, to say the least.
“Some people in this country thought that I had become completely mad when I launched this initiative,” said Étienne Schneider, the deputy prime minister and minister of the economy of Luxembourg, in remarks opening the NewSpace Europe conference in Luxembourg City Nov. 16. “The leader of the biggest opposition party wanted to offer me a one-way ticket to Mars.”
But Schneider might get the last laugh, much sooner than some might expect. While the focus of the space resources initiative has been on space mining companies like Deep Space Industries and Planetary Resources, who are still years away from extracting water ice or other materials from asteroids, startups with more near-term space ambitions are also being lured to the country.
At NewSpace Europe — a spinoff of the annual NewSpace Conference held in the United States by the Space Frontier Foundation — space mining turned out to be a relatively minor topic. Both Deep Space Industries and Planetary Resources were present, but kept a low profile beyond one talk by a Planetary Resources executive.
Instead, the focus was on the development of commercial space ventures in general in Europe, and particularly in Luxembourg. There, European startups are finding new opportunities, but also facing different challenges than their American counterparts.
Aspiring to the Grand Duchy
The biggest announcement to come out of the conference actually took place the day before the event, and had nothing to do with space resources. At a press conference at Luxembourg’s Ministry of the Economy, the government announced it struck a deal with Spire, the company developing a constellation of cubesats to collect ship-tracking and weather data.
Under the deal, the Luxembourg Future Fund will invest in Spire’s $70 million Series C round. Spire will, in turn, establish a European headquarters in Luxembourg as the company seeks to hire more staff to analyze the data its satellites collect.
“Our talent team is looking forward to tapping into Luxembourg’s population of incredibly talented people in business and engineering,” Platzer said in a statement about the funding deal.
Platzer, speaking at NewSpace Europe Nov. 17, said it made sense for Spire, which already has offices in Glasgow, Scotland, as well as San Francisco and Singapore, to set up shop in Luxembourg as the company seeks to grow. In that talk, he described the difficulties in growing a company, particularly in finding the right people.
“Luxembourg becomes a very, very obvious choice for looking for the next 250 collaborative superstars,” he said. “It is incredibly open, and it is incredibly welcoming.”
Platzer, who grew up in Austria, said he will be working out of the new Luxembourg office. “I’m very excited to be personally moving to Luxembourg,” he said, citing the appeal of its multicultural and multilingual setting. “It really brings to the forefront one of the core values that Spire holds dear, and that’s being global: our customers are global, our satellites are global, our operations are global and our people are global.”
Building a European NewSpace industry
Spire is a relatively mature startup, with several rounds of funding under its belt and offices worldwide. Can European startups follow in its footsteps?
“Everyone complains that Europe is a little bit behind, and that startups are not really growing,” said Agnieszka Lukaszczyk, European Union policy director for Planet, during one panel discussion at the conference. The number of startups in general is roughly the same between the U.S. and Europe, she said. “The difference, however, is that in the U.S. they continue to grow, while in Europe they either don’t survive or, if they do, they remain very small companies.”
One reason for that limited growth is access to funding. Thibaud Delourme, head of the Space Data for Societal Challenges and Growth unit at the European Commission, linked it to fundamental societal differences between the United States and Europe.
“In the States, you have private pension schemes that can invest in startups” through venture capital funds, he said. “Of course, we don’t have that in Europe, where we have social stability.”
Some companies, like Iceye, a Finnish company developing synthetic aperture radar smallsats, have looked to American firms for funding, while at the same time trying to remain European. “We started as a European company and we intend to keep it that way,” said Pekka Laurila, Iceye’s co-founder and chief executive, The company’s Series A round was led by a U.S.-based fund, True Ventures. “When we went out there to get Silicon Valley funding, we were still able to keep our headquarters in Europe.”
Finding early stage angel investors, wealthy individuals who are willing to make small seed investments in companies, has also been a struggle for European space startups. “The barrier is understanding the risk and the market,” said Sebastian Straube, the founder and chief executive of Interstellar Ventures, one of the few European venture capital firms with a focus on the space industry.
He suggested that it might require a new wave of entrepreneurs, successful in other businesses, to be willing to risk funding space companies. “The old money is very hesitant to invest in space,” he said. (One audience member suggested that rich European families may in fact be investing in space startups, but are simply discreet about it.)
Government grants have helped support many startups in their early phases, but they come with a different set of problems that can hurt their long-term growth, argued Mark Boggett, managing director of Seraphim Capital, a London-based fund dedicated to backing space-related companies.
“Most of the finances available initially for startups comes from government sources,” he said. “In order to successfully go through that grant process, the entrepreneurs have to be very technical.”
The challenge, he said, is once those entrepreneurs develop a technology with those government grants and then try to commercialize it. “The problem is that they’re still talking about technology,” he said. “They’re not talking about business, about how they’re going to make money. That’s really a big problem.”
Growing a European startup, in space or other sectors, can also be hindered by European labor laws that, at least from an American perspective, make it harder to lay off employees once companies reach a certain size.
The American approach, where it’s much easier to terminate employees, “lets you manage risk, lets you manage fluctuations and variability much more easily than having to sustain that labor cost,” said Carissa Christensen, founder and chief executive of Bryce Space and Technology, a U.S. company that is opening an office in Britain.
Straube argued another challenge facing companies is that, even within the European Union, companies and investors think nationally. “It’s a fragmented market,” he said. “A lot of entrepreneurs with whom we talk think, unfortunately, very locally, in their own countries.”
Invoking the Silicon Valley saying of “go big or go home,” he argued for more national initiatives like Luxembourg’s space resources project. “Luxembourg has done a great job, but we’d like to see these kind of initiatives from Germany and Poland, Norway and Finland.”
“This is something we’re missing in Europe, having bold ambitions,” he added.
Even if it was downplayed at the conference, Luxembourg is still interested in the bold ambitions of supporting a space resources industry in the country. Schneider, in his speech, noted the passage earlier this year of a law granting companies the rights to resources extracted from celestial bodies, making Luxembourg only the second country in the world, after the U.S., to enact such a law.
Schneider said the country is developing cooperative agreements with other countries, from Portugal to the United Arab Emirates, to exchange information on the exploration and commercial utilization of space resources. On Nov. 29, the government announced another such agreement, with Japan. “We are in advanced discussions with China,” he added.
He made it clear, though, that Luxembourg’s commercial space ambitions go beyond playing the long game of space resources. He said the government was working with the European Investment Fund to promote other deals for space companies. “We are joining forces to accelerate the development of new space technologies,” he said. “Luxembourg is ready and eager to support and nurture the growing number of commercial space initiatives.”
More is in the works for 2018, he said. “We have some big announcements coming to further support and enable commercial space entities and space resource companies,” he said. They include, he said, a national space agency set up as a public-private partnership with venture capital funds to invest in more companies.
Schneider has, to some degree, staked his political career on the success of this overall space initiative, be it space mining or other ventures, generating jobs and economic activity for the country. If it falls through, though, he’s prepared.
“I’m very happy today that Jan Woerner, the director general of ESA, told me that he would pay for the return ticket.”