The dawn of the space age was, in many ways, a direct response to heightened competitive political and military rhetoric from major global superpowers in the latter part of the previous century. The pressure to conquer space stemmed from the threat of progress by foreign nations, and, consequently, an ideology. But when government involvement in space increased in such countries as the United States in the 1980s, so too did the unexpected accidents and disasters.
The need for diversification as a means to mitigate technology-related risk ultimately served as an important catalyst to slowly open up the world of space to private enterprise. As an example, the Challenger accident in 1986 forced the Department of Defense to look for alternatives to the Space Shuttle. It was deemed too risky to have just one launch vehicle for missions.
Relatively young companies such as SpaceX and Blue Origin are ushering in the next era of space exploration as part of a new free market. Their progress to date has generated a significant amount of enthusiasm among the masses for a fresh set of safe and sustainable methods of transportation to the cosmos. And wherever there’s enthusiasm, there’s also interest from sources of private investment capital. As reported by CB Insights, VCs are paying more attention to technology startups that are accelerating the commercialization of space.
In 2015, VC investment in the sector increased by 253 percent year-over-year, and a whopping 2,052 percent since 2012. Although the capital deployed to date is concentrated on a few companies, such as SpaceX, OneWeb and O3b Networks, the influx still represents an appetite from select private investors to support the sector’s progress.
A surge in interest in outer space by sources of private capital presents the opportunity of rapid growth and commercialization that should, through the laws of supply and demand, drive down costs associated with cosmic ventures in the long run. This reality will make the space economy as accessible as any other on Earth several decades down the road. Private enterprises are also expected to take financial pressure off government institutions to engage in basic tasks like launching rockets, thus saving plenty of taxpayer dollars for other initiatives.
Contemporary space-based industries and businesses
The exploration and study of space has been embedded within a narrative that emphasizes and epitomizes human progress under the guise of our species’ evolution. For many, this is reason enough to invest in the commercialization of space. But when stripping out this narrative, what exactly are the economic reasons for undertaking the huge financial and biological risks associated with exploring space? Do the risks currently outweigh the opportunities?
For starters, with government bureaucracy having entirely controlled space for the past few decades, it only seems fitting for people to have a desire to fly up there and do what could have been done only by a select few astronauts a short while ago.
Space tourism companies like Virgin Galactic and the eccentric entrepreneurs behind them (i.e. Richard Branson) have pushed space tourism heavily in the media and on to front pages. But the whole notion of being able to “experience space” is arguably being used as a precursor to the heavier and more profitable forms of private enterprise, each of which is scheduled to make an appearance in the coming decades.
Resource extraction and research
Although space tourism represents the most prominent and active form of private enterprise interests taking shape in the cosmos today, other planned commercial ventures are also in the works for the foreseeable future. The 2027 Mars One mission plans to open the door for corporations to bypass bureaucracy and fly people toward the Red Planet. Besides flybys and ceremonial long-distance trips, businesses are also looking toward asteroid mining, energy development and pharmaceuticals.
There are many opportunities prevalent in space, but for each opportunity there also exists a major challenge.
In the case of asteroid mining, there is huge potential to generate significant economic returns through extracting resources from a typical Near Earth Asteroid (NEA). It has been suggested by some scientists that one NEA may host trillions of dollars’ worth of natural materials, making it a lucrative business for private investors and business professionals to pursue. Deep Space Industries’ recently announced Prospector-1 mission will represent the world’s first interplanetary mining mission.
With respect to energy development, space-based solar panel farms are being contemplated to power space technologies and locations, as well as equipment here on Earth. But given the high up-front investment costs required to complete such a project in comparison to output and revenues, the capability isn’t expected for another several decades.
And finally, in terms of pharmaceuticals, conducting medical research in micro-gravity space conditions presents the potential for breakthroughs that will, as an example, see superior quality crystals replacing synthesized proteins for the use of manufacturing better drugs.
Media and entertainment
In addition to tourism, resource extraction and scientific research, space commercialization is taking shape through media, branding and advertising initiatives. Each of the current and planned uses of space by private enterprise present the opportunity for media syndication on mass levels that can generate significant revenue and global corporate ad impressions for various project-specific stakeholders.
For example, companies like Virgin Galactic and Space Adventures continue to use celebrity endorsements and paid-for, license-friendly media campaigns to generate interest in their services and get mass populations to see space as a frontier fit for conquering. Also, several opportunities exist for corporations like Mars One to syndicate and license content for small-scale missions and turn them into global phenomena, which will drive further interest in space exploration among the general population and the private enterprise sector. The organization has already garnered mass media attention for its astronaut selection process.
The net result of such branding activities is a significant step forward for the private enterprises engaging in commercial space activity. These initiatives are poised to influence governments to further deregulate space for the sake of making the consumption of content easier and more affordable.
Challenges and risks associated with the commercialization of space
There are many opportunities prevalent in space, but for each opportunity there also exists a major challenge. As noted by the United States House Science Subcommittee on Space, three things in particular make space exploration and development a not-so-attractive proposition: lack of financing for new ventures on a mass scale, lack of secured insurance and an inability to forge self-sustaining commercial markets.
Indeed, many of these factors are changing, but they still present major roadblocks for entrepreneurs and private institutions.
Access to capital
In terms of lack of financing, private capital is still not flowing freely and blindly through to space-based enterprises like it is with internet-, digital media- and hardware-related technology businesses. In 2015, approximately $129 billion in VC funding was deployed globally across 7,872 deals. Of this total, just over $2 billion was deployed to space-based companies across 44 deals. This makes sense, as the typical investment horizon for a VC is 7 to 10 years.
Space commercialization is here to stay despite the challenges and obvious roadblocks.
Space-based enterprises represent much longer investment horizons with a far greater risk of failure. And, naturally, without the necessary seed or growth-stage capital, it becomes very difficult for any entrepreneur to run a successful space-based private enterprise. As such, building a space-based business has largely been within the realm of successful tech billionaires.
Access to insurance
There also is a lack of adequate and secured insurance, which is because of the inability of insurers to see and test the reliability of space-based technologies in the recent past. Few financial institutions are capable of providing space-based enterprises with the financial insurance that matches the scale of initiatives in space.
Insurance is key for private businesses to offset the risk that was previously absorbed by governments, and to be able to engage in cosmic activities profitably with minimal risk, insurance capital needs to be available more freely.
Ability to create self-sustaining markets
Lastly, an inability to forge self-sustaining commercial markets in the past puts into question the commercial viability of space-based enterprises. Two decades ago, the commercial satellite business was expected to achieve independence within a few years of being established, but government involvement is still needed to this day to see projects to the execution phase. It can be argued that this was previously due to a lack of capital from private markets, as well as a lack of information available about space commercialization within the public sphere. Luckily, these barriers are becoming less of an issue over time as the private sector absorbs the know-how that currently resides within the public sector.
In terms of risks overall, space entrepreneurs still need to prove they are up for the tasks related to commercializing space. Many fear that lives will be lost because proper precautions will not be taken. Given the laws in New Mexico regarding limited liability rights for corporations engaged in making space accessible for citizens, these concerns are not totally unfounded. After all, if something goes wrong in space, whose fault is it? And in the case of an international incident, which country’s laws apply? These are important questions.
Space commercialization is here to stay despite the challenges and obvious roadblocks. If history is any indication, the ostensibly innate human quest to conquer the “final frontier” will always prevail over rationality and intelligent foresight. This is a matter of the human condition, after all.
All of that having been said, continuous pressure should be placed on private institutions to ensure that the most prudent and wise decisions are made along the journey to commercialize space. Too much money and too many lives are potentially at stake to suggest otherwise.