Space

Space Angels’ Chad Anderson on entering a new decade in the ‘entrepreneurial space age’

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Space as an investment target is trending upwards in the VC community, but specialist firm Space Angels has been focused on the sector longer than most. The network of angel investors just published its most recent quarterly overview of activity in the space startup industry, revealing that investors put nearly $6 billion in capital into space companies across 2019.

I spoke to Space Angels CEO Chad Anderson about what he’s seen in terms of changes in the industry since Space Angels began publishing this quarterly update in 2017, and about what’s in store for 2020 and beyond as commercial space matures and comes into its own. Informed by data released publicly, SEC filings and investor databases — as well as anonymized and aggregated info from Space Angels’ own due diligence process and portfolio company management — Anderson is among the best-positioned people on either the investment or the operator side to weigh in on the current and future state of the space startup industry.

“2019 was a record year — record number of investments, record number of companies, a record on all these fronts,” Anderson said. “2019 in its own right was a huge year, but then you look at everything that happened over the last decade. We always refer to this last decade as ‘the entrepreneurial space age’ […] and you see everything that’s happened over the last 10 years, you see it all culminating in a record year like this one.”

This “entrepreneurial space age” is mostly the result of one company’s success: SpaceX. The private launch company has opened up so much access to space for private companies in the last 10 years, it unlocked a market previously accessible only to giant companies with the deepest pockets and the best relationships with the industry giants that proceeded it — giants whose primary interest was serving almost exclusively government and defense customers. Even still, if you look at the 2019 breakdown, SpaceX features prominently in terms of the overall share of investment dollars, as do other huge and well-funded companies like Blue Origin and SoftBank-backed OneWeb.

“Doesn’t it feel a little bit top-heavy?,” Anderson asked rhetorically. “You size it all up, 3.8 of the 5.8 billion was for those three companies […] and yet we are seeing a really healthy maturation of the space ecosystem: companies graduating from from idea and concept to growth.”

Anderson pointed out that despite a clear overweighting in terms of the total dollar value among a chosen few, there was still a lot of money distributed across 143 early-stage rounds during the quarter. In fact, early-stage investments made up more than half the activity in terms of investment round volume, with $686 million in funding accounted for across those. That indicates a healthy, mature investment market with good distribution of funding activity, whereas if you saw those big players eat up all the dollars without any activity on the early stage, there’d be reason to sound the alarm.

Generally speaking, space looks like a healthy area for startup activity — but what opportunities are most likely to characterize the next phase of the industry’s growth? Anderson cites portfolio company SkyWatch as a signal example of the kind of business that makes sense in this next phase of the entrepreneurial space age.

“People are working on infrared sensors, hyperspectral sensors — we’re getting all this new, all these different types of sensors, gathering all this new data that’s being updated on a really regular basis, at least once a day,” Anderson said. “The issue now is that there’s a bottleneck, and that’s due to distribution. We’re seeing what’s happening in geospatial intelligence and that value chain — we’re seeing that develop in much the same way that the GPS market did, when Trimble and Magellan others came along and tapped into this signal and distributed it out.”

As with GPS before it, there’s been a rush on geo observation technology and data, with large private constellations launched into service by the likes of Planet and Spire. Yet the distribution of said data hasn’t been modernized alongside satellite and observation equipment construction, meaning there’s a disconnect between the companies gathering this info and those customers who stand to make the most use of it.

“All these companies have really struggled to get their data used,” Anderson said. “Because they built their companies in the same way that all the big incumbents that were purely focused on serving the government […] it was all siloed, and it was the same company trying to design the satellite, build the satellite, get the satellite launched, operate the satellite, distribute the data and then build all the applications on that data. It’s insane to think that one company can do all that; almost each each one of those things is a separate company.”

That’s where SkyWatch comes in, providing an easy way to gain access to this data in a format that’s amenable for building applications. “You need to provide super-easy access to this data, and then take your hands off and let the tech community run with it,” Anderson explained.

“If you’re two college students doing an MBA somewhere, and you’re working on a mining project, and you think satellite data can benefit this project, you can now go tap into SkyWatch for a few bucks,” Anderson said. “You can get access to satellite imagery and you get access to it super easily through an API: you don’t have to sign any contracts, you don’t have to do any legal reviews of customer contracts. You’re on one standard legal agreement, you can easily access the data and you can get it for pennies.”

In general, this kind of supply-and-demand rebalancing is what Anderson thinks will be a crucial component of how the next major phase in the space startup industry will play out. I asked him about Blue Origin and Amazon founder Jeff Bezos’ comments from last year about how we’re in the infrastructure-building phase with leaner startups still on the horizon once the metaphorical railways are built. Anderson says he sees plenty of opportunity in unlocking access to the huge amount of geospatial data already being gathered and in supporting the deployment of mega-constellations like those being developed by Blue Origin and SpaceX, so the two things aren’t mutually exclusive.

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