Space Investing 101: Discover exciting early-stage aerospace investment opportunities

June 1, 2013
Author
Chad Anderson
June 1, 2013
Author
Chad Anderson

Space investing offers immense opportunity. The global space economy in 2012 was valued at over $300 billion in commercial revenue and government budgets, and is expected to grow to $600 billion by 2030. This growth has been and will continue to be fueled primarily by growth in the commercial sector.

The space industry has reached a pivotal moment in its development, where a shift toward private enterprise is enabling the growth of an entirely new industry. Today, exciting new investment opportunities exist in an arena that was once only within the reach of governments. The shift to private industry is also benefitting the public sector, enabling governments to focus their limited resources on aspirations that are not yet economically viable, such as deep space exploration. In an era of declining government budgets, commercial partners with a focus on reducing costs are making public investments in exploration and big science projects more viable, such as missions to Mars.

This new approach to the space industry and exploration is sometimes known as NewSpace. When we say NewSpace, we are not talking merely of the general commercialization of space, as there has been a commercial element in space activities for decades, but rather the cultural and philosophical shift toward greater private entity participation.

Investors are drawn to NewSpace and space investing because of the immense potential and a chance to make a significant impact on the future. It is this mix of blended returns that has brought investment opportunities within the risk threshold of early-stage investors. A few key milestones have enabled this transformation from government spending, to prize competitions, to public-private partnerships (PPPs), to wealthy individuals, to angel and VC investment in NewSpace companies. You can read more about what motivates investors to put their money in NewSpace ventures here:Space Investing: The Science of Rocket Investing

So who is investing in NewSpace? There are at least 10 prominent billionaires that are making significant investments in private spaceflight activities. All of them are shrewd businessmen who have demonstrated an ability to identify opportunity that no one else sees, and make a great deal of money from it. But investment in NewSpace isn’t just wealthy individuals betting on the future, NewSpace has attracted a good amount of institutional investment as well.

You don’t have to be Elon Musk or Richard Branson to invest in space companies. While NewSpace companies are sometimes involved in rocket science, investing in them doesn’t have to be. What space investors look for in potential investments is similar to what investors look for in other investments: strong management team, large market, sensible capitalization, and innovative technology. To a large extent, the most important factor to consider when investing in any early-stage company is a strong and experienced management team. You can read more about this here:Space Investing: Investing in NewSpace Management

The opportunity for early-stage investing lies in radical innovation. For too long, since the early days of the internet, venture capital has been too focused on incremental innovation, too risk-averse. There are a lot of investment opportunities in arenas outside the internet, ripe for radical innovation and outsized returns on investment. NewSpace is one of those industries and you can read more about that here:Space Investing: The Power of Two Bottom Lines

A key driver enabling the shift to NewSpace is the use of Public-Private Partnerships (or PPPs). Following the first successful mission of the Dragon capsule, Elon Musk publicly acknowledged that he could not have started SpaceX without the help of NASA. These mechanisms, intended to bridge the gap between government and private enterprise, are often misunderstood. If you are considering investing in NewSpace it is a good idea to be familiar with them, so here are a few key things any NewSpace investor should know. The agreements between NASA and their new private sector partners are known as Space Act Agreements, with a number of agreements under this heading including the Commercial Crew & Cargo (C3PO) and the Commercial Orbital Transportation Services (COTS). These agreements are fundamentally different from the historical government partnership models with Boeing and Lockheed Martin, which have been going on for decades. Instead of the traditional “cost-plus” model, NASA now pays in increments based on milestones, so that companies are only paid for what they achieve. The benefits of landing a government contract are numerous, however, for early-stage investors there is a potential “dark-side” to working for the government too early in a company’s life. You can read more about that here:Space Investing: Costs & Benefits of Public Sector Contracts

Space Angels Network members share a common passion for promoting the development of the aerospace industry and related technologies while also earning attractive returns on private investments. SAN regularly screens applications from entrepreneurs around the world seeking early-stage capital for their aerospace-related ventures. SAN members enjoy exclusive access to these unique space investing opportunities and benefit from membership in a community focused on finding and investing in new aerospace and aviation startups. If you are looking to actively participate in building the next generation of the aerospace industry, then we hope you will consider joining us.

There’s never been a better time to get involved in commercial space. If you’re ready to start investing in private space companies, we invite you to apply for membership to Space Angels.

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