Space, the next frontier for public-private investments

In 2021, space infrastructure businesses earned $14.5 billion in private investment, a new yearly high and a 50 percent increase over 2020. Sierra Space, Elon Musk's SpaceX, and Planet Labs brought in $4.3 billion or more in the fourth quarter, courtesy of a $250 million mega-round.

The quarterly study from Space Capital divides industry investments into infrastructure, distribution, and applications. Infrastructure covers firms commonly considered space enterprises, including rocket and satellite manufacturers.

There are substantial prospects in sectors such as satellite internet, high-speed product delivery, and possibly human spaceflight for investments in more accessible and lower-cost access to space. While a few private enterprises have driven recent space research endeavors, the United States military created a sixth branch — the Space Force — in 2019. These endeavors, coupled with growing interest from Russia and China, mean the US investments in the military public sector will continue to increase in the coming years.

Space industry highlights

The space is booming. Space travel started as a government effort and is now driven mainly by the private sector. According to Morgan Stanley, global space sector sales might reach $1 trillion by 2040, up from $350 billion in 2021, with satellite broadband internet access providing the most substantial near- and medium-term prospects.

In 2021, space companies spent a record $14.5 billion in investments.

The space market comprised commercial space income and government-procured space operations contracted to the private sector.

Last summer, Airbus and Thales Alenia Space secured substantial contracts worth more than $1 billion with the European Space Agency and the United Kingdom, boosting confidence in the market's continued growth.

The European Global Satellite Service's 10-year plan expects strong growth for the business, with ground stations and equipment generating more than $112.45 billion.

Revenue from Earth observation satellites also rose to over $3 billion. Nearly 32 percent of revenue comes from selling raw data from commercial satellites.

Public interest is starting to grow

While private equity initiatives have recently received most of the attention, public sector involvement has also increased. The National Defense Authorization Act of 2020, approved by President Donald Trump in December 2019, established the United States Space Command, including the Space Operations Force and the Space Development Agency.

In May 2020, NASA used a commercially built US rocket to launch a crewed voyage to the International Space Station. Since the closure of the space shuttle program in 2011, this is the first time the US has conducted a human-crewed trip to the ISS. It is also a watershed moment in the relationship between private corporations and the US government in space.

Investment community's expectations

Morgan Stanley believes that, aside from second-order impacts, broadband will be the primary source of development for the space business. The investment bank predicts that by 2040, the vertical will have grown to a $95 billion market, up from around $2 billion now. While Northern Sky Research thinks many satellite broadband use cases are still underserved today, driving demand has proven difficult, and maintaining high growth rates for decades might exhaust the industry.

Estimated global space economy

After decreasing 4 percent in 2020 due to the COVID-19 pandemic, the space economy is expected to rise 74 percent to $642 billion by 2030, at a compounded annual growth rate of 6.3 percent. The model for commercial space services will change. Various corporate and governmental groups have produced numerous global and international space economy estimations.

According to the 2014 report of the Organization of Economic Cooperation and Development, consumer services constituted 58 percent of the commercial income in the global space economy in 2013, followed by space manufacturing which comprised 33 percent and satellite operations services at 9 percent.

The report further revealed that Germany's space industry, driven by satellite manufacturing, had an estimated turnover of $3.1 billion in 2013.

In its 2018 report, the Canadian Space Agency said the Canadian space sector earned $5.6 billion in revenue in 2017, with satellite communications leading the way.

The global space market is estimated to be worth $337 billion by 2021, a 6 percent growth from 2020. It means a market value equivalent to 2019 before the COVID-19 pandemic, influencing satellite services revenue in 2020. Satellite navigation and communications continue to be the most important revenue generators, accounting for 50 percent and 41 percent of total market capitalization, respectively.

In 2018, the Federal Aviation Administration estimated the US space sector's value to be over $158 billion in 2016. According to reports, SATCOM is a leader in the US space business, primarily in satellite services, manufacturing, ground equipment, and launch services. According to the DOC Bureau of Industry and Security, the US space industrial base employed around 2.6 million people in 2012. In addition, the aerospace and military sectors' space systems contributed $39 billion to US economic production in 2018, according to a 2019 study by the Aerospace Sectors and Association.

The need for global leadership

Growing congestion in Earth's orbit, escalating tensions between the US and China, and a recent Russian weapons test that resulted in highly destructive debris orbiting around Earth have emphasized the growing potential of space collisions. China surpassed the US' 56 orbit launches last year and is now competing for global leadership and business partners to develop the moon, not to mention India and the UAE's space endeavors.

While there is an urgent need for global leadership and cooperation to promote regulation and sustain a sustainable space ecosystem, opportunities for US-China cooperation due to ongoing national security concerns and rising geopolitical tensions and competition in space are possibly slim.

Meanwhile, next year, a new UN resolution on a code of conduct represents an opportunity for leading space powers to come together and build a consensus to reduce risks in space.

Bottom line

Consumer broadband markets have raised great expectations, but while the addressable market is enormous and the possibility is unexplored, increasing demand has its own set of obstacles.

Space is increasingly appealing to investors, with a robust startup environment, ultra-wealthy people investing in the business, and investment bankers valuing the space economy in billions of dollars. However, Silicon Valley dreamers must not be taken away and instead conduct a fair market study.